U.S. Securities and Exchange Commission
                         Washington, D.C.  20549

                            FORM 10-KSB

(Mark One)

[x]       ANNUAL  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the fiscal year ended June 30, 1997

[ ]       TRANSITION REPORT  UNDER  SECTION  13  OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [No Fee Required]

          For   the   transition  period  from   _____________________   to
          ______________________________

     Commission file number 1-10310

                           SETECH, INC.
          (Name of small business issuer in its charter)

DELAWARE                                                        11-2809189
(State  or  other  jurisdiction  of  incorporation or organization) (I.R.S.
Employer Identification No.)

905 INDUSTRIAL DRIVE, MURFREESBORO, TENNESSEE     37129
(Address of principal executive offices)        (Zip Code)

Issuer's telephone number:(615) 890-1700

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

          Title of Class
     Common Stock, $.01 par value

       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 requirement for the past
90 days.  Yes  X  No ____


       Check if there is  no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best  of  registrant's  knowledge,  in definitive
proxy  or information statements incorporated by reference in Part  III  of
this Form 10-KSB or any amendment to this Form 10-KSB.  [ ]

     State issuer's revenues for the most recent fiscal year  $35,167,717

     State  the  aggregate  market  value  of the voting stock held by non-
affiliates computed by reference to the price  at which the stock was sold,
or the average bid and asked prices of such stock,  as  of a specified date
within the past 60 days.  (See definition of affiliate in Rule 12b-2 of the
Exchange Act).  $1,015,278

     State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date:  5,669,003

                    DOCUMENTS INCORPORATED BY REFERENCE

        If  the following documents are incorporated by reference,  briefly
describe them  and  identify  the  part  of  the Form 10-KSB into which the
document is incorporated: (1) any annual report  to  security  holders; (2)
any  proxy or information statement; and (3) any prospectus filed  pursuant
to Rule  424(b)  or  (c)  of the Securities Act of 1933 ("Securities Act").
The list documents should be clearly described for identification purposes.
None

     Transitional Small Business Disclosure Format (check one):
Yes ____    No  X

                       CAUTIONARY STATEMENTS

     This annual report on  Form 10-KSB contains statements relating to the
future of SETECH, Inc (the "Company")  (including  certain  projections and
business  trends)  that  are  "forward  looking  statements" as defined  by
Section 27A of the Securities Act of 1933, as amended,  Section  21E of the
Securities  Exchange  Act  of  1934, as amended, and the Private Securities
Litigation  Reform  Act  of  1995,  as   amended.   These  forward  looking
statements  include  statements regarding the  intent,  belief  or  current
expectations of the Company  and  its  management  and  involve  risks  and
uncertainties  that  may  cause  the  Company's  actual  results  to differ
materially  from  the  results discussed in the forward looking statements.
When used in this Form 10-KSB  with  respect  to  the  Company,  the  words
"estimate,"   project,"   "intend,"   "anticipate,"   "expect,"  "foresee,"
"believe" and similar expressions are intended to identify  forward looking
statements.  Readers  are  cautioned not to place undue reliance  on  these
forward looking statements,  which  speak  only  as of the date hereof. The
risks and uncertainties relating to the forward looking statements include,
but  are  not  limited  to,  changes  in political, economic  and/or  labor
conditions; changes in the regulatory environment; the Company's ability to
integrate its acquisitions; competitive  production  and pricing pressures;
as well as other risks and uncertainties.

                              PART I

ITEM 1.   BUSINESS.

GENERAL

     SETECH, INC., formerly named Aviation Education Systems,  Inc.,  is  a
Delaware corporation (the "Company") formed in 1987. The Company is engaged
in  the  businesses  of  providing "integrated supply"/inventory management
services, general line industrial  distribution  services,  as  well as job
shop  machining,  engineering  products  and  services,  to  a  variety  of
industries  including  automotive,  aviation, and medical through its three
subsidiary corporations:

          Titan Services, Inc. ("Titan").
          Southeastern Technology, Inc. ("Southeastern")
          Lewis Supply Company, Inc. ("Lewis")

     In August 1996, the Company changed  its name from "Aviation Education
Systems, Inc." to "SETECH, INC." to better reflect its diversified business
operations.

     The Company acquired Titan and Southeastern in September 1993 upon the
acquisition of their parent corporation, SEtech,  Incorporated. The Company
caused  SEtech,  Incorporated to be merged into the Company,  resulting  in
Titan and Southeastern  becoming  direct  and  separate subsidiaries of the
Company. The Company acquired Lewis Supply Company,  Inc.  in June of 1997.
Titan  and  Southeastern are Tennessee corporations; Lewis is  incorporated
under Delaware law.

     On January  30,  1997, the Company sold all of the stock of two of its
wholly owned subsidiaries,  Barton  ATC,  Inc.  ("BARTON")  and  Barton ATC
International,  Inc.  ("BARTON Intn'l") (sometimes referred to collectively
in the Company's public  filings  as  the  "Government  Services Group") to
Serco Group, Inc., a wholly-owned subsidiary of Serco Group  plc, a British
publicly traded company. (For a more detailed description of the  Company's
sale of its Government Services Group, please see the Company's Form 10-QSB
for the quarterly period ended December 31, 1996, filed with the Commission
February 14, 1997).

TITAN

TITAN'S OPERATIONS

     Titan  operates  in  a  business  segment offering "integrated supply"
services  to  the manufacturing industry.  Presently,  Titan  delivers  its
services primarily to the automotive industry through facilities located in
Tennessee  and  Michigan.   Titan  provides  procurement,  engineering  and
maintenance/repair services for  machined  spare  parts, original equipment
manufacturer ("OEM") spare parts and inventory management  services.  These
types of services are increasingly being utilized by major manufacturers to
supplement and enhance in-house capabilities and control costs.

COMPETITION

     Titan  operates  in  the  segment  of  industry  known  as "integrated
supply."  Titan  has encountered competing firms, and integrated  suppliers
operate in a highly  competitive  market.  Additionally,  Titan  may in the
future encounter presently unforeseen competition.

MAJOR CUSTOMERS

     Titan   operates  under  three  contracts  as  a  source  supplier  of
purchasing and  inventory  control functions for General Motors Corporation
at three automotive plants,  located  in  Tennessee and Michigan. Titan has
received  several  major  awards  in  recognition  of  its  high  level  of
performance  from  General  Motors. Contracts  with  this  single  customer
account for virtually all of Titan's revenues.

PRINCIPAL SUPPLIERS

     Titan acquires machining  services  and  parts  from a wide variety of
machine   shops.   OEM   spare  parts  are  purchased  from  the   original
manufacturer. Titan purchases  approximately  3%  of its parts from its co-
subsidiary Southeastern.

SOUTHEASTERN

SOUTHEASTERN'S OPERATIONS

     Southeastern  is  a  job shop machining and engineering  organization,
serving  a  variety  of  industries  including  aerospace,  automotive  and
medical.  Southeastern continues  its  expansion  in  the manufacturing and
sale  of medical and surgical devices for major medical  manufacturers,  to
their specifications. Management believes, based upon recent growth in this
area, that  the  medical  field  will continue to become a more significant
source of machine work in the future.

COMPETITION

     Southeastern  operates  in  a  highly   competitive   environment  and
confronts  competition  from  both  generalized  and specialized  job  shop
machining  and  engineering  businesses.  Southeastern   is  equipped  with
sophisticated   computer   aided   design   and   manufacturing  equipment.
Southeastern engineers utilize state-of-the-art equipment and systems which
are  designed  to enable them to meet stringent customer  requirements  and
generate  innovative   solutions  to  consistently  emerging  manufacturing
impediments resulting from cost containment programs.

<PAGE>
MAJOR CUSTOMERS

     Five customers account  for  80% of Southeastern's revenues, little of
which  is  based  on  long-term  contracts.   Southeastern's   business  is
concentrated in approximately equal numbers among the aerospace, automotive
and medical industries.

SUPPLIERS

     Historically,  the  availability  of  raw  materials  has not been  of
concern  to Southeastern whose management foresees no significant  material
related  impediment  to  production  or  production  scheduling.  Principal
suppliers  to  Southeastern  include:  Fry  Steel;  Tennessee  Die  Supply;
Jorgensen Steel; Wyman Gordon; and Loftis Metals.

LEWIS

LEWIS' OPERATIONS

     Lewis   is  a  general  line  industrial  distributor  with  a  strong
integrated supply  presence.   Presently,  Lewis  delivers  its services to
customers  in  Tennessee,  Mississippi,  Arkansas,  Alabama,  Kentucky  and
Missouri.

COMPETITION

     The  industrial  distribution  industry  is  highly  competitive   and
features  numerous  distribution channels, including national, regional and
local distributors; direct mail suppliers; large warehouse chains; hardware
stores; and manufacturers' own sales forces.  Many of Lewis' competitors in
industrial distribution  are  small  enterprises who sell to customers in a
limited  geographic area, but Lewis also  competes  against  several  large
distributors  that  have  significantly  greater  resources than Lewis.  As
customers increasingly seek low-cost alternatives to traditional methods of
purchasing  and sources of supply, they are, among other  things,  reducing
the number of  their  industrial  suppliers. Also, industrial suppliers are
consolidating to achieve economies  of  scale  and  increase  efficiencies,
which   consolidation  trend  could  cause  the  industry  to  become  more
competitive.   In  addition, new competitors may emerge.  Certain of Lewis'
competitors sell identical  products for prices lower than those offered by
Lewis.  Moreover, Lewis also competes on the basis of responsiveness to the
needs   of  customers  for  quality   service,   product   diversity,   and
availability.  There can be no assurance that Lewis will be able to compete
successfully under such conditions.

     Additionally,  like  Titan,  Lewis operates in the segment of industry
known as "integrated supply."  Lewis  has  encountered competing integrated
supply  firms, and integrated suppliers operate  in  a  highly  competitive
market. Lewis  may  in the future encounter presently unforeseen integrated
supply competition.
<PAGE>
MAJOR CUSTOMERS

     Lewis had three  customers  which  accounted  for  14%,  11%  and  9%,
respectively,  of  Lewis' sales during its year ended January 31, 1997.  In
addition, Lewis supplies  integrated  supply  services  under six contracts
which  together  account  for  35%  of Lewis' revenues. Because  the  Lewis
acquisition was contemporaneous with  the  close  of  the  Company's fiscal
year, none of Lewis' revenues are reflected on the Company's  Statements of
Operations included in this Form 10-KSB. (See Note 2 of the June  30,  1997
financial  statements  included in this Form 10-KSB for unaudited pro forma
information combining the  consolidated results of the Company and Lewis as
if the Acquisition had occurred on July 1, 1995.)

PRINCIPAL SUPPLIERS

     Historically, the availability  of supplies has not been of concern to
Lewis' management.  Lewis has over 4500 suppliers nationwide.

EMPLOYEES OF COMPANY AND SUBSIDIARIES

     As of June 30, 1997, the Company  and  its  three subsidiaries had 211
full-time  employees,  including  5  executive personnel  and  6  part-time
employees. The employees are apportioned  among  the businesses as follows:
SETECH (2, both of whom are executives); Titan (39  full-time,  including 1
executive, 1 part-time); Southeastern (47 full-time, including 1 executive,
5 part-time); Lewis (123 full-time, including 1 executive).


ITEM 2.   PROPERTIES.

     Among  the  Company  and  its  subsidiaries, only Lewis owns any  real
property.

     Lewis purchased the property at  477  South  Main  Street  in  Memphis
Tennessee  in November of 1986.  Currently, $66,942 remains outstanding  on
Lewis' mortgage.   This  Memphis  location  serves  as  the headquarters of
Lewis'  operations.   In addition, Lewis leases buildings,  equipment,  and
vehicles under non cancelable operating leases.

     Titan conducts its  operations  from three rented facilities, one each
located:  (1)  in  Murfreesboro,  Tennessee;   (2)   near   its  automotive
manufacturing  customer  in  Tennessee; and (3) adjacent to its  automotive
manufacturing customer in Michigan.  None  of the three lease terms expires
after 1998.

     Southeastern conducts its operations from  facilities  located  at 905
Industrial  Drive  Murfreesboro,  Tennessee  that  are  leased under a non-
cancelable, operating lease expiring July 31, 1998.
<PAGE>
ITEM 3.   LEGAL PROCEEDINGS.

     The  Company  has  settled the lawsuit it filed on October  20,  1992,
against  its  former officials,  James  E.  Turner,  the  Company's  former
President, Chief Executive Officer, Treasurer, Chairman and a member of the
Board of Directors;  Donna  M. Turner, the Company's former Secretary and a
Director; and Paul F. Caviglia,  Jr.,  the  former Chief Financial Officer,
and  subsequently  amended  to  add  as  defendants   the  Company's  prior
attorneys,  Blau,  Kramer,  Wactler,  Lieberman  and Satin,  P.  C.,  David
Lieberman and Richard Satin. The Company has agreed  to  accept  $45,000 in
settlement  of  its  claim  against  the  former attorneys, and $25,000  in
settlement of its claim against James E. Turner.

ITEM 4.   SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.

     On  April  8,  1997,  a majority of the shareholders  of  the  Company
consented to an amendment to  the  Company's  Articles  of Incorporation to
reduce the number of authorized shares from 400,000,000 to  10,000,000.  In
accordance  with  Delaware  law,  the remaining shareholders were  promptly
notified of this action.


                              PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON  EQUITY  AND  RELATED  STOCKHOLDER
MATTERS.

     (a)  Marketing  Information  -  There  is  only a limited and sporadic
trading market for the Company's common stock, currently  trading  over the
counter,  which  has  historically  been  thinly traded with limited market
maker participation.

     The  following  table,  prepared  from  information  supplied  by  the
National Quotation Bureau, sets forth the range  of high and low bid prices
for  the  Company's  common stock for the fiscal periods  indicated  (which
reflects  inter-dealer   prices,   without  retail  mark-up,  mark-down  or
commission and may not necessarily represent  actual  transactions) (prices
for  1996 have been adjusted to give effect to the June  30,  1996  reverse
stock split):
<PAGE>

                                        COMMON STOCK

                                        High      Low
1996 (Fiscal)
First Quarter                           1.90      .40
Second Quarter                          2.0       .40
Third Quarter                           2.20      2.00
Fourth Quarter                          2.20      1.20

1997 (Fiscal)
First Quarter                           N/A       N/A
Second Quarter                          1 3/4     1 5/8
Third Quarter                           1 11/16   1 1/2
Fourth Quarter                          1 9/16    1 1/32

     (b)  Holders  -  There were approximately 180 holders of record of the
Company's common stock  as  of  June 30, 1997, inclusive of those brokerage
firms and/or clearing houses holding  the  Company's  securities  for their
clientele  (with  each  such  brokerage  house  and/or clearing house being
considered as one holder).

     (c)  Dividends - The Company has not paid or  declared  any  dividends
upon  its  common  stock  since its inception and, by reason of its present
financial  status and its contemplated  financial  requirements,  does  not
contemplate or anticipate paying any dividends upon its common stock in the
foreseeable future.

     Effective as of June 30, 1996, the Company effectuated a twenty-to-one
reverse stock  split  which  reduced  the number of shares of the Company's
single  class of common stock. As a result  of  the  twenty-to-one  reverse
stock split, the price per share of the Company's common stock increased by
a multiple of 20.

ITEM 6.   MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATION.

PLAN OF OPERATION

     With the acquisition of Lewis (the  "Acquisition") and the disposition
of its Government Services Group, the Company  is  increasing  its focus on
integrated supply.  While the Company believes that it will realize certain
long-term  synergies  through  the  combination  of  the  integrated supply
capacities  of  Titan  and  Lewis,  there  can  be  no assurance that  such
synergies  will  be realized.  Nonetheless, Management  believes  that  the
assimilation of Lewis following the Acquisition is going smoothly.

     The Company believes  that  a  strategic opportunity exists during the
short and near-term to expand its integrated  supply  business with Titan's
existing automotive manufacturing customer. The Company  will  also seek to
market  its  integrated  supply services to other manufacturing businesses.
Company management constantly  considers  the most advantageous utilization
of its financial, personnel and tangible resources,  including  appropriate
acquisitions and dispositions.

RESULTS OF OPERATIONS

     For  the  fiscal  year  ended  June  30, 1997, the Company posted  net
revenues of $35,167,717, compared to $34,468,123  for  the  previous fiscal
year. (Please see Note 1 of the June 30, 1997 financial statements included
with this Form 10-KSB relating to "Reclassification of Financial  Statement
Presentation," where it indicates that amounts received from customers  for
the  cost  of  inventory  acquired and sold under inventory procurement and
management contracts, which were previously recorded as a reduction in cost
of revenues, have been reclassified  as  revenues.) The Company realized an
income from continuing operations before income  taxes  for the fiscal year
ended June 30, 1997, of $941,599 compared to $709,868 for  the  fiscal year
ended June 30, 1996, an increase of 32.6%. These revenue and income figures
do  not  reflect  amounts attributable to the Government Services Division,
sold by the Company  January 31, 1997, and accounted for as a separate line
item  called "Discontinued  Operations"  in  the  Company's  Statements  of
Operations  included  in the June 30, 1997 financial statements included in
this Form 10-KSB. (See  Note  16  of these financial statements for further
explanation.)  Nor do these revenue  and  income  figures  reflect  amounts
attributable to  Lewis,  acquired by the Company June 26, 1997. (Please see
Note 2 of the June 30, 1997  financial statements included in this Form 10-
KSB for unaudited pro forma information  combining the consolidated results
of the Company and Lewis as if the Acquisition  had  occurred  on  July  1,
1995.)
     In  accordance  with  FASB  Statement  109, the Company's statement of
operations for the fiscal year ended June 30,  1997  reflects an income tax
provision  of  $428,026. Please see Note 9 of the June 30,  1997  financial
statements  included   in  this  Form  10-KSB  for  detailed  analysis  and
explanation.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 1997, the  Company's  current  assets exceeded its current
liabilities by approximately $19,829,912. Please  note  that the assets and
liabilities  of  Lewis are reflected in the 1997 numbers on  the  June  30,
1997,  balance  sheet   included   in   this  Form  10-KSB,  while  amounts
attributable to the Government Services Division  are not included. (Please
see Notes 1, 2 and 16 of the June 30, 1997 financial statements included in
this Form 10-KSB.)

     The  Company  maintains  a secured revolving line  of  credit  with  a
banking institution in the maximum  amount  of the lesser of $25 million or
the total of eligible accounts receivable and  inventory  as defined in the
revolving line of credit agreement. (Please see Exhibit 4.1   and Note 7 of
the June 30, 1997 financial statements included in this Form 10-KSB  for  a
description of the terms and maturities of this loan.)

     See Item 12, "Certain Relationships and Related Transactions," of this
Annual  Report  on  Form  10-KSB  for a description of the sale (and use of
proceeds thereof) of certain securities  of  the  Company during the fiscal
years ended June 30, 1996 and 1997.

     Management believes, but can give no assurance,  that  these infusions
of debt and equity capital will result in sufficient capital to support the
Company's  existing  operations,  but the Company may be required  to  seek
external financing sources to support  expansion  of  its existing lines of
business.  There  can  be no assurance that the Company would  be  able  to
obtain such financing on reasonable or attractive terms, if at all.

LOSS CONTINGENCIES
                    None.



               [THIS SPACE INTENTIONALLY LEFT BLANK]


<PAGE>
ITEM 7.   FINANCIAL STATEMENTS.

SETECH, INC. and Subsidiaries:

     Report of Independent Public Accountants.
     Consolidated Balance Sheets as of June 30, 1997 and June 30, 1996.
     Consolidated Statements  of Operations for the fiscal years ended June
        30, 1997 and 1996.
     Consolidated Statements of Changes in Stockholders' Equity for the
          fiscal years ended June 30, 1997 and 1996.
     Consolidated Statements of  Cash Flows for the fiscal years ended June
        30, 1997 and 1996.
     Notes to Consolidated Financial Statements.



<PAGE>








SETECH, INC. AND SUBSIDIARIES


CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1997 AND 1996

TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Setech, Inc.:


We have audited the accompanying consolidated balance sheet of SETECH, INC. (a
Delaware Corporation and formerly Aviation Education Systems, Inc.) and
Subsidiaries as of June 30, 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Setech, Inc. and
Subsidiaries as of June 30, 1997 and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.


                                         /s/ Arthur Andersen LLP

Nashville, Tennessee
August 29, 1997
<PAGE>
                     INDEPENDENT AUDITOR'S REPORT

The Board of Directors
Aviation Education Systems, Inc.
Murfreesboro, Tennessee


We have audited the accompanying consolidated balance sheet of SETECH, INC. (a
Delaware Corporation and formerly Aviation Education Systems, Inc.) and
Subsidiaries as of June 30, 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aviation Education
Systems, Inc. and subsidiaries as of June 30, 1996 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.


                                            /s/ Dempsey Wilson & Company, PC

Murfreesboro, Tennessee
August 19, 1996
<PAGE>







SETECH, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS

JUNE 30, 1997 AND 1996

<TABLE>
<CAPTION>
                       ASSETS                                 1997                  1996
<S>                                                   <C>                   <C>
CURRENT ASSETS:
   Cash and cash equivalents                            $ 1,633,559          $ 1,328,854
   Accounts receivable, less allowance for
doubtful accounts of $110,689 and $1,665,                 8,449,902            4,549,164
respectively
   Inventories                                           17,305,262            9,302,796
   Deferred tax asset                                      520,328               306,000
   Stock subscriptions receivable                                -               661,500
   Net assets of discontinued operation                          -             1,735,916
   Prepaid expenses and other current assets               504,621                71,323
                                                        --------------      ---------------            
        Total current assets                            28,413,672            17,955,553
                                                     

PROPERTY AND EQUIPMENT, NET                              1,746,551               587,347
NONCURRENT DEFERRED TAX ASSET                               31,197               629,680
COST IN EXCESS OF NET ASSETS ACQUIRED, NET OF
ACCUMULATED AMORTIZATION OF $559,959  AND $413,883,     
RESPECTIVELY                                               6,954,320             1,777,272

OTHER ASSETS                                               126,484                24,072
                                                        ---------------      ---------------       
        Total assets                                    $ 37,272,224         $ 20,973,924
                                                        ---------------      --------------- 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Notes payable-financial institutions                 $        -           $ 7,794,044
    Current portion of long-term debt                      411,620               539,016
   Current portion of capital lease obligations             95,129                58,189
   Accounts payable                                      5,975,425             3,353,691
   Accrued expenses                                      2,015,289             1,351,888
   Income taxes payable                                     86,297                47,636
                                                        ----------------     ---------------
        Total current liabilities                        8,583,760            13,144,464
                                                        ----------------     ---------------

LONG-TERM DEBT, NET OF CURRENT PORTION                  20,099,790             1,075,497
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION          411,562               154,725
                                                        ----------------     ---------------
                                                        20,511,352             1,230,222
                                                        ----------------     ---------------
COMMITMENTS AND CONTINGENCIES

PUTTABLE STOCK                                             510,204                     -
                                                        ----------------     ---------------    
STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value, 10,000,000 and
    400,000,000 shares authorized, respectively;
    5,669,003 and 5,413,901 shares issued, respectively     56,690                54,139
   Additional paid-in capital                           11,916,583            11,512,038
   Accumulated deficit                                  (4,098,166)           (4,612,082)
   Treasury stock                                         (208,199)             (354,857)
                                                        ----------------     ----------------
                                                         7,666,908             6,599,238
                                                        ----------------     ----------------

        Total liabilities and stockholders' equity      $ 37,272,224         $ 20,973,924
                                                        ----------------     ----------------
</TABLE>

The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE>




SETECH, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30, 1997 AND 1996


<TABLE>
<CAPTION>
                                                              1997                  1996
<S>                                                   <C>                   <C>
REVENUES                                               $ 35,167,717          $ 34,468,123
COST OF REVENUES                                        31,500,600          31,509,822
                                                       ----------------     ---------------
       Gross profit                                     3,667,117            2,958,301

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES                                                2,055,716            1,765,263
                                                       ----------------      --------------
       Operating income                                 1,611,401            1,193,038
                                                        ---------------      --------------
OTHER INCOME (EXPENSE):
  Interest income                                         99,834                75,124
  Interest expense                                      (769,636)             (558,294)
                                                        ---------------      -------------
                                                        (669,802)             (483,170)
                                                        ---------------      -------------      
   Income from continuing operations before
     income taxes                                        941,599               709,868

INCOME TAX BENEFIT (PROVISION)                          (428,026)              692,882
                                                        ----------------      -------------
       Income from continuing operations                 513,573             1,402,750
                                                        ----------------     --------------
DISCONTINUED OPERATIONS:
  Operating income (loss), net of applicable tax
  provision of $132,604 and $113,238, respectively       112,112                 (3,511)
  Loss on disposal, net of applicable tax provision
     of $310,882                                        (111,769)                    -
                                                        ----------------     ---------------- 
       Income (loss) from discontinued operations            343                (3,511)
                                                         ---------------     ----------------

NET INCOME                                              $ 513,916            $ 1,399,239
                                                        -----------------    ----------------
  
NET INCOME  PER SHARE:
  Primary -
     Income from continuing operations                  $   0.10             $    0.27
     Income from discontinued operations                    0.00                  0.00
                                                         ----------          ------------
       Net income per share                             $   0.10             $    0.27

  Fully diluted -
     Income from continuing operations                  $   0.09             $    0.24
     Income from discontinued operations                    0.00                  0.00
                                                         -----------         ------------
       Net income per share                             $   0.09             $    0.24
</TABLE>


The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>






SETECH, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED JUNE 30, 1997 AND 1996


<TABLE>
<CAPTION>
                                       Treasury Stock             Common Stock              Paid-In        Accumulated
                                     Shares       Amount        Shares        Amount        Capital        Deficit        Total
<S>                               <C>          <C>           <C>           <C>           <C>           <C>            <C>
BALANCE (DEFICIT), AT JUNE 30,    -                    $-     5,413,901       $54,139   $11,495,681   $(6,011,321)    $5,538,499
1995
  Purchase of treasury stock      1,018,410   (1,264,000)             -             -             -              -   (1,264,000)
  Sales of treasury stock         (732,500)       909,143             -             -        16,357              -       925,500
  Net income                      -                     -             -             -             -      1,399,239     1,399,239
                                 --------------------------------------------------------------------------------------------------
BALANCE (DEFICIT), AT JUNE 30, 
1996                               285,910       (354,857)     5,413,901        54,139    11,512,038    (4,612,082)     6,599,238

   SALES OF TREASURY STOCK        (122,215)       146,658             -             -        24,443              -       171,101
  Issuance of stock for Lewis,
      net of amounts redeemable
      under put option            -                     -       255,102         2,551       380,102              -       382,653
  Net income                      -                     -             -             -             -        513,916       513,916
                                 ---------------------------------------------------------------------------------------------------
BALANCE (DEFICIT), at June 30,    163,695      $(208,199)     5,669,003       $56,690   $11,916,583   $(4,098,166)    $7,666,908
1997
</TABLE>


  The accompanying notes to consolidated financial statements are an integral
                           part of these statements.
<PAGE>




                         SETECH, INC. AND SUBSIDIARIES


                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                  FOR THE YEARS ENDED JUNE 30, 1997 AND 1996

<TABLE>
<CAPTION>
                                                              1997                  1996
<S>                                                   <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Income from continuing operations                    $  513,573           $ 1,402,750
   Adjustments to reconcile income from continuing
operations to net cash used in continuing operations:
        Depreciation and amortization                      316,381               344,184
        Bad debt                                                 -                (5,835)
        Deferred income taxes                              384,968              (566,859)
        Gain on disposal of equipment                            -                (4,028)
        Changes in operating assets and liabilities:
          Accounts receivable                            1,261,779            (3,075,982)
          Inventories                                   (1,591,748)           (3,047,101)
          Other assets                                     (90,264)              (24,914)
          Accounts payable                                (988,864)            2,150,030
          Accrued expenses                                 120,765                70,906
          Income taxes payable                              38,661              (129,318)
                                                         --------------      ---------------
             Net cash used in continuing operations        (34,749)           (2,886,167)
                                                         --------------      ---------------
   Discontinued operations:
        Income (loss) from discontinued operations         112,112                (3,511)
        Loss on disposal of discontinued operations       (111,769)                    -
        Changes in net assets of discontinued              (90,748)                3,511
          operations                                       ------------      ---------------
             Net cash used in discontinued operations      (90,405)                    -
                                                           ------------      ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from sale of equipment                              -                 4,028
    Proceeds from sale of business                       2,150,000                     -
    Consideration paid for Lewis                        (6,306,357)                    -
    Purchase of equipment                                 (122,079)              (53,985)
                                                         ---------------       -------------   
             Net cash used in investing activities      (4,278,436)              (49,957)
                                                        ----------------       -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds from (payments on) short-term debt      (7,794,044)            3,165,607
   Proceeds from long-term debt                         13,011,940             1,000,000
   Payments on long-term debt                           (1,254,098)             (470,338)
   Payments on capital lease obligations                   (88,104)                    -
   Proceeds from sale of treasury stock, less related      
     receivable                                            171,101               264,000
   Collection of stock subscriptions receivable            661,500                     -
   Purchase of treasury stock                                    -            (1,264,000)
                                                         --------------      --------------   
             Net cash provided by financing             
                activities                                4,708,295             2,695,269
                                                         --------------      --------------
NET  INCREASE (DECREASE) IN CASH AND 
CASH EQUIVALENTS                                            304,705              (240,855)
               
CASH AND CASH EQUIVALENTS, 
BEGINNING OF PERIOD                                       1,328,854             1,569,709       
                                                          -------------      --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                $ 1,633,559          $ 1,328,854
</TABLE>

     (CONTINUED)
<PAGE>




  SETECH, INC. AND
    SUBSIDIARIES


    CONSOLIDATED
 STATEMENTS OF CASH
       FLOWS

FOR THE YEARS ENDED
 JUNE 30, 1997 AND
        1996

    (CONTINUED)

<TABLE>
<CAPTION>
                                                              1997                  1996
<S>                                                   <C>                   <C>
SUPPLEMENTARY INFORMATION:
    Cash paid from continuing operations during the
        year for:
      Interest                                          $  747,337           $   572,649
      Income taxes                                          47,636                38,176
    Non-cash transactions:
      Notes payable issued to former shareholders of
       Lewis in connection with acquisition                750,000                     -

      Stock issued for acquisition of Lewis                892,857                     -
      Additional shares of stock to be issued for                        
         acquisition of Lewis                              107,142                     - 
      Long-term capital leases                             363,386               251,623
</TABLE>
  THE ACCOMPANYING
      NOTES TO
    CONSOLIDATED
FINANCIAL STATEMENTS
ARE AN INTEGRAL PART
OF THESE STATEMENTS.
<PAGE>




SETECH, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 1997 AND 1996



THE COMPANY'S BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

   ORGANIZATION

   SETECH, Inc. (formerly Aviation Education Systems, Inc. and the "Company")
   is a provider of integrated supply services specializing in the procurement
   and management of tooling, supply and proprietary spare parts inventories
   for the automotive and other manufacturing industries, as well as a provider
   of sophisticated machining services primarily for aviation and medical
   instrument manufacturing concerns.

   Prior to January of 1997, the Company was also a provider of air traffic
   control, weather observing and forecasting services under contracts with the
   FAA and other federal, state and local governments and agencies through its
   former subsidiaries Barton ATC, Inc. and Barton ATC International, Inc.  In
   January of 1997, the Company sold its stock in these subsidiaries (see Note
   16).

   PRINCIPLES OF CONSOLIDATION

   The consolidated financial statements include the accounts of SETECH, Inc.
   and its wholly-owned subsidiaries Lewis Supply Company, Inc. ("Lewis"),
   Southeastern Technology, Inc.  and Titan Services, Inc.  References to the
   Company in these notes include SETECH, Inc. and its subsidiaries on a
   consolidated basis.  All significant intercompany balances and transactions
   have been eliminated in consolidation.

   CASH EQUIVALENTS

   The Company considers all highly liquid debt instruments with an original
   maturity of three months or less to be cash equivalents.

   INVENTORIES

   Inventories are generally stated at the lower of cost or market.  Cost is
   determined principally using the first-in, first-out (FIFO) method.

<PAGE>




   PROPERTY AND EQUIPMENT

   Property and equipment are recorded at cost and depreciated on a straight-
   line basis over the estimated useful lives of the assets as follows:
   vehicles and machinery and equipment - 3 to 7 years; furniture and fixtures
   - 5 to 7 years; leasehold improvements - 7 to 15 years; building - 40 years.
   Expenditures for maintenance and repairs are generally charged to expense as
   incurred, whereas expenditures for improvements and replacements are
   capitalized.

   The cost and accumulated depreciation of assets sold or otherwise disposed
   of are removed from the accounts and the resulting gain or loss is reflected
   in the consolidated statements of operations.

   Property and equipment obtained through purchase acquisitions are stated at
   the estimated fair value determined on the respective dates of acquisitions.

   INTANGIBLE ASSETS

   The excess of the aggregate purchase price over the fair value of assets of
   businesses acquired (goodwill) are being amortized on a straight-line basis
   over a period of 15 to 40 years.

   Subsequent to an acquisition, the Company continually evaluates whether
   later events and circumstances have occurred that indicate the remaining
   estimated useful life of its intangible assets may warrant revision or that
   the remaining balance of such assets may not be recoverable.  When factors
   indicate that such assets should be evaluated for possible impairment, the
   Company uses an estimate of the acquired operation's undiscounted cash flows
   over the remaining life of the asset in measuring whether the asset is
   recoverable.

   REVENUE AND EXPENSE RECOGNITION

   The Company maintains contracts with its customers to procure and manage
   tooling, supply and proprietary spare parts inventories under various terms.
   The Company's contracts are generally from three to five years in length
   with renewal provisions for subsequent periods.   Management expects to
   renew the Company's existing contracts for periods consistent with the
   remaining renewal options allowed by the contracts or other reasonable
   extensions.

   Revenues from procurement and inventory management services are recognized
   as the related inventory items are delivered and as fixed fees and
   incentives are earned.

   CREDIT RISK AND CONCENTRATION OF ACTIVITIES

   The Company grants credit terms in the normal course of business to its
   customers.  Credit limits, ongoing credit evaluation and account monitoring
   procedures are utilized to minimize the risk of loss.  Collateral is
   generally not required.
<PAGE>




   A significant number of the Company's customers are in the aviation,
   automobile and medical instrument industries.   Approximately 73% of the
   Company's total revenues, for the 1997 and 1996 fiscal years, were to a
   customer in the automobile industry.  Trade accounts receivable at June 30,
   1997 include approximately $2.3 million due from the same customer .

   INCOME TAXES

   The Company accounts for income taxes under Statement of Financial
   Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
   Under the asset and liability method of SFAS 109, deferred tax assets and
   liabilities are recognized for the future tax consequences attributable to
   differences between the financial statement carrying amounts of existing
   assets and liabilities and their respective tax bases.  Deferred tax assets
   and liabilities are measured using enacted tax rates expected to apply to
   taxable income in the fiscal years in which those temporary differences are
   expected to be recovered or settled.  Under SFAS 109, the effect on deferred
   tax assets and liabilities of a change in tax rates is recognized in income
   in the period that includes the enactment date.

   STOCK-BASED COMPENSATION

   Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
   Based Compensation" ("SFAS 123"), encourages, but does not require,
   companies to record compensation cost for stock-based employee compensation
   plans at fair value.  The Company has chosen to continue to account for
   employee stock-based compensation using the intrinsic value method as
   prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
   Stock Issued to Employees" ("APB Opinion No. 25"), and related
   Interpretations.  Under APB Opinion No. 25, no compensation cost related to
   employee stock options has been recognized because all options are granted
   with exercise prices equal to or greater than the estimated fair market
   value at the date of grant.  See Note 11 for further discussion.

   NET INCOME PER SHARE

   Primary net income per share is computed by dividing net income by the
   weighted average number of common shares outstanding during the year.  Fully
   diluted net income per share reflects the effect of common shares
   contingently issuable upon conversion of convertible debt securities in
   periods in which such conversion would cause dilution and the effect on net
   income of converting the debt securities.

   Statement of Financial Accounting Standards No. 128, "Earnings per Share"
   ("SFAS 128"), has been issued effective for fiscal periods ending after
   December 15, 1997, and establishes standards for computing and presenting
   earnings per share.  The Company is required to adopt the provisions of SFAS
   128 in the second quarter of fiscal 1998.  Adoption of SFAS 128  at June 30,
   1997 would not have a material effect on the Company's financial statements,
   taken as a whole.
<PAGE>




   RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION

   Amounts received from customers for the cost of inventory acquired and sold
   under inventory procurement and management contracts, which were previously
   recorded as a reduction in cost of revenues, have been reclassified as
   revenues in the accompanying consolidated statements of operations.  This
   reclassification conforms the Company's presentation to industry practice.

   Certain additional reclassifications have been made to the 1996 financial
   statements to conform with the 1997 presentation.

   USE OF ESTIMATES

   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 and
   disclosure of contingent assets and liabilities at the date of the financial
   statements as well as the reported amounts of revenues and expenses during
   the reporting period.  Actual results may differ from those estimates.

   NEW ACCOUNTING PRONOUNCEMENTS

   In March 1995, the Financial Accounting Standards Board ("FASB") issued
   Statement of Financial Accounting Standards No. 121, "Accounting for the
   Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of"
   ("SFAS 121").  This statement imposes criteria for evaluating the
   recoverability of long-term assets at each balance sheet date.  The Company
   adopted SFAS 121 effective July 1, 1996.  The Company did not experience a
   material impact on its results of operations, financial condition or cash
   flows as a result of adoption.

   In February 1997, the FASB issued Statement of Financial Accounting
   Standards No. 129, "Disclosure of Information about Capital Structure"
   ("SFAS 129").  SFAS 129 establishes standards for disclosing information
   about an entity's capital structure.  The Company will be required to adopt
   SFAS 129 in the second quarter of fiscal 1998.   Management does not expect
   the adoption to have a material impact on the Company's financial position,
   results of operations or cash flows.



2. ACQUISITION

   Effective June 26, 1997, the Company acquired Lewis in a purchase
   transaction.  The acquisition was consummated by the exchange of 255,102
   shares of the Company's common stock, a commitment to issue an additional
   30,612 shares of the Company's common stock, $5,952,500 cash and notes
   payable totaling $750,000 for 100% of the outstanding shares of Lewis's
   common stock.  The principal shareholder and three employees of Lewis also
   entered into an employment agreement and an agreement not to compete with
   the Company (see Note 13).
<PAGE>




   The 30,612 additional shares of the Company's common stock will be issued in
   increments of 10,204 shares per year on June 1 of 1998, 1999 and 2000,
   respectively.   These shares have been valued as of the date of the
   acquisition and recorded in the accompanying consolidated balance sheets as
   an accrued expense.

   The total purchase price, including costs associated with the acquisition,
   was $8,056,356 which has been tentatively allocated to the assets acquired
   and liabilities assumed based on their estimated fair values as follows:


<TABLE>
<CAPTION>
<S>                                <C>
Current assets                     $11,898,815
Property and equipment                 844,045
Goodwill                             5,323,123
Other assets                           119,866
Deferred tax assets, net               324,149
Current liabilities                (4,046,092)
Long-term debt                     (6,407,550)
                                   ------------
                                    $8,056,356
</TABLE>

   The purchase price has been allocated to the assets acquired and liabilities
   assumed based on information currently available as to their estimated fair
   values.   Should additional information indicate changes to this evaluation,
   net additions or reductions in the fair values currently assigned will be
   credited to or charged against amounts allocated to goodwill.

   The following unaudited pro forma information combines the consolidated
   results of the Company and Lewis as if the acquisition had occurred on July
   1, 1995, after giving effect to amortization of goodwill and interest
   expense on borrowings to finance the acquisition.  The pro forma information
   is not necessarily indicative of the results of operations which would have
   been obtained during such periods.  While the Company believes that it will
   realize certain long-term synergies through the integration of certain
   operating functions, there can be no assurances that such synergies can be
   realized, and no amounts have been reflected in the pro forma adjustments to
   reflect such anticipated synergies.

<TABLE>
<CAPTION>
                                                           Fiscal Year Ended
                                                            June 30, 1997           June 30, 1996
                                                                          (UNAUDITED)

<S>                                                       <C>                     <C>     
Revenues from continuing operations                       $ 76,253,990            $ 72,605,297
                                                          --------------         ---------------  
Net income from continuing operations                     $ 432,485               $ 1,414,078
                                                          --------------         ---------------
Net income from continuing operations per
  share:
   Primary                                                $ 0.08                  $ 0.26
                                                          ---------------         -------------- 
   Fully diluted                                          $ 0.06                  $ 0.21
</TABLE>



<PAGE>




3. INVENTORIES

   Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                1997                   1996
<S>                                                    <C>                    <C>
       Parts purchased under procurement contracts      $15,586,937                   $ 7,530,264
       Specialty machining contracts in process         1,505,316                      1,338,698
       Raw materials                                      213,009                      433,834
                                                        --------------           ------------------
                                                        $17,305,262                   $ 9,302,796
</TABLE>


PROPERTY AND EQUIPMENT

   Property and equipment, at cost, consist of the following:

<TABLE>
<CAPTION>
                                                                1997                   1996
<S>                                                    <C>                    <C>
       Land                                               $28,717                     $ -
       Building                                           271,450                      -
       Machinery and equipment                          2,719,651                   2,341,478
       Furniture and fixtures                             595,790                      52,950
       Vehicles                                            39,534                      39,535
       Leasehold improvements                             150,068                     129,051
                                                       --------------              -------------
                                                        3,805,210                   2,563,014
  
       Less accumulated depreciation and
         amortization                                   (2,058,659)                (1,975,667)
                                                        -----------------          --------------    
                                                        $1,746,551                   $ 587,347
</TABLE>

   Depreciation expense totaled $170,306 in 1997 and $198,108 in 1996.
   Substantially all property and equipment is pledged as collateral on the
   Company's revolving line of credit (See Note 7).


5. ACCRUED EXPENSES

   Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                                1997                   1996
<S>                                                    <C>                    <C>
       Employees' compensation and benefits              $906,057                     $ 858,618
       Other accrued expenses                             950,112                      135,326
       Customer deposits                                  159,120                      357,944
                                                         ------------          ------------------
                                                        $2,015,289                    $ 1,351,888
</TABLE>

<PAGE>




6. NOTES PAYABLE - FINANCIAL INSTITUTIONS

   During 1996 and a portion of 1997, the Company maintained revolving
   lines of credit with total borrowing capacity of $8,800,000 and interest
   at variable rates.   Amounts outstanding under these lines totaled
   $7,794,044 at June 30, 1996.   Substantially all of the Company's
   accounts receivable, inventory and fixed assets were pledged as
   collateral under the lines.  The lines matured during 1997.


7. LONG-TERM DEBT

   Long-term debt as of June 30, 1997 and 1996, consists of the following
   balances:

<TABLE>
<CAPTION>
                                                                1997                   1996
<S>                                                       <C>                    <C>
Revolving line of credit to bank, interest due
  monthly at LIBOR plus 2.5% (8.5% at June 30, 1997).
  Matures June 26, 2000.                                   $17,806,182                   $ -
       
Notes payable to former shareholders of Lewis,
  due in annual installments of  $250,000 principal plus
  interest at 7.5%.  Matures June 1, 2000.                     750,000                      -
 
Convertible subordinated debentures, due in
   annual installments of principal of $750,000
   beginning July 1, 1999.   Interest payable
   annually at 8.5%.  Matures July 1, 2000.
   Convertible to common stock in the event of
   default at a rate of one common share for
   each $3 of principal and interest
   outstanding.                                              1,500,000                      -

Convertible subordinated debentures, due in
    annual installments of principal and interest
    of  $161,024 at 8.0%.  Matures from June 30,
    1999 to March 1, 2001.   Convertible to
    common stock in the event of default at
    varying rates of one common share for each $1
    to $1.06 of principal and interest
    outstanding.                                                362,630                      565,291
</TABLE>
<PAGE>





<TABLE>
<CAPTION>
                                                                      1997                     1996
<S>                                                         <C>                      <C>
       Convertible subordinated debentures extinguished
          during 1997.                                       $-                       $ 1,000,000
       Other notes payable                                      92,598                     49,222
                                                              --------------          -----------------
                                                             20,511,410                 1,614,513
       Less current portion                                  (411,620)                   (539,016)
                                                             ----------------         -----------------   
                                                             $20,099,790               $ 1,075,497
</TABLE>

   The Company's debentures are payable to two of its stockholders and are
   subordinated to all other indebtedness.  Outstanding principal and accrued
   interest is convertible to the Company's common stock only in the event of
   default.  The notes payable to former Lewis shareholders are subordinated to
   the revolving line of credit facility.

   Maximum borrowings available under the revolving line of credit are limited
   to the lesser of $25 million or the total of eligible accounts receivable
   and inventory as defined in the revolving line of credit agreement (the
   "Agreement").  Additional borrowings available under the line at June 30,
   1997 were approximately $1 million.  In addition to customary provisions
   related to events of default, the Agreement provides that an event of
   default will occur upon the termination of any "eligible supply contract"
   (as defined in the Agreement) or upon a change in control of the Company (as
   defined in the Agreement).  The revolving line of credit is secured by
   substantially all assets of the Company and  contains covenants regarding
   certain financial statement amounts, ratios and activities of the Company
   and its subsidiaries.  At June 30, 1997, the Company was in compliance with
   such covenants or had obtained appropriate waivers.

   Annual maturities of long-term debt are summarized as follows:

<TABLE>
<CAPTION>
                  YEAR ENDING JUNE 30,
<S>                          <C>
1998                             $411,620
1999                              422,422
2000                           18,882,583
2001                              794,785
                               ------------                               
                              $20,511,410
</TABLE>


<PAGE>




8. CAPITAL LEASE OBLIGATIONS

   The Company leases certain manufacturing equipment under capital leases.
   Related cost and accumulated depreciation of assets under capital leases at
   June 30, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                1997                  1996
<S>                                     <C>                   <C>
Machinery and equipment                   $615,010              $251,624
Accumulated depreciation                  (80,626)              (22,328)
                                          -------------        ---------------
                                          $534,384              $229,296
</TABLE>


   The future minimum lease payments required under the capital leases at June
   30, 1997 are summarized as follows:

<TABLE>
<CAPTION>
            Year
            <S>                                            <C>
            1998                                           $167,756                                                    
            1999                                            167,756
            2000                                            114,023
            2001                                             92,382
            2002                                             70,564
                                                            ---------
            Total minimum lease obligations                 612,481
            Less: interest                                 (105,790)
                                                         -------------
            Present value of total minimum lease
              obligations                                $  506,691
</TABLE>


9. INCOME TAXES

   Income tax expense (benefit) on income from continuing operations consisted
   of the following for the fiscal years ended June 30, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                1997                   1996
<S>                                                    <C>                    <C>
       Current tax expense (benefit)                      $43,058                     $ (64,370)
       Deferred tax expense                               391,675                      440,836
       Reduction in valuation allowance                   (6,707)                      (1,069,348)
                                                        -----------------      ---------------------
                                                         $428,026                     $ (692,882)
</TABLE>
<PAGE>




 A reconciliation of the U.S. Federal statutory rate to the effective rate for
 income tax expense (benefit) on income from continuing operations is as
 follows:

<TABLE>
<CAPTION>
                                                1997                  1996
<S>                                     <C>                   <C>
U.S. Federal statutory rate               $320,144              $199,521
State taxes on income                       37,664                18,224
Expenses not deductible                     57,380                90,246
Other                                       19,545                68,475
Change in valuation allowance              (6,707)           (1,069,348)
                                         ------------        -------------- 
                                          $428,026            $(692,882)
</TABLE>

Significant components of the Company's deferred tax liabilities and assets,
using a tax rate of 38%, are as follows:

<TABLE>
<CAPTION>
                                                                1997                   1996
<S>                                                    <C>                    <C>
       Current assets:
         Reserves on assets                              $314,650              $ -
         Liabilities not yet deductible                   187,570            250,598
         Other                                             18,108             55,402
                                                       ------------          -------------  
                Net current asset                         520,328            306,000
                                                       ------------          -------------
       Noncurrent assets (liabilities):
         Net operating loss deductions                 66,801                 831,483
         Other                                         -                      (43,185)
         Depreciation                                  (35,604)               (151,911)
                                                       -------------         ------------
           Noncurrent asset                            31,197                 636,387
           Less valuation allowance                    -                      (6,707)
                                                       --------------        ------------
                Net noncurrent asset                   31,197                 629,680
                                                       --------------        ------------ 
       Total net deferred tax asset                      $551,525                $935,680
</TABLE>

   SFAS 109 requires the Company to record a valuation allowance when it is
   "more likely than not that some portion or all of the deferred tax assets
   will not be realized."  It further states that "forming a conclusion that a
   valuation allowance is not needed is difficult when there is negative
   evidence such as cumulative losses in recent years."   In 1996, the Company
   significantly reduced a previously recorded valuation allowance based upon
   expected realization of tax benefits.   The ultimate realization of deferred
   income tax assets depends on the Company's ability to generate sufficient
   taxable income in the future.  If the Company is unable to generate
   sufficient taxable income in the future through operating results or tax
   planning opportunities, increases in the valuation allowance will be
   required through a charge to expense (decreasing stockholders' equity).

   At June 30, 1997, the Company had approximately $200,000 of net operating
   loss carryforwards for federal income tax purposes available to offset
   future taxable income, which begin expiring in 2003.

<PAGE>




10. PUTTABLE STOCK AND SHAREHOLDER AGREEMENT

   In connection with the acquisition of Lewis, 255,102 shares of the Company's
   common stock issued and 30,612 of the shares to be issued are subject to a
   shareholder agreement.   Under the terms of the agreement, the shareholder
   has the option to require the Company to repurchase the shares at a price of
   $2.00 per share if the Company has not effected a public offering of the
   Company's common stock on a major stock exchange prior to April 30, 2000, or
   in the event of a change in control of the Company (as defined in the
   agreement).   The agreement also requires the shareholder to grant the
   Company a right of first refusal in certain circumstances (as defined in the
   agreement) on any proposed sale of the Company's common stock by the
   shareholder.  The agreement expires on June 30, 2000.


11.  STOCKHOLDERS' EQUITY

   COMMON STOCK

   During fiscal 1997, the Company decreased the number of authorized shares of
   common stock from 400 million to 10 million.

   On February 28, 1996, the Company repurchased 1,018,410 shares of the
   Company's common stock held by a former executive for $1,264,000.  The
   Company subsequently reissued 732,500 of these treasury shares to certain
   officers, affiliates and existing shareholders for $925,500.  Stock
   subscriptions receivable represent payments in transit on June 30, 1996 for
   the reissuance of shares.  During fiscal 1997, a director and certain
   officers acquired 122,215 shares for $171,101.

   STOCK OPTIONS

   In August 1994, the Company approved stock option plans for officers, key
   executives and directors, which provide for both non-qualified and qualified
   incentive stock option grants for which options may be granted to "key
   employees" as designated by the Board of Directors.  These options will vest
   over a period of four years and expire either three months after termination
   of employment or ten years after date of grant.  The Company reserved up to
   250,000 shares of its common stock for future issuance under these plans.
   At June 30, 1997, the Company had options for 29,556 shares outstanding
   under the plan with an exercise price of $1.40.  No options were outstanding
   under the plan at June 30, 1996.
<PAGE>




   In addition to the above plans, the Company issued options for 45,000 shares
   to an employee and former shareholder of Lewis during 1997.  The options
   became exercisable upon issuance, have an exercise price of $3.50 per share
   and expire one month after termination of the individual's employment with
   the Company.

   The Company accounts for options issued to employees under APB Opinion No.
   25.  All options are granted with exercise prices equal to or greater than
   management's estimate of the fair value of the Company's common stock on the
   date of grant.   As a result, no compensation cost has been recognized.

   Had compensation cost for the Company's employee stock option plans been
   determined based on the fair value at the grant date for awards in 1997
   consistent with the provisions of SFAS No. 123, the Company's net income and
   earnings per share would have been reduced to the following pro forma
   amounts for the 1997 fiscal year:

<TABLE>
<CAPTION>
                                                                        1997
<S>                             <C>                             <C>
Net income:                     As reported                      $ 513,916
                                                                 -----------
                                Pro forma                        $ 490,695

Net income per share:

   Primary                      As reported                      $   0.10
                                                                 ------------
                                Pro forma                        $   0.09

   Fully diluted                As reported                      $   0.09
                                                                 ------------
                                Pro forma                        $   0.09
</TABLE>

   The resulting pro forma compensation cost  may not be representative of that
   to be expected in future years.

   The fair value of each option on its date of grant has been established for
   pro forma purposes using the Black-Scholes option pricing model using the
   following weighted average assumptions:

                                             1997

   Expected dividend yield                   0.00%
   Expected stock price volatility           0.00%
   Risk free interest rate                   6.05%
   Expected life of options                  5 years

<PAGE>




12. NET INCOME PER SHARE

   The following table presents information necessary to calculate fully
   diluted net income per share for the fiscal years ended June 30, 1997 and
   1996:

<TABLE>
<CAPTION>
                                                                1997                   1996
<S>                                                    <C>                    <C>
         Income from continuing operations               $513,573                     $ 1,402,750
         Plus interest on convertible debentures, net
            of associated tax provision                    62,048                      47,207
                                                        -----------            --------------------
         Adjusted income from continuing
           operations                                    $575,621                     $ 1,449,957
                                                        ------------           ---------------------       

         Weighted average shares outstanding            5,261,008                      5,158,850
         Plus additional shares issuable upon
           conversion of convertible debentures            891,883                      947,025
                                                         ------------          --------------------- 
         Adjusted weighted average shares
           outstanding                                  6,152,891                      6,105,875
</TABLE>


13. COMMITMENTS AND CONTINGENCIES

   LEASES

   The Company rents certain facilities, primarily office and warehousing
   facilities, under various operating leases which expire beginning March 1998
   through December 31, 2006.  Rent expense totaled $312,079 in 1997 and
   $259,744 in 1996, respectively.

   Minimum future lease payments are estimated as follows:

<TABLE>
<CAPTION>
                  YEAR ENDING JUNE 30,
<S>                    <C>
1998                   $150,017
1999                     11,690
2000                      3,936
                        ---------
                       $165,643
</TABLE>

   EMPLOYMENT AND NONCOMPETE AGREEMENTS

   Subsequent to its acquisition of Lewis, the Company entered into an
employment agreement with a former shareholder of Lewis.   The agreement
contains certain severance benefits including one year of salary continuation
if the employee is terminated without cause or resigns as a result of a change
in control of the Company prior to the expiration of the agreement.  The
agreement is for a term of three years and includes an agreement not to compete
with the Company for a period of one year after termination of the individual's
employment with the Company.

   The Company also entered into employment agreements with three employees of
Lewis.   The agreements contain certain severance benefits including one year
of salary continuation if the employees are terminated without cause prior to
the expiration of the agreements.  The agreements are for terms of two years
and include an agreement not to compete with the Company for a period of one
year after termination of employment with the Company.


   LITIGATION

   The Company is a defendant in certain legal matters in the ordinary course
of business.  Management believes that the resolution of such matters will not
have a material effect on the Company's financial condition or results of
operations.


14. WAGE DEFERRAL PLAN

   The Company sponsors a 401(k) wage deferral plan (the SETECH, Inc. 401k Plan
   and the "Plan").  All employees of the Company age 21 and older are eligible
   to participate beginning either on April 1 or October 1 subsequent to hire
   date.  During 1997, employees could contribute up to the lesser of $9,500 or
   15% of their salaries, subject to IRS limitations.  All participant
   contributions to the Plan are fully vested at the time of contribution.
   Discretionary employer contributions vest ratably over five years of service
   to the Company.  During fiscal 1997 and 1996, the Company made discretionary
   employer contributions to the Plan totaling $33,027 and $21,547,
   respectively.


15. FAIR VALUE OF FINANCIAL INSTRUMENTS

   The following estimated fair values of financial instruments is made in
   accordance with the requirements of Statement of Financial Accounting
   Standards No. 107, "Disclosures About Fair Value of Financial Instruments".
   The estimated fair value amounts have been determined by the Company using
   available market information and appropriate valuation methodologies.

   CASH, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE

   The carrying amounts of these items are a reasonable estimate of their fair
   value due to their short-term nature.

   LONG-TERM DEBT

   The carrying amount of long term debt approximates fair value as the
   interest rates are predominantly variable which fluctuate with market
   conditions.

<PAGE>




16. DISCONTINUED OPERATIONS

   On January 31, 1997, the Company sold the net assets of Barton ATC, Inc. and
   Barton ATC International, Inc., which represented its governmental services
   industry segment in prior years, to Serco, Inc. for $2,150,000.
   Accordingly, these operations are accounted for as discontinued operations,
   and their assets, liabilities and results of operations are segregated in
   the accompanying consolidated statements of operations, balance sheets and
   statements of cash flows.

   The net loss on the disposal includes additional tax provision which
   resulted from the excess of the Company's book value of its investment in
   the discontinued operations over the value of those operations for income
   tax purposes.  Income from discontinued operations for fiscal 1997 and 1996
   includes amortization of goodwill which is not deductible for income tax
   purposes.

   Revenues associated with the discontinued operations were $6,727,072 and
   $8,332,524 for the fiscal years ended June 30, 1997 and 1996, respectively.
   Assets and liabilities for all periods presented have been reclassified for
   amounts associated with the discontinued operations.  Summarized balance
   sheet data for the discontinued operations is as follows at June 30, 1996:

<TABLE>
<CAPTION>
                                                                1996
<S>                                                  <C>
Current assets                                        $ 2,116,990
Property, plant and equipment, net                        540,660
Goodwill                                                  247,356
                                                       ------------
  Total assets                                          2,905,006

Current liabilities                                    (1,067,406)
Other non-current liabilities                            (101,684)
                                                        -----------
  Net assets                                           $ 1,735,916
</TABLE>

<PAGE>




ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE.

       On June 27, 1997, the Company filed a Form 8-K relating to its change in
certifying accountant from Dempsey Wilson & Company, PC to Arthur Andersen LLP.
Accordingly, the disclosure called for by this Item has been previously
reported as that term is defined in Rule 12b-2 under the Exchange Act.

                               PART III

ITEM 9.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The Company's directors and executive officers are as follows:

NAME, AGE AND POSITION                BIOGRAPHICAL DATA

Mr. Thomas N. Eisenman (47)
President and CEO
Director

           Mr. Eisenman was elected President and CEO of the Company in
           February 1996. He is also the Chief Executive Officer of
           Southeastern and Titan (since June 1995) and Lewis (since June
           1997). He is a Director of the Company and all of its subsidiaries.
           He serves as a member of the Executive Committee of the Company's
           Board of Directors. Mr. Eisenman founded and served as President of
           Southeastern.  He has also held the position of President of Titan
           Services, Inc. and served on the Board of Directors of SEtech, Inc.
           prior to the Company's acquisition in 1993 of SEtech. He worked with
           Kennametal, Inc. in the area of Technical Representation, Technical
           Sales, and Manufacturing Management.  He also served as a
           manufacturing engineer for Teledyne Firth Sterling. Mr. Eisenman
           holds a Bachelor of Arts degree in Natural Sciences from Slippery
           Rock University.

Cindy L. Rollins (33)
Secretary, Treasurer, Director
Vice President and CFO

           Ms. Rollins is Vice President, Chief Financial Officer and a
           Director of the Company and of each of its three subsidiaries. Ms.
           Rollins became Secretary and Treasurer of the Company in July 1992.
           She became Chief Financial Officer of the Company on September 1,
           1993. Ms. Rollins was employed, in June 1986, by BARTON, where she
           had various finance and accounting positions. Ms. Rollins has served
           continuously as a member of the Board of Directors of the Company
           since August 13, 1992. She is a member of the Executive Committee of
           the Company's Board of Directors. Ms. Rollins holds a BBA in
           Accounting from Middle Tennessee State University.

Mr. William J Ballard (55)
Director

           Mr. Ballard was elected as a member of the Board of Directors of the
           Company on April 25, 1996 by a vote of the Board to fill the vacancy
           created by the resignation of Robert W. Lynch, Jr. Mr. Ballard is
           the Chairman and Chief Executive Officer (since March 1993) of
           Children's Comprehensive Services, Inc., a public company engaged in
           the business of juvenile education and treatment. Previously, he
           served as President of Paladin Capital and President of Major Safe
           Company, Inc. Mr. Ballard holds a B.S. from Middle Tennessee State
           University and an M.B.A. from the University of Chicago.


Mr. Hans R. Buser (49)
Director

           Mr. Buser is a lawyer and certified accountant with degrees in Law
           (1972) from the University of Basel, Switzerland; and in Accounting
           (1982) from the Audit School of Basel, Switzerland.  Mr. Buser has
           held positions in the Swiss financial community and in the
           government of Switzerland.  He is presently serving as a Vice
           President in the Audit Division of ATAG Ernst & Young of Basel,
           Switzerland.  Mr. Buser currently serves as a member of the
           Environmental Committee of the City of Wallbach, Switzerland.

Mr. Peter Joss (54)
Director

           Mr. Joss holds a Bachelor of Business Administration and a Masters
           Degree in Economics from the St-Gall School of Economics,
           Switzerland.  From 1969 to 1971 Mr. Joss worked at the Institute of
           Tourism and Transport at the St-Gall School of Economics and from
           1971 to 1973 was responsible for transport and tourism matters in
           the cantonal government of St-Gall.  Mr. Joss held, from 1973 until
           1980, a post with the Federal Transit Authority, in Bern, where he
           was responsible for public finance of the Swiss railroad system.
           Following that assignment, from 1980 until 1988, he served as the
           Vice President, Finance, of the Swiss Federal Transit Authority.
           Since 1988, Mr. Joss has served as the Chief Executive Officer of
           Mittelthurgaubahn, a Swiss railroad, and as the Chairman of the
           Board of Directors of both Reiseburo Mittelthurgau and Hotel
           Thurgauerhof, Weinfelden.  He is currently a member of the Board of
           Directors of several Swiss and French companies.
Mr. Martin Oester (40)
Director

           Mr. Oester is an economist with degrees in Economics from the
           University of Neuchatel and in Education from the Teachers Training
           College in Spiez, Switzerland.  Mr. Oester has taught, both at the
           secondary and post secondary levels; served the Swiss Railway Union
           as an advisor in economic affairs and transportation policy and,
           since 1989, has been Investment Manager for, and Vice President of,
           Pensionskasse der ASCOOP, a Swiss pension fund. Pensionskasse der
           ASCOOP is the largest single holder of the Company's capital stock.

     The Board of Directors is authorized to have up to seven members; the
board currently consists of six Directors. The directors are annually elected
for a one year term by the stockholders. The Board of Directors is authorized
to fill any interim vacancy.

     Messrs. Ballard, Buser, Joss and Oester comprise the four members of the
Compensation Committee of the Board of Directors of the Company.

      Anthony Morriello serves as President of Southeastern. Richard Hulbert is
the President of Titan. Michael S. Burnham, Jr. is Corporate Leader of Lewis.

        Section 16(a) Beneficial Ownership Reporting Compliance

     The Company's officers, directors and 10% shareholders have disclosed
information pursuant to Section 16(a) relating to certain events and
transactions not formerly disclosed in Section 16 reports, though information
relating to beneficial ownership and certain transactions of officers,
directors and 10% shareholders has been disclosed in the Company's periodic
reports. Specifically, Section 16 reports have been filed relating to the
following: Mr. Eisenman - two acquisitions of stock not reported on Form 4 were
reported on Form 5; Mr. Ballard - one acquisition of stock not reported on Form
4 was reported on Form 5; Mr. Oester -his becoming a Director, not reported on
Form 3, and one acquisition of stock, not reported on Form 4, were reported on
Form 5; Mr. Joss - his becoming a Director, not reported on Form 3, and one
acquisition of stock, not reported on Form 4, were reported on Form 5; Mr.
Buser -his becoming a Director, not reported on Form 3, and two acquisitions of
stock, not reported on Form 4, were reported on Form 5.

     Pensionskasse der ASCOOP (ASCOOP) - 5 transactions by 4 affiliates of
ASCOOP not reported on Form 4 (two Form 4's would have been needed to report
these transactions) were reported on Form 5 because the shares acquired by its
affiliates could be deemed to be indirectly beneficially owned by ASCOOP,
though ASCOOP disclaimed beneficial ownership on its Form 5.  Spida
Ausgleichskassen (SPIDA) - 4 transactions by 2 affiliates of SPIDA not reported
on Form 4 (three Form 4's would have been needed to report these transactions)
were reported on Form 5 because the shares acquired by its affiliates could be
deemed to be indirectly beneficially owned by SPIDA, though SPIDA disclaimed
beneficial ownership on its Form 5. Also, three sales transactions by SPIDA not
reported on Form 4 (all of which would have been included on the same Form 4)
were reported on Form 5.

ITEM  10.    EXECUTIVE  COMPENSATION.

       The following table sets forth the cash compensation paid for services
rendered in all capacities to the Company during its fiscal year ended June 30,
1997, to each executive officer of the Company whose cash compensation exceeded
$100,000 in such fiscal year.

<TABLE>
<CAPTION>
                                                            Annual Compensation
                                                                  (in $)
<S>                            <C>           <C>            <C>           <C>
Name and Capacity in which                                                Securities
Remuneration was Received       Year          Salary         Bonus        Underlying Options
Thomas N. Eisenman                 1997             123,461        36,190        7171 Shares
President and CEO                  1996              94,846        27,900                -0-
                                   1995              67,308           -0-                -0-
Robert W. Lynch, Jr. (1)           1997                 -0-           -0-                -0-
                                   1996              87,500           -0-                -0-
                                   1995             150,000           -0-                -0-
Richard Hulbert                    1997             112,635        23,866        6277 Shares
President, Titan                   1996             107,311        25,600                -0-
                                   1995              94,574        16,093                -0-
</TABLE>

<PAGE>




       (1) Mr. Lynch resigned as Chief Executive Officer and a Director of the
     Company and all other offices with the Company and its four subsidiaries
     on January 31, 1996. Compensation includes amounts received from July 1,
     1995 through the date of his resignation.

                 Option/SAR Grants in Last Fiscal Year

<TABLE>
<CAPTION>

                            Number of          % of Total Options
                            Securities         Granted to
                            Underlying Options Employees in Fiscal Exercise or Base
                            Granted            Year                Price ($/share)     Expiration Date
       Name
<S>                         <C>                <C>                 <C>                 <C>
Thomas N. Eisenman
President and CEO           7171               24%                 $1.40               July 1, 2006
Richard R. Hulbert          6277               21%                 $1.40               July 1, 2006
President, Titan
</TABLE>

     Messrs. Hulbert and Burnham and Ms. Rollins have employment agreements
with the Company or one of its three subsidiaries. The term of the employment
agreements for Rollins and Hulbert expires August 31, 1998.  Mr. Burnham's
contract expires June 30, 2000.

     Each member of the Board of Directors of the Company who are not employees
of the Company or any of its subsidiaries receives a quarterly director's fee
of $400.

     See Item 12 (below), "Certain Relationships and Related Transactions," of
this Annual Report on Form 10-KSB for a description of the purchases of Company
common stock by Mr. Eisenman, Mr. Hulbert and certain members of the Board of
Directors during the fiscal years ended June 30, 1996 and 1997.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

                        PRINCIPAL STOCKHOLDERS

     The table below sets forth information regarding the beneficial ownership
of the Common Stock, as of the date hereof and giving effect to the June 30,
1996 reverse stock split, by (i) each person known to the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock,
(ii) each director and executive officer of the Company and (iii) all directors
and executive officers of the Company as a group.  Unless otherwise indicated,
each of the stockholders listed below has sole voting and investment power with
respect to the shares beneficially owned.

<TABLE>
<CAPTION>
                                                                    Amount and
                     Name and Address                       NATURE OF BENEFICIAL OWNER
        CLASS        OF BENEFICIAL OWNER                                                   PERCENT OF CLASS
<S>                  <C>                                    <C>                        <C>
       Common        William J Ballard                                          75,000                      1.3%
                     805 South Church
                     Murfreesboro, Tennessee 37130
       Common        Michael S. Burnham, Jr.                                   255,102                      4.5%
                     477 South Main St.
                     Memphis, Tennessee  38103
       Common        Hans R. Buser                                        135,000  (1)                      2.4%
                     Aeschengraben 9
                     Postfach 2149
                     CH-40002, Basel, Switzerland
       Common        Thomas N. Eisenman                                        324,016                      5.7%
                     905 Industrial Drive
                     Murfreesboro, Tennessee 37129
       Common        Richard R. Hulbert                                        320,265                      5.6%
                     905 Industrial Drive
                     Murphreesboro, TN  37129
       Common        Peter Joss                                                 75,000                      1.3%
                     Schutzenstrasse 15
                     CH-8570, Weinfelden, Switzerland
       Common        Martin Oester                                               2,500                     0.04%
                     Beundenfeldstrasse 5
                     Postfach 694, 3000 Bern, Switzerland
       Common        Cindy L. Rollins                                              -0-                      0.0%
                     905 Industrial Drive
                     Murfreesboro, Tennessee 37130
       Common        Pensionskasse der ASCOOP                          2,600,045   (2)                     45.9%
                     Beundenfeldstrasse 5
                     Postfach 694, 3000 Bern 25,
                     Switzerland
       Common        Spida-Ausgleichskassen                             1,259,205  (3)                     22.2%
                     Bergstrasse 21
                     8044 Z<u">rich, Switzerland
       Common        All officers and directors                              1,186,883                     20.9%
                     as a group (6 persons)(4)
</TABLE>

                (1) Includes 10,000 shares owned by Mr. Buser's spouse.

                (2) Does not include amounts owned by Mssrs. Oester, Joss and
           Buser, each of whom has an affiliation with Pensionskasse der
           ASCOOP.

                (3) Does not include amounts owned by Mr. Buser, who is an
           affiliate of Spida Ausgleichskassen.

                (4) Excludes shares owned by Pensionskasse der ASCOOP, the
           employer of Mr. Oester, a Director of the Company, and with whom Mr.
           Joss and Mr. Buser have an affiliation; and excludes shares owned by
           Spida-Ausgleichskassen with whom Mr. Buser, a Director, has an
           affiliation.


     See Item 12 (below), "Certain Relationships and Related Transactions," of
this Annual Report on Form 10-KSB for a description of the purchase by the
Company of all the Company's shares owned by its former chief executive
officer, Robert W. Lynch, Jr., in February 1996 and the  sale (and use of
proceeds thereof) of certain securities of the Company during the fiscal years
ended June 30, 1996 and 1997 to certain members of its Board of Directors.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Effective January 31, 1996, Robert W. Lynch, Jr., resigned as the
President and Chief Executive Officer of the Company, and from all other
offices and positions with the Company and its subsidiaries. Pursuant to an
agreement between Mr. Lynch and the Company, the Company purchased all of Mr.
Lynch's stock ownership in the Company, aggregating 20,368,200 shares, for a
purchase price of $1,264,000. (Please note that, unless otherwise indicated,
descriptions of transactions in the Company's stock occurring prior to the
effectuation of the June 30, 1996 20-1 reverse stock split reflect "pre-split"
shares.)

     In February 1996 the Company offered 10,000,000 shares of such stock at a
price of $.06 per share to key members of management.  On February 28, 1996,
pursuant to the Company's offer, Mr. Eisenman acquired 2,200,000 shares for
$132,000 ($0.06 per share) and Richard Hulbert, the President of Titan, also
acquired 2,200,000 shares for $132,000. The Company utilized the $264,000 to
repurchase a portion of the shares held by Lynch and funded the balance of the
purchase of shares held by Lynch by the issuance to Pensionskasse der ASCOOP
and Spida-Ausgleichskassen, the Company's largest two shareholders, of $500,000
each in convertible subordinated debentures (convertible in the event of
default at $.06 per share of common stock) maturing in three years.  These
debentures were paid January 31, 1997.

     The Company in May 1996 registered up to 250,000 shares of its common
stock (giving effect to the June 30, 1996 reverse stock split) with the
Securities and Exchange Commission for future issuance in accordance with the
terms and conditions of two Employee Stock Option Plans (an incentive stock
option plan and a non-qualified stock option plan) disclosed in Note 11 of the
June 30, 1997 financial statements included in this Form 10-KSB. As of June 30,
1997, 29,556 options had been granted under the Plans.  Copies of these Plans
are included in two Form S-8 registration statements filed by the Company with
the Commission in May 1996.

     On June 28, 1996 (prior to the June 30, 1996 effectuation of the 20 - 1
reverse stock split) Directors Buser and Joss each purchased 1,500,000 shares
of the Company common stock at a price of $0.07 per share. Director Oester
purchased 50,000 shares at $0.07 per share. Peter Schuler, an affiliate of
Spida-Ausgleichskassen, and Jean-Claude Duby, an affiliate of Pensionskasse der
ASCOOP (the largest shareholder of the Company) also purchased 1,500,000 and
100,000 shares, respectively, of the Company common stock on June 28, 1996 at
the same price per share. On the same date Mr. Eisenman and Mr. Hulbert each
acquired 2,800,000 shares of the Company common stock at a price of $0.06 per
share.  The aggregate price of these seven stock purchases equalled $661,500.
The Company will apply the proceeds of these stock sales to pay some of the
indebtedness incurred when it purchased in February 1996 all the shares of
Company common stock owned by Mr. Lynch.

     In August 1996 (after effectuation of the reverse stock split) Director
William J Ballard purchased 75,000 shares of Company common stock at a price of
$1.40 per share (an aggregate purchase price of $105,000). The Company will
apply the proceeds to pay Company indebtedness. The Company has approved an
award of 30,000 shares (after effectuation of the reverse stock split)
preliminarily granted to Mr. Eisenman by the Company in the 1996 fiscal year as
additional compensation. As of September 25, 1997, these shares had not been
issued.

     On November 16, 1996, the Company sold 47,215 shares of its Common Stock,
$.01 par value to the following Company employees: Kerry Simmons, Anthony
Morriello and Travis Pierson. The total price of $66,101 was paid in cash.  The
sales were made pursuant to Rules 505 and 506 of Regulation D, based on the
fact that the aggregate offering price did not exceed $5,000,000 (Rule 505) and
the fact that there were fewer than 35 investors, each of whom the issuer
reasonably believed immediately prior to sale had such knowledge and experience
in financial and business matters that he was capable of evaluating the merits
and risks of the prospective investment.

     Effective June 26, 1997, the Company acquired all of the outstanding stock
of Lewis Supply Company, Inc. in a purchase transaction ("the Acquisition").
The Acquisition was consummated by the exchange of 255,102 shares of the
Company's common stock, a commitment to issue an additional 30,612 shares,
$5,952,500 cash and notes payable totaling $750,000 for 100% of the outstanding
shares of Lewis' stock.  Michael S. Burnham, Jr., Corporate Leader of Lewis and
one of its largest shareholders, was a party to the Acquisition agreement and
various other agreements related thereto. (See below) Mr. Burnham and various
members of his family (see below) who were shareholders of Lewis received
consideration
in the Acquisition proportional to their ownership interests in Lewis.

     Specifically, Mr. Burnham and his family received stock in the following
amounts:

     Michael S. Burnham, Jr., 99,298 shares of SETECH, Inc. $.01 Par Value
     Common Stock;

     Michael S. Burnham, Jr. C/F Gregory Burnham UTMA TN, for 16,954 shares of
     SETECH, Inc. $.01 Par Value Common Stock;

     Michael S. Burnham, Jr. C/F Spencer Burnham UTMA TN, for 16,954 shares of
     SETECH, Inc. $.01 Par Value Common Stock;

     Elizabeth A. Harris (Mr. Burnham's spouse), 64,227 shares of SETECH, Inc.
     $.01 Par Value Common Stock;

     Elizabeth A. Harris, Trustee UA dated 4/23/90 FBO Gregory Burnham and
     Spencer Burnham (Mr. Burnham's sons), Elizabeth Harris Trust I, for 19,223
     shares of SETECH, Inc. $.01 Par Value Common Stock;

     Elizabeth A. Harris, Trustee UA dated 4/23/90 FBO Gregory Burnham and
     Spencer Burnham, Elizabeth Harris Trust II, for 19,223 shares of SETECH,
     Inc. $.01 Par Value Common Stock;

     Elizabeth A. Harris, Trustee UA dated 4/23/90 FBO Gregory Burnham and
     Spencer Burnham, Elizabeth Harris Trust III, for 19,223 shares of SETECH,
     Inc. $.01 Par Value Common Stock;

     Mr. Burnham and his family received Promissory Notes in the following
amounts:

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Michael S.
     Burnham, Jr. in the principal amount of $227,304, plus interest at the
     rate of 7% per annum, payable in three annual installments of $75,768;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Elizabeth A.
     Harris, in the principal amount of $147,021 plus interest at the rate of
     7% per annum, payable in three annual installments of $49,007;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Elizabeth A.
     Harris, Trustee U/A dated 4/23/90 FBO Gregory Burnham and Spencer Burnham
     (Elizabeth Harris Trust I) in the principal amount of $44,007, plus
     interest at the rate of 7% per annum, payable in three annual installments
     of $14,669;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Elizabeth A.
     Harris, Trustee U/A dated 4/23/90 FBO Gregory Burnham and Spencer Burnham
     (Elizabeth Harris Trust II) in the principal amount of $44,007, plus
     interest at the rate of 7% per annum, payable in three annual installments
     of $14,669;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Elizabeth A.
     Harris, Trustee U/A dated 4/23/90 FBO Gregory Burnham and Spencer Burnham
     (Elizabeth Harris Trust III) in the principal amount of $44,007, plus
     interest at the rate of 7% per annum, payable in three annual installments
     of $14,669;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Michael J.
     Burnham, Jr., Custodian for Spencer Burnham under TN UTMA in the principal
     amount of $38,811, plus interest at the rate of 7% per annum, payable in
     three annual installments of $12,937;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Michael J.
     Burnham, Jr., Custodian for Gregory Burnham under TN UTMA in the principal
     amount of $38,811, plus interest at the rate of 7% per annum, payable in
     three annual installments of $12,937;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Barbara Harris
     in the principal amount of $87,714, plus interest at the rate of 7% per
     annum, payable in three annual installments of $29,238;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Barbara Harris,
     Trustee U/A dated 4/23/90 FBO Joanna Gorodetzki and Alexander Gorodetzki
     (Barbara Harris Trust I) in the principal amount of $26,106, plus interest
     at the rate of 7% per annum, payable in three annual installments of
     $8,702;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Barbara Harris,
     Trustee U/A dated 4/23/90 FBO Joanna Gorodetzki and Alexander Gorodetzki
     (Barbara Harris Trust II) in the principal amount of $26,106, plus
     interest at the rate of 7% per annum, payable in three annual installments
     of $8,702;

     Promissory Note, dated June 26, 1997, from SETECH, Inc. to Barbara Harris,
     Trustee U/A dated 4/23/90 FBO Joanna Gorodetzki and Alexander Gorodetzki
     (Barbara Harris Trust III) in the principal amount of $26,106, plus
     interest at the rate of 7% per annum, payable in three annual installments
     of $8,702;

     Mr. Burnham and his family received cash in the following amounts:

     Michael Burnham - $1,022,379; Elizabeth Harris - $661,263; Elizabeth
Harris Trust I -$197,927; Elizabeth Harris Trust II - $197,927; Elizabeth
Harris Trust III - $197,927; Gregory Burnham - $174,565; Spencer Burnham -
$174,565; Nancy Katz - $274,024; John Katz - $274,024; David Katz - $385,158;
Jared Katz - $385,158; Sara Katz $385,158; Barbara Harris -$651,658; Barbara
Harris Trust I - $193,944; Barbara Harris Trust II - $193,944; Barbara Harris
Trust III - $193,944; Joanna Gorodetzki - $129,191; Alex Gorodetzki - $129,191.

     Additionally, Mr. Burnham entered into a three-year (beginning June 30,
1997) employment agreement with the Company under which he is entitled to
receive a base salary of $128,000 per year and by which he is entitled to an
option to purchase 45,000 shares of the Company's stock at $3.50 per share.

     Also, Mr. Burnham, the Company and Mr. Eisenman are parties to a
Shareholders' Agreement under which  Mr. Burnham has the option under certain
circumstances (defined in the agreement) to require the Company to repurchase
his shares at a price of $2.00 per share.  Additionally, Mr. Burnham has
granted the Company a right of first refusal under certain circumstances
(defined in the agreement) on any proposed sale of stock by Mr. Burnham.
(Please see Exhibit 10.4 and Note 10 to the June 30, 1997 financial statements
included in this Form 10-KSB for a detailed description of the terms of this
agreement.)

     In connection with the Acquisition, the Company issued $1,500,000 in
convertible subordinated debentures (convertible in the event of default at a
rate of one common share for each $3 of principal and interest outstanding) to
two of its major stockholders, Pensionskasse der ASCOOP and Spida
Ausgleichskassen. The debentures are to be repaid in annual installments of
principal of $750,000 plus interest at 8.5%.  These debentures mature July 1,
2000.
<PAGE>




ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

           a)   Exhibits

Exhibit
Number          Description

EX-2.1          Stock Purchase Agreement dated November 7, 1996, by and between
                SETECH, INC. and Serco, Inc. ("Stock Purchase Agreement")
                (incorporated by reference to Exhibit 2.1 of Form 10-QSB for
                the quarterly period ended December 31, 1996, filed with the
                Commission February 14, 1997)

EX-2.2          Letter Agreement dated November 22, 1996, amending Stock
                Purchase Agreement (incorporated by reference to Exhibit 2.2 of
                Form 10-QSB for the quarterly period ended December 31, 1996,
                filed with the Commission February 14, 1997)

EX-2.3          Letter Agreement dated January 29, 1997, amending Stock
                Purchase Agreement (incorporated by reference to Exhibit 2.3 of
                Form 10-QSB for the quarterly period ended December 31, 1996,
                filed with the Commission February 14, 1997)

EX-2.4          Letter Agreement dated January 29, 1997, amending Stock
                Purchase Agreement (incorporated by reference to Exhibit 2.4 of
                Form 10-QSB for the quarterly period ended December 31, 1996,
                filed with the Commission February 14, 1997)

EX-2.5          Stock Purchase Agreement among SETECH, Inc. and the
                Shareholders of Lewis Supply Company, Inc. dated June 26, 1997
                (the "Acquisition Agreement") (incorporated by reference to
                Exhibit 2.1 of Form 8-K filed with the Commission July 10,
                1997)
 .

     Items 2.5(a) through 2.5(l) are schedules or attachments to the
Acquisition Agreement and will be provided to the Commission upon request,
pursuant to Item 601(b)(2) of Regulation S-B.

     2.5(a) Disclosure Letter
     2.5(b) Allocation of Purchase Price
     2.5(c) Employment and Noncompetition Agreement
     2.5(d) Non-negotiable Promissory Note
     2.5(e) Burnham Employment and Noncompetition Agreement
     2.5(f) Shareholder Agreement
     2.5(g) Sellers' Representative Power of Attorney
     2.5(h) Approved Inventory of Company
     2.5(i) Tax Allocation
     2.5(j) Opinion of Counsel to Sellers
     2.5(k) Opinion of Counsel to Buyers
     2.5(l) Addresses for Notice to Sellers

EX-3.(i)        Articles of Incorporation, SETECH, INC.

EX-3.(ii)       Amended and Restated By-Laws, SETECH, INC. (incorporated by
                reference to Exhibit 3.(ii) of the Company's Form 10-KSB for
                the fiscal year ended June 30, 1996, filed with the Commission
                September 27, 1996)

EX-4.1          Loan and Security Agreement by and among First Union Commercial
                Corporation, SETECH, Inc., Lewis Supply Company, Inc.,
                Southeastern Technology, Inc., and Titan Services, Inc. dated
                June 26, 1997 (incorporated by reference to Exhibit 4.1 of Form
                8-K filed with the Commission July 10, 1997)

EX-4.2          Guaranty Agreement dated June 26, 1997, whereby SETECH, Inc.
                guarantees subsidiary indebtedness obligations to First Union
                Commercial Corporation (incorporated by reference to Exhibit
                4.2 of Form 8-K filed with the Commission July 10, 1997)

EX-4.3          Revolver Note dated June 26, 1997 payable by Lewis Supply
                Company, Inc. to First Union Commercial Corporation
                (incorporated by reference to Exhibit 4.3 of Form 8-K filed
                with the Commission July 10, 1997)1

EX-4.4          Revolver Note dated June 26, 1997 payable by Titan Services,
                Inc. to First Union Commercial Corporation (incorporated by
                reference to Exhibit 4.4 of Form 8-K filed with the Commission
                July 10, 1997)

EX-4.5          Revolver Note dated June 26, 1997 payable by Southeastern
                Technology, Inc. to First Union Commercial Corporation
                (incorporated by reference to Exhibit 4.5 of Form 8-K filed
                with the Commission July 10, 1997)

EX-10.1         Employment Agreement of Cindy L. Rollins (incorporated by
                reference to Exhibit 10.1 of the Company's Form 10-KSB for the
                fiscal year ended June 30, 1996, filed with the Commission
                September 27, 1996)

EX-10.2         Employment Agreement of Richard R. Hulbert (incorporated by
                reference to Exhibit 10.2 of the Company's Form 10-KSB for the
                fiscal year ended June 30, 1996, filed with the Commission
                September 27, 1996)

EX-10.3         Employment and Non-Compete Agreement of Michael S. Burnham,
                Jr., dated June 26, 1997

EX-10.4         Shareholders' Agreement by and among SETECH, Inc., Michael S.
                Burnham, Jr., and Thomas N. Eisenman, dated June 26, 1997

EX-10.5         Agreement between Company and Robert W. Lynch, Jr.
                (incorporated by reference to Exhibit 10.5 of the Company's
                Form 10-KSB for the fiscal year ended June 30, 1996, filed with
                the Commission September 27, 1996)

EX-10.6         Incentive Stock Option Plan (Incorporated by Reference to Form
                S-8 Registration Statement filed May 21,1996, effective June 9,
                1996, Commission file number 333-04143)

EX-10.7         Non-qualified Stock Option Plan (Incorporated by Reference to
                Form S-8 Registration Statement filed May 21,1996, effective
                June 9, 1996, Commission file number 333-04147)

EX-21           Subsidiaries of the Registrant

EX-27           Financial Data Schedule (EDGAR version only)


           b)   On June 27, 1997, the Company filed Form 8-K relating to its
change in certifying accountant from Dempsey Wilson & Company, PC to Arthur
Andersen LLP.

     On July 10, 1997, the Company filed Form 8-K relating to its acquisition
of Lewis Supply Company, Inc.  On September 9, 1997, the Company filed Form 8-
K/A to provide audited financial statements of Lewis Supply Company, Inc., and
to provide pro forma financial information showing the results of the
acquisition.



                              SIGNATURES

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

(Registrant)          SETECH, INC.

By: (Signature and Title)              /S/ THOMAS N. EISENMAN

                      Thomas N. Eisenman, President and CEO
                      Principal Executive Officer
Date: September 25, 1997

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

By:  (Signature and Title)                /S/ THOMAS N. EISENMAN

                      Thomas N. Eisenman, President, CEO and Director
Date: September 25, 1997


By:  (Signature and Title)                /S/ CINDY L. ROLLINS

                      Cindy L. Rollins, Secretary, Vice President, CFO and
Director
                      Chief Financial Officer and Chief Accounting Officer
Date: September 25, 1997


By:  (Signature and Title)                /S/ WILLIAM J BALLARD

                      William J Ballard, Director
Date: September 25, 1997


By:  (Signature and Title)                /S/ HANS R. BUSER

                      Hans R. Buser, Director
Date: September 25, 1997


By:  (Signature and Title)                 /S/ PETER M. JOSS

                      Peter M. Joss, Director
Date: September 25, 1997


By:  (Signature and Title)                /S/ MARTIN A. OESTER

                      Martin A. Oester, Director
Date: September 25, 1997
<PAGE>




             SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
            REPORTS FILED PURSUANT TO SECTION 15(D) OF THE
                 EXCHANGE ACT BY NON-REPORTING ISSUERS

     No annual report with respect to the registrant's last fiscal year nor any
proxy material with respect to any annual or other meeting of security-holders
has been sent to security-holders.