FORM 10-AKSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)

(X)  AMENDED ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended April 30, 2000

or

( )  TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE
     ACT OF 1934 (NO FEE REQUIRED)

For the transition period from
                               ---------------------------------
Commission File Number      0 3928
                        --------------

                            WELLINGTON HALL, LIMITED
                            ------------------------
                 (Name of small business issuer in its charter)

         NORTH CAROLINA                                           56-0815012
         --------------                                           ----------
(State or other jurisdiction of                              (I. R. S. Employer
 incorporation or organization)                              Identification No.)

           425 JOHN WARD ROAD                                      27295
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)

Issuer's telephone number, including area code:      336-249-4931

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

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

                           Common Stock (No Par Value)
                                (Title of Class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the Exchange  Act during the  preceding 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.
Yes  [X]    No  [ ]

     Check if there is no disclosure  of  delinquent  filers in response to item
405 of  regulation  5-b  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-AKSB or any amendment. [X]

     State issuer's revenues for its most recent fiscal year: $ 5,395,680

     State  the   aggregate   market   value  of  the   voting   stock  held  by
non-affiliates,  computed by reference to the price as 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): Approximately $78,214 as of July 28, 2000.

     State the number of shares  outstanding of each of the issuer's  classes of
common equity as of the latest  practicable  dated:  3,823,220  shares of Common
Stock (No Par) as of July 28, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

     None

     Transitional Small Business Disclosure Form (Check One)

         Yes [ ]      No [X]

                                       -1-
<PAGE>

                                     Part I

Item 1.   Description of Business

General

     The Company  manufactures  and imports high quality wooden home  furniture.
The  manufacturing  operation  involves the machining,  sanding,  assembling and
finishing of components  and other raw  materials.  The  Company's  products are
distributed  nationally through full-service retail stores, mail order catalogs,
the internet and  unaffiliated  trade  showrooms  that service the  professional
designer.

     The  Company  owns a lumber  processing  mill and  furniture  manufacturing
facility  located in San Pedro Sula,  Honduras,  Central  America (the "Honduran
Facilities").  Wellington Hall Caribbean  Corporation  ("WHCC"),  a wholly-owned
subsidiary of the Company,  serves as a sales and  distribution  company for the
Honduran Facilities. WHCC is a North Carolina corporation organized in December,
1988 and is located in Lexington,  North Carolina. Muebles Wellington Hall, S.A.
("MWH"), the Honduran subsidiary of WHCC, located in San Pedro Sula, manages and
operates the Honduran Facilities.

     The  Company has  developed  and  adopted a  marketing  plan that  includes
strategic measures such as (i) augmenting the Company's traditional product line
with new  categories  of home  furnishing  products  such as mirrors and Chinese
antiques,  (ii)  augmenting  the Company's  traditional  product line with lower
priced products produced by foreign  manufactures (other than and in addition to
the Company's  Honduran produced goods),  (iii) updating and upgrading  catalogs
and other sales aids in all  distribution  channels,  (iv) operating a full time
retail  outlet,  and (v)  beginning  in fiscal  year 2001,  to develop off shore
suppliers  for the  Company's  products  produced  in the past at the  Company's
Lexington facility. See "Business--Markets."

     In pursuit of this strategy the Company has established a relationship with
a number of foreign  manufactures  whose  products  the Company is  distributing
exclusively,  or are  manufacturing  the Company's new designs for distribution,
or,  beginning  in fiscal year 2001,  manufacturing  a portion of the  Company's
traditional product line manufactured domestically in the past. In addition, the
Company formed a relationship with Furniture Classics (see below) an importer by
which the Company is supplied several  categories of products for distribution..
The Company first begin marketing new designs form foreign suppliers in February
of 1998 and  formally  introduced  these  products,  and  products  supplied  by
Furniture  Classics,  at the High Point  International  Furniture Market held in
April 1999 and made the initial shipments of these goods in the first and second
quarter of fiscal year 1999.  The Company has  continued  to expand the resource
base of foreign  manufacturers  and  introduced  their  products  at each of the
furniture markets held  semiannually in April and October.  The Company does not
have a contractual relationship with the primary manufacturer of these products.

     In March of 1999, the Company and Furniture  Classics Limited (FCL) entered
into a verbal agreement  whereby FCL would supply the Company a line of mirrors,
chinese  antiques,  and other  products  from their  foreign  sources  which the
Company would market exclusively. Under this agreement R. Douglas Ricks, the FCL
president  become a shareholder  by investing  $27,000 for 100,000 shares of the
Company's common stack, was elected a Director,  and has assisted  management in
developing  additional products to further exploit these new sources. As part of
the  agreement and to enhance  Company sales and possibly  finance the growth of
these sales,  FCL received  certain  incentives in the form of warrants.  At the
High  Point  International  Furniture  Market  held in April  1999  the  Company
displayed  these  products  and initial  shipment of a portion of the  resulting
orders were  reflected in the  Company's  sales during the fiscal first  quarter
ending on July 31, 1999 and  continued  through out fiscal year 2000.  On May 4,
1999 Company and FCL executed a contractual  agreement and on May 21, 1999,  FCL
invested  $27,000 by the before  mentioned  agreement for 100,000  shares of the
company's  common stock. The funds from the investment were utilized to purchase
inventory  specifically  for showroom  samples of new product  introduced at the
April 1999 International Furniture Market held in High Point, North Carolina and
to support the shipment of orders received for mirrors. On October 31, 1999, FCL
exercised a warrant and invested $30,000 by the before  mentioned  agreement for
100,000 shares of the company's common stock. The funds from the investment were
utilized to purchase inventory (see Managements  Discussion and Analysis and the
Proxy Statement).

     In addition to the foregoing,  the Company recruited an experienced  senior
executive  to lead its sales and  marketing  function.  In September  1996,  the
Company  employed  Arthur F.  Bingham for the newly  created  position of Senior
Executive Vice President of Sales and Marketing.  Mr. Bingham is responsible for
directing  and  overseeing  all  aspects of the  Company's  sales and  marketing
activities with the goal of assuring  continuing growth in profitable sales. Mr.
Bingham also represents the Company exclusively in the states of North Carolina,
South Carolina and Virginia.  Mr. Bingham's employment  arrangement provides for
several  incentives  for him to assist the Company in increasing  sales revenues
(see Managements Discussion and Analysis and the Proxy Statement).

     Management  believes that the highly leveraged  position of the Company has
impeded  its  ability to pursue  strategies  designed  to improve its results of
operations.  In  response,  the Company has  pursued a number of  strategies  to
improve its financial condition by raising equity capital, reducing indebtedness
and increasing  working  capital.  Certain  elements of  management's  plan were
implemented or developed in fiscal year 1997.

                                       -2-
<PAGE>

     In connection with the employment of Arthur F. Bingham as Senior  Executive
Vice President of Sales and Marketing, Mr. Bingham made a loan to the Company of
$285,694.  On February 12, 1997, Mr. Bingham  purchased 600,000 shares of Common
Stock  at a  price  of  $.50  per  share,  which  purchase  price  was  paid  by
cancellation of the foregoing loan and for an additional  investment of $14,306.
The Company used the funds  provided by Mr.  Bingham to reduce its  indebtedness
and provide  working  capital.  The Company  also granted  stock  options to Mr.
Bingham  and to Mr.  Ralph  Eskelsen,  manager of the  Honduran  Facilities,  as
incentives  to these  key  employees.  Mr.  Eskelsens  options  expired  without
execution.

     The  Company  successfully  negotiated  with its  lenders to amend its loan
agreements  therewith to provide more favorable  terms. On January 16, 1997, the
Company  obtained an  additional  $250,000 line of credit from  Lexington  State
Bank. In addition, on March 10, 1997, the Company entered into an agreement with
the Overseas Private Investment  Corporation ("OPIC") to restructure its loan to
reduce principal payments until July 1997 (with the deferred payments to be made
in a larger  balloon  payment at the end of the term of the loan in 1999) and to
lower the interest rate. The effect of the restructured  loan was a reduction to
the Company's cash requirements for scheduled principal payments for fiscal 1997
and 1998 of $247,748 and $123,874, respectively, which contributed significantly
to the Company's working capital and cash flow for these years. The restructured
OPIC  loan  also  reduced  the  interest  rate  from 12% to 10% per  annum.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

     On February  21,1997,  the Company filed a registration  statement with the
Securities and Exchange Commission for the offer and sale of 1,689,887 shares of
its common  stock.  The shares were to be offered first to the holders of record
of its  outstanding  common  stock  as of a date at or about  the time  that the
registration  statement was to becomes  effective,  who would have had the right
for thirty days to purchase one  additional  share for each share then held at a
price of $.50 per share.  Each Wellington Hall shareholder as of that date could
also have subscribed  within that thirty day period for additional  shares,  and
any available  shares would have been sold to  shareholders  who have subscribed
therefor on a pro rata basis. Any shares still remaining after the expiration of
the offering to Wellington Hall shareholders could have been sold to persons who
were not directors, officers or shareholders of Wellington Hall.

     Primarily  because of the  operating  losses  experience in fiscal 1997 and
beyond, the aforementioned stock offering was canceled and there are no plans to
pursued the matter  further.  The legal and  related  costs  associate  with the
offering were expensed during fiscal 1998.

     On April 23,  1999,  Ernst B. Kemm,  upon the Board of  Directors  approval
purchase 1,333,333 shares of the Company's common stock for $400,000 or $.30 per
share. The purpose of the funds was to reduce trade payable with certain vendors
and sales  representatives,  finance new sales aids, finance the purchase of raw
materials  for the  Company's  Honduran  facility and to finance the purchase of
furniture from off shore manufacturers.

     On April 30,  2000,  Ernst B. Kemm,  upon the Board of  Directors  approval
executed a Loan Term loan with the Company  whereby the Company can borrow up to
$110,000 to finance the purchase of inventory  from off shore  suppliers.  Under
the terms of the loan,  interest will be paid monthly on the outstanding balance
at a rate of 1 1/2 per above prime as established by Lexington  State Bank. Upon
notification by Mr. Kemm, the outstanding balance will be due on the last day of
the thirteenth month following the receipt of notification.  The Company has the
right to make payments  against the balance from time to time. On April 30, 2000
the Company borrowed $55,000 against this loan.

     On April  19,  1999,  Hoyt M.  Hackney,  the  Company  President,  with the
majority  of the Board of  Directors  approval  , agreed to alter the  "Deferred
Compensation  Agreement"  between Mr.  Hackney and the  Company.  The  agreement
allows  that upon  retirement,  at age 62 or older,  or upon his death he or his
estate  would  received  $50,000  per year for a period of ten years  (see Proxy
Statement).  The Company has accrued the  expensed of this  obligation  over the
last twelve  years and is scheduled  to continue  that expense  until the sum of
$300,000 has been accrued. At April. 30, 2000 the Company's Balance Sheet stated
a $312,000 long term liability as a result of this accrual.

     The revisions to the "Deferred Compensation Agreement",  not yet finalized,
are expected to reduce the compensation from $50,000 to $20,000 per year but, in
any event,  not before  May 1, 2005.  In  exchange  Mr.  Hackney  would  receive
restricted  stock,  1,000,000 shares of common stock at $.30, which could not be
sold until after  retirement or death and then only in increments of 1/10 of the
shares  per year for a period of 10 years.  This  action,  if  finalized,  could
capitalize  the $300,000  liability and thus remove the long term liability from
the Company's balance sheet.

     The  primary  purpose  of  the  revisions  to  the  "Deferred  Compensation
Agreement"  was as an  incentive to the  Company's  lenders to  restructure  the
outstanding  loan  whereby  the  potential  outlay of $50,000  per year would be
removed or delayed to  potentially  enhance the  Company's  ability to repay its
debt.

     On June 16,  1999,  Lexington  State  Bank  (LSB),  the  company's  primary
domestic  lender,  restructured the company's debt whereby three lines of credit
with an aggregate  total loan balance of  approximately  $1,272,000 and one term
loan with a balance of approximately  $277,784 were replaced by a long term loan
of $1,529,784 with the repayment amortized over a period of ten years and a line
of credit of $300,000.  On June 16, 1999 the Company  owed $20,000  against this
line of credit. The three lines of credit retired carried interest rates ranging
between  prime plus 1% and 1 1/2%.  The long term loan  retired  had an interest
rate of prime plus 1.5%. The new long term loan and line of credit bear interest
rates of prime plus 3/4% and are secured by  substantially  all of the Company's
domestic assets.  Principal payments on the line of credit are is due on demand.
The line of credit and long term loan also contains  restrictive  covenants that
prohibit  Wellington Hall from paying  dividends and making other  distributions
with respect to its capital stock.  The line of credit is reviewed  annually for
renewal. On April 30, 2000 the Company owed $240,000 on the line of credit.

                                       -3-
<PAGE>

     The primary  effect on June 16, 1999 of the  restructured  LSB debt reduced
the Company's "Current Liabilities" by approximately $967,280 and increased long
term debt.  Depending  on the level the Demand  Notes  utilized  over time,  the
Company's  interest and principal  payments  essentially  remained  equal to the
level  of  those  requirements  prior  to the  restructuring  of the  debt  thus
minimizing the effect on the Company's working capital.

     On  July  22,  1998,  WHCC  requested  the  Overseas   Private   Investment
Corporation   (OPIC)  waiver  the  principal   payments  due  on  the  company's
outstanding  debt (See  "Management  Discussion and Analysis") on July 31 and on
October 31, 1998. The Company did not received an official reply to that request
but only paid the interest due on those  dates.  Thereafter,  and on January 31,
1999 and on April 30, 1999 the company paid interest due and a reduced principal
payment of approximately  $21,000 versus  approximately  $62,000 required by the
terms of the loan  agreement.  This left the company  with a past due balance on
April 30, 1999 of approximately $207,000.

     After a number of  discussions  between the  Company and OPIC,  the Company
entered a new request on April 23,  1999 to amend the terms of the loan  whereby
OPIC would received $225,000 in preferred stock and with the balance of the loan
to be repaid over a period of six years with a one year being a grace  period on
the repayment of principal.

     The effect on this  request,  had it been granted,  would have  effectively
reduced  the loan  balance  from  approximately  $821,000  at April 30,  1999 to
approximately   600,000;   reduce  interest  expense  by  approximately  $22,550
annually,  and enhance the  company's  effort to restore its sales and profit by
allowing a period to increase working capital.  Since the total debt outstanding
with the OPIC was due on October 31, 1999, the Company's  Balance Sheet reflects
the debt as a "Current  Liability" under "Current maturities on Long Term Debt".
Had OPIC granted the Company's request, approximately $225,000 would have become
equity and the balance  will be  reflected  on the Balance  Sheet as a Long Term
Debt.

     On October 31,  1999 the  Company  was unable to make the  balloon  payment
which had grown to  approximately  $826,479 and,  therefore,  the Company was in
default of the loan  agreement.  The  Company did make the  quarterly  scheduled
interest  payments  on October  31,  1999,  on January 31, 2000 and on April 30,
2000. The acceptance of the interest  payments by OPIC does not in any way alter
the default status of the loan.

     The  Company  agreed in  December of 1999 to bear the expense of having the
OPIC mortgage on the Company's  Honduran facility  extended.  Under Honduran law
the  maximum  length of time a  mortgage  can  remain in effect is ten years and
OPIC's  original  mortgage  was due to expire on April 1,  2000.  All  necessary
actions  have  now  been  completed  and the  original  OPIC  mortgage  has been
effectively  extended for another ten years. The expense of this transaction was
minimal.

     In February of 2000,  the Company's  management  and OPIC personnel met and
discussed  the future  Company plans to satisfying  the principal  balance.  The
Company's  position  was that  additional  time must be given  for it's  current
strategy,  presented to OPIC during the meeting, to produced the growth in sales
and a resulting  level of  profitability  adequate to servicing  the debt and/or
that the  Honduran  facility be sold or and  investor be found with  interest in
part  ownership of that  facility.  The proceeds  from such a sale or investment
could, among other things,  pay off the OPIC loan balance.  Selling the Honduras
facility  and then  contracting  the  production  of the  Company's  products is
consistent  with the  Company's  current  strategy of  becoming a marketing  and
distribution Company for products available from foreign manufacturers.

     On May 1, 2000 the Company and OPIC  entered into a  Forbearance  Agreement
which among other things  forebeared OPIC until October 31, 2000 from seeking to
enforce its rights  against the  collateral  under the Loan Agreement due to the
failure  by the  Company to make  payment of  principal  in full,  and  interest
thereon by October 31, 1999, as required under the terms of the loan  agreement.
In  consideration  for OPIC's above stated  agreement to forbear from seeking to
enforce right against the collateral, WHCC agreed to among other things to:

(i)  No later than July 3`, 2000,  pledge, or cause to be pledged,  to OPIC in a
     manner and with documentation (including legal opinions) acceptable to OPIC
     in form and  substance  (once  executed,  such  document  shall  constitute
     "Financing  Documents")  all of the shares of Muebles  Wellington Hall S.A.
     (Muebles); and

(ii) Make  quarterly  interest  payments in the manner and at the  default  rate
     specified in the Loan  Agreement on the full,  unpaid  balance of the loan,
     effective as of October 31, 1999; and

(iii)Exercise  its best  efforts to sell  Muebles at a net value  sufficient  to
     repay  OPIC's debt in full,  and to cover  OPIC's cost of  collection,  and
     commencing May 1, 2000, provide a written report to OPIC on a monthly basis
     regarding the Company's efforts to sell Muebles.  The terms of any proposed
     sale are subject to OPIC's prior  approval,  and all of the proceeds of any
     sale shall be  payable to OPIC,  in a manner  OPIC may  specify,  up to the
     amount owing to OPIC under the Financial Document; and

(iv) As may be requested  by OPIC,  WHCC shall  cooperate  fully to provide OPIC
     with a written appraisal,  or work with such broker as OPIC may identify to
     expeditiously sell Muebles,  subject to the provisions of the last sentence
     of subparagraph (iii) above.

     On May 31, 2000 the  Forbearance  agreement  was amended  whereby item (ii)
above was  revised  to read:  Make  quarterly  interest  payments  in the manner
specified  in the Loan  Agreement  on the  full,  unpaid  balance  of the  loan,
effective  as of  October  31,  1999;  and in lieu of  making  penalty  interest
payments on each  quarterly  payment date specified in the Loan  Agreement,  the
Company shall pay a total penalty charge of $25,138.7 on October 31, 2000, which
represents the penalty interest that will accrue during the Forbearance  Period,
computed on the basis of 360-day years of twelve 30-day months.

                                       -4-
<PAGE>

     This amendment to the  forbearance  agreement  allows the difference in the
10%  interest  rate on the OPIC loan balance in effect prior to October 31, 1999
and the default  interest  rate of 13% included in the Loan  Agreement  would be
added to the outstanding principal balance quarterly. On January 31, 2000 and on
April 30, 2000 the principal balance was increased  accordingly and on April 30,
2000 the outstanding balance was $838,876.34.

     On April  30,  2000  Ernst B.  Kemm  agreed,  upon the  Board of  Directors
approval,  to loan the Company up to  $110,000  to be used to finance  furniture
purchases  from  offshore  source.  At April 30, 2000 the Company  owed  $55,000
against this loan.

     The Company's business was founded in 1964, and the Company is incorporated
in North Carolina.  The Company's  principal  office is located at 425 John Ward
Road, Lexington, North Carolina 27295, telephone (336) 249-4931.

Products

     The Company's products include occasional living room tables,  dining room,
and bedroom furniture, modular wall systems, entertainment cabinets (for storage
of televisions,  stereo equipment and video cassette recorders,  etc.),  console
tables, mirrors, coffee tables, commodes and other occasional and accent pieces.
The product line generally represents an eclectic collection of reproductions or
renderings  of 18th and 19th century  English,  American  and French  styles and
Chinese  Antiques.  Many  of the  Company's  18th  century  English  and  French
reproductions and other designs are offered exclusively by the Company.

     The Company  imports to its  domestic  facility  certain of its designs for
finishing when the domestic  production  costs for such designs are prohibitive.
These imported designs are assembled in the Honduran  Facilities and finished in
the Company's  Lexington,  North  Carolina  facility and includes solid mahogany
dining chair frames, occasional items and poster beds. Sales of imported designs
have  increased  over  time as a  result  of the  Company's  acquisition  of the
Honduran  Facilities.  As described  herein below,  WHCC,  the  Company's  North
American  subsidiary,  distributes  the  products  manufactured  at the Honduran
Facilities,  and during fiscal 2000, such products  accounted for  approximately
42% of the  Company's  consolidated  sales (net of inter company  sales),  while
products  produced  domestically  by the Company  accounted for about 48% of its
consolidated sales.  Unfinished  furniture imported from the Honduran Facilities
accounted for about 26% of the Company's  domestically-produced  sales,  and the
number of imports for finishing from elsewhere was negligible. In addition, WHCC
furnished the Company's  domestic  operations with  approximately 15% of certain
forms of wood utilized in domestic production.  The balance of the raw materials
utilized  by  the  Company's  domestic  operations,   including  plywood,  brass
decorating hardware, finishing material and packing material, are purchased from
domestic sources.  The sale of products imported from foreign sources other than
the Honduran  facility  accounted for about 10.5% of the Company's  consolidated
sales.

     WHCC markets to the U.S. furniture  industry  (including the Company) three
categories  of  unfinished  products  manufactured  by the Honduran  Facilities,
including:  (i) raw  materials  in the form of  wooden  dimension  stock  (rough
parts); (ii) unfinished  assembled items for furniture such as occasional tables
and dining chair frames;  and (iii) components  (turnings and carvings) utilized
in  domestic  production  (OEM  sales).  The  majority  of sales  utilize  solid
mahogany, but the Company also uses Laurel, Pine and San Juan Areno.

     WHCC also markets  directly to the retail trade a bedroom,  dining room and
occasional  table group fully produced and finished in the Honduran  Facilities.
By  assembling  and  finishing  the  group in  Honduras,  significantly  greater
advantage of  plentiful,  less costly  labor and lower  overhead can be realized
which result in a lower retail purchase price for the Honduran - produced group.
This lower  price,  along with the  utilization  of solid  "Honduran  Mahogany,"
recognized  by the  world  trade as one of the  premier  hardwoods,  allows  the
Company to compete  within its market  niche.  All of the wood  utilized  by the
Company's  Honduran  Facilities  is  harvested  from  segments of forests  under
sustainable management programs.

Markets

     The Company utilizes several different avenues of distribution. The Company
distributes its finished  products to the designer trade,  retail stores,  trade
showrooms,  the internet  and  consumer  catalogues.  The  following  discussion
describes the views of the Company regarding each avenue of distribution for its
finished products.

Designer Trade

     The Company  believes  that the  designer  trade has become one of the more
viable outlets for its primary product niche,  traditional,  high-end furniture.
From the Company's  perspective,  the advantage of this outlet is that virtually
all sales are "special order," negating the need for promotional discounts,  and
the  disadvantages  are the  relatively  low sales volume per account versus the
cost of sales aids  necessary to service the account,  the  requirement  that it
grant  credit  to  accounts  with  limited  assets  and  with a  limited  credit
histories,  and the  inadequate  means the designer  normally  has  available to
receive  delivery and service his  customer.  Since  decorators do not generally
stock or display a significant amount of products, they are largely dependent on
the availability  and quality of the Company's sales materials,  and as such, it
is  important  for the Company to create  and/or  improve and maintain its sales
aids,  including  but not  limited  to  photography  and  catalogs  for both the
Company's and WHCC's products.

                                       -5-
<PAGE>

     As part of the  Company's  strategy to increase  its sales,  the Company is
giving a high priority to  maintaining  quality sales  materials.  During fiscal
1999, the Company's  financial position  prohibited the publication of new sales
catalogs and some new products  were neither  photographed  or  cataloged.  With
additional  funds received late in the fiscal year, a new bedroom and occasional
furniture  catalogs have been produced and issued including products produced at
the Company's Honduras facility and marketed by WHCC.

Retail Stores

     Retail stores are a desirable outlet for the Company's products because the
potential  volume of sales is relatively high and certain retail stores do stock
and  display  the  Company's  products.  The  Company  does not,  however,  have
contractual  relationships with such retail stores. The Company and a particular
retail  store may have an  informal  understanding  at the time that the Company
sells its  products  to such a store,  which  understanding  may  relate to such
things as amount of the Company's  products to be displayed on the store's floor
space, pricing and dating for payment purposes. The Company's use of this outlet
has declined over several years for various  reasons,  including but not limited
to the fact that many dealers within the industry have gone out of business.  In
addition,  the Company has been unable to compete  effectively  with the invoice
dating  policy (e.g.  "buy now,  pay nothing  until  later")  employed by larger
manufacturers  because such a policy increases  receivables and drains available
cash. The Company  believes that its inability to compete with such a policy has
induced many  dealers not to consider  the  Company's  products  when  assigning
available  floor  space  and  when  assigning  resources  for  warehouse  stock.
Accordingly  and in the absence of a display or stock,  a growing  percentage of
the Company's  orders received from retail stores are for items which the dealer
can only sale by utilizing the Company's  catalogs,  a circumstance that further
necessitates  the creation  and/or  improvement and maintenance of the Company's
sales aids. See--"Designer Trade."

Internet

     Early in 1996 the company  added its own home page to the internet and with
limited  expense had essentially the entire product line added by Design On Line
(wellngtonhallltd.com).  Design on Lines sales  access to it file to  designers.
The Home Page and the Design On Line site only provides  (hits)  inquiries which
can be passed  on to  dealers.  In late  spring of 1999,  a  furniture  internet
retailer, Furniture.Com. began selling the Company's WHCC product. The resulting
sales  increased  to a  significant  level  until  late in June  2000  when  the
Company's products were removed from Furniture.Com's product presentation on the
internet.  This remove was made without  explanation.  The Company is evaluating
adding its products to other internet retailers.

Trade Showrooms

     The Company  maintains a showroom in High Point,  North Carolina to display
its product line during the semiannual  International  Furniture  Market held in
that city in the fall and spring of each year and is  affiliated  with a limited
number of trade showrooms, that are accessible only to the professional designer
and not generally  open to the public,  in some major markets and design centers
around the country.  Trade  showrooms  generally  target the affluent  customer,
which tends to be the Company's ultimate  customer,  and as such, they have been
an important outlet for the Company in past years. However, the Company believes
that this outlet has  diminished  in  importance  somewhat  over the last decade
because  of  "Gallery  Programs"  sponsored  by  the  larger  manufacturers  and
retailers  under which retail  stores act in large part as competing  showrooms,
offering substantial  discounts to induce designers to purchase from them. It is
the opinion of the Company that trade  showrooms sales have diminished to such a
low level  that they are no longer of  significant  to the  Company's  marketing
efforts.

Consumer Catalogs

     Consumer  catalogs are a means of distribution  that has not been available
to or  utilized  by the  Company  prior to late  1996.  Since the  October  1996
Furniture  Market held in High Point N.C., the Company has had a limited portion
of its product lines included from time to time in the catalogs of major catalog
companys.  The  Company  does  not  have a  contractual  relationship  with  the
aforementioned  catalog  companys  though the Company does expect certain of its
products to be similarly  included in future editions.  The catalog in which the
Company's  products appeared included  different types of furniture,  wooden and
otherwise,  in addition to that sold by the Company,  as well as those  products
that the catalog  company  markets in addition to  furniture  like,  clothing or
electronics.  Sales from theses  catalog  represent  only a small portion of the
Company's total annual sales.

OEM Sales

     Following the acquisition and expansion of the Honduran Facilities in 1990,
the Company  aggressively  sought to sell to other  manufacturers  ("OEM sales")
dimension stock, wood components (carvings and turnings), and

                                       -6-
<PAGE>

unfinished assemblies with significant success. However, in 1993 and early 1994,
the  Company's  sales of its  proprietary  products grew to such a level that it
appeared that it would be more profitable to use the majority, if not all of the
capacity of the Honduran Facilities for the production of the Company's products
to the exclusion of its OEM business.  During such time, the Company expected to
direct available resources to reducing  indebtedness as opposed to continuing to
expand its OEM business. However, very late in 1994 the market for the Company's
products  became soft and,  without  the OEM sales,  it became  necessary  about
mid-1995  and  through  much of  calendar  1996 to curtail  production  to avoid
additional  increases in inventory.  For all of fiscal year 1998,  the Company's
directed its efforts with some success toward  establishing  a distribution  for
its proprietary line and, at the same time,  toward rebuilding a dealer base for
OEM sales. During fiscal year 2000, OEM sales were unchanged and these sale were
negligible relative to the Company's consolidated sales.

Research and Development

     While  neither the  Company  nor WHCC has a full-time  employee or facility
devoted  exclusively to research and  development,  the Company's  President and
Executive Vice Presidents devotes substantial time to the design and development
of new products. Though, because of the nature of the Company's designs, many of
its  products  may  remain  marketable  for a  significant  period of time,  the
competition  in and the  fashion  orientation  of the  home  furnishings  market
require  that  the  Company's  product  line  be  continually   updated  by  the
introduction  of new products.  The  development  of such new products  involves
producing  samples of the new items for display and for the  production of sales
aids with respect to such new products.  The samples are  constructed  utilizing
production  labor and  facilities  and from raw materials  that are purchased in
very small  quantities.  The Company does not account for the associated cost of
these samples  separately,  instead  absorbing the expenses as production costs.
The labor costs, lost production volume and overhead absorption, and the premium
prices  charged  on the small  quantities  of raw  materials  that such  samples
require can, in the aggregate,  have a significant  impact on operation results.
The  Company's  does not  otherwise  spend a  material  amount on  research  and
development.

Sales

     The  Company's  sales  function  is led by Arthur F.  Bingham,  its  Senior
Executive Vice President of Sales and Marketing.  The Company  employs eight (8)
independent,  commissioned  sales  representatives  who generally sell to retail
stores and service trade showrooms in the United States,  Japan and Canada.  The
Company generally sells its products on a net 30-day basis.

     WHCC  employs  one  independent,   commissioned  sales  representative  for
products  sold to U.S.  furniture  manufacturers  other  than the  Company,  the
Company's OEM business,  and that commissioned sales  representative  covers the
two  eastern  states in which the  majority  of the U.S.  furniture  industry is
located.  In  addition to this sales  representative,  the  Company's  president
devotes a  substantial  amount of time to marketing  certain  categories  of the
Company's   products  to  customers  not  specifically   covered  by  the  sales
representative.  WHCC utilizes the Company's 8 independent  representatives  for
products finished in the Honduran Facilities and marketed directly to the retail
trade.

Backlog

     The  Company's  firm backlog of orders on April 30, 2000 was  approximately
$1,876,566  down from its backlog of $2,342,513 on April 30, 1999. The April 30,
2000 backlog included $763,498 of domestically-manufactured products, as opposed
to  $1,191,649  included  in  the  1999  backlog.   The  backlog  for  WHCC  and
Honduran-produced  products, less intercompany orders, was $780,936 on April 30,
2000 versus  $552,148 on April 30,  1999.  The April 30, 2000  backlog  included
$332,132 of imported products,  from sources other than Honduras,  as opposed to
$552,794 included in the 1999 backlog.

Sources and Availability of Raw Materials

     The  Company's  principal  raw material is wood,  and the Company  utilizes
several  different  species including  Mahogany,  Laurel,  Pine, San Juan Areno,
Walnut,  Poplar,  Cherry,  Oak, Maple and Cedar. Wood for domestic production is
purchased in the form of dimension stock (rough parts), components (turnings and
carvings)  and  plywood.  The  Company  uses all of  these  forms of wood in the
manufacturing  of its  products.  For  example,  in the  production  of a table,
turnings and carvings may be used for table legs and specialty designs,  plywood
may be used for the tabletop and dimension  stock (large pieces of wood that the
Company is able to process into the required  dimensions)  may be used for other
parts of the table.  Plywood is  generally  available  in  adequate  supply from
domestic resources. Dimension stock and components are generally supplied to the
Company by its Honduran Facilities.  These same raw materials are available from
domestic sources but generally at higher prices and lower quality.  Accordingly,
the loss of the Honduran  Facilities as the Company's primary source of wood and
as its sole supplier of the  Company's  proprietary  line of assembled  items of
furniture would have a significant  adverse effect on the Company's  operations,
financial condition, competitiveness and future prospects.

                                       -7-
<PAGE>

     Though  the  agency  of the  Honduran  government  responsible  for  forest
resources is not able to provide an accurate inventory of the supply of mahogany
or other species of wood available in Honduras and large  quantities of mahogany
have  previously  been  harvested  from  Honduras  over the years,  the  Company
believes  based  upon all  available  information  that an  adequate  supply of'
mahogany  is  available  and  will be  available  for many  years  to come.  The
Company's  belief is based on the fact that the Honduran  government  has always
made available to the Company as much mahogany as it has requested and has never
indicated that such supply may be in future  jeopardy.  In addition to mahogany,
the Company  currently  utilizes the other species of wood referenced  above and
continually researches whether other species of wood are available in commercial
quantities for manufacturing in order to expand its resource base.

     The  Honduran  government  has  established  programs  such that all timber
harvested  is in areas of  forest  under  sustainable  management.  The  program
requires that a physical inventory be taken by representatives of the government
to  determine  the number of suitable  trees of a given  variety in a particular
portion  of the  forest.  From  the  inventory  data,  the  Honduran  government
calculates how quickly that  particular  variety of tree in that particular area
will regenerate and, then, how much can be harvested annually such the supply of
such variety can be sustained. Wood cannot be harvested or transported without a
permit  that the  Honduran  government  issues  with a  termination  date,  that
specifies the species to be harvested,  the amount of wood to be harvested,  and
the  particular  portion of forest is to be harvested and the delivery point for
the harvested wood. is to be delivered.

     With respect to the Company,  sustainable  management works as follows: the
Honduran  government  solicits the Honduran  wood-working  industry (users),  of
which the Company is a part,  to determine  the need for various types -of wood.
The Honduran  government then issues permits to various entities  (suppliers) to
harvest their assigned  areas of forest until the aggregate  amount of permitted
harvesting  satisfies the users'  requested  needs.  Once the permits are issued
specifying the Company as the exclusive recipient;  price,  delivery and payment
terms  can be  negotiated  with the  supplier.  Once  the  permits  are  issued,
harvesting can not commence  until a stumpage tax is paid by the supplier.  Most
often the  supplier  does not have the  resources to pay the tax and the Company
effectively prepays the tax.

Seasonality

     As is typical in the furniture  industry,  the Company's greatest volume of
incoming  orders is  received  in the spring and fall of each year.  This is due
primarily to the  International  Furniture Market held each April and October in
High Point,  North  Carolina.  Careful  scheduling of  production  minimizes the
effects of such  seasonality on the Company's  production and shipments.  Orders
are generally shipped within 30 to 90 days of receipt.

Competition

     The  furniture  industry  is  highly  competitive,  and no  single  company
dominates the industry.  The Company,  while  unranked in any known  comparative
study of the industry, competes with many nationally-recognized manufacturers of
quality  furniture.  Many  furniture  manufacturers  have  substantially  larger
production capabilities, and distribution networks, as well as greater financial
resources than has the Company.  The Company's  principal method of competing is
by product  design  (including  items or categories of items not available  from
other manufacturers),  product quality (including high-grade hardwoods and other
materials used in construction and quality-constructed cabinetry and finish) and
price. Most of the Company's designs are offered by the Company exclusively. The
Company believes its pricing structure, product design and product quality to be
competitive with those of its competitors.

     The furniture industry is a segmented industry in which design, quality and
price place each  manufacturer  into a  competitive  market  niche.  The Company
competes in the  medium-to-high  price market,  which normally requires a larger
number of items  comprising the product line,  smaller  production lot sizes and
higher  inventory  requirements to maintain a competitive  delivery  cycle.  The
Company  estimates  that there  approximately  12 to 15 furniture  manufacturers
directly competing with the Company in the medium-to-high  price market for case
goods. The Company's limited financial resources restrict its ability to compete
effectively in its market niche.

Environmental Control Facilities

     The Company's domestic  operations must meet extensive  federal,  state and
local  regulatory  standards  in the areas of safety,  health and  environmental
pollution  controls.  Historically,  these  standards  have not had any material
adverse  effect on the Company's  sales or  operations.  The furniture  industry
currently  anticipates  increased  federal and state  environmental  regulation,
particularly  with respect to emissions from paint and finishing  operations and
wood dust levels in manufacturing operations. The industry and its suppliers are
attempting to develop water-based  finishing materials to replace  commonly-used
organic-based  finishes  which are a major  source of regulated  emissions.  The
Company  cannot at this time  estimate the impact of these new  standards on the
Company's operations or the cost of compliance thereof (including future capital
expenditure requirements).

                                       -8-
<PAGE>

Employees

     As of April 30, 2000 the Company had approximately 210 employees, including
approximately  187  people  currently  employed  at  the  Honduran   Facilities.
Approximately 120 of the Company's employees are full-time employees.

Item 2.   Description of Property

     The  Company  owns and  operates  one plant that  houses its United  States
production  facilities and general offices and is located on 17 acres of land in
Lexington,  North Carolina.  The 82,500 square foot facility is of brick, steel,
concrete and concrete block construction and is well-maintained  and in adequate
condition. The Company's manufacturing facilities generally operate on a 40-hour
week.  Substantially  all  of  the  Company's  physical  properties  located  in
Lexington,  North Carolina,  including inventory,  machinery and equipment,  are
pledged as collateral  under the Company's loan  agreements with Lexington State
Bank of North Carolina, the Company's primary bank lender.

     The Company's  Honduran  Facilities  consist of seven and one-half acres of
land  located  in San  Pedro  Sula,  Honduras,  a 21,120  square-foot,  equipped
dimension mill, a 7,840 square-foot wood resaw operation, two dry kilns, boilers
and related  processing  equipment,  two buildings for dry lumber  storage and a
6,408 square-foot building for "green" lumber storage. In July 1990, the Company
completed  construction of a 45,000  square-foot  addition to the  manufacturing
facility and a 2,600 square-foot office building.

     The Company believes its properties are generally  suitable and adequate to
meet its intended uses and, in the opinion of  management,  they are  adequately
covered by insurance.

     The Honduran Facilities,  including both real and personal property such as
plant and equipment but not including  inventory or receivables,  are pledged to
secure a loan from the OPIC.  The loan proceeds were used to finance  completion
of capital  improvements to the Honduran Facilities.  In addition,  Banchas, the
Company's  Honduran  bank lender,  holds a second  mortgage on the assets of the
Honduran Facilities.

     The  lumber  dimension  mill,  as  well  as  the  furniture   manufacturing
operations  of the  Honduran  Facilities,  operate  on a  44-hour  work  week (a
standard  work  week in  Honduras).  The  Company  believes  that  the  mill and
furniture  manufacturing  facilities are in adequate  condition and suitable for
its intended uses.

     The  Company  leases a 4,400  square-foot  showroom  located in High Point,
North  Carolina  utilized to display the Company's  products,  particularly  new
product introductions,  during the semiannual  International  Furniture Markets.
The Company  believes  the  showroom is in good  condition  and suitable for its
intended use.

Item 3.   Legal Proceedings

     There is no pending material litigation involving the Company or any of its
subsidiaries.  To the best of management's  knowledge,  no legal  proceedings or
proceedings by any governmental authorities are contemplated.

Item 4.   Submission of Matters to Vote of Security Holders.

          None

                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters.

     Until  October 1995,  the Common Stock of the Company  traded in the NASDAQ
over-the-counter  market system. Since that time, the Company's Common Stock has
traded on the NASD's  over-the-counter  bulletin  board.  In absence of a market
maker to  furnish  quotations,  the  Company  has  listed  the only sale  prices
available to the Company  which are trade  prices that  appeared on the Internet
during fiscal year 2000.

     Quarter Ending    High     Low         Quarter Ending    High     Low

     July     1998     5/32     5/32        July     1999     0.20     0.07
     October  1998     0.15     0.15        October  1999     0.20     0.07
     January  1999     1/8      1/8         January  2000     0.20     0.07
     April    1999     0.07     0.07        April    2000     0.20     0.07

     These market  quotations  represent  trade prices,  as they appeared on the
Internet.

     As of July 28, 2000, there were  approximately 562 holders of record of the
Company's Common Stock.

                                       -9-
<PAGE>

     The Company has not paid any dividends since its inception. Pursuant to the
terms of its  line-of-credit  and long-term loan agreements with Lexington State
Bank,  the  Company may not pay any  dividends,  purchase,  redeem or  otherwise
retire any of its capital stock or otherwise make any other  distribution of its
assets  resulting  in the  reduction  of its capital  without the prior  written
consent of Lexington  State Bank. See  "Management's  Discussion and Analysis of
Results of Operations and Financial Condition."

Item 6.   Managements Discussion and Analysis or Plan of  Operation

Liquidity and Capital Resources

     The Company's  principal  long-term  capital  resources  are  shareholders'
equity,  the term loan of Wellington Hall with Lexington State Bank and the term
loan of WHCC with the Overseas  Private  Investment  Corporation  (OPIC).  As of
April 30, 2000, total  stockholders'  equity was approximately  $939,039 and the
outstanding principal amounts of the Lexington State Bank loan and the OPIC loan
were about $1,455,505 and $838,876 respectively.

     On June 16,  1999,  Lexington  State  Bank  (LSB),  the  company's  primary
domestic  lender,  restructured the company's debt whereby three lines of credit
with an aggregate  total loan balance of  approximately  $1,272,000 and one term
loan with a balance of approximately  $277,784 were replaced by a long term loan
of $1,529,784 with the repayment amortized over a period of ten years and a line
of credit of $300,000.  On June 16, 1999 the Company  owed $20,000  against this
line of credit. The three lines of credit retired carried interest rates ranging
between  prime plus 1% and 1 1/2%.  The long term loan  retired  had an interest
rate of prime plus 1.5%. The new long term loan and line of credit bear interest
rates of prime plus 3/4% and are secured by  substantially  all of the Company's
domestic assets.  Principal payments on the line of credit are is due on demand.
The line of credit and long term loan also contains  restrictive  covenants that
prohibit  Wellington Hall from paying  dividends and making other  distributions
with respect to its capital stock.  The line of credit is reviewed  annually for
renewal. On April 30, 2000 the Company owed $240,000 on the line of credit.

     The primary  effect on June 16, 1999 of the  restructured  LSB debt reduced
the Company's "Current Liabilities" by approximately $967,280 and increased long
term debt.  Depending  on the level the Demand  Notes  utilized  over time,  the
Company's  interest and principal  payments  essentially  remained  equal to the
level  of  those  requirements  prior  to the  restructuring  of the  debt  thus
minimizing the effect on the Company's working capital.

     On March 10, 1997,  WHCC and OPIC executed an amended loan agreement  that,
among other things, lowered the interest rate to 10% per annum as of November 1,
1996 and waived  principal  payments  from July 31, 1996 until July 31, 1997, at
which time the Company began making quarterly payments of approximately $31,000.
Principal  payments were scheduled to increase to approximately  $62,000 on July
31, 1998 with a balloon  payment of  approximately  $557,438  due on October 31,
1999. Upon execution of the amended documents, WHCC paid OPIC a rescheduling fee
of 1% of the principal balance.  The proceeds from the OPIC loan,  together with
funds generated  internally by Wellington Hall, were used to acquire and improve
the Honduran Facilities.

     The Company,  beginning on July 31, 1998 and  thereafter was unable to make
quarterly  principal payments except for the quarters ending on January 31, 1999
and April 30, 1999 when for each quarter the Company paid approximately $21,000.
The Company has made all required quarterly  interest  payments.  On October 31,
1999 the  Company  was  unable to make the  balloon  payment  which had grown to
approximately  $826,479 and,  therefore,  the Company was in default of the loan
agreement.  The Company did make the quarterly  scheduled  interest  payments on
October 31, 1999,  January 31, 2000 and on April 30, 2000. The acceptance of the
interest  payments  by OPIC did not in any way alter the  default  status of the
loan.

     The  Company  agreed in  December of 1999 to bear the expense of having the
OPIC mortgage on the Company's  Honduran facility  extended.  Under Honduran law
the  maximum  length of time a  mortgage  can  remain in effect is ten years and
OPIC's  original  mortgage  was due to expire on April 1,  2000.  All  necessary
actions  have  now  been  completed  and the  original  OPIC  mortgage  has been
effectively  extended for another ten years. The expense of this transaction was
minimal.

     In February of 2000,  the Company's  management  and OPIC personnel met and
discussed  the future  Company plans to satisfying  the principal  balance.  The
Company's  position  was  that  addition  time  must be given  for it's  current
strategy,  presented to OPIC during the meeting, to produced the growth in sales
and a resulting  level of  profitability  adequate to servicing  the debt and/or
that the  Honduran  facility be sold or and  investor be found with  interest in
part  ownership of that  facility.  The proceeds  from such a sale or investment
could, among other things,  pay off the OPIC loan balance.  Selling the Honduras
facility  and then  contracting  the  production  of the  Company's  products is
consistent  with the  Company's  current  strategy  of  curtailing  unprofitable
domestic  production  and  becoming a  marketing  and  distribution  Company for
products available from foreign manufacturers.

     On May 1, 2000 the Company and OPIC  entered into a  Forbearance  Agreement
which among other things  forebears  OPIC until October 31, 2000 from seeking to
enforce its rights  against the  collateral  under the Loan Agreement due to the
failure  by the  Company to make  payment of  principal  in full,  and  interest
thereon by October 31, 1999, as required under the terms of the loan  agreement.
In  consideration  for OPIC's above stated  agreement to forbear from seeking to
enforce right against the collateral, WHCC agreed to among other things to:

<PAGE>
                                      -10-

(i)  No later than July 3`, 2000,  pledge, or cause to be pledged,  to OPIC in a
     manner and with documentation (including legal opinions) acceptable to OPIC
     in form and  substance  (once  executed,  such  document  shall  constitute
     "Financing  Documents")  all of the shares of Muebles  Wellington Hall S.A.
     (Muebles); and

(ii) Make  quarterly  interest  payments in the manner and at the  default  rate
     specified in the Loan  Agreement on the full,  unpaid  balance of the loan,
     effective as of October 31, 1999; and

(iii)Exercise  its best  efforts to sell  Muebles at a net value  sufficient  to
     repay  OPIC's  debt in full,  and to cover  PIC's cost of  collection,  and
     commencing May 1, 2000, provide a written report to OPIC on a monthly basis
     regarding the Company's efforts to sell Muebles.  The terms of any proposed
     sale are subject to OPIC's prior  approval,  and all of the proceeds of any
     sale shall be payable to OPIC, in a manner OPIC may specify,  to the amount
     owing to OPIC under the Financial Document; and

(iv) As may be requested  by OPIC,  WHCC shall  cooperate  fully to provide OPIC
     with a written appraisal,  or work with such broker as OPIC may identify to
     expeditiously sell Muebles,  subject to the provisions of the last sentence
     of subparagraph (iii) above. On May 31, 2000 the Forbearance  agreement was
     amended  whereby  item  (ii)  above was  revised  to read:  make  quarterly
     interest  payments in the manner  specified  in the Loan  Agreement  on the
     full, unpaid balance of the loan,  effective as of October 31, 1999; and in
     lieu of making penalty  interest  payments on each  quarterly  payment date
     specified  in the Loan  Agreement,  the Company  shall pay a total  penalty
     charge of  $25,138.7  on October 31,  2000,  which  represents  the penalty
     interest that will accrue during the  Forbearance  Period,  computed on the
     basis of 360- day years of twelve 30-day months.

     This amendment to the  forbearance  agreement  allows the difference in the
10%  interest  rate on the OPIC loan balance in effect prior to October 31, 1999
and the default  interest  rate of 13% included in the Loan  Agreement  would be
added to the outstanding principal balance quarterly. On January 31, 2000 and on
April 30, 2000 the principal balance was increased  accordingly and on April 30,
2000 the outstanding balance was $838,876.34.

     The OPIC loan prohibits the payment of dividends and other distributions by
Wellington  Hall and requires  that it maintain a stated  amount of tangible net
worth as well as certain financial  ratios,  including current assets to current
liabilities and total  indebtedness to tangible net worth. In addition,  WHCC is
required  to  maintain a stated  amount of  current  assets in excess of current
liabilities,  and WHCC and MWH are required to maintain stated ratios of current
assets to current liabilities and indebtedness to tangible net worth. Wellington
Hall, WHCC an MWH are each in compliance with the requirements of the OPIC loan.

     Under the OPIC loan arrangement, Wellington Hall is obligated to supply any
necessary funds to WHCC to meet WHCC's obligations thereunder,  and MWH has also
guaranteed the  obligations  of WHCC. The OPIC loan is secured by  substantially
all of the tangible assets of the Honduran Facilities.

     The Company's primary sources of liquidity are the bank lines of credit and
cash flow from operations.  For its domestic  operations,  the Company has three
hundred  thousand  dollar lines of credit with Lexington  State Bank (See above)
and the  outstanding  balance at April 30, 2000 was  $240,000.  MWH has lines of
credit with two Honduran  banks and as of April 30, 2000,  an aggregate of about
$218,219 had been borrowed under these lines. Borrowings bear interest at a rate
that ranges  between 27% and 30% payable  quarterly  and principal is payable on
demand.  The lines are secured by a second  lien on the fixed  assets of MWH and
current assets.

     The  Company's  other  primary  source of liquidity is net cash provided by
operating  activities  which was about ($177,043) and $78,306 in fiscal 2000 and
1999,  respectively.  The primary contributing factors to the negative cash flow
was a decrease in Current Liabilities of approximately $91,815 an an increase in
Accounts  Receivable of about $279,144.  If the Company is to meet its liquidity
needs in the  future,  it must  generate  positive  cash  flows  and  avoid  any
significant losses in the future.

     As of April 30, 2000,  accounts  receivable had increased by  approximately
$279,144  since the  beginning of the fiscal year,  mostly as a result of higher
sales late in the fourth quarter. The receivables represented a turnover rate of
about  forty-eight  days,  a increase of about  eight days when  compared to the
turnover rate reported at April 30, 1999. The company's normal terms of sale for
the payment of invoices is Net 30 days for domestically produced goods (DPG) and
3% 10; Net 30 for foreign  produced goods (FPG). In the case of export sales, an
Irrevocable Letter-Of-Credit is required

     Consolidated inventories decreased by about $426,136 during the fiscal year
primarily  a  result  of a  decrease  of  about  $580,000  to the  inventory  of
domestically  produced goods which reduction was off-set by an increase of about
$198,000  in foreign  produced  goods at the  Company's  Honduran  facility,  an
increase of 143,000 of inventory of goods purchase from other foreign  resources
and an  adjustment to the reserve for slow moving  inventory of about  $134,283.
The total  inventory  is  expected  to  continue  to  decline  to both  generate
operating  capital and to improve  the turn on the  inventory  value.  Sales and
backlogs are further discussed herein below.

     Property  and  equipment  is reported to have  increased  by about  $12,800
reflecting  the  devaluation  of the Honduran  currency  during the fiscal year.
Actual  capital  expenditures  for the fiscal years were  approximately  $39,809
mostly to upgrade and maintain the Honduran facility. The value of the Company's
foreign fixed assets are revalued to reflect the fluctuation in the value of the
foreign  currency.  The  decline in that value  during the fiscal  year 2000 was
approximately  $27,009 and the devaluation of the Honduran  currency relative to
the prior fiscal year end was about 4.7%. The historical  value of the Company's
Honduran assets are carried on the subsidiaries' books in the local

                                      -11-
<PAGE>

currency,  the lempira.  Lempiras  are  converted to dollars at the spot rate in
effect at period end when the Company's  financial  statements are consolidated,
and the reduction to the reported  value of these assets  appears as part of the
translation  adjustment.  There are no significant capital  expenditures planned
for fiscal year 2001 and  expenditures are expected to be limited to maintenance
needs which develop from time to time.

     Current  Maturities on Long Term Debt declined slightly and mostly reflects
the balloon payment  required by the terms of the OPIC loan agreement on October
31,  2000.  (See the  discussion  of the OPIC loan above).  Long-term  debt less
current  maturities  increased  because  of a new long term loan with  Lexington
State Bank as a result of the  Company's  loans being  restructured  on June 16,
1999 (see the discussion of LSB above) a new loan from Ernst B. Kemm of $55,000,
and the addition penalty interest from the OPIC Forbearance  Agreement discussed
above.

     Current liabilities  decreased by approximately  $91,815 mostly as a result
of a decrease  of about  $103,379 in trade  payable.  These  reductions  are not
expected to continue in fiscal year 2001.

     The Company is subject to the risk that foreign  currency  fluctuation  may
have an adverse impact on its operations,  For example, if the Honduran currency
were to stabilize in the future or to increase in value against the dollar,  the
Honduran  subsidiary's  cost might increase causing profit margins to erode. The
Company,  however,  does  not  engage  in  any  hedging  of  the  exchange  rate
fluctuations.  Since the  acquisition  of the Honduran  subsidiary in 1989,  the
lempira has continually  devalued against the U.S.  dollar,  from 2.0 lempira to
the dollar in 1989 to 14.71  lempira to the dollar at April 30,  2000.  Although
the devaluation of the lempira has resulted in reductions in the historical book
value  of  the  assets  and  liabilities   and  a  corresponding   reduction  to
shareholders'  equity  in the  form of a $1.94  million  cumulative  translation
adjustment,  the  Company  also  benefits  from  lower  product  cost  from  the
subsidiary  as the  lempira  devalues.  In view of the  long-term  trend  of the
devaluation,  management  believes that hedging of the exchange rate fluctuation
is unnecessary and could reduce or eliminate the benefits of lower product costs
resulting from any continued devaluation.

     As of  September  1, 1996,  the Company  executed an  Employment  and Stock
Purchase Agreement with Arthur F. Bingham (the "Agreement"). On October 10, 1996
Mr. Bingham loaned the Company  $285,694 at terms included in an addendum to the
Agreement.  On February 12, 1997 and,  during the Company's last fiscal quarter,
Mr.  Bingham  purchased  600,000  shares of common  stock at a price of $.50 per
share,  which purchase price was paid by  cancellation of the foregoing loan and
for an  additional  investment  of $14,306.  Mr.  Bingham has also been  granted
options to purchase 300,000 additional shares at option prices ranging from $.80
to $1.30  per  share,  150,000  of which  are  subject  to  certain  performance
conditions.

     On April 23, 1999,  Ernst B. Kemm,  upon the Board of  Directors  approval,
purchase 1,333,333 shares of the Company's common stock for $400,000 or $.30 per
share. The purpose of the funds was to reduce trade payable with certain vendors
and sales  representatives,  finance new sales aids, finance the purchase of raw
materials for the Company's  Honduran  facility,  and to finance the purchase of
furniture from off shore manufacturers.

     In 1989,  the Company  acquired the  Honduran  Facilities  and  anticipated
raising  $1,500,000  through  the sale of the  Company's  stock by the  board of
directors.  The private  placement  ended early in 1990  having  produced  about
one-half the funds anticipated. The result of not raising all the funds has been
that the Company has had to incur more debt and  restrict  capital  expenditures
that were both in its  original  plans at the time of the  acquisition  and that
have developed since the acquisition. Because of this debt, sales needed to grow
rapidly from the time of the acquisition to a level at which  operating  incomes
would be adequate to service the debt and to fund  capital  needs if the Company
was to grow.  Maintaining an adequate level of sales since the  acquisition  has
been possible only for limited periods of time, mostly as a result of a sluggish
furniture  economy  that  existed  over  portions  of that time,  a period  that
includes  two  recessions.  The  sluggish  furniture  economy  also  reduced the
industry's distribution base, especially the base of mid to small retailers more
committed to using smaller  manufacturers,  such as the Company,  as a resource.
Furthermore,  management  believes that the consumer  taste in home  furnishings
swung away from the more  formal  designs  and  executions  that the Company has
marketed to more informal designs. In addition,  and over the more recent years,
the medium to higher priced  segments of the  furniture  has basically  seen the
industry go off shore and domestic produced products have become non competitive
and/or unprofitable.

     Management  believes that the  resulting  situation is that the Company has
too much debt service,  given its sales volume most recently  achieved,  and has
inadequate  funds for its plans to  restoring  and  growing its sales to a level
where its  operating  profits can  accommodate  its needs.  The  Company's  cash
position has been tight during all of previous four years.  The sale of stock to
Mr. Bingham  assisted the Company in meeting its working  capital and other cash
needs  during  fiscal  1997.  During  fiscal  years 1998 and 1999,  the  Company
depended  on the  sale of  excessive  inventories,  much  of  which  was  highly
discounted,  to support  continued  operations.  The equity  fund  received as a
result of Mr. Kemm's and Mr.  Rick's  investments  (See  discussion of Furniture
Classics  below)  along with the continue  reduction  of  inventory  contributed
materially to operating funds during fiscal year ended April 30, 2000.

     On April 30,  2000,  Ernst B. Kemm,  upon the Board of  Directors  approval
executed a long term loan with the Company  whereby the Company can borrow up to
$110,000 to finance the purchase of inventory  from off shore  suppliers.  Under
the terms of the loan,  interest will be paid monthly on the outstanding balance
at a rate of 1 1/2 per above prime as established by Lexington  State Bank. Upon
notification by Mr. Kemm, the outstanding balance will be due on the last day of
the thirteenth month following the receipt of notification.  The Company has the
right to make payments  against the balance from time to time. On April 30, 2000
the Company borrowed $55,000 against this loan.

                                      -12-
<PAGE>

     In March of 1999, the Company and Furniture  Classics Limited (FCL) entered
into a verbal agreement  whereby FCL would supply the Company a line of mirrors,
chinese  antiques,  and other  products  from their  foreign  sources  which the
Company will market exclusively.  Under this agreement R. Douglas Ricks, the FCL
president would became a shareholder by investing  $27,000 for 100,000 shares of
the Company's common stack,  would be nominated as a Director,  and would assist
management  in  developing  additional  products  to further  exploit  these new
sources.  As part of the  agreement  and to enhance  Company  sales and possibly
finance the growth of these sales, FCL received  certain  incentives in the form
of warrants. At the High Point International Furniture Market held in April 1999
the Company  displayed these products and initial shipment  resulting orders are
reflected in the Company's sales during the fiscal year ended April 30, 2000. On
May 4, 1999 Company and FCL  executed a  contractual  agreement  and on June 22,
1999 the Company  received $27,000 for the Company's common stock (see the Proxy
Statement). The warrants issued as part of the FCL agreement are priced a can be
exercised by the following:

     100,000 shares at $0.30 per share exercisable until October 31, 1999

     100,000 shares at $0.40 per share exercisable until July 31, 2000

     100,000 shares at $0.40 per share exercisable until December 31, 2000

     100,000 shares at $0.45 per share exercisable until December 31, 2001

     100,000 shares at $0.45 per share exercisable until December 31, 2001

     100,000 shares at $0.53 per share exercisable until December 31, 2001

     Under the terms of the  agreement  the company can  purchase  the  products
involved directly from the foreign source in container loads,  purchases partial
container loads or from Furniture Classics Limited's inventory. FLC in any event
is responsible for providing  letters of credit or satisfying other credit terms
with the  foreign  vendors.  FCL  receives  a 10%  brokers  fee on all  products
delivered to the Company.  For orders  placed as partial  containers or from FCL
inventories,  FCL  received  addition  fee  to  cover  handling,  delivery,  and
warehousing expense as applicable.  Both parties have the right to terminate the
agreement  with ninety day notice but must honor all  outstanding  orders at the
time of termination.

     At the annual meeting of shareholders  held in September of 1999, Mr. Ricks
was elected a director  and on October 31, 1999 Mr.  Rick's  exercised a warrant
and invested $30,000 for 100,000 shares of the Company's common stock. The funds
received from Mr. Ricks was used to purchase inventory.

     On April  19,  1999,  Hoyt M.  Hackney,  the  Company  President,  with the
majority  of the Board of  Directors  approval  , agreed to alter the  "Deferred
Compensation  Agreement"  between Mr.  Hackney and the  Company.  The  agreement
allows  that upon  retirement,  at age 62 or older,  or upon his death he or his
estate  would  received  $50,000  per year for a period of ten years  (see Proxy
Statement).  The Company has accrued the  expensed of this  obligation  over the
last twelve  years and is scheduled  to continue  that expense  until the sum of
$300,000 has been accrued. At April. 30, 2000 the Company's Balance Sheet stated
a $312,000 long term liability as a result of this accrual.

     The revisions (the revision) to the "Deferred Compensation Agreement",  not
yet finalized,  are expected to reduce the  compensation to $20,000 per year but
not before May 1, 2005.  In exchange,  Mr.  Hackney would  receiving  restricted
stock,  1,000,000  shares of common  stock at $.30,  which can not be sold until
after  retirement or death and then only in increments of 1/10 of the shares per
year for a period  of 10  years.  This  action  could  capitalize  the  $300,000
liability and thus remove the long term  liability  from the  Company's  balance
sheet when the transaction is executed.

     The  primary  purpose  of  the  revisions  to  the  "Deferred  Compensation
Agreement"  was as an  incentive to the  Company's  lenders to  restructure  the
outstanding  Company loans  whereby the potential  outlay of $50,000 per year is
removed,  reduced and/or  delayed to enhance the Company's  ability to repay its
debt over all or part of the period the  restructured  loan long agreement would
specify.  After  the  action  of the board of  directors  on April 19,  1999 the
financial  institutions  to whom the  Company  is  indebted  have  shown  little
interest in the revision being complete though, in fact, it was suggested by one
of the Company's lenders.

     The  finalization of this revision to the Deferred  Compensation  Agreement
has been tabled. As a condition of the revision,  the revision can not represent
a taxable event to Mr. Hackney.  Professional assistance has produced a scenario
whereby the revision may meet this condition but further  profession  evaluation
will be  required.  Because of the  expense and  demands on  management  of more
urgent matters, finalizing the revision has been given a lower priority.

     The  Company  leases a 4,400  square-foot  showroom  located in High Point,
North Carolina which is utilized to display the Company's products, particularly
new  product  introductions,   during  the  semiannual  International  Furniture
Markets.

RESULTS OF OPERATIONS

Fiscal Year ended April 30, 2000 compared to Fiscal Year ended April 30, 1999

     Consolidated revenues for the fourth quarter of fiscal year ended April 30,
2000 were  approximately  $1,177,621  down about  $281,992  when compared to the
revenues of approximately $1,459,318 reported for the

                                      -13-
<PAGE>

fourth quarter of fiscal 1999. For the fiscal year 2000,  consolidated  revenues
were about  $5,404.107 and down about  $340,239.  Sales included of domestically
produced furniture for the fourth quarter were approximately $389,791 down about
$543,900 from the fourth  quarter the previous year and these sales for the year
were  approximately  $2,301,471  down  about  $1,196,630  when  compared  to the
previous fiscal year. Sales included for the fourth quarter of products produced
in the  Honduran  facility,  net of  inter  company  sales,  were  approximately
$626,523  an  increase  of about  $106,296  versus  the  approximately  $520,227
reported last year. For the year, these sales were  approximately  $2,253,573 an
increase of about  $193,538  when  compared  with the  approximately  $2,060,035
reported the previous year.

     The consolidated  sales also include for the fourth quarter and fiscal year
new products from new off shore resources marketed under Wellington Hall Imports
(WHI)  which were  first  introduced  in April  1999.  For the  fourth  quarter,
revenues form these products were approximately $157,147 and for the fiscal year
were  $566,818.  There were no sales of this  category of  products  included in
fiscal year 1999.  There were  essentially five sources utilized in fiscal 2000,
four of which are by Furniture Classics.  In fiscal 2001, the Company expects to
add  additional  off shore  vendors and new  products.  Sales as a result of new
products from two new sources whose  products were  introduced in April 2000 are
expected to be impacted beginning in the second fiscal quarter ending on October
31, 2000.

     The consolidated  revenues  included sales from the Company's retail outlet
located in the Lexington facility and operated as Palmetto  Furniture  Galleries
for the fourth quarter of about $90,801 about equal to the approximately $98,250
for the previous  years fourth  quarter and for the fiscal year sales were about
$259,469  versus  about  $215,  024 for fiscal  year 1999 an  increase  of about
$49,000.

     The decline in the sales of domestic produced products is a continuation of
a trend that the Company has  experience  over the last four years.  The Company
experienced a significant drop in the rate of incoming orders for these products
in fiscal 1997 and has experienced a continuing  downward trend since that time.
Management believe that probably several  fundamental  factors contribute to the
cause  of  this  trend  including  a  shrinking   distribution  base  whereby  a
significant  number of retailers  have gone out of business,  changing  consumer
taste away from more formal designs such as the Company's products, and the high
cost of  domestic  production  which  can not  compete  with  imports  which are
possibly undercut the value of domestically produced goods.

     To possibly  counter act this decline the Company has developed and adopted
a marketing  plan that includes  strategic  measures such as (i)  augmenting the
Company's  traditional  product  line  with new  categories  of home  furnishing
products such as mirrors and Chinese  antiques,  (ii)  augmenting  the Company's
traditional  product  line  with  lower  priced  products  produced  by  foreign
manufactures  (other  than and in addition to the  Company's  Honduran  produced
goods),  (iii)  updating  and  upgrading  catalogs  and other  sales aids in all
distribution  channels,  (iv)  operating  a full  time  retail  outlet,  and (v)
beginning in fiscal year 2001, to develop off shore  suppliers for the Company's
products   produced   in  the   past  at  the   Company's   Lexington   facility
(domestically-produced products).

     In pursuit of this strategy the Company  developed and  introduced in April
of 1999  approximately  thirty designs that were to be produced  exclusively for
the Company by a foreign manufacture. The Company then entered into an agreement
with Furniture Classics Limited to supply the Company a line of mirrors, chinese
antiques, and other products from their foreign sources which the Company market
exclusively. At the High Point International Furniture Market held in April 1999
the Company initially  displayed these products and sales are reflected above as
the revenues  included from WHI. At the Market held in October of 1999 and April
2000,  the Company  expanded on it display of products from  Furniture  Classics
Limited.  In  addition  and at the April  2000  Market,  the  Company  displayed
products to be supplied by two new  suppliers in an effort to increase  sales of
the imported goods. The orders received as a result of the expanded displays and
expected to be reflected in fiscal 2001 sales for Wellington Hall Imports.

     These sales of Honduran  produced  products are marketed  under the name of
the Company's  subsidiary,  Wellington  Hall  Caribbean  Corp.  (WHCC  products)
reportedly  increased (see discussion of sales above) when compared with the the
fiscal  previous  year.  These sales  include  both the finished  products  sold
primarily  through  retailer  (retailer sales) and to other  manufacturers  (OEM
sales).  For the fiscal year the  retailer  sales  actually  increased  by about
$225,411 or 10.4%  while OEM sales  declined  by about  $31,873  down from about
$124,669  the  previous  year.  The  increase  in  retailer  sales can mostly be
attributed to the production and  distribution  of new catalogs on most of these
products during the first quarter of fiscal year 2000.

     The decline in domestic  sales has also  negatively  effected the Company's
foreign  operations.  The domestic operation was consuming a significant portion
of the foreign output as dimension  stock,  carved and/or turned  components and
unfinished assemblies into domestic production. The decline has effectively cost
the  foreign  operation  its best and largest  customer.  This  situation,  most
significantly,  resulted in the Honduran  facility  operating under capacity and
unprofitably over the more recent past. To counteract this loss of inter Company
sales and to increase revenues and operations at the Honduran  facility,  effort
has been directed through WHCC at selling other  manufactures and wood consumers
their products and production  requirements;  OEM sales.  These sales, as stated
above  declined  from about  $124,669 in fiscal 1999 to only about $ 92,700 even
though a number of manufacturer  and a significant  amount of product was quoted
and in many  cases  sampled.  Management  contribute  this  lack of  success  to
possibly two factors.  First,  and like the  Company,  most of the  manufactures
pursued produce domestically higher priced products and the items quoted did not
sale.  Secondly,  the  competition  for OEM  sales is more  competitive  and the
products are probably  more  readily  available  than in years past from sources
significantly  less expensive  than  Honduras.  Even though the Company enjoys a
significant  advantage in production cost at its Honduran  facility  relative to
domestic cost, such countries,  for example,  as Indonesia or China seem to have
even greater advantages.

                                      -14-
<PAGE>

     As another means of increasing WHCC sales, other than the efforts discussed
above, the Company converted some products from it domestically produced product
line to the WHCC line. An English bedroom and a quantity of occasional furniture
items,  which in the past were  included in the domestic  product line have been
switch to Honduran  production  and the sales of these products were included in
the fiscal year 2000 revenues. Management believes these items are being sold at
lower price but at higher margins..

     This  switch  in  product  accelerated  the  decline  in the  level  of the
Company's domestic  production  activities which contributed most heavily to the
losses  reported  the last three  years.  By the end of fiscal  year  2000,  the
domestic facility has essentially become a facility to receive, deluxe, package,
warehouse  and  distributed  products  both from the Honduran  facility and from
other foreign  sources  discussed  above.  Considerable  effort is being made to
bring the domestic  operating  costs and overheads down to a level such that the
remaining domestic production, WHCC sales, and Wellington Hall Import sales will
absorb these cost and return the Company to profitability.

     To reduce inventories and to generate operating funds, the Company has sold
inventories  deemed to be slow moving,  of unacceptable  quality or discontinued
product at highly discounted  prices. In fiscal year 1999, the Company ended its
association with a Furniture Clearance Center whereby this inventory was sold at
highly discounted prices which negatively  effected operation cost. In the first
quarter of fiscal year 2000, the Company  stopped the using of "Tent" sales held
at the Lexington  facility to raise  operating  capital by selling  inventory at
highly  discounted  prices.  To expand sales and revenues,  the Company opened a
"Factory Outlet" where by products are sold to the public generally at wholesale
prices or at  discounted  prices  within the  available  margins.  The outlet is
operated as Palmetto Furniture Gallery (PFG),  housed in the Lexington facility,
operating expense charged to the Company,  and manned by Company personnel.  The
consolidated  revenues include the sales generated by PFG (see above). In fiscal
year 1999,  these inventory sales  accounted for  approximately  $182,578 to the
consolidated  loss  versus a small  profit  contribution  in fiscal year 2000 of
$5,291. The outlet will continue to operate during the upcoming fiscal year.

     The  Company's  firm backlog of orders on April 30, 2000 was  approximately
$1,876,566  down from its backlog of $2,342,513 on April 30, 1999. The April 30,
2000 backlog included $763,498 of domestically-manufactured products, as opposed
to  $1,191,649  included  in  the  1999  backlog.   The  backlog  for  WHCC  and
Honduran-produced products, less inter company orders, was $780,936 on April 30,
2000 versus  $552,148 on April 30,  1999.  The April 30, 2000  backlog  included
$332,132 of imported products,  from sources other than Honduras,  as opposed to
$552,794 included in the 1999 backlog.

     Cost of sales  decreased  approximately  $277,482 to about $979,131 for the
fourth quarter and decreased  about $663,903 to about  $3,973,562 for the fiscal
year ended April 30, 2000. For the quarter the Cost of Sales were about 80.2% of
sales down from about 86.96% the previous  year. For the fiscal year the Cost of
Sales as a percent of sales were  about  73.6% down from about  80.5% for fiscal
year 1999. The primary reasons for the decline in Cost of Sales were:

(i)  The decline in the cost of highly  discounted  inventory during fiscal 2000
     versus those sold the previous year as discussed above.

(ii) Lower cost of good sold for  Honduran  produced  goods as a results of cost
     reductions and increases in prices.

(iii)The addition  sales of products  from off shore sources other than Honduras
     which have lower cost as a percent of sales relative to the declining sales
     of domestically produced goods which have a higher cost.

     Reported revenues and cost of goods sold as a percentage of sales have been
affected  by  changes  in the  Company's  prices on those  products  distributed
through retailers.  The prices for domestically produced product were increased,
effective  August 15, 1999, by about 5 to 6% to improve  margins on that portion
of the  company's  product  lines.  Prices for Honduran  produced  products were
increased about 6% affective on April 15, 1999 and on April 15, 2000.

     Selling,  general  and  administrative  expenses  declined  in  the  fourth
quarterly  by about  $80,204 to about  $203,694  and was about 17.3 % percent of
revenues and were down about  $86,897  during the year to about  $1,200,877  and
represented  about 22.2% of  revenues.  The decline in these cost for the fiscal
year  reflect  lower  sales  commission  on lower  sales  and  voluntary  salary
reductions  for  management.  These  reduction  will  continue  at least for the
upcoming  first quarter of fiscal 2000 ending July 31, 2000.  The fourth quarter
decline also included  certain over accrued  expense which will not be reflected
in future results.

     Interest  expenses of  approximately  $98,513 for the fiscal fourth quarter
represent an increase of about $12,000 versus that paid during the previous year
fourth quarter.  For the fiscal year 2000, interest expenses were about $372,673
versus  about  $403,214 in fiscal year 1999,  down about  $30,541 over the prior
year as a result mostly of a slight  decline in short term foreign debt with the
higher interest rates (See discussion above).

     For the the fiscal quarter ended April 30, 2000, operating income (earnings
before  interest  and  taxes)  was  a  about  $84,513  compared  to  a  loss  of
approximately  ($81,194) for quarter  ended April 30, 1999.  For the fiscal year
ended April 30, 2000,  the  operating  income was  $229,668  versus the previous
year's loss of about  ($149,408).  The net loss for the fourth quarter was about
($11,441),  (0.0) cents per share  versus a loss of about  ($127,397)  or ($.02)
cents per share for the previous years fourth quarter, while for the fiscal year
there is a net loss of ($150,885) or ($.04) per share, compared to a net loss of
($570,914) or ($.25) per share for the prior year, fiscal 1999.

     The net loss reported in the fourth quarter and fiscal year ended April 30,
2000 are a result  generally  of slow sales,  the  company's  limited  operating
capital and relatively high level of indebtedness. Because of the slow sales and

                                      -15-
<PAGE>

and to avoid increasing inventories,  it was necessary, during most of the year,
to reduce production volumes,  primarily assembled production,  in the Company's
domestic facility and foreign operations to levels below that required to manage
labor and overhead  cost.  In  addition,  the Company  sold off  inventories  at
essentially  break-even  prices to generate cash to cover the operating loss and
to finance continued operations.

     The  Company's  auditing  firm  expressed  that in their  opinion  there is
substantial  doubt about the Company and its subsidiaries to continue as a going
concern.  (See the Independent  Auditors Report and note 21 in the  consolidated
financial statements). For the Company to continue to operate, sales and profits
must increase to a level whereby indebtedness can be repaid as scheduled and the
outstanding OPIC loan principal balance is repaid on or before October 31, 2000.
To increase  sales,  the company  will need more  operating  funds.  To generate
operating  funds  the  Company  will need to raise  capital  or sell part of its
assets. To repay OPIC by October 31, 2000 the company will need to raise capital
or refinance the outstanding principal..

     The Company  does not believe it can expect to raise  capital  through some
common  channel  because of its recent  history of sales and profits even though
results  improved  materially  in fiscal year 2000.  Therefore,  the most likely
avenue is to sell certain assets.  The sell of the Company's  Honduran facility,
or arrange an outside investment in that facility,  has been discussed from time
to time and over the last twelve months with a number of potentially  interested
entities  but no  material  commitment  has been  received by the  Company.  The
Company  believes  that the value of that  facility  exceeds  all the  Company's
indebtedness  and possibly  all it's  liabilities.  The Company  prefers a buyer
which  would  continue to sale the  Company  it's  products  for  marketing  and
distribution to its established customers.

     The Lexington  operations,  domestic operations,  could be sold and, though
discussion  have  occurred  from time to time over the last  twelve  months with
potential buyers, there has been no material commitment received by the Company.
The Company believes that the value of that facility and operations  exceeds all
the Company's  indebtedness  and possibly all it's  liabilities.  If the Company
sales the domestic  operations it would  represent a change of ownership and the
Company would  continue to operate the Honduran  facility.  The Company  believe
that a potential  buyer  would  continue to  purchase  there  products  from the
Honduras facility.

     The Company has considered proposing the sale of its public corporate shell
and/or  taking  the  Company  private.  Thought  this  action  would  not  raise
significant capital,  considerable expense would be eliminated.  The Company has
not received a material commitment on a sale of the corporate shell.

     The OPIC (see discussion above) loan and Forbearance Agreement terminate on
October  31,  2000 and the  Company  intends  to take all  possible  actions  to
repaying  the loan on or before  that date.  In  addition  to finding a buyer or
investor  discussed  above,  the  possibility of  refinancing  the loan is being
presently being pursued. The Company has not received a material commitment form
a lender on refinancing the loan.

     Sales  of  foreign  produced   products  and  Honduran   produced  products
demonstrated  adequate margins for  profitability in fiscal year 2000. In fiscal
year 2001 and in addition to the  established  products,  the Company expects to
expend the product line from foreign sources and to secure the production of its
products  manufactured  domestically  in the past from  foreign  sources.  Those
products manufactured domestically in the past are expected to be purchased at a
price which will in many situations allow the reduction of wholesales prices and
an  improvement  in the margins on their sale.  If the Company can finance these
purchases in quantities to maintain a reasonable  level of sales it could return
to profitability in fiscal year 2001 ending April 30, 2001.

Subsequent Event:

     The Company Honduran  subsidiary,  Muebles  Wellington Hall, S.A.  recorded
certain accounting  adjustment that required restating the fiscal years 2000 and
1999 financial statements.

     The following  tables  reflect the effect of the  restatement on previously
reported financial statements:

<TABLE>
<CAPTION>
                                  Balance Sheet

                                                         At April 20, 2000
                                           As previously
                                              reported      Adjustments      As restated
-----------------------------------------------------------------------------------------
Assets:
<S>                                         <C>             <C>              <C>
Cash                                        $     22,336    $          0     $     22,336
                                            ------------    ------------     ------------
Accounts receivable, net                          71,352         (25,358)          46,160
Inventory                                        928,719           1,724          930,443
Prepaid expenses and other current
   assets                                          8,065          21,842           29,907
Property, plant and equipment, net               362,562         (22,519)         340,043
Other assets                                         299               0              299
                                            ------------    ------------     ------------
      Total assets                          $  1,393,333    ($    24,144)    $  1,369,188
                                            ============    ============     ============

<PAGE>
                                      -16-

<CAPTION>
Liabilities and Stockholders' equity
<S>                                         <C>             <C>              <C>
Note payable                                $    218,219    $          0     $    218,219
                                            ------------    ------------     ------------
Account payable                                  123,176         (10,585)         112,591
Payable to parent company                        125,359               0          125,359
                                            $    466,754    $    (10,585)    $    456,169
                                            ------------    ------------     ------------
Stockholders' equity                        $    896,370    $    (13,559)    $    880,529
                                            ------------    ------------     ------------
   Total liabilities and stockholders'
      equity                                $  1,393,33     $    (24,144)    $  1,369,188
                                            ============    ============     ============

<CAPTION>
                          Statement of Earnings (Loss)

                                                       Year ended April 30, 2000
                                           As previously
                                             reported       Adjustments      As restated
-----------------------------------------------------------------------------------------
<S>                                         <C>             <C>              <C>
Net Sales                                   $  2,035,681    ($     4,421)    $  2,031,260
                                            ------------    ------------     ------------
Cost of sales                                 (1,662,335)            485       (1,661,850)
   Gross profit                                  373,346          (3,936)         369,410
Selling, general and administrative
   expenses                                     (145,122)          1.121         (144,001)
      Operating profit                           228,224          (2,815)         225,409

Other expenses:
   Interest, net                                (105,868)             31         (105,837)
   Foreign exchange loss, net                     (4,696)             37           (4,659)
                                                (110,564)             68         (110,496)

Other income                                       5,656             (68)           5,588
                                            ------------    ------------     ------------
   Net earnings                             $    123,316    $     (2,815)    $    120,501
                                            ============    ============     ============

<CAPTION>
                                                        Year ended April 30, 1999
                                           As previously
                                             reported       Adjustments      As restated
-----------------------------------------------------------------------------------------
<S>                                         <C>             <C>              <C>
Net Sales                                   $  2,071,637    $          0     $  2,071,637
                                            ------------    ------------     ------------
Cost of sales                                 (1,785,182)         10,128       (1,775,054)
   Gross profit                                  286,455          10,128          296,583
Selling, general and administrative
   expenses                                     (173,696)          2,455         (171,241)
   Operating profit                              112,759          12,583          125,342

Other expenses:
   Interest, net                                (151,597)              0         (151,597)
   Other expenses                                (29,590)         29,590                0
                                                (181,194)          29590         (151,597)

Other income                                      68,715         (95,459)         (26,745)
                                            ------------    ------------     ------------
   Net earnings                             $        280    $    (53,280)    $   (53 ,000)
                                            ============    ============     ============
</TABLE>

                                      -17-
<PAGE>

     In the process of consolidating the Muebles  Wellington Hall (MWH) restated
financial statements, provisions to remove profits in inventories as a result of
inter  company  sales were  recalculated  and  reduced  for fiscal  year 1999 by
approximately  $53,280  which effect off set the addition loss from the restated
MWH financial statement to the extent that the consolidated loss for fiscal 1999
was  reduced  by about  $2,473.  The  change in the  provision  for  profits  in
inventory in fiscal 1999 carried forward into the  determination  of results for
fiscal 2000 which in combination  with the restated  reduction in profits on the
MWH restated  financial  statements of about $2,815,  increased the consolidated
loss previously reported by about $56,908 or from $93,917 to $150,885.

     The net effect of all the accounting adjustments and the restated financial
statements  was a  reduction  to  Stockholders  Equity of $14,984 or 1.6% of the
$950,977  originally  reported and a $22,524  reduction to Assets or .47% of the
$4,830,435   originally   reported  (See  note  3  to  the  Notes  to  Financial
Statements).

                           Forward Looking Statements

     Certain statements in Item 1. -Business and item 7 -Management's Discussion
and  Analysis  of  Financial   Condition  and  Results  of  Operations   contain
forward-looking  statements  that  involve  risks  and  uncertainties,  such  as
statements of the Company's plans, objectives, expectations, and intentions. The
cautionary  statements made in this 10AKSB should be read as being applicable to
all related  forward-looking  statements where ever they may appear in this form
10AKSB.  The  Company's  actual  results  could  differ  materially  from  those
discussed herein.

Item 7.   Financial Statements

                              REPORT AND CONSENT OF
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders

Wellington Hall, Limited and Subsidiaries
Lexington, North Carolina

We hereby consent to the incorporation,  in this annual report on Form 10-KSB of
Wellington Hall, Limited and Subsidiaries for the year ended April 30, 2000

The audit  referred to in the above  mentioned  report also included the related
consolidated  financial statements for the two years ended April 30, 2000 listed
in the  accompanying  index. In our opinion,  such financial  schedules  present
fairly the information required to be set forth therein.


                                        /S/ Turlington and Company, L.L.P.


Lexington, North Carolina
July 7,  2000

                                      -18-
<PAGE>

Turlington and Company, L.L.P.                            509 East Center Street
Certified Public Accountants                                Post Office Box 1697
                                            Lexington, North Carolina 27293-1697
                                                            Office: 336-249-8697
                                                         Facsimile: 336-248-8697

                          INDEPENDENT AUDITORS' REPORT

To the Stockholders

Wellington Hall, Limited and Subsidiaries
Lexington, North Carolina

We have audited the accompanying consolidated balance sheets of Wellington Hall,
Limited  and  Subsidiaries  as of April 30,  2000 and the  related  consolidated
statements of income, comprehensive income, stockholders' equity, and cash flows
for the years then ended April 30, 2000 and 1999. These  consolidated  financial
statements are the  responsibility of Wellington Hall, Limited and Subsidiaries'
management.  Our  responsibility is to express an opinion on these  consolidated
financial  statements  based  on our  audits.  We did not  audit  the  financial
statements of Muebles Wellington Hall, S. A., a wholly-owned  subsidiary,  which
statements  reflect total assets of  $1,804,798 as of April 30, 2000,  and total
revenues of $2,306,847  and $2,074,849  respectively,  for the years ended April
30, 2000 and 1999 These  statements  were audited by other auditors whose report
has been furnished to us, and our opinion,  insofar as it relates to the amounts
included for Muebles  Wellington  Hall,  S. A., is based solely on the report of
the other auditors.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  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 audits provide a reasonable  basis
for our opinion.

In our  opinion,  based on our  audits  and the  report of other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the  financial  position of  Wellington  Hall,  Limited and
Subsidiaries as of April 30, 2000 and 1999 and the results of their  operations,
and their  cash  flows for the years then  ended in  conformity  with  generally
accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that Wellington Hall, Limited and Subsidiaries will continue as a going concern.
As discussed in Note 21 to the consolidated financial statements, under existing
circumstances,  there is substantial doubt about the ability of Wellington Hall,
Limited and Subsidiaries to continue as a going concern.  Management's  plans in
regard to that matter also are described in Note 21. The consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

As  discussed  in  Note  3  to  the  consolidated   financial  statements,   the
accompanying  consolidated  balance  sheet as of April 30,  2000 and the related
consolidated statements of income,  comprehensive income,  stockholders' equity,
and cash flow for the years ended April 30, 2000 and 1999, have been restated.

                                        /S/ Turlington and Company, L.L.P.

Lexington, North Carolina
July 7, 2000

                                      -19-
<PAGE>

                                      KPMG

                     KPMG PEAT MARWICK ASESORES, S. de R.L.
                       Auditoria, Consultoria e Impuestos

Apartado 3398, Tequcigalpa                          Apartado 257, San Pedro Sula
Honduras, C.A.                                                    Honduras, C.A.
Telefono:232-2806, 232-5907                          Telefono:553-3545, 553-0146
Telefax: 232-5925                                              Telefax: 552-2223
E-Mail: kpmgtgu@hondudata.com                      E-Mail: kpmgsps@hondudata.com


                          Independent Auditors' Report
                          ----------------------------

The Board of Directors
Muebles Wellington Hall, S.A. de C.V.:

We have audited the accompanying  balance sheet of Muebles Wellington Hall, S.A.
de C.V.  ("the  Company") as of April 30, 2000,  and the related  statements  of
earnings (loss),  retained  earnings and cash flows for the years ended at April
30, 2000 and 1999.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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 out  auditors  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of Muebles Wellington Hall, S.A.
de C.V.,  as of April 30,  2000 and the results of its  operations  and its cash
flows  for the  years  ended at April  30,  2000  and  1999 in  conformity  with
generally accepted accounting principles in Honduras.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 15 to the
financial statement, there is substantial doubt about the ability of the Company
to continue as a going concern.  Management's plans in regard to this matter are
also described in Note 15. The financial  statements do not include  adjustments
that might result from the outcome of this uncertainty.

As discussed in Note 3 to the financial  statements,  the  accompanying  balance
sheet as of April  30,  2000  and the  related  statement  of  earnings  (loss),
retained  earnings  and cash flows for the years  ended April 30, 2000 and 1999,
have been restated.

The Company is a subsidiary of Wellington Hall Caribbean Corporation, to whom it
sells 100% of its  products.  Due to this  relationship  it is possible that the
terms of these  transactions  are not the same as those that would  result  from
transactions with unrelated third parties.

                                        /S/ KPMG

San Pedro Sula, Honduras
July 7, 2000

KPMG Peat Marwick asesores, S. de R.L. socidad
establecida bajo las hondurenes, es una fima
miebro de KPMG International, una asociacion Suiza

                                      -20-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                                                     April 30,
                                                                       2000
                                                                    -----------

ASSETS
Current assets:
   Cash                                                             $     4,541
                                                                    -----------
Accounts receivable:                                                    667,231
   Trade
   Less, allowance for doubtful accounts                                (63,843)
   Inventories                                                        3,313,535
   Prepaid expenses                                                      88,638
   Deferred income taxes                                                 22,145
                                                                    -----------
                                                                      4,032,247
                                                                    -----------
Property and equipment:
   Cost                                                               1.965.679
   Less accumulated depreciation                                      1,294,680
                                                                    -----------
                                                                        670,999
                                                                    -----------
Other assets
   Deferred income taxes                                                104,366
   Other                                                                    299
                                                                    -----------
                                                                        104,665
                                                                    -----------
                                                                    $ 4,807,911
                                                                    ===========
LIABILITIES

   Current liabilities:
   Current maturities on long-term debt                             $   953,918
   Notes payable - other                                                458,219
   Accounts payable - trade                                             483,707
   Customer deposits                                                     68,457
   Other current liabilities                                            172,108
                                                                    -----------
                                                                      2,136,409
                                                                    -----------
Noncurrent liabilities:
   Long-term debt, less current maturities
      (including $80,000 due to officer)                              1,420,463
   Deferred compensation accrual                                        312,000
                                                                    -----------
                                                                      1,732,463
                                                                    -----------
                                                                      3,868,872
                                                                    ===========
STOCKHOLDERS' EQUITY

Common stock; authorized 6,000,000 shares; no par;
   3,823,220 shares issued and outstanding                            3,811,531

Preferred stock; authorized 5,000,000 shares; $5 par;
   no shares issued and outstanding                                         -0-

Accumulated other comprehensive income (loss)                        (1,906,531)

Retained earnings (deficit)                                            (965,961)
                                                                    -----------
                                                                        939,039
                                                                    -----------
                                                                    $ 4,807,911
                                                                    ===========

               The accompanying notes are an integral part of the
                        consolidated financial statements


                                      -21-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES
                        CONSOLIDATED STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                          Years Ended April 30
                                                          2000            1999
                                                      ------------     ------------
Common stock:
   Authorized 6,000,000 shares; no par:
<S>                                                   <C>              <C>
      Balances, beginning of years                    $  3,754,531     $  3,354,531
      Shares issued during the years                        57,000          400,000
                                                      ------------     ------------
      Balances, end of years                             3,811,531        3,754,531
                                                      ------------     ------------
Preferred stock:
   Authorized 5,000,000 shares; $5 par; issued and
      outstanding beginning and end of years                   -0-              -0-
                                                      ------------     ------------
Accumulated other comprehensive income (loss):
   Balances, beginning of years                         (1,872,406)      (1,870,875)
   Changes during the years                                (34,125)          (1,531)
                                                      ------------     ------------
   Balances, end of years                               (1,906,531)      (1,872,406)
                                                      ------------     ------------
Retained earnings (deficit):
   Balances, beginning of years                           (815,076)        (244,162)
   Net loss for the years                                 (150,885)        (570,914)
                                                      ------------     ------------
   Balances, end of years                                 (965,961)        (815,076)
                                                      ------------     ------------
                                                      $    939,039     $  1,067,049
                                                      ============     ============
</TABLE>

                 The accompanying notes are an integral part of
                     the consolidated financial statements

                                      -22-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                          Years Ended April 30
                                                          2000            1999
                                                      ------------     ------------
Revenue:
<S>                                                   <C>              <C>
   Sale of furniture                                  $  5,395,680     $  5,721,206
   Other income                                              8,427           23,130
                                                      ------------     ------------
                                                         5,404,107        5,744,336
                                                      ------------     ------------
Costs and expenses:
   Cost of goods sold                                    3,973,562        4,605,970
   Selling, general, and administrative expense          1,200,877        1,287,774
   Interest expense                                        372,673          403,214
   Other income                                       ------------     ------------
                                                         5,447,112        6,296,598
   Other income                                       ------------     ------------
Loss before income tax expense(benefit)                   (143,005)        (552,622)

Income tax expense (benefit)                                 7,880           18,292

Net loss for the years                                    (150,885)        (570,914)
   Other income                                       ============     ============
Earnings (loss) per share of common stock:
   Basic and diluted:
      Net loss for year                                       (.04)           (. 25)
                                                      ============     ============
</TABLE>

               The accompanying notes are an integral part of the
                        consolidated financial statements

                                      -23-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                                      Years Ended April 30
                                                      2000             1999
                                                  ------------     ------------

Net loss for the years                            $   (150,885)    $  (570,914)

Other comprehensive income (loss) -
   net of changes during years:

Foreign currency translation adjustments               (34,125)          (1,531)
   Other income                                   ------------     ------------
Comprehensive loss for the years                  $   (185,010)    $   (572,445)
                                                  ============     ============

               The accompanying notes are an integral part of the
                        consolidated financial statements

                                      -24-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                           Years Ended April 30
                                                           2000            1999
                                                      ------------     ------------
Cash flows from operating activities:
<S>                                                   <C>              <C>
   Net loss for the years                             $   (150,885)    $   (570,914)
                                                      ------------     ------------
   Adjustments to reconcile net loss to
      net cash provided by operating activities:
      Depreciation                                          61,156           82,697
      Deferred compensation                                 24,000           24,000
      Allowance for slow-moving inventory                 (134,283)         142.000
      Deferred income taxes                                 (5,705)           5,046
   Changes in assets and liabilities:
      Accounts receivable                                 (279,144)         110,712
      Note receivable - officer                                  0           12,605
      Inventories                                          426,136          174,160
      Prepaid expenses                                     (27,019)          15,898
      Other assets                                             516            3,739
      Accounts payable, customer deposits,
         and other current liabilities                     (91,815)          78,363
                                                      ------------     ------------
         Net cash provided by operating activities        (177,043)          78,306
                                                      ------------     ------------
Cash flows from investing activities:
   Purchase of equipment                                    12,800          (11,845)
                                                      ------------     ------------
Cash flows from financing activities:
   Long-term borrowings                                    853,187
   Payments on long-term debt                              (83,271)        (125,192)
   Payments on short-term debt                            (688,594)        (316,179)
   Proceeds from issuance of stock                          57,000          400,000
                                                      ------------     ------------
Overseas Private Investment Corporation
   note deferred interest                                   12,397               --

Net cash provided by (used for) financing activities       150,719          (41,371)
                                                      ------------     ------------
Effect of exchange rate changes on cash                     (6,273)          (7,666)

Net increase (decrease) in cash                            (45,397)          17,424

Cash, beginning of years                                    49,938           32,514
                                                      ------------     ------------
Cash, end of years                                    $      4,541     $     49,938
                                                      ------------     ------------
Cash paid during the years for:
   Income taxes                                       $     25,974            $ -0-
                                                      ------------     ------------
Interest                                              $    357,645     $    389,687
                                                      ------------     ------------
</TABLE>

               The accompanying notes are an integral part of the
                        consolidated financial statements

                                      -25-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              As of and for the Years Ended April 30, 2000 and 1999

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

These consolidated  financial statements were prepared on the basis of generally
accepted  accounting  principles.  The more  significant of these principles are
described as follows:

Inventories  are stated at the lower of cost or market with cost computed by use
of the  first-in,  first-out  method.  Provision  has been made for obsolete and
slow-moving inventory.

Property and  equipment is carried at cost less  accumulated  depreciation.  New
assets and  expenditures  which  substantially  increase the useful lives of the
existing  assets are  capitalized.  Maintenance  and  repairs  are  expensed  as
incurred.  Depreciation is computed by use of the straight-line  method over the
estimated useful lives of the assets.

Earnings  (loss) per share is  computed  by  dividing  net income  (loss) by the
weighted average shares outstanding and diluted share equivalents outstanding.

Revenue from sales is recognized when materials are shipped to the customers.

The consolidated  financial  statements include the accounts of Wellington Hall,
Limited and its  wholly-owned  subsidiaries,  Wellington  Hall Caribbean  Corp.,
Muebles  Wellington  Hall,  S.  A.,  and  Palmetto  Furniture  Galleries,   Inc.
(hereinafter referred to collectively as the Company). All intercompany accounts
and transactions have been eliminated in consolidation. Muebles Wellington Hall,
S. A. was formed  during the year ended April 30, 1990,  and Palmetto  Furniture
Galleries,  Inc. was formed during the year ended April 30, 1998.  Both of these
subsidiaries were accounted for as purchases.

The financial statements of foreign subsidiaries have been translated into U. S.
dollars in accordance with Statement of Financial  Accounting  Standards  (SFAS)
No. 52. All  balance  sheet  accounts  have been  translated  using the  current
exchange  rates at the balance sheet date.  Income  statement  amounts have been
translated using the average exchange rate for the year.  Adjustments  resulting
from the changes in exchange  rates during the years are included in accumulated
other comprehensive income, a separate component of stockholders' equity.

The  financial  statements  of Muebles  Wellington  Hall,  S.A. were prepared in
accordance   with  generally   accepted   accounting   principles  in  Honduras.
Representatives  from the auditors of Muebles  Wellington  Hall, S.A. state that
there  are  no  material   differences  between  generally  accepted  accounting
principles utilized in Honduras and those utilized in the United States.

The  preparation  of  consolidated   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 consolidated
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

2.   NATURE OF OPERATIONS AND CONCENTRATION OF CREDIT RISK:

Wellington Hall, Limited and its subsidiary, Muebles Wellington Hall, S. A., are
manufacturers of wall systems,  dining room, bedroom,  and accent and occasional
furniture,  with plant facilities  located in Lexington,  North Carolina and San
Pedro  Sula,  Honduras.   The  accent  and  occasional  furniture  accounts  for
approximately 50% of the Company's total sales. The remaining 50% of total sales
is split about  evenly  over the other  three  product  lines.  Wellington  Hall
Caribbean  Corp. is a sales  organization  located in Lexington,  North Carolina
responsible  for selling Muebles  Wellington  Hall, S. A.'s products to both the
general public and Wellington Hall, Limited.  Palmetto Furniture Galleries, Inc.
is also a sales organization  located in Lexington,  North Carolina  responsible
for selling  second  quality  furniture of both  manufacturing  affiliates.  The
Company grants credit to customers who are located primarily in the U. S.

The  Company's  policy is to maintain its cash  balances in reputable  financial
institutions insured by the Federal Deposit Insurance Corporation which provides
$100,000 of insurance coverage on each customer's cash balances. At times during
the years,  the Company's cash balances may have exceeded  $100,000.  Management
believes that this policy will not cause any adverse effect to the Company.

                                      -26-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.   RESTATEMENT:

Due  to  certain  accounting  adjustments  recorded  by the  Company's  Honduran
subsidiary,  the Company was  required to restate the fiscal years 2000 and 1999
consolidated financial statements.

The following  tables  reflect the effects of the  restatement on the previously
reported consolidate financial statements:

                                  BALANCE SHEET

<TABLE>
<CAPTION>
                                                                April 30, 2000
                                                As Previously                          As
                                                   Reported       Adjustments       Restated
                                                 ------------    ------------     ------------
Assets:
<S>                                              <C>             <C>              <C>
   Cash                                          $      4,541               0     $      4,541
   Accounts receivable, net                           628,580    $    (25,192)         603,388
   Inventories                                      3,310 191           3,344        3,313,535
   Prepaid expenses                                    66,795          21,843           88,638
   Deferred income taxes                              126,511               0          126,511
   Property, plant and equipment, net                 693,518         (22,519)         670,999
   Other assets                                           299               0              299
                                                 ------------    ------------     ------------
      Total Assets                               $  4,830,435    $    (22,524)    $  4,807,911
                                                 ------------    ------------     ------------
Liabilities:
   Notes payable                                 $  2,832,600    $  2,832,600
   Accounts payable                                   494,293    $    (10,586)         483,707
   Customer deposits and other liabilities            552,565               0          552,565
                                                 ------------    ------------     ------------
                                                    3,879,458         (10,586)       3,868,872
                                                 ------------    ------------     ------------
Stockholders' equity                                  950,977         (11,938)         939,039
                                                 ------------    ------------     ------------
   Total liabilities and stockholders'
      equity                                     $  4,830,435    $    (22,524)    $  4,807,911
                                                 ============    ============     ============

<CAPTION>
                              STATEMENTS OF INCOME

Revenue
<S>                                              <C>             <C>              <C>
   Sale of furniture                             $  5,395,680               0     $  5,395,680
   Other income                                         8,496    $        (69)           8,427
                                                 ------------    ------------     ------------
                                                    5,404,176             (69)       5,404,107
                                                 ------------    ------------     ------------
Costs and expenses:
   Cost of goods sold                               3,916,596          59,966        3,973,562
   Selling, general and administrative
      expenses                                      1,200,914             (37)       1,200,877
   Interest expense                                   372,703             (30)         372,673
                                                 ------------    ------------     ------------
                                                    5,490,213          56,899        5,547,112

   Loss before income tax expense                     (86,037)        (56,968)        (143,005)
                                                 ------------    ------------     ------------
Income tax expense                                      7,880               0            7,880
                                                 ------------    ------------     ------------
Net loss for the years                           $    (93,917)   $    (56,968)    $   (150,885)
                                                 ------------    ------------     ------------
Earnings (loss) per share of common stock:
   Basic and diluted:
   Net loss for the years                        $      (0.02)              0     $      (0.04)
                                                 ============    ============     ============
</TABLE>

                                      -27-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        STATEMENTS OF INCOME (CONTINUED)

<TABLE>
<CAPTION>
                                                              Year Ended April 30, 1999
                                                 As Previously                          As
                                                   Reported      Adjustments        Restated
                                                 ------------    ------------     ------------
 Revenue:
<S>                                              <C>             <C>              <C>
   Sale of furniture                             $  5,721,206               0     $  5,721,206
   Other income                                         1,884          21,246           23,130
                                                 ------------    ------------     ------------
                                                    5,723,090         (21,246)       5,744,336
                                                 ------------    ------------     ------------
Costs and expenses:
   Cost of goods sold                               4,577,499         (28,471)       4,605,970
   Selling, general, and administrative
      expenses                                      1,297,527          (9,753)       1,287,774
   Interest expense                                 6,278,185         (18,773)       6,296,958

   Loss before income tax expense                    (555,095)          2,473         (552,622)
                                                 ------------    ------------     ------------
Income tax expense                                     18,292               0           18,292
                                                 ------------    ------------     ------------
Net loss for the years                           $   (573,387)   $      2,473     $   (570,914)
                                                 ============    ============     ============
Earnings (loss) per share of common stock:
   Basic and diluted:
      Net loss for the years                     $      (0.25)              0     $      (0.25)
                                                 ============    ============     ============
</TABLE>

The adjustments  related primarily to the subsidiaries  reversal of accruals for
trade accounts payable and severance.

4.   NOTE RECEIVABLE - OFFICER:

On January 30,  1992,  Hoyt  Hackney,  President  and Chief  Executive  Officer,
exercised  options and awards for 180,000  shares of common  stock at the option
price of $.80 per share resulting in a net increase in common stock of $144,000.
This increase was accomplished by cash of $40,000 being paid over to the Company
along with the  issuance  of a demand  note to the  Company  by Hoyt  Hackney of
$104,000.  The note receivable - officer was collateralized by the assignment of
the  interest the officer has in the  Company's  deferred  compensation  accrual
account and bears interest at the federal rate as issued from time to time. This
note was paid in full during the year ended April 30, 1999.


5.   INVENTORIES:

Inventories at April 30, 2000 consisted of the following:

                                                           2000
                                                       -----------

Finished goods                                         $ 1,657,096
Work-in-process                                          1,110,293
Raw materials                                              553,863
                                                       -----------
                                                         3,321,252
                                                            (7,717)
                                                       -----------
                                                       $ 3,313,535
                                                       ===========

                                      -28-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


6.   PROPERTY AND EQUIPMENT:

The major classes are as follows at April 30, 2000 are as follows:

                                                           2000
                                                       -----------

Land and buildings                                     $ 1,111,590
Machinery and equipment                                   707,165
Furniture, fixtures, and other equipment                   146,924
                                                       -----------
                                                       $ 1,965,679
                                                       ===========

Depreciation  expense for the years  ended April 30 , 2000 and 1999  amounted to
$61,156 and $82,697 respectively.

 7.      NOTES PAYABLE - OTHER:

Notes payable - other consisted of the following at April 30, 2000:

Banco La Capitalizadora Hondurena, S. A.
     Interest rates from 27% to 30%, secured by
     second mortgage on fixed assets and a lien on
     inventories of Muebles Wellington Hall, S. A.     $   141,061

Banco de Honduras, S. A.
     Interest rates from 27% to 30%, secured by
     inventories and a third mortgage on
     certain machinery and equipment of
     Muebles Wellington Hall, S. A.                         77,158

Lexington State Bank - Line of Credit
     Interest rate prime plus .75% (9.75% at
     April 30, 2000), secured by substantially
     all of the Company's assets, payable in full
     on June 16,2000                                       240,000
                                                       $   458.219
                                                       ===========

On June 16, 1999,  Wellington Hall, Limited refinanced certain of its short-term
notes payable to  long-term.  In  accordance  with SFAS No. 6, these  short-term
loans have been  classified as long-term on the Company's  Consolidated  Balance
Sheet and are more fully described in Note 8 below.

8.   LONG-TERM DEBT:

Long-term debt consisted of the following at April 30, 2000:

                                                           2000
                                                       -----------
E. Kemm
Interest payable monthly at 1% above prime                  25,000
     Interest payable monthly at 1 1/2% above prime
     due in full May 31, 2001                               55,000

                                      -29-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Overseas Private Investment Corporation
     Interest rate 10.00%, payable in quarterly
     installments of $30,969 plus interest through
     April 30, 1998.  Beginning July 31, 1998,
     quarterly installments increase to $61,937
     plus interest with a balloon payment due
     October 1999                                          838,876

Lexington State Bank
     Interest rate prime plus .75% (9.75% at
     April 30, 2000) payable in monthly
     installments of $19,000 including interest         1,455,505
                                                         2,374,381

Less current maturities                                    953,918
                                                       -----------
                                                       $ 1,420,463
                                                       ============

The weighted  average interest rate paid E. Kemm amounted to 10.0% for the years
ended April 30, 2000.

E. Kemm is a stockholder and an officer of the Company.

The Overseas Private  Investment  Corporation loan is secured by a first lien on
all real estate and all current and future  fixed  assets of Muebles  Wellington
Hall,  S. A. and a security  interest  in the Sales  Agreement  between  Muebles
Wellington Hall, S. A. and Wellington Hall Caribbean Corp.

On May 1, 2000,  the Company  entered into an  agreement  with OPIC whereby OPIC
agrees to forbear  from  seeking to enforce its rights  against  the  collateral
under the loan  agreement  due to the failure by the Company to make  payment of
principal  and  interest  in full on October  31,  1999 as  required by the loan
agreement. In consideration of this forbearance, the Company shall:

     a)   Pledge to OPIC all the shares of Muebles Wellington Hall, S.A. by July
31, 2000.

     b)   Make quarterly  interest  payments at the default rate as specified in
the loan agreement.

     c)   Exercise its best efforts to sell Muebles  Wellington Hall, S.A.. at a
price sufficient to repay the OPIC debt, and agrees to cooperate with
OPIC or a broker OPIC may identify to assist in the sale.

     At April 30, 2000, the Company had accrued interest at the default rate (an
additional  3%) from October 31, 1999 to April 30, 2000 and added this amount to
the loan principal.

     The Lexington State Bank loans are secured by a first lien on all assets of
Wellington Hall, Limited.

     The projected payments of long-term debt in each of the years subsequent to
April 30, 2000 are:

                  Year Ending April 30              Amount

                          2001                    $ 953,918

                          2002                    1,420,463

9.   STOCK OPTION PLAN:

On February 10,  1997,  the Board of Directors  approved  the  Wellington  Hall,
Limited 1997 Stock Option and Restricted  Stock Plan (the Plan).  The Plan has a
term of ten years, expiring on February 9, 2007. Under the Plan, the Company may
grant  options  or  restricted  stock  awards  to key  employees,  officers,  or
directors for up to an aggregate of 1,200,000  shares of common  stock,  with no
individual  receiving more than 600,000  shares.  The price of the shares issued
under the Plan is to be  determined  at the time of the  grant,  not to be below
100% of the fair market value of the common stock at the time of the grant.  The
Plan was  approved  by the  stockholders  of the  Company at the October 1, 1997
annual stockholders'  meeting. At April 30, 2000, no options or stock awards had
been granted.

                                      -30-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  CAPITAL STOCK AND CAPITAL STRUCTURE:

The Company,  in accordance with its long-term loan agreement and line of credit
with Lexington  State Bank, is restricted  from paying  dividends on its capital
stock without prior written consent of the Bank.

All shares of capital stock represent voting shares.

During the year ended April 30, 1999, the Company issued an additional 1,333,333
shares of common stock at $.30 per share to an existing officer/stockholder.

During the year ended April 30, 2000, the company entered into an agreement with
Furniture  Classics,  Ltd.  whereby,  in return for certain  exclusive rights to
market and  distribute  certain of  Furniture  classics,  Ltd.'s  products,  the
Company has granted  common  stock  warrants to  Furniture  Classics,  Ltd.  The
agreement  provided for the granting of warrants at specific prices ranging from
$.27 per share to $.53 per share and  expiring on  specific  dates over the next
two fiscal  years.  Furniture  Classics,  Ltd  exercised  its right to  purchase
100,000 shares at $.27 per share and 100,000 shares at $.30 per share during the
fiscal year ended April 30, 2000. Additionally,  as a part of the agreement, the
Company agreed to and did appoint one  representative  from Furniture  Classics,
Ltd to its Board of Directors.

11.  INCOME TAXES:

At April 30, 2000,  Wellington  Hall,  Limited and  Subsidiaries had federal net
operating  losses of  $1,996,724  and state net  operating  losses of $2,304,497
available to offset future tax liabilities, if any.

Generally,  the federal losses may be varied forward for fifteen years and North
Carolina  losses may be carried  forward  for five  years.  Effective  for years
beginning  January 1, 1999,  North  Carolina  laws were  amended to increase the
number of years a net operating  loss may be carried  forward to fifteen  years.
The change applies to losses incurred in tax years beginning on or after January
1, 1993 and limits a loss that is more than fifteen  years old to 15% of taxable
income before the remaining portion may be carried forward.  For years beginning
January 1, 2002, the percentage limitation is repealed. Additionally, for losses
incurred in 1998 and after,  federal net operating losses may be carried forward
for twenty years.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the  company's  deferred  tax assets and  liabilities  at April 30,  2000 are as
follows:

                                                           2000
                                                       -----------
Deferred tax assets:
Book over tax depreciation                             $     5,509
Book allowance for inventory                                 2,980
Book allowance for doubtful accounts                        22,145
Tax over book inventory                                     25,727

Deferred compensation                                      120,494

State net operating loss carryforward                      174,900
Federal net operating loss carryforward                    619,420
                                                       -----------
                                                           971,175
Valuation allowance for deferred tax assets               (844,664)
                                                       -----------
Net deferred tax assets                                $   126,511
                                                       ===========

Due to certain  conditions,  the  valuation  allowance  was increased by $80,230
during the years ended April 30, 2000 and 1999.

Classification on the Company's Consolidated Balance Sheets is as follows:

                                      -31-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                                           2000
                                                       -----------
Current asset                                          $    22,145
Noncurrent asset                                           104,366
                                                       $   126,511

There  follows a  reconciliation  of the income taxes per the income tax returns
with the income tax expense per the April 30, 2000  Consolidated  Statements  of
Income:

                                                  2000                  1999
                                               ---------              ---------
Amounts shown by returns (net)                 $  13,585              $  13,246
Deferred income taxes                             (5,705)                 5,046
                                               $   7,880                 18,292
                                               =========              =========

Effective income tax rates                           2.3%                   3.6%
                                               =========              =========

No provision has been made for U. S. income taxes on unremitted  earnings of the
foreign subsidiary (approximately $261,057 ) at April 30, 2000 , since it is the
present intention of management to indefinitely reinvest these earnings.

The  components  of income  (loss)  before income taxes at April 30, 2000 are as
follows:

                                                  2000                  1999
                                               ---------              ---------
Domestic                                       $(266,854)             $(505,091)
Foreign                                          123,849                (47,531)
                                               $(143,005)             $(552,622)
                                               =========              =========

Federal,  foreign,  and state  income tax  expense  (benefit)  at April 30, 2000
consisted of the following:

                                                  2000                  1999
                                               ---------              ---------
Federal                                        $  (4,534)             $   3,317
Foreign                                              -0-                    -0-
State                                          $  12,414                 14,975
                                               $   7,880              $  18,292
                                               =========              =========

The following  schedule  reconciles  the  differences  between the U. S. federal
income tax rate and the effective tax rate at April 30, 2000:

                                                  2000                  1999
                                               ---------              ---------
Tax computed at the U. S. federal rate              34.0%                  34.0%
Deferred income taxes                               (5.2)                    .6

Nondeductible expenses and benefit of
 domestic net operating loss                       (34.0)                 (34.0)
State income taxes, net                              7.5                    3.0

                                                     9.2%                   3.6%
                                               =========              =========

                                      -32-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12.  LEASES:

The Company leases showroom space under a five-year  operating lease expiring in
April 2004.

The Company also leases office equipment under noncancelable  leases expiring in
2000 through 2004.

Net minimum lease payments on the foregoing leases are as follows:

         Years Ending April 30                  Amount

                 2001                         $  68,003

                 2002                            66,308

                 2003                            63,128

                 2004                            61,318
                                              ---------
                                              $ 258,757
                                              =========

Net lease  expenses of the  foregoing  leases for the years ended April 30, 2000
and 1999 are $108,646 and $98,621, respectively.

13.  CONTINGENT LIABILITIES:

In accordance  with the Honduran  Labor Code,  the Company has the obligation to
pay  severance  compensation  to its  employees in the event of dismissal  under
certain  specific  circumstances.  It is the  policy of the  Company to pay such
severance payments in accordance with the Law. At April 30, 2000 , the estimated
contingent liability aggregated approximately $359,897.

On June 26, 1998,  the Board of Directors of  Wellington  Hall  Caribbean  Corp.
voted to pursue the sale of its Honduran subsidiary, Muebles Wellington Hall, S.
A.

14.  EARNINGS PER SHARE:

During the year ended April 30, 1998,  Wellington Hall, Limited and Subsidiaries
adopted SFAS No. 128,  "Earnings Per Share".  SFAS No. 128 requires  entities to
present basic earnings per share computed by dividing income available to common
stockholders  by the  weighted  average  number  of  common  shares  outstanding
(3,781,553 shares in 2000 ).

As discussed in Note 10 to the consolidated  financial  statements,  the Company
has issued  common stock  warrants  allowing  the purchase of 500,000  shares at
prices ranging from $ .27 to $ .53 per share. Under SFAS No. 128, these warrants
would be considered  diluted share  equivalents if the warrants  allowed for the
purchase  of  stock  at a price  lower  than  market.  The  market  price of the
Company's  stock  during the period was well below that stated in the  warrants,
and the warrants are, therefore, considered antidilutive and disregarded for the
purposes of computing  diluted  earnings  per share . 15.  Incentive  Plan:  The
Company has an Incentive  Plan covering  certain  officers and key employees who
have the greatest opportunities to contribute to current earnings and the future
success of the Company's  operations.  The amount determined under the Incentive
Plan is based upon profits of the Company.

On January 1, 1987,  the  President  of the  Company  executed a new  employment
contract  and  forfeited  his  rights  under  the  Incentive  Plan as one of the
conditions of the new contract.

16.  DEFERRED COMPENSATION AGREEMENT:

On May 8, 1987, the Company adopted a Deferred  Compensation  Agreement with the
President of the Company  which will provide for the payment of $50,000 per year
for 10 years in  monthly  installments  when the  President  reaches  age 62 and
retires. The Agreement provides that if he dies before he has received the total
payments or if he dies before retirement, then his beneficiary shall receive the
benefit balance thereof in monthly  installments.  In future years, the deferred
compensation will be accrued over the remaining term of service by the President
on a present  value  basis.  The  accruals for the year ended April 30, 2000 was
$24,000.

                                      -33-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16.  DEFERRED COMPENSATION AGREEMENT (CONTINUED):

At the April 19, 1999 meeting of the Board of Directors,  the Board  approved an
amendment to this Deferred  Compensation  Agreement.  This amendment changes the
annual payment under the Agreement to $20,000 per year not to begin prior to May
1, 2000.  In  exchange  for the  $30,000  decrease  in the annual  payment,  the
President is to receive  1,000,000 shares of the Company's stock. This amendment
is to take effect at such time as it is executed by the  officers of the Company
and its President. At the date of the audit, the Agreement amendment had not yet
been executed.

17.  PROFIT SHARING PLAN:

During the year ended  April 30,  1987,  the Company  adopted a combined  Profit
Sharing and Salary  Reduction Plan. The Company  contributes 50% of the employee
contributions with a 2% maximum Company  contribution on each employee's salary.
The Plan also has a feature  whereby the Directors can set aside certain profits
as determined annually by the Directors. The Profit Sharing and Salary Reduction
Plans are tax exempt under applicable sections of the Internal Revenue Code. The
contributions  by the  Company  for the years ended April 30, 2000 and 1999 were
$3,342 and $7,572, respectively.

18.  QUARTERLY FINANCIAL DATA - UNAUDITED:

The following is a summary of the quarterly  results of operations for the years
ended April 30, 2000 and 1999:

                    Earnings (Loss) Per Share of Common Stock

Quarter               Net            Gross             Net           (Basic &
Ended                Sales           Profit           Income          Diluted)
-------------------------------------------------------------------------------
July 31           $ 1,489,569     $   412,459      $   (11,280)
October 31          1,264,150         427,356          (64,130)     $     (0.02)
January 31          1,420,533         307,332           (6,563)
April 30            1,221,428         274,971          (68,912)           (0.02)

                  $ 5,395,680     $ 1,422,118      $  (150,885)     $     (0.04)
-------------------------------------------------------------------------------

19.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",  requires
that the Company disclose  estimated fair values for its financial  instruments.
The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash:

The carrying amount approximates fair value.

Notes payable - other:

Due to the fact that these are  short-term  notes payable  within one year,  the
carrying amount approximates fair value.

Long-term debt:

The fair value of  long-term  debt is estimated  based on the current  rates the
Company could obtain on debt of the same remaining maturities.

The estimated fair values of the Company's financial instruments are as follows:

                            Carrying          Fair
                             Amount          Value
                           ----------      ----------
Cash                       $    4,541      $    4,541
Notes payable - other         458,219         458,219
Long-term debt              2,374,381       2,374 381

                                      -34-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20.  RELATED PARTY TRANSACTIONS:

During the year ended April 30, 2000, the Company purchased  inventory  totaling
$195,941 from  Furniture  classics,  Ltd., a stockholder  whose  president  also
serves on the Company's Board of Directors.

21.  GOING CONCERN CONSIDERATIONS:

As reflected in the accompanying consolidated financial statements,  the Company
incurred a $150,885 loss in the year ended April 30, 2000.  The Company's  gross
profit percentage  increased from 20% in the year ended April 30, 1999 to 27% in
the year ended April 30, 2000. While this increase is encouraging, the Company's
lines of credit and short-term  borrowings  were at near maximum levels at April
30, 2000 and 1999,  and cash balances were very low. A final balloon  payment of
the remaining principal on the Company's loan with (OPIC) is due in October 1999
and was not paid.

Management is continuing  to develop new product lines with a  concentration  in
higher volume items which should result in lower costs. Management also plans to
continue  to cut  costs at its  domestic  manufacturing  facility  and  increase
production at its foreign manufacturing facility where costs are less. According
to its  agreement  with OPIC,  the Company will exercise its best effort to sell
Muebles Wellington Hall, S.A.

22.  STATUTORY RESERVE:

According to the  Commercial  Code of the Republic of  Honduras,  the  statutory
reserve must be constituted  annually  appropriating  at least 5% of the periods
earnings until it reaches 20% of capital stock. The statutory reserve,  which is
included in retained earnings, amounted to $23,558 at April 30, 2000.

23.  SEGMENT INFORMATION:

The  Company's  reportable  segments  are  strategic  business  units that offer
different  services  or are  geographically  integrated.  They  are  managed  in
different ways because each requires different  marketing  strategies or is in a
different geographical area.

WHOLESALE - Wellington Hall,  Limited and Wellington Hall Caribbean Corp. engage
in the wholesale marketing and sales of fine furniture. Wellington Hall, Limited
manufactures  much of the furniture that it sells, and Wellington Hall Caribbean
Corp. purchases the furniture that it sells from its wholly-owned subsidiary.

RETAIL - Palmetto Furniture  Galleries,  Inc. engages in the retail sales of any
second quality furniture manufactured by its affiliates.

FOREIGN - Muebles  Wellington Hall, S. A., a company  wholly-owned by Wellington
Hall  Caribbean  Corp.,  is engaged in the  manufacturing  of fine furniture and
components at its facilities in San Pedro Sula, Honduras.  Recently,  all of its
sales have been to its sole owner.

                                     Wholesale        Retail          Foreign
Eliminations Consolidated
Sales revenues       2000          $  5,136,771    $    258,909    $  5,395,680
                     1999             5,506,934         214,272       5,721,206

Affiliated revenues  2000               303,265    $  2,031,260    $ (2,334,525)
                     1999             1,271,812       2,072,393      (3,344,205)

Depreciation         2000                29,067          36,155          65,222
                     1999                49,071          33,626          82,697

Interest income      2000                   528             528
                     1999                32,082         (31,554)            528

Interest expense     2000               266,837         105,837         372,673
 and other           1999               251,561         151,653         403,214

Income tax expense   2000                 7,880           7,880
                     1999                18,292          18,292

                                      -35-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23.  SEGMENT INFORMATION (CONTINUED):

                                      Wholesale         Retail          Foreign
Eliminations Consolidated
Net loss             2000              (218,710)          5,290         123,849
                                        (61,314)       (150,885)
                     1999              (328,181)       (182,578)        (47,531)
                                        (12,624)       (570,914)

Total assets         2000             7,515,095         414,233       1,100,707
                                     (4,222,124)      4,807,911

Capital expenditures 2000                12,800          12,800
                     1999                11,845          11,845

The eliminations column indicated the eliminations of intercompany  transactions
or  accounts  receivable   necessary  to  prepare  the  consolidated   financial
statements.

Other Geographic Information - Sales to unaffiliated customers:

                               2000             1999

United States              $  5,266,440     $  5,321,467

Japan                           129,240          393,053

Republic of Korea                 6,686
                           ------------     ------------
                           $  5,395,680     $  5,721,206
                           ============     ============

24.  SUBSEQUENT EVENTS:

Subsequent  to  April  30,  2000,  the  Board of  Directors  and  management  of
Wellington  Hall,  Limited  and  Subsidiaries  have had  discussions  with other
companies regarding the sale of the Company's corporate shell.


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

                                    PART III

ITEM 9.   DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL  PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Position with the Company;  Principal Occupation During the Preceding Five Years
(if different)

Name                          Age

Hoyt M. Hackney, Jr.           63       President, Chief Executive Officer,
                                        Chief Financial Officer and Treasurer,
                                        Director since 1978

Donald W. Leonard (1)          81       Chairman of the Board of Directors,
                                        Director  since 1965; Private Investor

Ernst B. Kemm                  64       Executive Vice President, Director since
                                        1978

William W. Woodruff (1)        76       Secretary , Director since 1977;
                                        President and Owner of Woodruff Shoe
                                        Store

Arthur F. Bingham              45       Senior Executive Vice President of Sales
                                        and Marketing (1996-present), Director
                                        since 1996; Sales Representative for
                                        Lexington Furniture Industries
                                        (1978-1996)

                                      -36-
<PAGE>

          (1)  Mr. Woodruff is Mr. Leonard's brother-in-law.


     The executive officers are elected by the Board of Directors to serve until
the next  annual  meeting  of the  Board and until  their  successors  have been
elected and qualified.

     The Board of  Directors  of the Company met two times during the year ended
April 30, 2000.  The Board does not have  standing  audit,  nominating  or other
committees performing similar functions.  All Directors attended at least 75% of
the total  number of the meetings of the Board of Directors  and  committees  on
which they served during fiscal 2000.

ITEM 10.  EXECUTIVE COMPENSATION

     The following table sets forth information concerning  compensation paid to
the Chief Executive Officer of the Company's during the last three fiscal years.

                                            Annual                    All Other
                              Fiscal     Compensation               Compensation
Name/Position                  Year        Salary($)     Bonus($)       (1)
                            ----------    ----------    ---------    ----------
Hoyt M. Hackney, Jr            2000         84,000          0          25,738
  President                    1999        106,210          0          25,738
  Treasurer                    1998        107,943          0          25,738
  Chief Executive Officer
  Chief Financial Officer


          (1)  The amounts  reported in this  column  consists of the  Company's
               matching   contribution   under  its  401(k)  plan  and  deferred
               compensation plan.

     The  non-salaried  directors were not compensated  during fiscal year ended
April 30, 2000.

     Effective  January 1, 1987.  the Company  entered into a 5-year  employment
agreement with Mr. Hackney (the "Employment  Agreement") that will automatically
be extended for  successive  one-year terms unless and until either party to the
Employment Agreement gives written notice of termination. Throughout the term of
the Employment Agreement, Mr. Hackney is to serve as President,  Chief Executive
Officer and Chief  Financial  Officer of the  Company,  is to be  nominated  for
election  as a  Director  of the  Company  and is to  devote  his full  time and
attention to the Company's  business affairs.  If for any reason (other than his
"for cause"  termination) Mr. Hackney does not continue in these positions,  Mr.
Hackney may elect to terminate the Employment Agreement and receive as severance
compensation  an  amount  equal  to one  and  one-half  times  his  then  annual
compensation. Under the Employment Agreement, Mr. Hackney may be terminated only
"for  cause",  which is  defined  to mean (1)  willful  material  breach  of his
obligations under the Employment Agreement;  (2) willful gross misconduct in the
course of his employment that is substantially  injurious to the Company; or (3)
conviction in any court of a felony which results in incarceration for more than
90 consecutive days.

     In conjunction with the execution of the Employment Agreement,  the Company
and Mr.  Hackney  entered  into a  executive  deferred  compensation  agreement,
effective May 8, 1987 (the "Deferred  Compensation  Agreement"),  which provides
for the  payment of $50,000  per year for a period of 10 years  payable in equal
monthly  installments,  upon Mr.  Hackney's  retirement  at age 62. The  monthly
installment payments shall be paid to Mr. Hackney's beneficiary if he dies prior
to retirement or after  retirement  but prior to the  expiration of the ten-year
payout  period.  $24,000 in  deferred  payments  were  accrued  pursuant  to the
Deferred  Compensation  Agreement for the benefit of Mr.  Hackney  during fiscal
2000.

     If the  Company  is  (1)  merged,  liquidated,  consolidated  or  otherwise
combined  with any other  company,  or (2) if  substantially  all the  assets or
shares of stock of the Company are acquired by any other person or entity (1 and
2 above hereinafter a "Change of Control Event"), the Employment Agreement will,
pursuant to its terms,  automatically  remain in full force and effect until the
end of the  two-year  period  immediately  following  the date of the  Change of
Control Event. If the Employment  Agreement is extended beyond December 31, 1991
due to the occurrence of a Change of Control Event, Mr. Hackney is to be paid an
annual salary of $155,000 throughout the term of extension.  Upon the occurrence
of a Change of Control  Event.  the Company or its  successor  in  interest  may
terminate the  Employment  Agreement  upon the payment to Mr.  Hackney of a cash
amount equal to 1 1/2 times the is then annual compensation.  The Company or its
successor  may  terminate  the Deferred  Compensation  Agreement  following  the
occurrence of a Change of Control  event upon the payment to Mr.  Hackney of

     (a)  $100,000 in cash or

                                      -37-
<PAGE>

     (b)  a cash  amount for each share of the  Company  stock then owned by Mr.
          Hackney equal to or greater than the lesser of (i) four times the book
          value  per  share of such  stock or (ii) 15 times  the net  after  tax
          profits per share of such stock,  computed  as of the  Company's  most
          recent  fiscal  year  end  in  accordance   with  Generally   Accepted
          Accounting Principles.

     Effective  September 1, 1996, the Company entered into a 10-year employment
agreement  with  Arthur  F.  Bingham  ("the   Employment   Agreement")  that  is
automatically  extended for  successive  one-year  terms unless and until either
party to the Employment  Agreement gives written notice of' termination pursuant
to the terms  therein.  Throughout  the term of the  Employment  Agreement,  Mr.
Bingham is to serve as Senior  Executive  Vice  President of Sales and Marketing
and as an  exclusive  sales  representative  of the Company and is to devote his
full time and attention to such positions. The Employment Agreement contemplates
that,  for the term thereof,  Mr.  Bingham shall also serve as a Director of the
Company.  If, for any reason other than the  termination of his employment  "for
cause," Mr. Bingham does not continue in these positions,  Mr. Bingham may elect
to terminate the Employment  Agreement and receive as severance  compensation an
amount equal to one and one-half times his then annual  compensation.  Under the
Employment  Agreement,  Mr. Bingham may be terminated only "for cause," which is
defined  to mean (1)  willful  material  breach  of his  obligations  under  the
Employment  Agreement,  which breach is not  substantially  cured by Mr. Bingham
within ten business  days after the Company  gives to him written  notice of the
specific  alleged  breach (it being  understood  that Mr.  Bingham's  failure to
perform or discharge  his duties and  responsibilities  hereunder as a result of
his  incapacity due to physical or mental illness or injury or accident or death
shall not be deemed such a breach);  (2) willful gross  misconduct in the course
of his  employment  that  is  substantially  injurious  to the  Company;  or (3)
conviction in any court of a felony that results in incarceration  for more than
ninety  consecutive days (unless such conviction is reversed in any final appeal
thereof).

     Pursuant to the Employment  Agreement,  Mr. Bingham is to be compensated in
an amount equal to a commission of 5% of all sales of products of WHCC and 6% of
all sales of products of the Company,  both to exclude what is commonly referred
to as OEM sales, a commission of 5% on all orders considered  "House"  orders, a
commission of 5% on inventory sales used to raise capital and reduce  inventory,
annual  compensation  of $30,000 and an annual bonus equal to the amount that 2%
of the sales in the North  Carolina  territory  from WHCC and 1% of the sales in
the North Carolina  territory from the Company  exceeds  $30,000 for each fiscal
year  beginning  September 1, 1996 through August 31, 1997. No bonuses were paid
during fiscal year ending April 30, 2000.

     If the Company is merged,  liquidated,  consolidated or otherwise  combined
with any other company,  or if  substantially  all the assets of the Company are
acquired by any other person or entity,  or if the control of the Company  shall
pass to any other  person or entity not  presently  in control,  the  Employment
Agreement  shall  remain in full  force  and  effect  or,  at the  option of the
Company,  upon the  occurrence  of any such  event  described  hereinabove,  the
Company or its  successor  may  terminate  this  Employment  Agreement  upon the
payment to Mr. Bingham of an amount equal to 1 " times his earnings for the last
fiscal year prior to  termination,  such  payment to be made within  thirty days
after  the date of  termination.  For  purposes  of  determining  Mr.  Bingham's
earnings,  there shall be included both the commissions paid under Mr. Bingham's
sales territory and the annual  compensation  paid for Mr. Bingham's  service as
Senior Executive Vice President of Sales and Marketing.

     On February  10,  1997,  the Board of  Directors  of the  Company  adopted,
subject to shareholder approval, the 1997 Stock Option and Restricted Stock Plan
(the  "Plan").  The Plan has a ten year term and,  unless  sooner  terminated as
provided in the Plan, will terminate on February 9, 2007.

     The Plan will be  administered  by an option  committee  (the  "Committee")
appointed by the Board of Directors of the Company.  The Committee  must consist
of no fewer than two directors appointed by the Board, none of whom is a current
employee of the Company, a former employee that receives  compensation for prior
services  rendered  during the taxable year, an individual  receiving  direct or
indirect  remuneration from the Company in any capacity other than as a director
or a former or current officer of the Company,  all with the intent of complying
Section 162(m) of the Internal Revenue Code of 1988, as amended (the "Code").

     Under the Plan,  the Company may grant  incentive  stock options  ("ISOs"),
nonqualified  stock  options or  restricted  stock  awards up to an aggregate of
1,200,000  shares of the  Company's  common  stock,  no par value  (the  "Common
Stock").  No individual may receive  options or restricted  stock under the Plan
aggregating  more than 600,000  shares of Common Stock over the ten-year life of
the  Plan.  The  number  and class of  shares  available  under the Plan will be
adjusted  appropriately  in the event of stock  splits and  combinations,  share
dividends and similar changes in the  capitalization of the Company.  Any shares
of Common  Stock that are subject to  incentive  stock  options or  nonqualified
stock options granted under the Plan and that are not issued,  and any shares of
Common Stock that are issued pursuant to restricted  stock awards under the Plan
and that are  subsequently  forfeited,  may  again be the  subject  of grants or
awards under the Plan.

     Awards  may be  granted  under  the Plan only to key  employees  (including
statutory  employees  within the  meaning of  Section  3121(d)(3)  of the Code),
officers or directors of the Company,  whether or not  employees.  The Committee
will determine those persons who will receive ISOs,  nonqualified  stock options
and  restricted  stock awards under the Plan.  -38- The Plan  provides  that the
Board of Directors may  terminate,  amend or revise the terms of the Plan at any
time,  except that no  amendment  or  revision  shall (i)  increase  the maximum
aggregate number of shares subject to the Plan,  except as permitted by the Plan
in order to make  appropriate  adjustments for stock splits,  share dividends or
similar changes in the Common Stock;  (ii) change the minimum purchase price for
shares  subject to options  granted  under the Plan;  (iii)  extend the  maximum
duration  of ten  years  established  under  the  Plan for any  option  or for a
restricted stock award; or (iv) permit the granting of an option or a restricted
stock  award to anyone  other than  eligible  recipients  under the terms of the
Plan.

     With respect to nonqualified  stock options or restricted stock awards, the
Committee is authorized under the terms of the Plan, in its discretion,  to make
loans or payments to  optionees or  restricted  stock award  recipients  for the
purpose of assisting such persons with payment of personal income taxes incurred
upon  exercise of  nonqualified  stock options or the lapse of  restrictions  to
which restricted stock is subject.

     If the Company becomes a party to any merger or  consolidation  in which it
is not the surviving entity or pursuant to which the shareholders of the Company
exchange their Common Stock, or if the Company  dissolves or liquidates or sells
all or  substantially  all of its assets,  the Committee may, in its discretion,
cause all ISOs and  nonqualified  stock  options  outstanding  under the Plan to
become  immediately  exercisable and, to the extent not exercised,  such options
will  terminate on the  effective  date of such  transaction.  In addition,  the
Committee may, in its  discretion,  cause all  restricted  stock awards that are
still subject to any  restrictions or conditions to become fully vested,  and no
longer subject to forfeiture,  on such effective date, unless otherwise provided
in the applicable restricted stock agreement.

     The price of shares subject to stock options granted under the Plan will be
determined by the  Committee at the time of grant of the option,  but may not be
less than 100% of the fair market  value of the Common  Stock at the time of the
grant.  On February  xx,  2001,  the fair market  value of the common  stock was
estimated  to be $.07.  The  Committee  will  determine at the time of grant the
dates on which stock  options will become  exercisable  and may  accelerate  the
scheduled exercise date of an option if deemed  appropriate.  The Committee may,
in its  discretion,  make any ISO or  nonqualified  stock option  subject to the
satisfaction  of such  corporate  or  individual  performance  or other  vesting
standards as the Committee deems  appropriate.  No stock option may expire later
than ten year from the date of grant. ISOs granted under the Plan are subject to
the following additional  conditions:  (i) no ISO may be granted to a person who
owns, at the time of grant, stock representing more than 10% of the total voting
power of all  classes of stock of the  Company  unless the option  price for the
shares subject to such ISO is at least 110% of the fair market value on the date
of grant and such ISO award is exercisable only within five years after its date
of grant;  and (ii) the total fair market value of shares  subject to ISOs which
are  exercisable  for the first time by an optionee in a given calendar year may
not exceed $100,000, valued as of the date of the ISO's grant.

     Restricted  stock  may be issued  under  the terms of the Plan to  eligible
recipients who are selected from time to time by the Committee.  Such restricted
stock will be subject to such  restrictions  and conditions as may be determined
by the Committee at the time of the award. These restrictions and conditions may
include  (but are not  required  to  include)  restrictions  on  transfer of the
awarded shares of Common Stock, vesting conditions based on continued employment
with  the  Company  for a  specified  period  of time  following  the  award  or
satisfaction of individual or corporate performance criteria, or satisfaction of
other vesting  standards.  The lapse of restrictions and conditions with respect
to  restricted  stock may be  accelerated  at any time by the  Committee  in its
discretion.  Restrictions  and conditions  imposed on shares of restricted stock
shall  lapse,  in whole or in part,  as  provided  in the  applicable  agreement
evidencing the restricted stock award, but must lapse, if at all, not later than
ten years from the date of the award.

     Because the Plan is a  discretionary  plan, it is not possible to determine
what awards the Committee will grant thereunder.

     Federal Income Tax Consequences of Stock Option and Restricted Stock Plan

     ISOs  granted  under the Plan are intended to qualify as  "incentive  stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").  The grant of an ISO generally does not result in taxable income to the
participant  at the time of grant or at the time of exercise.  however,  for any
year in which Common Stock is purchased  upon exercise of an ISO, the difference
between the fair market  value of the Common  Stock at the time of exercise  and
its adjusted basis to the  participant  will be treated as an item of adjustment
for purposes of computation of the employee's alternative minimum taxable income
under Section 55 of the Code. If the participant exercises and ISO and sells the
Common Stock  purchased  thereunder at a gain,  the excess of the sales price of
the Common Stock over its adjusted basis to the participant will be taxable as a
long-term capital gain if the sale is made more than two years from the granting
of the ISO and  more  than  one  year  from  the  transfer  of the  stock to the
participant.  If the sale is made  within two years  after the  granting  of the
option  or  within  one  year  after  the  Common  Stock is  transferred  to the
participant  and if sales  proceeds  exceed the fair market  value of the Common
Stock on the date of exercise, the

                                      -39-
<PAGE>

participant  generally will recognize ordinary income,  equal to the fair market
value of the Common  Stock on the date of exercise  less the option  price,  and
capital gain  (long-term or short-term as the case may be),  equal to the amount
realized in excess of the fair market  value of the Common  Stock on the date of
exercise.  No tax deduction  will be available to the Company as a result of the
granting of ISOs, the exercise of such options,  or the sale by  participants of
the Common Stock purchased. However, the Company will be entitled to a deduction
in an amount equal to the ordinary income,  if any, realized by a participant on
the sale of Common Stock purchased pursuant to the exercise of an ISO.

     Nonqualified  stock  options  granted  under the plant are not  intended to
qualify as ISOs under the Code.  The grant of a  nonqualified  stock option will
not result in taxable  income to the  participant or a deduction to the Company.
On the date any such option is exercised, a participant generally will be deemed
to receive ordinary income equal to the amount by which the fair market value of
the Common Stock on the exercise date exceeds the option price,  and the Company
will generally receive a deduction in the same amount.

     Participants will recognize  taxable income at the time unrestricted  stock
is  received  under  the  Plan  equal  to the fair  market  value of the  shares
received.  The  Company  will be  entitled  to a  deduction  equal to the amount
includable in the participant's income.

     In general,  there will be no federal income tax consequences to either the
Company or the participant upon the grant of restricted stock. At that time, the
participant will recognize taxable income equal to the then fair market value of
the  Common  Stock  and the  Company  will  generally  receive  a  corresponding
deduction.  However,  participants  may elect,  within 30 days after the date of
grant,  to  recognize  ordinary  income  equal to the fair  market  value of the
restricted  stock on the date of grant and the  Company  will be  entitled  to a
corresponding deduction at that time.

     Any  discussion  herein  pertaining  to a  deduction  for  the  Company  is
qualified  by  application  of  Section  162(m) of the Code and the  regulations
thereunder. Section 162(m) limits to $1,000,000 per year the allowable deduction
for compensation  paid to or accrued by the chief executive officer and the four
most  highly  compensated  officers  (other  than the chief  executive  officer)
("Covered    Employees"),    except   that   such   limit   does   not   include
"performance-based  compensation," as that term is defined therein.  If the Plan
is approved by shareholders in the manner prescribed by applicable  regulations,
compensation  realized upon the exercise of options will be  "performance-based"
if the  exercise  price  is at  least  equal  to the  fair  market  value of the
underlying  stock  on the  date of  grant.  The  Plan is  intended  to meet  the
provisions of Section 162(m) such that any deductions realized from stock option
transactions  thereunder  will not be limited.  Compensation  derived from other
awards that may be granted under the Plan may be deemed  "performance-based"  if
they are designated as such by the Committee and if the grant thereof is subject
tot he attainment of certain  performance goals.  Except as permitted by Section
162(m)  and the  regulations  promulgated  thereunder,  compensation  derived by
Covered  Employees  from  awards  that are not  "performance-based"  will not be
deductible by the Company.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information  regarding directors and
executive officers of the Company, as well as those persons known by the Company
to own beneficially more than 5% of the outstanding Common Stock of the Company,
as of February xx, 2001:

Name and Address                                Amount and Nature      Percent
of Beneficial                                     of Beneficial       of Class
Owner                                              Ownership (1)         ---
                                                   ------------     ------------
Hoyt M. Hackney, Jr                                   226,958(1)             5.9
409 Edgedale Drive
High Point, N.C. 27262


Ernst B. Kemm                                       1,630,613(1)           42.65
1211 Lancaster Place
High Point, N.C. 27260

Donald W. Leonard                                      26,862(1)              .7
105 Westover Drive
Lexington, N.C. 27292

                                      -40-
<PAGE>

Name and Address                                Amount and Nature      Percent
of Beneficial                                     of Beneficial       of Class
Owner                                              Ownership (1)         ---
                                                   ------------     ------------
William W. Woodruff                                    16,000(1)              .4
320 Maegeo Drive
Lexington, N.C. 27292

Arthur F. Bingham                                     605,437(2,3)          15.8
315 3rd Avenue N. W
Hickory, N.C. 28601


Ralph L. Eskelsen, Jr                                      --(3)              --
Tacao River
San Pedro Sula
Honduras, Central America


All executive officers                              2,505,807(3)            65.6
and Directors as a Group
(5 Persons)

          (1)  To the best of the Company's knowledge,  all persons listed above
               own  the  shares  listed   directly  and  have  sole  voting  and
               investment power with respect thereto unless otherwise noted.

          (2)  Mr. Bingham's shares include 605,000 shares owned in a retirement
               plan of which he is beneficiary.

          (3)  Excludes  options to purchase  shares that have been  granted but
               are  not  currently  exercisable  and do not  become  exercisable
               within 60 days.

     To the best of the Company's knowledge,  all persons listed above have sole
voting and investment power over the shares which they own directly.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In connection with the employment of Arthur F. Bingham as Senior  Executive
Vice President of Sales and Marketing, Mr. Bingham made a loan to the Company in
October 1996 of $285,694  for a term of up to two years and bearing  interest at
the applicable  federal rate under Section 1274(d) of the Internal  Revenue Code
of 1986, as amended.  On February 12, 1997, Mr. Bingham purchased 600,000 shares
of Common  Stock of the  Company  at a purchase  price of $.50 per share,  which
purchase  price  was  paid by  cancellation  of the  foregoing  loan  and for an
additional  investment of $14,306.  The Company paid to Mr. Bingham  interest on
the loan in the amount of $6,368. Like those  transactions,  all future material
affiliated  transactions and loans will be made or entered into under terms that
are no less  favorable  to the  Company  than  those that can be  obtained  from
unaffiliated  third  parties.  In  addition,   all  future  material  affiliated
transactions  and loans,  and any  forgiveness  of loans,  must be approved by a
majority of the independent  outside members of the Company's Board of Directors
who do not have an interest in the transactions.  On May 4 1999, the Company and
Furniture Classics Limited (FCL), an importer of home furnishings,  entered into
an  agreement  whereby FCL would  supply the Company a line of mirrors,  chinese
antiques,  and other products from their foreign  sources which the Company will
market  exclusively.  Under this agreement R. Douglas  Ricks,  the FCL president
would  became a  shareholder  by  investing  $27,000 for  100,000  shares of the
Company's  common  stack,  would be  nominated  as a Director,  and would assist
management  in, among other things,  developing  additional  products to further
exploit these new sources and would received incentives in the form of warrants.
The warrants  issued as part of the FCL  agreement are priced a can be exercised
by the following:

     100,000 shares at $0.30 per share exercisable until October 31, 1999

     100,000 shares at $0.40 per share exercisable until July 31, 2000

     100,000 shares at $0.40 per share exercisable until December 31, 2000

     100,000 shares at $0.45 per share exercisable until December 31, 2001

     100,000 shares at $0.45 per share exercisable until December 31, 2001

     100,000 shares at $0.53 per share exercisable until December 31, 2001

     Under the terms of the  agreement  the company can  purchase  the  products
involved directly from the foreign source in container loads,  purchases partial
container loads or from Furniture Classics Limited's inventory. FLC in any event
is responsible for providing  letters of credit or satisfying other credit terms
with the foreign vendors. FCL

                                      -41-
<PAGE>

receives a 10% brokers fee on all products delivered to the Company.  For orders
placed as partial containers or from FCL inventories,  FCL received addition fee
to cover handling, delivery, and warehousing expense as applicable. Both parties
have the right to terminate the agreement  with ninety day notice but must honor
all  outstanding  orders at the time of  termination.  On October 31, 1999,  Mr.
Ricks exercised his warrant and invested  $30,000 for 100,000 shares.  Mr. Ricks
did not exercises warrants that were exercisable on July 31, 2000 or on December
31, 2000.

ITEM 14.  EXHIBITS, LISTS AND REPORTS ON FORM 8-K

     (a)  Exhibits  Index to Annual  Report on Form  10-KSB of  Wellington  Hall
          Limited For Fiscal Year 2000

Exhibit No.    Description

   3.1    Amended and Restated Charter of Wellington Hall Limited. *

   3.2    Bylaws of Wellington Hall, Limited, as amended. *

   10.1   Wellington Hall Executive Stock Plan. **

   10.2   Employment  Agreement and Executive  Deferred  Compensation  Agreement
          between the Company and Hoyt M. Hackney Jr., effective January 1, 1987
          and May 8, 1987, respectively. *

   10.3   Note - Security  Agreement,  dated April 23, 1986, between the Company
          and  Lexington  State  Bank is  incorporated  herein by  reference  to
          Exhibit 4.2 to the Company's Annual Report on Form 10-K for the fiscal
          year ended April 30, 1987.

   10.4   Loan  Agreement,  dated  April  15,  1987,  between  the  Company  and
          Lexington  State Bank is  incorporated  herein by reference to Exhibit
          4.2 to the  Company's  Annual  Report on Form 10-K for the fiscal year
          ended April 30, 1987.

   10.5   Note - Security  and Note  Modification  Agreements,  dated  April 26,
          1988,  between the Company and  Lexington  State Bank is  incorporated
          herein by reference to Exhibit 4.3 to the  Company's  Annual Report on
          Form 10-K for fiscal year ended April 30, 1988.

   10.6   Loan Agreement between  Wellington Hall Caribbean  Corporation and the
          Overseas Private Investment  Corporation,  dated December 22, 1989, as
          amended on September 1, 1990. ***

   10.7   Subordination  Agreement,  dated September 1, 1994, between Wellington
          Hall,  Limited,   Wellington  Hall  Caribbean   Corporation,   Muebles
          Wellington Hall, S.A. and the Overseas Private Investment Corporation.
          ***

   10.9   Amendment  to Loan  Agreement,  dated  February  1, 1991,  between the
          company and Lexington State Bank is  incorporated  herein by reference
          to Exhibit 10.14 to the  Company's  Annual Report on Form 10-K for the
          fiscal year ended April 30, 1991.

   10.10  Loan  Agreement,  dated August 20, 1991,  between  Muebles  Wellington
          Hall,  S.A.  and Banco de  Honduras,  S.A. is  incorporated  herein by
          reference  to  Exhibit A to the  Company's  Form 10-Q for the  quarter
          ended July 31, 1991.

   10.11  Amendment to Loan Agreement,  dated April 10, 1992 between the Company
          and Lexington State Bank. ****

   10.12  Promissory  note,  dated January 23, 1992 between the Company and Hoyt
          M. Hackney, Jr. ****

   10.13  Amendment to Executive Deferred Compensation Agreement , dated January
          23, 1992, between the Company and Hoyt M. Hackney Jr. ****

                                      -42-
<PAGE>

   10.14  Loan Agreement, dated June 28, 1993, between the Company and Lexington
          State Bank. *****

   10.15  Lease  Agreement  dated November 1, 1993 by and between North Hamilton
          Corporation and the Company,  is  incorporated  herein by reference to
          the  Company's  Annual  Report on Form 10-K for the fiscal  year ended
          April 30, 1994.

   10.16  Amendment  to the Loan  Agreement,  dated  September  1, 1994  between
          Wellington  Hall  Caribbean   Corporation  and  the  Overseas  Private
          Investment Corporation.******

   10.17  Employment  and  Stock  Purchase  Agreement  dated  September  1, 1996
          between the Company and Arthur F. Bingham, filed as Exhibit (a) to the
          Company's  Quarterly  Report on Form 10-QSB for the  quarterly  period
          ended July 31, 1996

   10.18  Amended Loan Agreement dated March 10, 1997 with the Overseas  Private
          Investment  Corporation,   filed  as  Exhibit  (a)  to  the  Company's
          Quarterly Report on Form 10-QSB for the quarterly period ended January
          31, 1997

   10.19  Promissory  Note dated  January  16,  1997  between  the  Company  and
          Lexington  State  Bank  filed  as  exhibit  10 (q) in  Part  II to the
          Registration Statement filed February 20, 1997

   10.20  Employment  Agreement  dated  December 1, 1997 between the Company and
          Ralph  L.  Eskelsen  filed  as  exhibit  10  (t)  in  Part  II to  the
          Registration Statement filed February 20, 1997

   10.21  Addenda to Employment and Stock Purchase  Agreement dated September 1,
          1996 between the Company and Arthur F. Bingham dated February 10, 1997
          filed as exhibit 10 (u) in Part II to the Registration Statement filed
          February 20, 1997

   10.22  1997 Stock Option and Restricted Stock Plan filed as exhibit 10 (v) in
          Part II to the Registration Statement filed February 20, 1997

   10.23  Nonqualified  Stock  Option  Agreement  dated as of February  10, 1997
          between the Company and Arthur F.  Bingham  filed as exhibit 10 (w) in
          Part II to the Registration Statement filed February 20, 1997

   10.24  Incentive Stock Option Agreement dated as of February 10, 1997 between
          the Company and Arthur F.  Bingham  filed as exhibit 10 (x) in Part II
          to the Registration Statement filed February 20, 1997

   10.25  Incentive Stock Option Agreement dated as of February 10, 1997 between
          the Company and Ralph L.  Eskelsen  filed as exhibit 10 (y) in Part II
          to the Registration Statement filed February 20, 1997

   10.26  Note Modification Agreement dated January 16, 1998 between the company
          and  Lexington  State  Bank is  incorporated  herein by  reference  to
          Exhibit 10.26 to the Company's Quarterly Report on Form 10-QSB for the
          fiscal quarter ended January 31, 1998.

   10.27  Amendment  to  Lease  Agreement  dated  March 1,  1998 by and  between
          Phillips Interest 3, Inc. and the Company,  is incorporated  herein by
          reference to Exhibit 10.27 to the Company's  Quarterly  Report on Form
          10-QSB for the fiscal quarter ended January 31, 1998.

   10.28  Commercial  Security  Agreement,  dated  June 16,  1999,  between  the
          Company and Lexington State Bank is  incorporated  herein by reference
          to Exhibit 10.28 to the Company's Annual Report on Form 10-Ksb for the
          fiscal year ended April 30, 1999.

                                      -43-
<PAGE>

   10.29  Promissory  Note,  dated  June  16,  1999,  between  the  Company  and
          Lexington  State Bank is  incorporated  herein by reference to Exhibit
          10.29 to the  Company's  Annual  Report on Form  10-KSB for the fiscal
          year ended April 30, 1999.

   10.30  Commercial Pledge Agreement,  dated June 16, 1999, between the Company
          and  Lexington  State  Bank is  incorporated  herein by  reference  to
          Exhibit  10.30 to the  Company's  Annual Report on Form 10-KSB for the
          fiscal year ended April 30, 1999.

   10.31  Business Loan Agreement,  dated June 16, 1999, between the Company and
          Lexington  State Bank is  incorporated  herein by reference to Exhibit
          10.31 to the  Company's  Annual  Report on Form  10-KSB for the fiscal
          year ended April 30, 1999.

   10.32  Promissory  Note,  dated  June  16,  1999,  between  the  Company  and
          Lexington  State Bank is  incorporated  herein by reference to Exhibit
          10.32 to the  Company's  Annual  Report on Form  10-KSB for the fiscal
          year ended April 30, 1999.

   10.33  Lease  Agreement,  dated  April 26,  1999,  between  the  Company  and
          Phillips  Interests  3, Inc. is  incorporated  herein by  reference to
          Exhibit  10.33 to the  Company's  Annual Report on Form 10-KSB for the
          fiscal year ended April 30, 1999.

   10.34  Marketing  Agreement,  dated May 4,  1999,  between  the  Company  and
          Furniture  Classics,  Limited.  is incorporated herein by reference to
          Exhibit  10.34 to the  Company's  Annual Report on Form 10-KSB for the
          fiscal year ended April 30, 1999.

   10.35  Warrants,  dated July 22,  1999,  issued by the Company to R.  Douglas
          Ricks is  incorporated  herein by  reference  to Exhibit  10.35 to the
          Company's Annual Report on Form 10-KSB for the fiscal year ended April
          30, 1999.

   10.36  Note Modification Agreement,  dated July 27, 1999, Between between the
          Company and Lexington State Bank is  incorporated  herein by reference
          to Exhibit 10.36 to the Company's Annual Report on Form 10-KSB for the
          fiscal year ended April 30, 1999.

   10.37  Business Loan Agreement, dated April 30, 2000, between the Company and
          Ernst B. Kemm is incorporated  herein by reference to Exhibit 10.37 to
          the  Company's  Annual Report on Form 10-KSB for the fiscal year ended
          April 30, 2000.

   10.38  Forbearance Agreement,  dated May 1, 2000, Between between the Company
          and Overseas private Investment  Corporation is incorporated herein by
          reference  to Exhibit  10.38 to the  Company's  Annual  Report on Form
          10-KSB for the fiscal year ended April 30, 2000.

   10.39  Modification  to Forbearance  Agreement,  dated May 31, 2000,  Between
          between the Company and Overseas  Private  Investment  Corporation  is
          incorporated  herein by  reference to Exhibit  10.39 to the  Company's
          Annual Report on Form 10-KSB for the fiscal year ended April 30, 2000.


     11   Earnings Per Share Computation

     22   Subsidiaries of the Company

*    Incorporated  herein by reference to the  identically-numbered  exhibits to
     the  Company's  Annual  Report on Form 10-K for the fiscal year ended April
     30, 1987.

**   Incorporated  herein by reference to the  identically-numbered  exhibits to
     the  Company's  Annual  Report on Form 10-K for the fiscal year ended April
     30, 1986.


***  Incorporated  herein by reference to the  identically-numbered  exhibits to
     the  Company's  Annual  Report on Form 10-K for the fiscal year ended April
     30, 1990.

                                      -44-
<PAGE>

**** Incorporated  herein by reference to the  identically-numbered  exhibits to
     the  Company's  Annual  Report on Form 10-K for the fiscal year ended April
     30, 1992.

*****Incorporated  herein by reference to the  identically-numbered  exhibits to
     the  Company's  Annual  Report on Form  10-KSB for the year ended April 30,
     1993.

******Incorporated herein by reference to the identically-numbered  exhibits to
     the  Company's  Annual  Report on Form  10-KSB for the year ended April 30,
     1995

     (b)  Exhibits Filed:


          3.1   Amended  and  Restated   Charter  of  Wellington  Hall  Limited.
                Incorporated by reference

          3.2   Bylaws of Wellington Hall, Limited, as amended.  Incorporated by
                reference

          10.37 Business  Loan  Agreement,  dated  April 30,  2000,  between the
                Company and Ernst B. Kemm.

          10.38 Forbearance  Agreement,  dated May 1, 2000,  Between between the
                Company and Overseas private Investment Corporation

          10.39 Modification  to  Forbearance  Agreement,  dated  May 31,  2000,
                Between  between  the Company and  Overseas  Private  Investment
                Corporation

     (c)  Reports on Form 8-K:  No  reports  on Form 8-K were  filed  during the
          fourth quarter of fiscal year ended April 30, 2000.

                                      -45-
<PAGE>

                                   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.


                                        WELLINGTON HALL, LIMITED

Date:  June 28, 2000                    By :
                                            -------------------------------
                                            Hoyt M. Hackney, Jr.
                                            President,( Principal Executive
                                            Officer, Principal Accounting
                                            Officer)

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

Name and Signature               Position                         Date
------------------               --------                         ----

_______________________          President (Chief                 July 28, 2000
Hoyt M. Hackney, Jr.             Executive Officer
                                 and Chief Financial
                                 Officer), Treasurer

_______________________          Executive Vice                   July 28, 2000
Ernst B. Kemm                    President and Director

_______________________          Chairman of the Board            July 28, 2000
Donald W.Leonard

_______________________          Secretary and Director           July 28, 2000
William W. Woodruff

_______________________          Senior Executive Vice            July 28, 2000
Arthur F. Bingham                President and Director