EXHIBIT
                                       13

                                      2000
                                  ANNUAL REPORT
                            WELLINGTON HALL, LIMITED
                            Lexington, North Carolina

                                      -21-
<PAGE>

TO THE SHAREHOLDERS OF WELLINGTON HALL LIMITED

     During the fiscal year 2000, the domestic  production and operations at the
Lexington N.C. facility were curtained significantly and by the end of the year,
the  operations had  essentially  been  converted to receiving,  packaging,  and
shipping  products from the Company's  Honduran  facility and from other foreign
manufactures. This action was part of a plan to reduce the sales of domestically
produced  products with low profit margins and then possibly replace those sales
with increased sales of the Company's  Honduran products and products from other
foreign  manufacturers that have higher profit margins. As a result, total sales
for the fiscal year declined by about $325,526 to about $5,395,680. However, the
sales of domestic products included in the total dropped about $1,196,630.  This
decline was partially  off set by an increase in the sales of Honduran  products
by about  $259,979,  an  increase in the sales of  products  from other  foreign
sources by about  $566,488,  and an  increase  in the sales  from the  Company's
retail outlet of about $44,637. All the sales are net of inter company sales.

     These  changes or "switch in sales"  resulted in a net loss for the year of
$93,917 versus a net loss the previous year loss of $573,387.  Operating profits
for the fiscal year were $286,566 versus and operating loss the previous year of
$133,644.

     During fiscal year 2001,  the Company plans are to continue to pursue means
of increasing the sales of Company's  Honduran  products and products from other
foreign resources. In addition, the Company also expects to purchase most of the
furniture  previously  manufactured  domestically at the Lexington facility from
off shore sources.  By so doing,  the objective will be restore some of the lost
sales of this  portion of the  Company's  product  line and with sales that will
have a profitable margin.

     The most  significant  challenge for fiscal year 2001 will managing  and/or
over coming the Company's  financial  situation.  First, the Company must retire
the debt with Overseas Private investment  Corporation,  about $838,876 on April
30, 2000, on or before October 31, 2000.  Secondly,  the Company must be able to
finance a steady flow of incoming  products  to maintain  sales at a  profitable
level  equal at least to the  Company's  debt  service  demands.  The  Company's
financial circumstances and possible remidies are further discussed below in the
"Management Discussion and Analysis" section which follows in this report.

Sincerely,


Hoyt Hackney, Jr.
President

Upon written request  directed to the Secretary of the Company at P.O. Box 1354,
Lexington,  North Carolina 27293-1354,  Shareholders will be furnished a copy of
the Company's Annual Report on form 10-KSB without charge

                                      -22-
<PAGE>

            MARKET PRICES, DIVIDENDS AND RELATED SHAREHOLDER 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.

     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."

                                      -23-
<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

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  $950,977 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 of $1,550,000 and one term loan with a balance of  approximately
$278,000  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.

     The effect of the  restructured  LSB debt  reduced the  Company's  "Current
Liabilities"  by  approximately  $967,280 and  depending on the level the Demand
Notes  utilized over time,  hold the Company's  interest and principal to almost
the  level of those  requirements  prior to the  restructuring  of the debt thus
minimizing the effect on the Company's working capital.  The net proceeds of the
original loans were used to refinance  indebtedness  used to purchase and expand
the Company's Lexington, North Carolina facility.

     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:

     (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

                                      -24-
<PAGE>

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.

     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, 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 ($118,144) and $78,004 in fiscal 2000 and 1999,
respectively.  The primary  contributing  factor to the negative cash flow was a
decrease in Other Current Liabilities of approximately  $256,661. 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
$78.212  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 $373,418 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 from 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  $15,307
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  $24, 502 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 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.

                                      -25-
<PAGE>

     Current liabilities decreased by approximately  $254,437 mostly as a result
of a decrease of about  $103,379 in trade payable,  about a $23,371  decrease in
customer  deposits,  and various Other Current  Liability's  of $136,392.  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.

     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

                                      -26-
<PAGE>

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 fourth quarter of fiscal
1999. For the fiscal year 2000,  consolidated  revenues were $5,404.176 and down
about $318,914. Sales included of domestically produced furniture for the fourth
quarter were  approximately  $389,791 down about $543,90 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.259,979.

                                      -27-
<PAGE>


     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 products 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 several  fundamental  factors probably contribute to the
cause of this trend  including  a  shrinking  distribution  base,  more and more
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.

     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

                                      -28-
<PAGE>


     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 Export 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 where by 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 $660,903 to about  $3,916,596 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 72.6% down from about 80% 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

     (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 about  17.3 %  percent  of
revenues and were down about  $96,613  during the year to about  $1,200,914  and
represent about 22.2% of revenues. The decline in these cost for the fiscal year
reflect lower sales commission on lower sales,  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 a increase of about $12,000  versus that paid during the previous year
fourth quarter.  For the fiscal year 1999, interest expenses were about $372,704
versus  about  $403,159 in fiscal year 1999,  down about  $30,455 over the prior
year as a result mostly of a slight decline in short term foreign debt with high
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  $286,666  versus the previous
year's loss of about  ($151,936).  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 ($93,917) or ($.02) per share,  compared to a net loss of
($573,387) or ($.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
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.

                                      -29-
<PAGE>

     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 20 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
oustanding 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
by 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  source 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.

                           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 10KSB should be read as being  applicable to
all related foreward-looking  statements where ever they may appear in this form
10KSB. The Company's actual results could differ materially from those discussed
herein.

                                      -30-
<PAGE>

TURLINGTON AND COMPANY, L.L.P.

                          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  1999,  and the  related
consolidated statements of income,  comprehensive income,  stockholders' equity,
and cash flows for the years then ended. 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 $1,308,735 and $1,325,651, respectively, as of April 30,
2000 and 1999, and total revenues of $2,041,637  and  $2,071,637,  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 20 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 20. The consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

July 7, 2000

                                      -31-
<PAGE>

                     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 AUDITOR'S REPORT
                          ----------------------------

Board of Directors
MUEBLES WELLINGTON HALL, S.A. DE C.V.:

We have audited the accompanying balance sheets of Muebles Wellington Hall, S.A.
de C.V., San Pedro Sula, Honduras, as of April 30, 2000 and 1999 and the related
statements of earnings  (loss),  retained  earnings and cash flows for the years
then ended.  Such 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 generally accepted auditing standards
in  Honduras.  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,  in 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,  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 1999 and the results of its operations and its
cash flows for the years then  ended,  in  conformity  with  generally  accepted
accounting principles in Honduras.

                                                     /s/ KPMG

July 7, 2000

                                      -32-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    April 30
                                                             2000             1999
                                                         ------------     ------------
ASSETS
Current assets:
<S>                                                      <C>              <C>
   Cash                                                  $      4,541     $     49,938
                                                         ------------     ------------
Accounts receivable:
   Trade                                                      692,423          617,191
   Less, allowance for doubtful accounts                      (63,843)         (63,843)
   Inventories                                              3,310,191        3,587,043
   Prepaid expenses                                            66,795           47,224
   Deferred income taxes                                       22,145           19,476
                                                         ------------     ------------
                                                            4,032,252        4,257,029
                                                         ------------     ------------
Property and equipment:
   Cost                                                     1,992,189        1,976,882
   Less accumulated depreciation                            1,298,671        1,244,920
                                                         ------------     ------------
                                                              693,518          731,962
                                                         ------------     ------------
Other assets:
   Deferred income taxes                                      104,366          101,329
   Other                                                          299            8,352
                                                         ------------     ------------
                                                              104,665          109,681
                                                         ------------     ------------

                                                         $  4,830,435     $  5,098,672
                                                         ============     ============
LIABILITIES

Current liabilities:
   Current maturities on long-term debt                  $    953,918     $    969,438
   Notes payable - other                                      458,219          433,994
   Accounts payable - trade                                   494,293          597,672
   Customer deposits                                           68,457           91,828
   Other current liabilities                                  172,108          308,500
                                                         ------------     ------------
                                                            2,146,995        2,401,432
                                                         ------------     ------------
Noncurrent liabilities:
   Long-term debt, less current maturities
      (including $80,000 due to officer)                    1,420,463        1,386,658
   Deferred compensation accrual                              312,000          288,000
                                                         ------------     ------------
                                                            1,732,463        1,674,658
                                                         ------------     ------------

                                                            3,879,458        4,076,090
                                                         ============     ============
STOCKHOLDERS' EQUITY
Common stock; authorized 6,000,000 shares; no par;
   shares issued and outstanding  for 2000 and 1999 -
   3,823,220 and 3,623,220, respectively                    3,811,531        3,754,531

Preferred stock; authorized 5,000,000 shares; $5 par;
no shares issued and outstanding for 2000 and 1999                -0-              -0-

Accumulated other comprehensive income (loss)              (1,949,086)      (1,914,398)

Retained earnings (deficit)                                  (911,468)        (817,551)
                                                         ------------     ------------
                                                              950,977        1,022,582
                                                         ------------     ------------
                                                         $  4,830,435     $  5,098,672
                                                         ============     ============
</TABLE>

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

                                      -33-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                        CONSOLIDATED STOCKHOLDERS' EQUITY

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

Common stock:
   Authorized 6,000,000 shares; no par:
      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                      (1,914,398)     (1,870,875)
   Changes during the years                             (34,688)        (43,523)
                                                    -----------     -----------
   Balances, end of years                            (1,949,086)     (1,914,398)
                                                    -----------     -----------

Retained earnings (deficit):
   Balances, beginning of years                        (817,551)       (244,164)
   Net loss for the years                               (93,917)       (573,387)
                                                    -----------     -----------
   Balances, end of years                              (911,468)       (817,551)
                                                    -----------     -----------
                                                    $   950,977     $ 1,022,582
                                                    ===========     ===========

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

                                      -34-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                                                        Years Ended April 30
                                                        2000            1999
                                                    -----------     -----------
Revenue:
   Sale of furniture                                $ 5,395,680     $ 5,721,206
   Other income                                           8,496           1,884
                                                    -----------     -----------
                                                      5,404,176       5,723,090
                                                    -----------     -----------
Costs and expenses:
   Cost of goods sold                                 3,916,596       4,577,499
   Selling, general, and administrative expenses      1,200,914       1,297,527
   Interest expense                                     372,703         403,159
                                                    -----------     -----------
                                                      5,490,213       6,278,185
                                                    -----------     -----------
Loss before income tax expense (benefit)                (86,037)       (555,095)

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

Net loss for the years                              $   (93,917)    $  (573,387)
                                                    ===========     ===========

Earnings (loss) per share of common stock:
   Basic and diluted:
      Net loss for the years                        $      (.02)    $      (.25)
                                                    ===========     ===========

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

                                      -35-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

Net loss for the years                              $   (93,917)    $  (573,387)

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

Foreign currency translation adjustments                (34,688)        (43,523)
                                                    -----------     -----------

Comprehensive loss for the years                    $  (128,605)    $  (616,910)
                                                    ===========     ===========

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

                                      -36-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          Years Ended April 30
                                                           2000          1999
Cash flows from operating activities:
   Net loss for the years                               $ (93,917)    $(573,387)
   Adjustments to reconcile net loss to
     net cash provided by operating activities:
      Depreciation                                         65,222        82,697
      Amortization                                              0        22,070
      Adjustment for allowance for fringe benefits              0       (46,039)
      Deferred compensation                                24,000        24,000
      Allowance for slow-moving inventory                (134,283)       75,613
      Deferred income taxes                                (5,705)        5,046
   Changes in assets and liabilities:
      Accounts receivable                                 (78,212)      102,508
      Note receivable - officer                                 0        12,605
      Inventories                                         373,418       296,317
      Prepaid expenses                                    (19,827)       31,829
      Other assets                                            782         3,339
      Accounts payable, customer deposits,
        and other current liabilities                     256,661        41,406
                                                        ---------     ---------
         Net cash provided by operating activities        118,144        78,004
                                                        ---------     ---------
Cash flows from investing activities:
   Purchase of equipment                                        0       (11,845)
                                                        ---------     ---------
Cash flows from financing activities:
   Long-term borrowings                                   389,387            --
   Payments on long-term debt                             (83,271)     (125,192)
   Payments on short-term debt                           (256,412)     (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      119,101       (41,371)
                                                        ---------     ---------

Effect of exchange rate changes on cash                    (6,545)       (7,364)

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     $ 417,553
                                                        ---------     ---------

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

                                      -37-
<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  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.

                                      -38-

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.   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.

4.   INVENTORIES:

Inventories consisted of the following:

                                                      2000              1999
                                                  -----------       -----------

Finished goods                                    $ 1,657,096       $ 2,098,895
Work-in-process                                     1,110,293         1,180,069
Raw materials                                         550,519           450,079
                                                  -----------       -----------
                                                    3,317,908         3,729,043
                                                       (7,717)         (142,000)
                                                  -----------       -----------
                                                  $ 3,310,191       $ 3,587,043
                                                  ===========       ===========

5.   PROPERTY AND EQUIPMENT:

The major classes are as follows:

                                                         2000            1999
                                                      ----------      ----------
Land and buildings                                    $1,111,590      $1,114,568
Machinery and equipment                                  733,675         716,292
Furniture, fixtures, and other equipment                 146,924         146,022
                                                      ----------      ----------
                                                      $1,992,189      $1,976,882
                                                      ==========      ==========

Depreciation  expense for the years  ended  April 30, 2000 and 1999  amounted to
$65,222 and $82,697 respectively.

6.   NOTES PAYABLE - OTHER:

Notes payable - other consisted of the following

                                                             2000         1999
                                                             ----         ----

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     $321,737

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     112,2571

                                      -39-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


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 June 16, 2000                     240,000          --
                                                           $ 458.210   $ 433,994
                                                           =========   =========

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
Sheets and are more fully described in Note 7 below.

7.   LONG-TERM DEBT:

Long-term debt consisted of the following:
                                                              2000       1999
                                                              ----       ----
E. Kemm
Interest payable monthly at 1% above prime                 $  25,000   $  25,000
   Interest payable monthly at 1 1/2% above prime
   due in full May 31, 2001                                   55,000

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     826,479

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   1,204,617


Lexington State Bank
   Interest rate prime plus .75%                             _______     300,000

                                                           2,374,381   2,356,096
Less, current maturities                                     953,918     969,438

                                                          $1,420,463  $1,386,658
                                                          ==========  ==========

The weighted  average interest rate paid E. Kemm amounted to 10.0% for the years
ended April 30, 2000 and 1999

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

                                      -40-

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.   LONG-TERM DEBT (CONTINUED)

     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


8.   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.

9.   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.

10.  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.

                                      -41-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  INCOME TAXES (CONTINUED)

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 are as follows:

                                                             2000        1999
                                                             ----        ----
Deferred tax assets:
Book over tax depreciation                                $   5,509   $  17,411
Book allowance for inventory                                  2,980      30,051
Book allowance for doubtful accounts                         22,145      19,476
Tax over book inventory                                      25,727      33,281

Deferred compensation                                       120,494     111,715

State net operating loss carryforward                       174,900     129,838
Federal net operating loss carryforward                     619,420     543,467
                                                          ---------   ---------
                                                            971,175     885,239

Valuation allowance for deferred tax assets                (844,664)   (764,434)
                                                          ---------   ---------
Net deferred tax assets                                   $ 126,511   $  120,805
                                                          =========   =========

Due to certain conditions,  the valuation allowance was increased by $80,230 and
$276,150 respectively, during the years ended April 30, 2000 and 1999.

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

                                                             2000        1999
                                                             ----        ----

Current asset                                             $  22,145   $   19,476
Noncurrent asset
                                                           -104,366      101,329
                                                          ---------   ---------

                                                          $ 126,511   $  120,805
                                                          =========   =========

There  follows a  reconciliation  of the income taxes per the income tax returns
with the income tax expense (benefit) per the 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                                     9.2%         3.3%
                                                          =========   =========

No provision has been made for U. S. income taxes on unremitted  earnings of the
foreign subsidiary (approximately $261,057 and $146,638,  respectively) at April
30,  2000  and  1999,  since  it is  the  present  intention  of  management  to
indefinitely reinvest these earnings.

The components of income (loss) before income taxes are as follows:

                                                             2000        1999
                                                             ----        ----

Domestic                                                  ($212,704)  ($558,350)
Foreign
                                                                --
                                                            126,667        3,255
                                                          ---------   ---------
                                                          ($86,037)  ($555,095)
                                                          =========   =========

                                      -42-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Federal,  foreign,  and state  income tax  expense  (benefit)  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:

                                                             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                                        14.4          2.7
                                                          ---------   ---------
                                                               9.2%         3.3%

11.  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 were $108,646 and $98,621, respectively.

12.  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 and 1999, the
estimated contingent liability aggregated  approximately  $359,897 and $325,352,
respectively.

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.

13.  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
(3,7814,553 shares in 2000 and 2,315,458 shares in 1999).

                                      -43-

<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13.  Earnings Per Share (Continued)

As discussed in Note 9 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 . 14.  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.

15.  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 years ended April 30, 2000 and 1999 were $24,000 each year.

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.

16.  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.

17.  QUARTERLY FINANCIAL DATA - UNAUDITED:
The following is a summary of the quarterly  results of operations for the years
ended April 30, 2000 and 1999:

<TABLE>
<CAPTION>
                   Earnings (Loss) Per Share of Common Stock

Quarter                 Net Sales            Gross Profit (Loss)          Net Income  (Loss)       (Basic and Diluted)
Ended            2000          1999           2000          1999          2000          1999          2000      1999
-------------------------------------------------------------------------------------------------------------------------
<S>          <C>            <C>           <C>           <C>          <C>             <C>             <C>          <C>
July 31       $1,489,569    $1,556,520    $  412,459    $  400,925    ($ 11,280)     ($  62,717)     ($  0.02)
October 31     1,264,150     1,351,361       427,356       308,897    (  64,130)     (  183,809)     (   0.02)     (0.08)
January 31     1,420,533     1,376,578       307,332       246,553    (   6,563)     (  204,464)     (   0.05)
April 30       1,221,428     1,436,747       331,937       187,332    (  11,944)     (  122,397)     (   0.06)

             $5,395,680 $    5,721,206    $1,479,084    $1,143,707   ($  93,917)     ($ 573,387)     (   0.02)    ($0.25)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

18.  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:

                                      -44-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17.  Quarterly Financial Data - Unaudited: (continued)

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:

                                      2000                        1999
                            ------------------------    ------------------------
                             Carrying        Fair        Carrying        Fair
                              Amount        Value         Amount        Value
                            ----------    ----------    ----------    ----------
Cash                        $    4,541    $    4,541    $   49,938    $   49,938
Notes payable - other          458,219       458,219       433,994       433,994
Long-term debt               2,374,381     2,374 381     2,356 096         2,356
096

19.  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.

20. GOING CONCERN CONSIDERATIONS:  As reflected in the accompanying consolidated
financial  statements,  the  Company  incurred a $93,917  loss in the year ended
April  30,  2000 and a  $573,387  loss in the year  ended  April 30,  1999.  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.

21.  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 and 1999.

22.  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.

                                      -45-
<PAGE>

                    WELLINGTON HALL, LIMITED AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

22.  Segment Information: (continued)

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        $2,035,681        ($2,338,946)
                    1999       1,271,812         2,071,637         (3,343,449)

Depreciation and    2000          29,067            36,155             65,222
 amortization       1999          49,071            55,696            104,767

Interest income     2000             528               528
                    1999          32,082           (31,554)               528
Interest expense    2000         260,617           112,086            372,703
  and other         1999         251,562           183,151            (31,554)
                                 403,159

Income tax expense  2000           7,880             7,880
                    1999          18,292            18,292
Net income          2000        (218,386)            5,291            126,667
                                  (7,489)          (93,917)
                    1999        (328,182)         (182,578)             5,767
                                 (68,394)         (573,387)

Total assets        2000       7,867,563           414,233          1,308,376
                              (4,759,737)        4,830,435
                    1999       7,272,490           261,725          1,325,651
                              (3,761,194)        5,098,672

Capital expenditures 2000         39,809            39,809
                     1999         11,849            11,845


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
                           ===========        ===========

                                      -46-
<PAGE>

                             OFFICERS AND DIRECTORS


                                    OFFICERS

Hoyt M. Hackney, Jr.                    Ralph L. Eskelson, Jr.
President and Treasurer                 General Manager
                                        Muebles Wellington Hall, S.A.

Ernst B. Kemm                           William W. Woodruff
Executive Vice President                Secretary


                                    DIRECTORS

Donald W. Leonard                       William W. Woodruff
Chairman of the Board                   President of Woodruff Shoe Store

Hoyt M. Hackney, Jr.                    Ernst B. Kemm
President and Treasurer                 Executive Vice President

Arthur F, Bingham
Senior Executive Vice President

                                 TRANSFER AGENT

                  Continental Stock Transfer and Trust Company

                                      -47-