U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  Form 10-KSB/A
                                 AMENDMENT NO 1

(Mark One)

|x|  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934

                   For the fiscal year ended December 31, 1997
                                             -----------------

|_|  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 
     OF 1934

For the transition period from __________________ to _________________

                         Commission File number 0-14575
                                                -------

                              IL INTERNATIONAL INC.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)


          Delaware                                       06-1331343
-------------------------------                      ----------------
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                       Identification No.)

400 Long Beach Boulevard,
Stratford, Connecticut                                      06497
----------------------------------------                ------------
(Address of principal executive offices)                 (Zip Code)

Issuer's telephone number (203) 378-4000
                          --------------

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

                          Common Stock, $.01 par value
                          ----------------------------
                                (Title of class)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

           Yes  |x|                              No  |_|

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and if no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|


                               Page 1 of 53 pages
                            Exhibit Index at page 51
<PAGE>

                                                                               2


            The issuer's revenues for its most recent fiscal year were
$8,230,730.

            State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days.

            Aggregate market value as of March 4,
            1998..............$396,900

            Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.

              Yes  |x|                        No  |_|

            State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.

            Common stock, $.01 par value, as of March 4,
            1998.............. 79,375,497 shares

                       DOCUMENTS INCORPORATED BY REFERENCE

            List hereunder the documents, all or portions of which are
incorporated by reference herein and the Part of the Form 10-KSB into which the
document is incorporated:

                                      None.

Transitional Small Business Disclosure Format (Check one:)

              Yes  |_|                        No  |x|
<PAGE>

                                                                               3


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

General

            IL International Inc. (the "Company") was incorporated in Delaware
on June 13, 1991.

            The Company's business, transacted through its operating
subsidiaries, is the design, marketing and worldwide distribution of
contemporary lamps and lighting products.

Operating Units

            Italiana Luce and IL USA, Inc. (formerly known as "PAF USA, Inc."),
a Delaware corporation ("IL USA"), are the Company's two operating subsidiaries.
Italiana Luce, which is based in Settimo Milanese, a suburb of Milan, Italy,
designs, markets and distributes worldwide high quality contemporary lamps and
lighting products. Italiana Luce's products are manufactured by a network of
subcontractors, some of which work almost exclusively for Italiana Luce, using
molds owned by Italiana Luce. IL USA is the exclusive distributor of Italiana
Luce's products in the United States and Canada.

            Incorporated in 1975, Italiana Luce shipped its first products,
principally classic hand-blown Venetian glass lamps, in early 1979. In 1984,
Italiana Luce introduced the first of its modern design lamps and began to phase
out its traditional product line. In 1993, a new line of traditionally designed,
high quality, hand-blown lamps was marketed under the Le Stelle trade name.

            Italiana Luce currently sells 32 collections of lighting products
consisting of about 290 line items. In the United States the suggested retail
prices of these fixtures range from $105 to $1,875 with an estimated weighted
average list price of $315. Actual selling prices in the United States for
portable fixtures are commonly 10% to 20% below the suggested retail prices.
Prices of these products are generally higher in the rest of the world.

            In 1993, IL USA acquired distribution rights in
<PAGE>

                                                                               4


North America for certain lighting products of contemporary design produced by
two non-affiliated Italian lighting manufacturers, Nemo S.r.l. ("Nemo") and
Effetre Industriale S.p.A. In October 1994, IL USA also began to distribute in
the United States a line of lighting products produced by Foscarini Murano
S.p.A. ("Foscarini"), located near Venice, Italy. Besides its contemporary line
of lighting fixtures featuring high quality hand-blown Venetian glass, Foscarini
offers an array of classic custom designed chandeliers. Effective June 30, 1997,
IL USA voluntarily relinquished its rights to distribute the Nemo line and
subsequently signed an agreement with Tre Ci Luce snc ("Tre Ci Luce"), a
manufacturer of contemporary lighting fixtures located outside Milan, Italy, to
become its exclusive distributor in the United States. Shipments of the Tre Ci
Luce line began in late January 1998.

            In total, the lines of non-affiliated product now currently
represented by IL USA consist of 53 collections of lighting products or about
1,000 line items (excluding custom-made products). The fixtures have suggested
retail selling prices which range from $95 to $3,200. During 1997, the estimated
weighted average list price was $425.

Industry Segments

            The Company operates within the lighting segment of the interior
furnishings market. Sales are made principally to the residential sector of the
market. The Company considers its present product line to comprise a single
industry segment.

Design

            The Company's design policy is to develop innovative contemporary
lighting products directed at the higher-end of the lighting market. The Company
does not have an in-house design group but instead develops its designs in close
cooperation with a small group of top architects and designers recognized for
their excellence in the field of modern design. In order to assure that new
product development is directly focused on market needs, the Company outlines
for its designers current market trends both in design and material content,
identifies product niches, and sets price guidelines. The majority of the
designers create lighting products exclusively for the Company. The "Italiana
Luce Collection" has been created principally by Italian designers such as Mario
Barbaglia,
<PAGE>

                                                                               5


Marco Colombo and Stefano Marcato. Ferdinand Porsche of F.A. Porsche Design, a
prominent German design group, has also designed products for the Company.
Italiana Luce's products have been exhibited in various museums of modern art in
Europe, the United States and South America. They have also been highly
acclaimed by contemporary design periodicals throughout the world.

Marketing

            The majority of the Company's products are sold in Western Europe
where the top three markets are Italy, Germany and France. Sales in the United
States and Canada account for about 30% of worldwide sales when expressed in
U.S. dollars. The Company also sells its products in Japan, Australia and
certain countries in South America. Products are distributed to the retail
consumer through independent stores, furniture stores, department stores and
mail order houses. Fixtures are also sold directly to contractors, purchasing
agents, architects and designers for use in commercial applications such as
offices, hospitality centers and restaurants.

            The residential markets around the world for high-end lighting
fixtures of contemporary design have been very soft for the past few years while
the contract market has seen some growth over the same period. As a result, the
Company has taken steps to increase its presence in the contract market. It is
estimated that currently less than 15% of the Company's sales are made directly
to the contract market. An additional unquantifiable volume of sales is made to
third parties who themselves sell the products into the contract market.

            The Company's products are sold in Italy through a network of
independent sales representatives. In other countries in Europe sales are made
on an exclusive basis either through a local distributor or through an importing
agent. In the United States, the products are sold through independent sales
agent organizations hired by IL USA. IL USA sells its products to a Canadian
distributor for distribution throughout Canada.

            The Company's marketing strategy is directed primarily at the
residential segment of the lighting market. Marketing efforts of the sales
representatives, who call principally on retail outlets, are supplemented by
promotional programs, including catalogue mailings,
<PAGE>

                                                                               6


incentive plans, attendance at trade shows, and national advertising through
trade and popular interior design publications. The generally weak economies in
Europe in recent years have negatively affected the Company's sales and cash
flow. To conserve its resources, the Company has advertised only sparingly in
recent years. Instead, the Company has increased the level of its promotional
activities to the trade.

Competition

            In each of the countries in which the Company markets its products,
the residential lighting sector of the interior furnishings industry is highly
competitive and fragmented, with many hundreds of companies operating within it.
The Company's major worldwide competitors in the high-end, contemporary lighting
sector of the interior furnishings market are Artemide, Flos, Leucos and Luce
Plan. Other competitors in the United States include George Kovacs and Koch &
Lowy. Some of the Company's competitors have greater financial and operating
resources than the Company. In addition, there is strong competition from
imports from the Far East which are priced substantially lower than the
Company's products, are often very similar in design, and are generally of a
lower quality.

            The Company believes its principal competitive advantages to be its
superior design capability, the Italian provenance of its products, the brand
name recognition of its products in the trade, and its professional management.

Seasonality

            Because it is the custom in Italy, as it is in much of Europe, to
shut down operations during the month of August, shipments for the third quarter
of the calendar year have historically accounted for approximately 15% of total
annual sales. The first and fourth quarters of the year have in most recent
years each accounted for close to 30% of total annual sales.

Sources of Supply

            The primary materials used by the Company are metal, technopolymer
and glass. These materials are in plentiful supply and are available from many
sources
<PAGE>

                                                                               7


throughout Europe. The Company has not experienced any material delays in the
delivery of any of these items in recent years.

Principal Customers

            The Company's five largest customers account, in the aggregate, for
less than 5% of its total sales.

Patents and Trademarks

            The Company has patents and trademarks in many countries on the
design of certain of its products. In those countries in which the Company has
significant sales, these patents and trademarks expire between 2006 and 2010.

Restructuring of Italiana Luce

            Confronted with continued weak demand for its products in every
major market in continental Europe and with no prospect of any improvement
during 1997, the Company determined that more radical cost cutting measures than
those previously undertaken were necessary. Consequently, the Company
implemented a plan in early 1997 to revise its operating and financial
requirements. Actions taken included close-out of a number of slower selling
products and liquidation of the Le Stelle line of traditional Venetian-style
fixtures, termination of one-third of the Company's workforce in Italy; reduced
compensation for the Company's officers and directors; cancellation of a lease
on approximately 13,000 square feet of warehouse space at Italiana Luce; and
elimination in Italy of all advertising. Savings in 1997 resulting from these
actions are estimated to have been in excess of $500,000.

Employees

            At December 31, 1997, the Company had 26 full-time employees and one
part-time employee. Fifteen full-time employees and the part-time employee were
employed in executive, management, sales, administrative, and clerical positions
and 10 in warehousing, shipping, assembly and technical support.

            Manufacture of the Company's products is undertaken by small
independent subcontractors in Italy. Each subcontractor produces a limited
number of the
<PAGE>

                                                                               8


Company's products. For many of the larger selling volume items, the Company has
two or more sources of supply.

            Although the Company has no collective bargaining arrangements, all
of its employees in Italy are covered by broad national wage and benefit
agreements mandated by various agencies of the Italian central government. The
Company considers its employee relations to be satisfactory.

Foreign and Domestic Operations

            A summary of the Company's operations by geographical area for the
years ended December 31, 1997 and 1996 is as follows:

                                                     Years Ended December 31,
                                                       1997             1996
                                                   -----------      -----------
Net sales to unaffiliated customers:
  United States (a)                                $ 2,509,174      $ 2,381,598
  Italy                                              2,513,690        3,389,958
  Germany                                            1,198,460        1,560,432
  Other countries                                    2,009,406        2,403,506
                                                   -----------      -----------

                Total                              $ 8,230,730      $ 9,735,494
                                                   ===========      ===========

Net sales between geographic areas (b):
  Italy                                            $   807,543      $   877,620
                                                   ===========      ===========

Operating profits/(losses):
  United States                                    $   187,942      $    27,562
  Italy                                               (701,791)        (741,977)
                                                   -----------      -----------

               Total                               $  (513,849)     $  (714,415)
                                                   ===========      ===========

                                                           December 31,
                                                       1997             1996
                                                   -----------      -----------
Identifiable assets:
  United States                                    $ 1,063,640      $ 1,078,840
  Italy                                              3,970,123        5,654,301
                                                   -----------      -----------

                Total                              $ 5,033,763      $ 6,733,141
                                                   ===========      ===========
<PAGE>

                                                                               9


----------
(a)   Includes export sales of $47,394 and $45,132 during the years ended
      December 31, 1997 and 1996, respectively.

(b)   Net sales between geographic areas refers to products sold by Italiana
      Luce to IL USA. These sales have been eliminated in consolidation.

ITEM 2. DESCRIPTION OF PROPERTY.

            The Company's executive offices are located at 400 Long Beach
Boulevard, Stratford, Connecticut where the Company leases 800 square feet of
office space from IL USA.

            The offices of Italiana Luce are located at Via Edison, 118, Settimo
Milanese, Italy. The leased premises consist of offices of approximately 3,200
square feet and a warehouse of approximately 26,000 square feet.

            The Company's distribution center in the United States is leased by
IL USA and is located at 400 Long Beach Boulevard, Stratford, Connecticut. It
consists of offices of approximately 1,600 square feet and a warehouse of
approximately 9,120 square feet.

            The Company's total annualized rental expense in 1997 was $198,305.
Leases generally are subject to periodic rent adjustments. Current leases expire
at varying times between 1998 and 2003.

            The Company anticipates that it will be able to renew its leases
upon their expiration or lease other facilities on comparable terms if the
current leases are not renewed. The Company believes that its facilities are
well maintained and are of adequate size in Italy for its projected needs in the
near term.
<PAGE>

                                                                              10


ITEM 3. LEGAL PROCEEDINGS.

            There are no legal proceedings, other than routine litigation
incidental to the Company's business, to which the Company is a party or of
which any of its property is the subject.

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

        Not applicable.
<PAGE>

                                                                              11


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

            The Company's common stock is quoted on the OTC ("Over-The-Counter")
Bulletin Board under the symbol ILIL, and is included in the National Quotation
Bureau's "Pink Sheets".

            The quarterly high and low bid prices of the Company's common stock
during 1996 and 1997 are set forth below. Prices are as reported by the National
Quotation Bureau, LLC.

                                                    High          Low
                                                    ----          ---
1996
----
First Quarter                                     $ 0.01        $ 0.01
Second Quarter                                      0.02          0.01
Third Quarter                                       0.02          0.015
Fourth Quarter                                      0.015         0.01

1997
----
First Quarter                                     $ 0.01        $ 0.006
Second Quarter                                      0.006         0.001
Third Quarter                                       0.0015        0.001
Fourth Quarter                                      0.005         0.001

            The foregoing OTC quotations are inter-dealer quotations without
retail markup, markdown or commission and may not represent actual transactions.

            On March 3, 1998, the Company estimates that it had 1,750
shareholders, comprised of 460 shareholders of record and 1,290 beneficial
shareholders whose shares are being held in brokerage firm accounts in "street
name."

            No cash dividends have been paid or declared on the common stock of
the Company since the Company was organized.
<PAGE>

                                                                              12


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Background

            IL International Inc. (the "Company") was incorporated in Delaware
on June 13, 1991 in connection with the Amended Plan of Reorganization (the
"Plan") of Chartwell Group Ltd. ("Chartwell") and CGL Finance, Inc. (together
with Chartwell, the "Debtors"). In accordance with the Plan's provisions,
Chartwell was dissolved on February 13, 1992.

            On April 8, 1991, a voluntary petition for reorganization pursuant
to Chapter 11 of the United States Bankruptcy Code was filed by the Debtors with
the United States Bankruptcy Court (the "Court"). The Effective Date of the Plan
was November 27, 1991. On October 1, 1992, the Court issued a Final Decree
approving the closure of the estates of the Debtors.

            On the Effective Date, the Company became the owner of Chartwell's
sole remaining operating subsidiary, Italiana Luce S.r.l., an Italian
corporation ("Italiana Luce"), and certain other assets and properties of
Chartwell, free and clear of all liens, claims and encumbrances.

Results of operations

            The functional currency of the Company's foreign subsidiary,
Italiana Luce, is the Italian lira. The Company translates all assets and
liabilities of Italiana Luce at year-end exchange rates, all income and expense
accounts at average rates, and records adjustments resulting from the
translation in a separate component of stockholders' equity.

            The Italian lira continued its roller-coaster ride against the U.S.
dollar during 1997. The weighted average exchange rate of the lira used in the
conversion of Italiana Luce's income statement for 1997 was 9.5% less than that
used in 1996. The comparable 1996 rate was 5.2% greater than that for 1995.

            Net sales for the Company for the year ended December 31, 1997 were
$8,230,730, a decrease of 15.5% on
<PAGE>

                                                                              13


net sales of $9,735,494 for the year ended December 31, 1996.

            Expressed in lire, net sales for the year ended December 31, 1997,
exclusive of sales in North America, fell 14.8% as compared to 1996. With
continental Europe continuing to experience high unemployment and stagnant
economies, the Company's sales declined in all major European markets.

            Sales in North America rose 5.5% in 1997. Strong sales of the
Foscarini line more than offset a decline in the Rialto line and only partial
year sales from the Nemo line for which IL USA voluntarily relinquished
distribution rights in early 1997. In September 1997, The Company signed a
long-term agreement with Tre Ci Luce to become its exclusive distributor in the
United States. Tre Ci Luce is a manufacturer of contemporary lighting fixtures
located outside Milan, Italy and previously had been only sparsely represented
in the United States. Initial shipments of Tre Ci Luce products were made in
late January 1998.

            The gross profit margin for 1997 was 39.8% of net sales compared to
41.6% in 1996. The drop in the gross profit percentage was due principally to
heavy price promotions offered by Italiana Luce in its efforts to boost volume
and the close out, in connection with its restructuring plan, of a number of
slower selling line items as well as the complete Le Stelle line of traditional
Venetian-style lighting fixtures. The weaker lira enabled IL USA to improve its
margins and to price promote its portable fixtures aggressively.

            Selling, general and administrative expenses for 1997 were 41.4% of
net sales compared to 47.2% in 1996. The substantial drop in expenses as a
percentage of net sales was directly attributable to the restructuring plan
implemented by the Company in early 1997 and for which a reserve of $165,000 was
charged against 1996 income. Actions taken in addition to the inventory
reduction measures mentioned above included termination of one-third of the
Company's workforce in Italy; reduced compensation for the Company's officers
and directors; cancellation of a lease on approximately 13,000 square feet of
warehouse space at Italiana Luce; and elimination in Italy of all advertising.

            Despite these significant steps which resulted in
<PAGE>

                                                                              14


estimated savings during 1997 of approximately $500,000, the Company has
continued to lose money. With further meaningful restructuring difficult to
envision, management determined that it would be in the best interests of the
stockholders if the Company were sold and, to that end, on March 5, 1998 signed
a conditional agreement to sell substantially all of its assets to Nemo S.r.l.
("Nemo"), located near Milan, Italy and a subsidiary of Cassina S.p.A., a major
European contemporary furniture manufacturer. See Footnotes 1[B] Basis of
Presentation and (21) Subsequent Event for further discussion).

            As a result of this possible sale and in conformity with new
reporting requirements relating to the accounting for the impairment of
long-lived assets, the Company wrote down the value of its fixed assets and
intangibles at December 31, 1997 by $380,000 to reflect the price to be paid by
Nemo for certain of these assets plus the estimated net proceeds from the
liquidation of the fixed assets which Nemo has elected not to acquire.

            In 1996, because of the poor financial performance of the Company
and with no certainty of any immediate improvement, management decided not to
recognize $262,193 of deferred tax assets arising in Italy in 1996, principally
the net operating loss carryforward, and to write off the balance of $308,947 of
deferred tax assets brought forward from prior years.

Foreign Currency Exposure

            The Company does not hedge its foreign currency exposure arising in
connection with its trading activities principally because the lira has been
trending weaker in recent years against most of the other major currencies in
which the Company transacts its business. In Europe, Italiana Luce invoices its
customers outside Italy in their local currencies and has realized modest
foreign exchange gains on such sales. IL USA purchases all its product from
Italy in Italian lira and has been able to improve its margins as the lira has
fallen against the U.S. dollar.

Financial Condition

            Capital expenditures, inclusive of expenditures on intangible
assets, were $161,643 and $304,032 for the years
<PAGE>

                                                                              15


ended December 31, 1997 and 1996, respectively.

            Net working capital at December 31, 1997 and December 31, 1996 was
$1,436,382 and $1,821,925, respectively. Converted at the December 31, 1997
exchange rate, the 1996 net working capital was $1,606,624.

            Total assets at December 31, 1997 and December 31, 1996 were
$4,670,715 and $6,733,141, respectively. Converted at the December 31, 1997
exchange rate, the 1996 total assets were $5,851,521.

Liquidity and Capital Resources

            The Company's current major source of financing is its short-term
lines of credit with certain Italian banks. These lines of credit are unsecured
and can be revoked by the banks without notice and for any reason. There are no
contractual limitations imposed by the banks on the Company's or its
subsidiaries ability to incur debt. Nor are there any financial ratios or other
covenants to which the Company must adhere.

            The Company currently uses these lines of credit to finance its
day-to-day operations. These facilities totalled Lit. 7,450,000,000 at December
31, 1997 ($4,214,000 when converted at the December 31, 1997 exchange rate).
Lit. 1,628,259,000 ($920,961) and Lit. 2,587,209,000 ($1,704,354 when converted
at the December 31, 1996 exchange rate) was outstanding under these lines at
December 31, 1997 and 1996, respectively.

            As the Company's financial position has continued to deteriorate
despite the significant restructuring measures implemented during 1997,
management has become increasingly concerned that its unsecured lines of credit
might be withdrawn by the lenders without notice. For this and other reasons, a
decision was taken in late February 1998, upon the consent of the majority
stockholder, to sell substantially all of the assets of the Company to Nemo. See
Footnotes 1[B] Basis of Presentation and (21) Subsequent Event for further
discussion.

Currency Fluctuations

            After holding firm against the U.S. dollar during
<PAGE>

                                                                              16


1996, the Italian lire experienced a marked decline in 1997 falling from Lit.
1,518 on the last day of 1996 to Lit. 1,768 at the end of 1997, a drop of 16.5%.

            Since approximately 70% of the financial results of the Company are
prepared initially in lire and subsequently converted to dollars, the effect of
this decline has been to distort substantially the reported value of the
Company's assets and, over time, the value of its sales revenue since a given
amount of lire produces a lesser dollar amount upon conversion as the lira
depreciates against the U.S. currency.

            The exchange rates used in the conversion of the income statements
are the weighted average rates of exchange for each year, namely Lit. 1,689 in
1997 and Lit. 1,543 in 1996. The balance sheets have been converted at the end
of year exchange rates. At December 31, 1997, the rate was Lit. 1,768; at
December 31, 1996 it was Lit. 1,518.

Year 2000

            Many existing computer programs use two digits to identify a year in
the date field. These programs were designed and developed without considering
the upcoming change in century. If not corrected, many computer applications
could fail or create erroneous results by or at the year 2000.

            The Company has conducted a comprehensive review of its computer
systems to identify the systems which could be affected by the Year 2000 issue,
and is developing an implementation plan to resolve the problem. Based on this
review, the Company does not believe that the cost of remediation will be
material to its financial position and results of operations.

ITEM 7. FINANCIAL STATEMENTS.

            Financial statements of the Company and its consolidated
subsidiaries are set forth herein beginning on page F-1.
<PAGE>

                                                                              17


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

        Not applicable.
<PAGE>

                                                                              18


                                    PART III

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

            The following information relates to all directors and executive
officers of the Company.

Michel F. Leemans

            Mr. Leemans, age 59, has been President and Chief Executive Officer
and a Director of the Company since prior to 1993. He was President and Chief
Executive Officer of Sofinance S.r.l., an investment banking firm, from prior to
1993 to 1994 and has been a Director since prior to 1993. He has been President
and Chief Executive Officer of Clac S.r.l., an advertising agency, since prior
to 1993.

Keith G. Frey

            Mr. Frey, age 58, has been Vice President, Finance and
Administration, Chief Financial Officer and a Director of the Company since
prior to 1993. He has also been President of IL USA, Inc., an operating
subsidiary of the Company, since prior to 1993.

Luigi Giroletti

            Mr. Giroletti, age 50, has been Vice President and Director of the
Company since prior to 1993. He has also been President and Managing Director of
Italiana Luce S.r.l., a designer and distributor of lamps and lighting products,
and an operating subsidiary of the Company, since prior to 1993.

Thomas R. Reardon

            Mr. Reardon, age 64, has been a Director of the Company since prior
to 1993. He has also been President of Heliochrome Press, commercial printers,
since prior to 1993. He was Chairman of the Board and President of The Studley
Press, Inc., commercial printers, from prior to 1993 to 1994.

Lewis G. Singer

            Mr. Singer, age 63, has been a Director of the Company since prior
to 1993. He has also been Principal and President of G-Seven Ltd., furniture
manufacturers, since 1994. From prior to 1993 to 1994 he was Principal of Thomas
C. Baer, Inc. (now Coro Services Inc.), a furniture
<PAGE>

                                                                              19


management consulting firm, and has acted as a consultant thereto since 1994.

Section 16(a) Beneficial Ownership Reporting Compliance

            Section 16(a) of the Exchange Act requires the Company's directors
and executive officers, and persons who own more than ten percent of the
Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of beneficial ownership and reports of changes in beneficial
ownership of Common Stock. Such persons are required by the Commission's
regulations to furnish the Company with copies of all Section 16(a) reports
filed.

            To the Company's knowledge, based solely on representations made to
the Company that no such reports were required in respect of the fiscal year
ended December 31, 1997, no filings under Section 16(a) were required by its
officers, directors and greater than ten percent stockholders.
<PAGE>

                                                                              20


ITEM 10. EXECUTIVE COMPENSATION

      The following table sets forth information concerning the compensation
earned by each of the executive officers of the Company for services rendered
during each of the fiscal years ended December 31, 1997, 1996 and 1995.

                           SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------

Name and Principal
 Position                          Year             Salary               Bonus
------------------                 ----            --------              -----
                                                                     
Michel F. Leemans (1)              1997            $ 25,800                -
 President and Chief               1996             135,049                -
 Executive Officer                 1995             141,357                -
                                                                     
Keith G. Frey                      1997            $110,000                -
 Vice President, Finance           1996             146,667                -
 and Administration                1995             146,667                -
                                                                     
Luigi Giroletti (2)                1997            $189,816                -
 Vice President                    1996             212,932                -
                                   1995             196,265             $65,799

----------
(1)   All such compensation was paid to Sofinance S.r.l., an investment banking
      firm of which Michel F. Leemans is a director.

(2)   The salary paid to Luigi Giroletti in the years ended December 31, 1997,
      1996 and 1995 included $52,467, $63,867 and $64,667, respectively, paid in
      U.S. dollars. Such payments were in addition to the base salary provided
      for in the services agreement of Mr. Giroletti with Italiana Luce (see
      "Certain Relationships and Related Transactions" below for a description
      of the services agreement). All other compensation paid to Mr. Giroletti
      was paid in lire and has been converted at the weighted average exchange
      rates for the respective years, namely, Lit. 1,689 in 1997, 1,543 in 1996
      and Lit. 1,627 in 1995.

            The Company has no pension, profit sharing, stock option, stock
purchase or other employee benefit plans.

            The Company makes available certain additional benefits to certain
of its executive officers. The Company considers such benefits to be ordinary
and incidental
<PAGE>

                                                                              21


business costs and expenses. The aggregate value of such benefits in the case of
each executive officer which cannot be precisely ascertained but which is less
than the lesser of either $50,000 or 10% of the total of annual salary and bonus
reported for each of the executive officers named in the Summary Compensation
Table, is not included in such table.

Compensation of Directors

            The Company pays its directors who are not employees of the Company
a querterly fee of $1,600, plus $120 and out-of-pocket expenses for attending
each meeting of the Board of Directors of the Company.
<PAGE>

                                                                              22


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

            The following table sets forth, as of April 13, 1998, the total
number of shares of Common Stock beneficially owned, and the percent so owned,
by each director of the Company, by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934), by the Company's chief executive officer and the Company's other
executive officers during the fiscal year ended December 31, 1997 and by all
directors and executive officers as a group. The number of shares owned are
those "beneficially owned," as determined under the rules of the Securities and
Exchange Commission, and such information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which a person has sole or shared voting
power or investment power and any share of Common Stock which the person has the
right to acquire within 60 days through the exercise of any option, warrant or
right, through conversion of any security, or pursuant to the automatic
termination of power of attorney or revocation of trust, discretionary account
or similar arrangement.

                                        AMOUNT AND NATURE        PERCENT
                                          OF BENEFICIAL             OF
NAME                                        OWNERSHIP             CLASS
----                                    -----------------        -------

Michel F. Leemans
 400 Long Beach Boulevard
 Stratford, CT 06497 .............         39,653,861(1)           51.6%
Keith G. Frey
 400 Long Beach Boulevard
 Stratford, CT 06497 .............         39,654,045(2)           51.6%
Luigi Giroletti
 400 Long Beach Boulevard
 Stratford, CT 06497 .............         39,653,861(1)           51.6%
Itamlight S.A 
 3 rue Nicolas Adames
 L-114 Luxembourg ................         39,653,861              51.6%
Einar Paul Robsham
 P.O. Box 5151
 Cochituate, MA 01778 ............          5,099,116               6.6%
<PAGE>

                                                                              23


All directors and executive
 officers as a group (five
 persons).........................         39,654,045              51.6%

----------
(1)   Represents 39,653,861 shares owned by Itamlight S.A., a Luxembourg
      corporation ("Itamlight"). Messrs. Leemans, Frey and Giroletti are the
      sole shareholders of Itamlight.
(2)   Includes 39,653,861 shares owned by Itamlight.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

            Italiana Luce has entered into a services agreement with Luigi
Giroletti. The current term of the services agreement expires December 31, 1998.
The agreement may be extended for such additional periods and on such terms as
may be mutually agreed upon. The services agreement provides for a salary,
payable in lire, which is subject to annual increases based on the ISTAT index
(i.e. the Italian cost of living index). Mr. Giroletti's salary under the
services agreement was Lit. 232,000,000 in 1997 ($137,349 when converted at the
1997 weighted average exchange rate), and Lit. 230,000,000 in 1996 ($149,065
when converted at the 1996 weighted average exchange rate).

            For the years ended December 31, 1997 and 1996, the Company paid
$25,800 and $135,049, respectively, plus out-of-pocket expenses, for consulting
services to Sofinance S.r.l., an investment banking firm of which Michel Leemans
is a director.
<PAGE>

                                                                              24


                                     PART IV

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

            (a)   Documents filed as part of the Report:

                  1.    Exhibits

                        Information with respect to this Item is contained in 
the attached Index to Exhibits.

                  2.    Financial Statements

                        Information with respect to this Item is contained on 
pages F-1 to F-22 of this Annual Report on Form 10-KSB.

            (b)   Reports on Form 8-K:

                  No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1997.
<PAGE>

                                                                              25


                                POWER OF ATTORNEY

            The registrant and each person whose signature appears below hereby
appoint Michel F. Leemans and Keith G. Frey as attorneys-in-fact with full power
of substitution, severally, to execute in the name and on behalf of the
registrant and each such person, individually and in each capacity stated below,
one or more amendments to the annual report which amendments may make such
changes in the report as the attorney-in-fact acting on the premises deems
appropriate and to file any such amendment to the report with the Securities and
Exchange Commission.

                                   SIGNATURES

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

Dated: April 29, 1998

                                       IL INTERNATIONAL INC.


                                       By /s/ Michel F. Leemans
                                          --------------------------------------
                                          Michel F. Leemans
                                          President and Chief
                                          Executive Officer

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

Dated: April 29, 1998                  By /s/ Michel F. Leemans
                                          --------------------------------------
                                          Michel F. Leemans
                                          President and Chief
                                          Executive Officer
<PAGE>

                                                                              26


Dated: April 29, 1998                  By /s/ Keith G. Frey
                                          --------------------------------------
                                          Keith G. Frey
                                          Chief Financial and
                                          Accounting Officer,
                                          Vice President, Finance and
                                          Administration, and
                                          Director


Dated: April 29,  1998                 By       ****
                                          --------------------------------------
                                          Luigi Giroletti
                                          Vice President and Director


Dated: April 29,  1998                 By       ****
                                          --------------------------------------
                                          Thomas R. Reardon
                                          Director


Dated: April 29,  1998                 By       ****
                                          --------------------------------------
                                          Lewis G. Singer
                                          Director


                                  **** By  /s/ Keith G. Frey
                                          --------------------------------------
                                          Keith G. Frey
                                          Attorney-in-Fact
<PAGE>

                                                                              27


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

                          Index to Financial Statements

            The following consolidated financial statements of the Company and
its subsidiaries are submitted herewith in response to Item 7 and Item 13(a)(1):

                                                                           Page
                                                                          Number
                                                                          ------

Report of Grant Thornton LLP,
  Independent Certified Public Accountants ..............................   28

Consolidated Balance Sheets
  - December 31, 1997 and 1996 ..........................................   29

Consolidated Statements of Operations
  - For the Years Ended
      December 31, 1997 and 1996 ........................................   30

Consolidated Statement of Stockholders' Equity
  - For the Years Ended
      December 31, 1997 and 1996 ........................................   31

Consolidated Statements of Cash Flows
  - For the Years Ended
      December 31, 1997 and 1996 ........................................   32

Notes to Consolidated Financial Statements
  - December 31, 1997 and 1996 ..........................................   33
<PAGE>

                                                                              28


                         REPORT OF INDEPENDENT CERTIFIED
                               PUBLIC ACCOUNTANTS


To the Stockholders and Board of Directors
   IL International Inc.

            We have audited the accompanying consolidated balance sheets of IL
International Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

            In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of IL
International Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

            The Company has determined that it is no longer a going concern.
However, it has not valued the individual assets and liabilities on a
liquidation basis because of the pending sale of the Company as described in
Note 21, which is expected to result in the recovery of the net asset value.
This conclusion is further supported by a valuation of the Company by Marshall &
Stevens, Incorporated.


GRANT THORNTON LLP

New York, New York
March 1, 1998 (except for Footnotes 1[B] and 21, as to which the date is March 
              5, 1998)
<PAGE>

                                                                              29


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                                                             December 31,
                                                         1997          1996
                                                     -----------    -----------
                   ASSETS
Current assets:
  Cash and cash equivalents                          $   557,115    $   324,298
  Trade accounts receivable, less allowance
    for doubtful receivables of $309,805
    in 1997 and $356,381 in 1996                       1,834,331      2,675,435
  Inventories                                          1,801,817      2,488,006
  Other current assets                                   238,860        368,793
                                                     -----------    -----------

     Total current assets                              4,432,123      5,856,532

Plant and equipment, net                                 182,047        775,529
Intangibles, net of accumulated amortization
  of $280,527 in 1997 and $292,964 in 1996                    --         32,445
Other assets                                              56,545         68,635
                                                     -----------    -----------

     Total Assets                                    $ 4,670,715    $ 6,733,141
                                                     ===========    ===========

  LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term debt                                    $   920,961    $ 1,704,354
  Current installments of long-term debt                  16,255         35,642
  Accounts payable                                     1,058,652        922,612
  Income taxes payable                                       660            325
  Other accrued liabilities                              999,213      1,371,674
                                                     -----------    -----------

     Total current liabilities                         2,995,741      4,034,607

Long-term debt, excluding current installments             9,593         30,104
Other liabilities                                        335,569        482,715
                                                     -----------    -----------

     Total Liabilities                                 3,340,903      4,547,426
                                                     -----------    -----------

Stockholders' equity:
 Common stock, $.01 par value per share;
   authorized, 100,000,000 shares;
   issued, 79,375,497 shares                             793,755        793,755
 Additional paid-in capital                            2,248,111      2,229,415
 Retained earnings                                    (1,100,952)      (467,643)
 Foreign currency translation adjustments               (547,249)      (305,959)
 Treasury stock, at cost
   - 2,554,113 common shares                             (63,853)       (63,853)
                                                     -----------    -----------

     Total stockholders' equity                        1,329,812      2,185,715
                                                     -----------    -----------


     Total Liabilities and Stockholders' Equity      $ 4,670,715    $ 6,733,141
                                                     ===========    ===========

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

                                                                              30


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations


                                                     Years Ended December 31,
                                                       1997             1996
                                                  ------------     ------------

Net sales                                         $  8,230,730     $  9,735,494
Cost of sales                                        4,956,243        5,687,962
                                                  ------------     ------------

Gross profit                                         3,274,487        4,047,532
Selling, general and
  administrative expenses                            3,408,336        4,596,947
Write-down of fixed assets                             380,000               --
Restructuring charge                                        --          165,000
                                                  ------------     ------------

Operating loss                                        (513,849)        (714,415)

Other income (expense):
 Interest income                                        20,594           15,323
  Interest expense                                    (109,398)        (108,819)
                                                  ------------     ------------

Loss before income taxes                              (602,653)        (807,911)
Income taxes                                            30,656          321,714
                                                  ------------     ------------

Net loss                                          $   (633,309)    $ (1,129,625)
                                                  ============     ============

Loss per common share - basic and diluted         $    (0.0082     $    (0.0147)
                                                  ============     ============

Weighted average number
  of common shares outstanding:                     76,821,384       76,821,384
                                                  ============     ============


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

                                                                              31


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

                 Consolidated Statement of Stockholders' Equity
                     Years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                          Common Stock                                   Foreign
                               -------------------------   Additional                    currency                         Total
                                 Number          Par         paid-in      Retained      translation     Treasury      stockholders'
                                of shares       value        capital      earnings      adjustment        stock          equity
                               -----------   -----------   -----------   ----------     -----------    -----------    -------------
<S>                             <C>          <C>           <C>           <C>            <C>            <C>            <C>        
Balance at January 1, 1996      79,375,497   $   793,755   $ 2,228,571   $   661,982    $  (423,543)   $   (63,853)   $ 3,196,912

Net loss for the year
  ended December 31, 1996               --            --            --    (1,129,625)            --             --     (1,129,625)
Utilization of deferred
  tax benefits not recorded
  as of the Effective Date              --            --           844            --             --             --            844
Unrealized foreign currency
  translation adjustment                --            --            --            --        117,584             --        117,584
                               -----------   -----------   -----------   -----------    -----------    -----------    -----------

Balance at December 31, 1996    79,375,497       793,755     2,229,415      (467,643)      (305,959)       (63,853)     2,185,715

Net loss for the year
  ended December 31, 1997               --            --            --      (633,309)            --             --       (633,309)
Utilization of deferred
  tax benefits not recorded
  as of the Effective Date              --            --        18,696            --             --             --         18,696
Unrealized foreign currency
  translation adjustment                --            --            --            --       (241,290)            --       (241,290)
                               -----------   -----------   -----------   -----------    -----------    -----------    -----------

Balance at December 31, 1997    79,375,497   $   793,755   $ 2,248,111   $(1,100,952)   $  (547,249)   $   (63,853)   $ 1,329,812
                               ===========   ===========   ===========   ===========    ===========    ===========    ===========
</TABLE>


The accompanying notes are an integral part of this statement.
<PAGE>

                                                                              32


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                                                      Years Ended December 31,
                                                         1997           1996
                                                     -----------    -----------
Cash flows from operating activities:
  Net loss                                           $  (633,309)   $(1,129,625)

  Adjustments to reconcile net loss to
    net cash used in operating activities:
    Depreciation and amortization                        313,918        432,794
    Write-down of fixed assets                           380,000             --
    Deferred tax benefits                                 18,696            844
    Other                                                (88,603)       (18,654)

    Changes in net assets and liabilities:
      (Increase) decrease in:
        Trade accounts receivable                        519,681        (61,260)
        Inventories                                      402,790        (62,689)
        Deferred taxes                                        --        308,947
        Other current assets                              90,353       (123,380)
        Other long-term assets                              (692)        (1,808)
      Increase (decrease) in:
        Accounts payable                                 261,196       (565,360)
        Income taxes payable                                 335        (28,016)
        Other accrued liabilities                       (236,920)        17,490
                                                     -----------    -----------

  Net cash provided by (used in)
    operating activities                               1,027,445     (1,230,717)
                                                     -----------    -----------

Cash flows from investing activities:
  Additions to plant and equipment, net                 (149,171)      (242,515)
  Additions to intangibles                                  (880)       (61,517)
                                                     -----------    -----------

  Net cash used in investing activities                 (150,051)      (304,032)
                                                     -----------    -----------

Cash flows from financing activities:
  Increase (decrease) in short-term debt                (567,718)     1,189,677
  Payments of long-term debt                             (29,892)       (36,613)
                                                     -----------    -----------

  Net cash provided by financing activities             (597,610)     1,153,064
                                                     -----------    -----------

Effect of exchange rate changes on cash                  (46,967)        19,768
                                                     -----------    -----------

Net increase (decrease) in cash and
  cash equivalents                                       232,817       (361,917)
Cash and cash equivalents at beginning of year           324,298        686,215
                                                     -----------    -----------

Cash and cash equivalents at end of year             $   557,115    $   324,298
                                                     ===========    ===========

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

                                                                              33


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           December 31, 1997 and 1996

(1A) Background and Nature of Business

            IL International Inc. (the "Company") was incorporated in June 1991
in connection with the Amended Plan of Reorganization (the "Plan") of Chartwell
Group Ltd. ("Chartwell") and CGL Finance, Inc., a wholly-owned subsidiary of
Chartwell (together with Chartwell, the "Debtors"), which filed a voluntary
petition for reorganization pursuant to Chapter 11 of the United States
Bankruptcy Code in April 1991. The Effective Date of the Plan was November 27,
1991. In October 1992, the Court issued a Final Decree approving the closure of
the estates of the Debtors.

            On the Effective Date, ownership of certain assets and properties of
Chartwell, including the stock of Italiana Luce S.r.l., an Italian corporation
("Italiana Luce"), and its wholly-owned subsidiary, IL USA, Inc. (at that time
named PAF USA, Inc.) ("IL USA"), vested in the Company free and clear of all
liens, claims and encumbrances.

            The Company's business, transacted through its operating
subsidiaries, is the design, marketing and worldwide distribution of
contemporary lamps and lighting products.

            As more fully described in Note 21, on March 5, 1998, the Company
signed a conditional agreement to sell substantially all of its assets to Nemo
S.r.l., an Italian corporation ("Nemo").

(1B) Basis of Presentation

            The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, during the years ended
December 31, 1997 and 1996, the Company experienced declining sales and
decreasing margins which resulted in operating losses of $513,849 and $714,415,
respectively.

            In early 1997, management implemented a plan it had developed in the
prior year to revise its operating and
<PAGE>

                                                                              34


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

financial requirements. Actions taken included termination of one-third of the
Company's workforce in Italy; reduced compensation for the Company's officers
and directors; elimination of approximately 13,000 square feet of warehouse
space in Italy; and close out of many of the Company's slower selling products.
Despite these significant steps which it is estimated resulted in annual savings
of approximately $500,000, the Company reported another loss in 1997.

            In view of the matters described above, recoverability of a major
portion of the recorded asset amounts shown in the accompanying balance sheet is
dependent upon continued operations of the Company, which in turn is dependent
upon the Company's ability to meet its financing requirements on a continuing
basis, to maintain present financing, and to succeed in its future operations.
Except for the write-down of fixed assets (see Note 5), the financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.

(2)  Summary of Significant Accounting Policies

      (a) Fresh Start Accounting

            The Company has implemented the accounting for entities emerging
from Chapter 11 and reorganization as set forth in Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code"
issued by the American Institute of Certified Public Accountants ("Fresh Start
Accounting").

      (b) Principles of Consolidation

            The consolidated financial statements include the accounts of IL
International Inc. and its subsidiaries, all of which are wholly-owned. All
significant intercompany balances and transactions have been eliminated in
consolidation.

      (c) Using Estimates in Financial Statements

            In preparing financial statements in conformity
<PAGE>

                                                                              35


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

with generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from these estimates.

      (d) Fair Value of Financial Instruments

            Statement of Financial Accounting Standards No. 107, "Fair Value of
Financial Instruments," requires disclosure of the estimated fair value of an
entity's financial instrument assets and liabilities. For the Company, financial
instruments consist principally of cash and cash equivalents and short-term
debt.

            The following methods and assumptions were used to estimate the fair
value of each class of financial instrument for which it is practicable to
estimate that value:

      Cash and cash equivalents:

            The carrying amount reasonably approximates fair value because of
      the short maturity of those instruments.

      Short-term debt:

            The carrying amount reasonably approximates fair value because of
      the short maturity of those instruments.

      (e) Cash and Cash Equivalents

            Cash and cash equivalents include cash on hand and amounts due from
banks. Short-term investments which have a maturity of three months or less are
considered cash equivalents.

      (f) Impairment

            In 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). Accordingly, when
<PAGE>

                                                                              36


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

indicators of impairment are present, the Company periodically evaluates the
carrying value of property, plant and equipment and intangibles in relation to
the operating performance and future undiscounted cash flows of the underlying
business. The Company adjusts the carrying amounts of the respective assets if
the expected future cash flows are less than the book value. In accordance with
SFAS 121, the Company wrote down the value of its fixed assets in 1997 (see Note
5).

      (g) Accounting for Stock-Based Compensation Plans

            In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") which defines the fair value based method of
accounting for an employee stock option. Under the fair value based method,
compensation cost is measured at the grant date based on the fair value of the
award and is recognized over the service period. A company may elect to adopt
the fair value method or elect to continue accounting for its stock option or
similar equity awards using the intrinsic method, where compensation cost is
measured at the date of grant based on the excess of the market value of the
underlying stock over the exercise price. If a company elects not to adopt the
fair value method, it must provide a pro forma disclosure of net income and
earnings per share, as if the fair value based method had been applied.

            SFAS 123 is effective for transactions entered into for fiscal years
that begin after December 15, 1995. Pro forma disclosures for entities that
elect to continue to measure compensation cost under the old method must include
the effects of all awards granted in fiscal years that begin after December 15,
1994. At present, the Company does not have any stock-based compensation plans.
However, it is currently anticipated that the Company will account for any
stock-based compensation plan it introduces in the future under the intrinsic
method and will make the appropriate pro forma disclosures. Therefore, SFAS 123
is not expected to have any effect on the Company's consolidated financial
statements.

      (h) Inventories

            Inventories are stated at the lower of cost or
<PAGE>

                                                                              37


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

market (net realizable value) using the first-in, first-out ("FIFO") method.

      (i) Plant and Equipment

            In accordance with Fresh Start Accounting, plant and equipment were
restated at approximate fair value as of November 30, 1991 (see Note 3).
Commencing December 1, 1991, depreciation and amortization of all newly acquired
plant and equipment as well as the plant and equipment stated at approximate
fair value have been provided by the straight-line method using the following
estimated useful lives:

      Leasehold improvements                      5 years
      Machinery and equipment               3 to 10 years
      Furniture and fixtures                3 to 10 years

      (j) Intangible Assets

            The unamortized balances of all intangible assets were written off
as of November 30, 1991. Intangible assets capitalized subsequent to November
30, 1991 are being amortized on a straight-line basis over five years.

      (k) Income Taxes

            The provision for income taxes is computed on the basis of financial
statement income. Deferred taxes result from temporary differences between the
amounts reported for financial statement and income tax purposes. These
temporary differences give rise to deferred tax assets. In view of the
uncertainty as to whether the Company would produce sufficient taxable income in
the future to utilize the benefits related to deferred tax assets available at
the time of reorganization, the Company did not record those deferred tax assets
in the consolidated financial statements. Instead, all such tax benefits are
reported as additions to paid-in capital when realized.

      (l) Foreign Currency Translation

            The financial statements of the foreign subsidiary of the Company
have been translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation." All balance sheet
accounts have been translated using the current exchange
<PAGE>

                                                                              38


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

rate at the balance sheet date. Income statement amounts have been translated
using the average exchange rate for the year. The gains and losses resulting
from the change in exchange rates from year to year have been reported
separately as a component of stockholders' equity. Foreign currency transaction
gains and losses are included in determining net income. Their effect on the
statement of operations is insignificant.

      (m) Loss Per Common Share

            Loss per common share is based on 76,821,384 shares of common stock,
being the sum of the 79,375,497 shares of common stock issued under the Plan
less 2,554,113 shares of common stock held in treasury and has been computed in
accordance with Statement of Financial Accounting Standards No 128, "Earnings
Per Share." Basic loss per share is computed using the weighted average common
shares outstanding during the period. Diluted loss per share is computed using
the weighted average common shares and common equivalent shares outstanding
during the period. The Company does not have any common equivalent shares
outstanding.

      (n) Information about Capital Structure

            In February 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 129 (SFAS 129), "Disclosure of Information
about Capital Structure," is effective for financial statements issued for
fiscal years ending after December 15, 1997. As the purpose of SFAS 129 was
primarily to consolidate certain disclosure requirements previously contained in
other pronouncements with which the Company was already in compliance, the
adoption of this statement had no effect on the Company's consolidated financial
statements.

(3) Fresh Start Accounting

            In 1991, the Company adopted Fresh Start Accounting in accordance
with Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code." Under this method, all assets and
liabilities were restated to reflect the emergence equity value of the
reorganized entity, which was determined to be $2,000,000.
<PAGE>

                                                                              39


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

            In accordance with the provisions of Statement of Position 90-7, the
excess of the carrying value of the assets of the Company immediately prior to
its reorganization over the emergence equity value of the entity was utilized to
reduce the carrying values of the non-current assets as of the Effective Date by
$1,106,220. Consequently, depreciation and amortization charges in the income
statement in subsequent years, principally 1992 through 1996, were less than
they would otherwise have been by a cumulative amount equal to the amount of the
write-down (as adjusted for exchange rate changes).

(4) Restructuring Charges

            During 1996, the Company recorded restructuring charges of $165,000.
These charges related to the downsizing of the Italian operations in reaction to
persistent weak demand in Europe for the Company's products. The charges
consisted of $132,000 for severance and related costs and the balance
principally for lease termination expenses. All employee severances occurred in
February 1997 and the lease termination was effective March 31, 1997.

(5) Write-Down of Assets

            In accordance with SFAS 121 and in connection with the proposed sale
of substantially all of its assets, the Company wrote down the value of its
fixed assets and intangibles by $380,000 in 1997 to reflect the estimated net
proceeds from the liquidation of the fixed assets not being acquired by Nemo
(see Notes 1(B) and 21), as follows:

                                                  Plant and
                                                  Equipment          Intangibles
                                                  ---------          -----------

Net book value prior
    to write-down                                 $ 556,525          $   5,522
Write-down                                         (374,478)            (5,522)
                                                  ---------          ---------

                                                  $ 182,047          $      --
                                                  =========          =========
<PAGE>

                                                                              40


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

            The carrying amount of the fixed assets at December 31, 1997
represents fair value less cost to sell.

            The carrying value of assets to be sold to Nemo and assets to be
sold under the liquidation plan at December 31, 1997 are:

                                                                 Cash and cash
                                                                equivalents and
                                                 Assets to        assets to be
                                                  be sold          sold under
                                                  to Nemo       Liquidation Plan
                                                 ---------      ----------------

Total assets
 at December 31, 1997
  at historical value                           $ 1,926,329       $ 3,124,386
Write-down                                               --          (380,000)
                                                -----------       -----------

Total assets
 at December 31, 1997
  at carrying value                             $ 1,926,329       $ 2,744,386
                                                ===========       ===========

            Included in "Cash and cash equivalents and assets to be sold under
Liquidation Plan" at December 31, 1997 are cash and cash equivalents of
$557,115.

(6) Inventories

            Inventories consist of the following:

                                                         December 31,
                                                   1997              1996
                                                 ----------       ----------

Raw materials                                    $  733,775       $1,076,372
Work-in-progress                                    233,782          456,212
Finished goods                                      834,260          955,422
                                                 ----------       ----------

                                                 $1,801,817       $2,488,006
                                                 ==========       ==========

            Work-in-progress represents partially completed inventories acquired
from third parties.
<PAGE>

                                                                              41


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

(7) Other Current Assets

            Other current assets consist of the following:

                                                              December 31,
                                                         1997             1996
                                                       --------         --------
Advances                                               $ 96,834         $156,226
Credit notes receivable                                  33,285            1,307
Prepaid rent                                             28,641            2,347
Catalogs                                                 28,423           79,857
Tax refunds                                              27,414           40,073
Miscellaneous prepaid expenses                           13,158           13,588
Product development costs                                 6,640           18,672
Interest receivable                                         512           27,495
Other                                                     3,953           29,228
                                                       --------         --------

                                                       $238,860         $368,793
                                                       ========         ========

(8) Plant and Equipment

            Plant and equipment consist of the following:

                                                           December 31,
                                                     1997               1996
                                                 -----------        -----------

Leasehold improvements                           $    39,470        $    42,204
Machinery and equipment                            1,773,785          1,889,472
Furniture and fixtures                                12,229             14,103
                                                 -----------        -----------

                                                   1,825,484          1,945,779
Less accumulated depreciation
  and amortization                                (1,643,437)        (1,170,250)
                                                 -----------        -----------

                                                 $   182,047        $   775,529
                                                 ===========        ===========

            Amortization of capitalized leases amounted to $28,354 in 1997 and
$39,077 in 1996.

            All fixed assets acquired prior to December 1, 1991 have been
recorded at their approximate fair value in accordance with Fresh Start
Accounting (see Note 3).
<PAGE>

                                                                              42


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

(10) Short-term Debt

            Loan arrangements have been established with certain Italian banks
under which the Company's foreign subsidiary may borrow on an overdraft and
short-term basis. These unsecured lines of credit may be terminated at the
option of the banks or the Company. At December 31, 1997, the amount available
under these arrangements aggregated Lit. 7,450,000,000 ($4,214,000 when
converted at the December 31, 1997 exchange rate), of which Lit. 1,628,259,000
($920,961) was outstanding, bearing a weighted average interest rate of 8.5%. At
December 31, 1996, Lit. 2,587,209,000 ($1,704,354 when converted at the December
31, 1996 exchange rate) was outstanding, bearing a weighted average interest
rate of 10.9%.

(9) Other Accrued Liabilities

            Other accrued liabilities consist of the following:

                                                             December 31,
                                                        1997              1996
                                                     ----------       ----------

Salaries, benefits and
  payroll taxes                                      $  169,864       $  253,807
Reorganization liabilities
  (see Note 17)                                         311,711          287,218
Restructuring charge (see Note 4)                            --          165,000
Sales commissions                                       121,336          135,385
Product warranty reserves                               104,842          122,314
Professional fees                                       109,450          117,282
Royalties                                                52,671          102,366
Other                                                   129,339          188,302
                                                     ----------       ----------

                                                     $  999,213       $1,371,674
                                                     ==========       ==========
<PAGE>

                                                                              43


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

(11) Long-term Debt

            Long-term debt consists of the following:

                                                            December 31,
                                                        1997             1996
                                                      --------         --------

Capitalized leases (see Note 14)                      $ 25,848         $ 65,746
Less current installments                              (16,255)         (35,642)
                                                      --------         --------

                                                      $  9,593         $ 30,104
                                                      ========         ========

            As of December 31, 1997, long-term debt, including current
installments, matures as follows:

            1998                                                       $ 16,256
            1999                                                          7,817
            2000                                                          1,775
                                                                       --------

                                                                       $ 25,848
                                                                       ========

            Cash paid for interest was $98,378 in 1997 and $104,313 in 1996.

(12) Income Taxes

            The Company and its domestic subsidiaries file a consolidated
Federal income tax return. Income tax expense is computed on the basis of
financial statement loss before income taxes as follows:

                                                Years Ended December 31,
                                                  1997             1996
                                               ---------        ---------

Domestic                                       $  63,050        $  30,917
Foreign                                         (665,703)        (838,828)
                                               ---------        ---------

                                               $(602,653)       $(807,911)
                                               =========        =========
<PAGE>

                                                                              44


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

            The income tax provision consists of:

                                                      Years Ended December 31,
                                                       1997               1996
                                                     --------           --------

Current tax expense
   Federal                                           $ 18,696           $     --
   State                                                2,833              3,276
   Foreign                                              9,127            318,438
                                                     --------           --------

                                                     $ 30,656           $321,714
                                                     ========           ========

            Deferred tax assets are comprised of the following:

                                                          December 31,
                                                     1997               1996
                                                 -----------        -----------

Operating loss carryforwards
  Pre-reorganization                             $   763,635        $   635,835
  Post-reorganization                                582,366            428,298
Write-down of fixed assets                           202,160                 --
Bad debt allowances                                  139,367            146,443
Product warranty reserves                             54,043             51,720
Inventory reserves                                    55,609             43,889
Other                                                 12,916             54,518
                                                 -----------        -----------

     Gross deferred tax assets                     1,810,096          1,360,703
     Valuation allowance                          (1,810,096)        (1,360,703)
                                                 -----------        -----------

                                                 $        --        $        --
                                                 ===========        ===========

            Cash paid for income taxes was $5,050 in 1997 and $5,638 in 1996.

            In view of the uncertainty as to whether it will generate sufficient
taxable income to utilize its deferred tax assets, the Company has set up an
allowance equal to 100% of such deferred tax assets, inclusive of its net
operating loss carryforwards.

            The provision for income taxes differs from the amount of income tax
determined by applying the statutory Federal income tax rate of 34.0% to profit
before income taxes as a result of the following differences:
<PAGE>

                                                                              45


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


                                                      Years Ended December 31,
                                                        1997             1996
                                                     ---------        ---------

Computed expected tax provision                      $(204,902)       $(274,689)
Foreign earnings at
  different rates                                     (127,815)        (156,836)
Permanent tax differences
  in Italy                                              61,664          188,723
Valuation allowance in Italy                           292,490          571,140
Foreign withholding taxes                                9,127           13,695
Other items                                                 92          (20,319)
                                                     ---------        ---------

                                                     $  30,656        $ 321,714
                                                     =========        =========

(13) Pre-Reorganization Tax Benefits

            The Company has available to it certain tax benefits which arose
prior to the Effective Date. In view of the uncertainty as to whether the
Company would ever produce sufficient taxable income to utilize such benefits,
these tax assets were never recorded in the consolidated financial statements as
of the Effective Date. Instead, the Company determined that it would report any
benefits derived from such tax assets as additions to paid-in capital as they
were realized.

            As of the Effective Date, the Company acquired from Chartwell
$2,000,000 in net operating loss carryforwards which expire in 2006. These net
operating loss carryforwards may be used to offset taxable income in the United
States and are subject to a cumulative annual limitation of $127,800. At
December 31, 1997, $763,635 were available for immediate use.

            For the years ended December 31, 1997 and 1996, $18,696 and $0,
respectively, arising from the utilization of unrecorded tax assets have been
reported as direct additions to paid-in capital. Additional paid-in capital was
also credited in 1997 and 1996 with $0 and $844, respectively, in respect of the
reversal of tax liabilities set up on the Effective Date which were no longer
required.

            As of December 31, 1997, pre-reorganization tax assets remaining
unrecorded and potentially available to reduce future tax liabilities amounted
to approximately
<PAGE>

                                                                              46


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

$1,901,000, of which $1,787,000 related to tax loss carryforwards ($1,221,000 in
the United States with an expiration date of 2006 and $566,000 in Italy with
expiration dates between 1998 and 2002).

(14) Severance Indemnities

            Other long-term liabilities consist of the Company's obligations to
its employees and sales representatives in Italy and to its agents in other
European countries, payable upon the termination of their employment or agency
relationship, as applicable. The amounts payable are calculated in accordance
with existing legal requirements, national labor contracts and individual
agreements. These liabilities are fully provided for and have been charged to
consolidated income in the period in which the liabilities vest.

(15) Leases

            As of December 31, 1997, the Company leased certain property, plant
and equipment under both capital and operating lease arrangements. Some of the
operating leases provide that the Company pay taxes, maintenance, insuranceand
other expenses applicable to leased premises and are subject to escalation.

            Future minimum lease payments for leases as of December 31, 1997
were as follows:
<PAGE>

                                                                              47


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

Year ending                                            Capital         Operating
December 31,                                           Leases            Leases
------------                                           ------            ------

   1998                                               $ 18,823          $171,653
   1999                                                  8,769            98,416
   2000                                                  1,775            98,416
   2001                                                     --            98,416
   2002 and thereafter                                      --           196,833
                                                      --------          --------

Total minimum lease payments                            29,367          $663,734
                                                                        ========

Less amounts representing
  interest at an effective
  annual rate of 9.50%                                  (3,519)
                                                      --------

Present value of minimum
  lease payments                                      $ 25,848
                                                      ========

            Rent expense was $198,305 in 1997 and $276,233 in 1996.

(16) Foreign and Domestic Operations

                                                       Years Ended December 31,
                                                        1997             1996
                                                     ----------       ----------

Net sales by geographic area:
  United States                                      $2,461,780       $2,336,466
  Italy                                               2,513,690        3,389,958
  Germany                                             1,198,460        1,560,432
  France                                                419,998          571,331
  Other European countries                            1,058,073        1,257,936
  Rest of the world                                     578,729          619,371
                                                     ----------       ----------

                                                     $8,230,730       $9,735,494
                                                     ==========       ==========

Net sales to unaffiliated customers:
  United States (a)                                  $2,509,174       $2,381,598
  Italy                                               2,513,690        3,389,958
  Germany                                             1,198,460        1,560,432
  Other countries                                     2,009,406        2,403,506
                                                     ----------       ----------

                                                     $8,230,730       $9,735,494
                                                     ==========       ==========
<PAGE>

                                                                              48


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

                                                      Years Ended December 31,
                                                        1997           1996
                                                     -----------    -----------

Net sales between geographic areas (b):
  Italy                                              $   807,543    $   877,620
                                                     ===========    ===========

Operating profits/(losses):
  United States                                      $   187,942    $    27,562
  Italy                                                 (701,791)      (741,977)
                                                     -----------    -----------

                                                     $  (513,849)   $  (714,415)
                                                     ===========    ===========

                                                            December 31,
                                                         1997           1996
                                                     -----------    -----------

Identifiable assets:
  United States                                      $ 1,063,640    $ 1,078,840
  Italy                                                3,970,123      5,654,301
                                                     -----------    -----------

                                                     $ 5,033,763    $ 6,733,141
                                                     ===========    ===========

----------
(a)   Includes export sales of $47,394 and $45,132 during the years ended
      December 31, 1997 and 1996, respectively.
(b)   Net sales between geographic areas refers to products sold by Italiana
      Luce to IL USA. These sales have been eliminated in consolidation.

(17) Contingency

            Certain potential liabilities (pre-reorganization claims) of
Chartwell, principally foreign national and domestic state income taxes, are
still under negotiation and are the responsibility of the Company. At December
31, 1997, the Company has received cash of $311,711, net of expenses, relating
to the liquidation of certain pre-reorganization assets of Chartwell which
vested in the Company on the Effective Date (see Note 1) and is included in
Other Accrued Liabilities (see Note 10). In addition, the former owners of
Italiana Luce have paid into escrow Lit. 125,693,000 ($71,093 when converted at
the December 31, 1997 exchange rate) in respect of the potential foreign
national income tax liabilities. The Company's management believes that the net
<PAGE>

                                                                              49


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

cash received from the liquidation of Chartwell's assets together with the
amount in escrow will be sufficient to pay any agreed assessments in respect of
the pre-reorganization claims. Any amounts remaining after settlement of all
claims will be reported as a direct addition to paid-in capital.

(18) Related Party Transactions

            For the years ended December 31, 1997 and 1996, the Company paid
$25,800 and $135,049, respectively, plus out-of-pocket expenses, for consulting
services to a consulting firm of which a director and officer of the Company is
a director.

            For the year ended December 31, 1997, the Company paid $15,915 for
composition and related services to a desk-top publishing company affiliated
with a director of the Company.

(19) 1996 Fourth Quarter Adjustment

            During the fourth quarter of 1996, the Company increased the
valuation allowance for its deferred tax assets by $571,140, consisting of
$262,193 which had been deferred in the current year and $308,947 which had been
deferred in prior years.

(20) Recent Accounting Pronouncements

            In July 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income," which requires a separate financial statement showing changes in
comprehensive income. SFAS 130 is effective for financial statements issued for
fiscal years beginning after December 15, 1997 and requires reclassification of
all prior-period financial statements for comparative purposes. The Company is
evaluating alternative formats for presenting this information, but does not
expect this pronouncement will materially impact the Company's results of
operations.

            In July 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 131,
<PAGE>

                                                                              50


                     IL INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

(SFAS 131), "Disclosures about Segments of an Enterprise and Related
Information," which requires companies to report certain information about
operating segments, including certain information about their products,
services, the geographic areas in which they operate and their major customers.
This statement supersedes FASB Statements Nos. 14, 18, 24 and 30. SFAS 131 is
effective for financial statements for fiscal years beginning after December 31,
1997. The Company is evaluating the requirements of SFAS 131 and the effects, if
any, on the Company's current reporting and disclosures.

(21) Subsequent Event

            On March 5, 1998, the Company entered into an Asset Purchase
Agreement ("Agreement") with Nemo S.r.l. ("Nemo"), an Italian corporation,
providing for the sale of substantially all of the Company's assets and
business. Consummation of the Agreement is conditional upon, among other things,
clearance by the Securities and Exchange Commission and completion of certain
legal formalities in Italy relating to personnel matters.

            Nemo has agreed to acquire the goodwill and operations, certain
inventory and fixed assets of the Company for an aggregate estimated purchase
price of $4,570,000 (when the estimated proceeds receivable in lire are
converted at an exchange rate of Lit. 1,800). The Company intends to collect its
receivables outstanding at the date of closing and to liquidate the inventory
and fixed assets which Nemo has elected not to purchase and expects the gross
proceeds therefrom will approximate $2,000,000. The Company estimates that it
will have to pay approximately $3,400,000 in respect of its liabilities
outstanding at the date of closing, severance pay, taxes and expenses associated
with the sale and with winding up the affairs of the Company. The ultimate
amount of proceeds to be received and liabilities incurred relating to the sale
and liquidation of the Company may be significantly different from the amounts
stated above. However, management believes that the Company will not incur a
loss on such sale and liquidation.
<PAGE>

                                                                              51


                               Index to Exhibits*

                                                                            Page
                                                                            ----

2.1      Amended Plan of Reorganization of Chartwell                         --
         Group Ltd. and CGL Finance, Inc. dated
         August 16, 1991 (the "Amended Plan of
         Reorganization") (incorporated by reference
         to Exhibit 2.1 to Chartwell's Current
         Report on Form 8-K dated November 6, 1991)

2.2      Order confirming Amended Plan of                                    --
         Reorganization dated November 6, 1991
         (incorporated by reference to Exhibit 2.2
         to Chartwell's Current Report on Form 8-K
         dated November 6, 1991)

2.3      Notice of Entry of Order Confirming Amended                         --
         Plan of Reorganization, and Discharge,
         dated November 6, 1991 (incorporated by
         reference to Exhibit 2.3 to Chartwell's
         Current Report on Form 8-K dated November 6,
         1991)

3.1      Certificate of Incorporation of the Company                         --
         as amended to date (incorporated by reference
         to Exhibit 3.1 to the Company's Current
         Report on Form 8-K dated November 27, 1991)

3.2      By-Laws of the Company, as amended to date                          --
         (incorporated by reference to Exhibit 3.2
         to the Company's Current Report on Form 8-K
         dated November 27, 1991)


----------
*     Copies of the exhibits filed with this Annual Report on Form 10-KSB or
      incorporated by reference herein do not accompany copies hereof for
      distribution to stockholders of the Company. The Company will furnish a
      copy of any of such exhibits to any stockholder requesting the same for a
      nominal charge to cover duplicating costs.
<PAGE>

                                                                              52


                                                                            Page
                                                                            ----

21       Subsidiaries of the Registrant                                      53

24       Power of Attorney (see "Power of Attorney"                          --
         in Form 10-KSB)