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

                            ----------------------
                                Form 10-K/A
(Mark One)
[ x ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
        THE SECURITIES EXCHANGE ACT OF 1934.

                 For the fiscal year ended December 31, 1998

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

                 For the transition period from         to
                                                -------    -----
                        Commission File Number 0-27712

                   INTEGRATED PACKAGING ASSEMBLY CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

Delaware                                            77-03090372
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                      Identification Number)

2221 Old Oakland Road                               95131-1402
San Jose, California                                (Zip Code)
(Address of principal executive office)

      Registrant's telephone number including area code: (408) 321-3600
     Securities registered pursuant to Section 12(g) of the Exchange Act:
                        Common Stock, .001 par value

     Indicate by check mark whether the registrant:  (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12  months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.  YES [ x ] NO [   ]

     Indicate by check mark if disclosure of delinquent filers in response to 
Item 405 of Regulation S-K is not contained herein, and will not be contained, 
to the best of registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K. [   ]

     The aggregate market value of the voting stock held by persons other than 
those who may be deemed affiliates of the Company as of March 5, 1999, was 
approximately $1,164,000.  Shares of Common Stock held by each executive 
officer and director and by each person who owns 5% or more of the outstanding 
Common Stock have been excluded in that such persons may under certain 
circumstances be deemed to be affiliates.  This determination of executive 
officer or affiliate status is not necessarily a conclusive determination for 
other purposes.

     The number of shares of the Registrant's Common Stock outstanding as of 
March 5, 1999 was 14,142,642.

                     AMENDED FILING OF FORM 10-K
              TO INCLUDE CERTAIN ADDITIONAL INFORMATION

	This amendment is being filed for the sole purpose of including certain 
additional information required by Part III of this Form 10-K.  All other 
information in the originally filed Form 10-K was presented as of the March 
10, 1999 filing date, or earlier as indicated, and has not been updated in
this amended filing.

                                     Page 1

<PAGE>



                             TABLE OF CONTENTS

                                                                       Page
                                                                       ----
Part I

    Item 1.   Business................................................   3
    Item 2.   Properties..............................................  11
    Item 3.   Legal Proceedings.......................................  11
    Item 4.   Submission of Matters to a Vote of Security Holders.....  12

Part II

    Item 5.   Market for Registrant's Common Equity and Related
              Stockholder Matters.....................................  13
    Item 6.   Selected Financial Data.................................  14
    Item 7.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations.....................  15
    Item 7a.  Quantitative and Qualitative Disclosures About Market
              Risk....................................................  23
    Item 8.   Financial Statements and Supplemental Data..............  24
    Item 9.   Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure.....................  48

Part III

    Item 10.  Directors and Executive Officers of the Registrant......  49
    Item 11.  Executive Compensation..................................  50
    Item 12.  Security Ownership of Certain Beneficial Owners and
              Management..............................................  56
    Item 13.  Certain Relationships and Related Transactions..........  57

Part IV

    Item 14.  Exhibits, Financial Statement Schedules and Reports
              on Form 8-K.............................................  58

SIGNATURES............................................................  60


                                     Page 2

<PAGE>

                                     PART I
                                     ------  

     This Report on Form 10-K contains forward-looking statements within the 
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the 
Securities Exchange Act of 1934.  Actual results could differ materially from 
those projected in the forward-looking statements as a result of the risk 
related factors set forth herein.

Item 1.  Business
-----------------  

     Integrated Packaging Assembly Corporation ("IPAC") is a leading
independent North American semiconductor packaging foundry.  The Company
receives wafers from its customers and assembles each integrated circuit in a
protective plastic package.  The Company's packaging facilities are located in
San Jose, California in close proximity to its customers and the end-users of
its customers' products.  Due to intense competitive pressures in the
electronics industry, semiconductor companies are faced with increasingly
shorter product life cycles and therefore have a need to reduce the time it 
takes to bring a product to market.  The Company believes that its close
proximity to its customers promotes quicker turnaround design, prototype
production and final product delivery to its North American customers, compared
to its principal competitors which are primarily located in Asia.

Manufacturing

Semiconductor Packaging Services

     The Company has focused on packages designed for assembly using Surface 
Mount Technology ("SMT") in which leads on integrated circuits are soldered to 
the surface of the printed circuit board.  Within the SMT market, the Company 
focuses on high pin-count packages, such as Quad Flat Packages ("QFPs") and 
Thin Quad Flat Packages (TQFPs").  The Company offers twelve different QFP and 
TQFP families with body sizes ranging from 7x7 mm to 32x32 mm, and with the 
number of leads available in certain package families ranging from 44 to 376 
leads.  Integrated circuits packaged by the Company are used in the following 
applications: personal computers, modems, disk drives, automobiles, cameras 
and telecommunications, among others.  The Company also offers a limited 
number of packages for emerging packaging technologies, such as Ball Grid 
Array ("BGA") packages.  Since inception, QFPs and TQFPs have accounted for 
substantially all of the Company's packaging revenues.

     Packaging involves several manufacturing operations, which are highly 
automated to facilitate high volume production.  The assembly process begins 
with the mounting of a finished, tested wafer onto a carrier.  After a dicing 
saw cuts the wafer into individual die, the cut wafer is moved to a die bonder 
which picks each good die off the wafer and bonds it to a lead frame with 
epoxy resin.  A lead frame is a miniature sheet of metal, generally made of 
copper with selective silver plating on which the pattern of input/output 
(I/0) leads has been cut.  Next, very fine (typically 0.001 inches in 
diameter) gold wires are connected to the die and the leads through the use of 
automated machines known as wire bonders.  These wire leads provide the 
electrical path necessary for the device to function.  Each die is then 
encapsulated in a plastic casing and marked.  The leads protruding from the 
finished casing are then plated with a tin and lead composition to permit the 
leads to be connected to the printed circuit board.  At the end of the 
packaging process, the leads are trimmed and formed into requisite shapes.  
After this packaging process is complete, the devices undergo final inspection 
and are prepared for shipment.

     The Company has expended substantial resources to significantly expand its
production capacity since inception.  The Company shipped approximately 1.6
million devices in 1994, approximately 10.5 million devices in 1995,
approximately 18.1 million devices in 1996, approximately 11.9 million devices
in 1997 and approximately 19.8 million devices in 1998. Since the fourth
quarter of 1996, the Company has had available manufacturing capacity.  The
Company's manufacturing capacity utilization is a function of the mix of
different package types produced by the Company at any one time and the
proportion of standard production runs compared to expedited production runs.
Thus, as the Company shifts its production among different package

                                Page 3

<PAGE>


types or allocates a different amount of available capacity to 
standard production runs, the rate of the Company's capacity utilization 
changes, at times significantly.

     The Company has made substantial investments in expanding its
manufacturing capacity during its operating history, in anticipation of
increased future business.  Since early 1997, the Company has incurred net
losses as revenues dropped substantially, while overhead and fixed costs
increased, with the result that there was substantial underutilized
manufacturing capacity.  The Company continues to operate with significant
underutilized capacity.  There can be no assurance that the Company will
receive orders from new or existing customers that will enable it to utilize
such manufacturing capacity in a timely manner.

     The Company's inability to generate the additional revenues necessary to 
more fully utilize its capacity has had and will continue to have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

     The Company believes that its competitive position depends on its ability 
to have sufficient capacity to meet anticipated customer demand.  Accordingly, 
although the Company currently has available manufacturing capacity, the 
Company will continue to selectively invest to expand such capacity, 
particularly through the acquisition of capital equipment, including equipment 
for new packages (e.g. BGA and CSP).  There can be no assurance that the 
Company will be able to utilize such capacity, that the cost of such expansion 
will not exceed management's current estimates or that such capacity will not 
exceed the demand for the Company's services.  In addition, expansion of the 
Company's manufacturing capacity will continue to significantly increase its 
fixed costs, and the future profitability of the Company will depend on its 
ability to utilize its manufacturing capacity in an effective manner.  The 
Company's inability to generate the additional production volume necessary to 
fully utilize its capacity had a material adverse effect on its business, 
financial and results of operation during 1997 and 1998 and would continue to 
have a material adverse effect on the Company's future business, financial 
condition and results of operations.

     The semiconductor packaging business is capital intensive and requires a 
substantial amount of highly automated, expensive capital equipment which is 
manufactured by a limited number of suppliers, many of which are located in 
Asia or Europe.  The Company's operations are significantly dependent upon the 
Company's ability to obtain capital equipment for its manufacturing operations 
in a timely manner.  In this regard, the Company spent $4.6 million, including 
$3.1 million under a capital lease, in 1998 and expects to spend up to $3.0 
million to purchase capital equipment in 1999.  The Company currently 
purchases capital equipment from a limited group of suppliers including Dai-
Ichi Seiko Co., Ltd., ESEC SA and Kaijo Corporation.  The Company has no long 
term agreement with any such supplier and acquires such equipment on a 
purchase order basis.  The market for capital equipment used in semiconductor 
packaging has at times been characterized by intense demand, limited supply 
and long delivery cycles.  The Company's dependence on such equipment 
suppliers poses substantial risks.  Should any of the Company's major 
suppliers be unable or unwilling to provide the Company with high quality 
capital equipment in amounts necessary to meet the Company's requirements, the 
Company would experience severe difficulty locating alternative suppliers in a 
timely fashion and its operations could be materially adversely affected.  In 
this regard, in the second half of 1996, the Company experienced problems with 
the performance of certain capital equipment which resulted in manufacturing 
inefficiencies.  These equipment problems had a material adverse effect on the 
Company's financial results in the fourth quarter of 1996.  Any further 
problems with such capital equipment or any prolonged delay in equipment 
shipments by key suppliers or an inability to locate alternative equipment 
suppliers could have a material adverse effect on the Company's business, 
financial condition and results of operations and could result in damage to 
customer relationships.  Moreover, increased levels of demand in the capital
equipment market may cause an increase in the price of equipment, further
lengthen delivery cycles and limit the ability of suppliers to adequately
service equipment following delivery, any of which could have an adverse
effect on the Company's business, financial condition or results of 
operations.  In addition, adverse fluctuations in foreign currency exchange
rates, particularly the Japanese yen, could result in increased prices for 
capital equipment purchased by the Company, which could have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

                                     Page 4

<PAGE>

     The Company currently outsources some of its electroplating of the copper 
leads protruding from the plastic moldings with a tin and lead composition 
from International Lead Frame Corporation, a subsidiary of Mitsui High-Tec, 
Inc., and Hytek Finishes, Inc.  The Company has no long term agreement with 
either supplier and such services are provided on a purchase order basis.  
From time to time, the Company's plating subcontractors have experienced 
significant manufacturing problems. There can be no assurance that the 
Company's subcontractors will not experience manufacturing problems in the 
future or that such problems will not result in increased costs or production 
delays which could have a material adverse effect on the Company's business, 
financial condition and results of operations.  In 1998, the Company installed 
an advanced electroplating system at a leased facility in Milpitas, 
California, approximately 2 miles from the Company's main facility.  The 
Company currently plates approximately 70% of its devices at this facility.

Quality Control

     The Company believes that total quality management is a vital component of
customer satisfaction and internal productivity.  The Company has established
quality control systems, which are designed to maintain acceptable
manufacturing yields at high volume production.  The Company has also
developed a sophisticated proprietary software program for material resource
planning, shop floor control, work in process tracking, statistical process
control and product costing.  The Company obtained certification for its
packaging operations pursuant to ISO 9002 in December 1996.

     As of December 31, 1998, the Company's quality control staff consisted of 
10 engineers, technicians and other employees who monitor the Company's design 
and production processes in order to ensure high quality.  These employees 
include line inspectors who work with members of the production staff to 
conduct examination, testing and fine-tuning of products during the production 
process.  Quality control personnel are involved from initial design to 
production.  The quality control staff also collects and analyzes data from 
various stages of the production process which is used by the Company for 
statistical process control.

     The semiconductor packaging process is complex and product quality and 
reliability is subject to a wide variety of factors.  Defective packaging can 
result from a number of factors, including the level of contaminants in the 
manufacturing environment, human error, equipment malfunction, use of 
defective raw materials, defective plating services and inadequate sample 
testing.  From time to time, the Company has experienced lower than 
anticipated production yields as a result of such factors.  The Company's 
failure to maintain high quality production standards or acceptable production 
yields would likely result in loss of customers, delays in shipments, 
increased costs, cancellation of orders and product returns for rework, any of 
which could have a material adverse effect on the Company's business, 
financial condition and results of operations.

Dependence on Raw Materials Suppliers

     To maintain competitive manufacturing operations, the Company must obtain 
from its suppliers, in a timely manner, sufficient quantities of acceptable 
materials at expected prices.  The Company sources most of its raw materials, 
including critical materials such as lead frames and die attach compound, from 
a limited group of suppliers.  Substantially all molding compound, a critical 
raw material, is obtained from a single supplier.  From time to time, 
suppliers have extended lead times or limited the supply of required materials 
to the Company because of supplier capacity constraints and, consequently, the 
Company has experienced difficulty in obtaining acceptable raw materials on a
timely basis.  In addition, from time to time, the Company has rejected
materials from those suppliers that do not meet its specifications, resulting
in declines in output or yield.  Any interruption in the availability of or 
reduction in the quality of materials from these suppliers would materially
adversely affect the Company's business, financial condition and results of
operations.  For example, in the second quarter of fiscal 1996, the Company's
revenues were adversely affected by the rejection of a batch of key material.
The Company's ability to respond to increased orders would also be adversely
affected if the Company is not able to obtain increased supplies of key raw
materials.

                                     Page 5

<PAGE>

     The Company purchases all of its materials on a purchase order basis and 
has no long term contracts with any of its suppliers.  There can be no 
assurance that the Company will be able to obtain sufficient quantities of raw 
materials and other supplies.  The Company's business, financial condition and 
results of operations would be materially adversely affected if it were unable 
to obtain sufficient quantities of raw materials and other supplies in a 
timely manner or if there were significant increases in the costs of raw 
materials that the Company could not pass on to its customers.

Marketing and Sales

     The Company's business is substantially affected by market conditions in 
the semiconductor industry, which is highly cyclical and, at various times, 
has been subject to significant economic downturns and characterized by 
reduced product demand, rapid erosion of average selling prices and production 
over capacity.  In addition, rapid technological change, evolving industry 
standards, intense competition and fluctuations in end user demand 
characterize the markets for integrated circuits.  Because the Company's 
business is entirely dependent on the requirements of semiconductor companies 
for independent packaging foundries, any downturn in the semiconductor 
industry is expected to have an adverse effect on the Company's business, 
financial condition and results of operations.   For example, delays or 
rescheduling of orders due to a downturn or anticipated downturn in the 
semiconductor industry have in the past and could in the future have a 
material adverse effect on the Company's business, operating results and 
financial condition.

     The semiconductor industry is comprised of different market segments based 
on device type and the end use of the device.  Accordingly, within the 
semiconductor industry, demand for production in a particular segment may be 
subject to more significant fluctuations than other segments.  If any of the 
Company's significant customers are in a segment which has experienced adverse 
market conditions, there would be an adverse effect on the Company's business, 
financial condition and operating results.  In this regard, the Company has 
experienced a significant decline in orders since 1996 which the Company 
attributes in part to reduced demand for semiconductors manufactured by 
certain of the Company's customers that serve, in particular, the personal 
computer market.  There can be no assurance that this reduced demand, or the 
general economic conditions underlying such demand, will not continue to 
adversely affect the Company's results of operations.   Furthermore, there can 
be no assurance that any such continuation or expansion of this reduced demand 
will not result in an additional and significant decline in the demand for the 
products produced by the Company's customers and a corresponding material 
adverse impact on the Company's business, operating results and financial 
condition.

     In addition, the Company has been substantially dependent on a relatively 
small number of customers within the semiconductor industry.  The high 
concentration of business with a limited number of customers has adversely 
affected the Company's operating results, when business volume dropped 
substantially for several customers.  There can be no assurance that such 
customers or any other customers will continue to place orders with the 
Company in the future at the same levels as in prior periods.  The Company's 
need for additional financing, and the uncertainty as to whether such 
financing can be obtained, has adversely affected the Company's ability to 
obtain new customers.  The loss of one or more of the Company's customers, or 
reduced orders by any of its key customers, would adversely affect the 
Company's business, financial condition and results of operations.

                                     Page 6

<PAGE>


     The Company's marketing and sales efforts are focused on North American 
semiconductor companies that design or manufacture IC devices which are used 
in applications such as personal computers, modems, disk drives and 
telecommunication products.  Within such markets, the Company emphasizes 
packaging complex, high pin-count products.  The Company sells its services 
directly through its sales and customer support organization.  The Company 
assists its customers in evaluating designs with respect to manufacturability 
and when appropriate recommends design changes to reduce manufacturing costs 
and lead times.  The Company also offers lead frame design services for a fee.

     To date, the Company has been substantially dependent on a relatively
small number of customers Specifically, Atmel, Cirrus Logic and Ford 
accounted for 39%, 11%, and 11%, respectively, of the Company's revenues in
1998. Cirrus Logic, Intel Corporation and Atmel accounted for 17%, 16% and
14%, respectively, of the Company's revenues in 1997.  Cirrus Logic, Tseng
Laboratories, and Intel Corporation accounted for 32%, 17% and 14%,
respectively, of the Company's revenues in 1996.  The Company anticipates
that significant customer concentration will continue, although the companies
which constitute the Company's largest customers may change from period to
period.

     All of the Company's customers operate in the cyclical semiconductor 
business and their order levels may vary significantly from period to period.  
In addition, there can be no assurance that such customers or any other 
customers will continue to place orders with the Company in the future at the 
same levels as in prior periods.  In this regard, Ford recently announced that 
it will stop manufacturing the automotive components that the Company 
packages, by the end of 1999.  As a result, the Company does not expect any 
significant revenue from Ford during the second half of 1999.  There can be no 
assurance that adverse developments in the semiconductor industry will not 
adversely affect the Company's business, financial condition and results of 
operations.  The loss of one or more of the Company's customers, or reduced 
orders by any of its key customers, would adversely affect the Company's 
business, financial condition and results of operations.  The Company ships 
its products in accordance with customer purchase orders and upon receipt of 
semiconductor wafers from its customers.  The Company generally ships products 
within one to seven days after receiving the customer's wafers, and, 
accordingly, the Company has not, to date, had a material backlog of orders.  
The Company expects that revenues in any quarter will be substantially 
dependent upon orders received in that quarter.  The Company's expense levels 
are based in part on its expectations of future revenues and the Company may 
be unable to adjust costs in a timely manner to compensate for any revenue 
shortfall.

Competition; Decline in Average Selling Prices

     The semiconductor packaging industry is highly competitive.  The Company 
currently faces substantial competition from established packaging foundries 
located in Asia, such as Advanced Semiconductor Assembly Technology in Hong 
Kong, Advanced Semiconductor Engineering, Inc. in Taiwan, ANAM in Korea, PT 
Astra in Indonesia and Swire Technologies in Hong Kong.  Each of these 
companies has significantly greater manufacturing capacity, financial 
resources, research and development operations, marketing and other 
capabilities than the Company and has been operating for a significantly 
longer period of time than the Company.  Such companies have also established 
relationships with many large semiconductor companies which are current or 
potential customers of the Company.  The Company could face substantial 
competition from Asian packaging foundries should one or more of such 
companies decide to establish foundry operations in North America.  The 
Company also faces competition from other independent, North American 
packaging foundries.  The Company also competes against companies which have 
in-house packaging capabilities as current and prospective customers 
constantly evaluate the Company's capabilities against the merits of in-house 
packaging.  Many of the Company's customers are also customers of one or more 
of the Company's principal competitors.  The principal elements of competition 
in the semiconductor packaging market include delivery cycle times, price, 
product performance, quality, production yield, responsiveness and 
flexibility, reliability and the ability to design and incorporate product 
improvements.  The Company believes it principally competes on the basis of
shorter delivery cycle times it can offer customers due to the close proximity
of its manufacturing facility to its customers' operations and the end users
of its customers' products.

     Since mid-1996, the Company has experienced a decline in the average 
selling prices for a number of its products.  The Company expects that average 
selling prices for its products will continue to decline in the future, 
principally due to intense competitive conditions.  A decline in average 
selling prices of the Company's products, if not offset by reductions in the 
cost of producing those products, would continue to decrease the Company's 
gross margins and materially and adversely affect the Company's business, 
financial condition and results of operations.  There can be no assurance that 
the Company will be able to reduce its cost per unit.

                                     Page 7

<PAGE>

Research and Development

     The Company's research and development efforts are focused on improving
the efficiency and capabilities of its production processes, and on developing
new packages by making improvements upon commercially available materials and
technology.  The Company's research and development efforts are focused on
improving existing technology, such as developing thermally enhanced QFPs that 
result in better heat dissipation, and emerging packaging technologies, such 
as BGA packages that provide for an increased number of leads per device 
without increasing the size of the functional integrated circuit and Chip 
Scale Packaging ("CSP").  Although the Company did not ship significant 
quantities of BGA devices in 1998, it believes that the increased pin count 
made available by BGA technology is an important technology that will enable 
the Company to provide new packaging services to its customers.  The Company 
also works closely with the manufacturers of its packaging equipment in 
designing and modifying the equipment used in the Company's production 
process. 

     As of December 31, 1998, the Company employed 5 persons in research and 
development activities.  In addition, other management and operational 
personnel are involved in research and development activities.  The Company 
supplements its research and development efforts with alliances and technology 
licensing agreements. For example, the Company is a member of an ARPA-TRP 
consortium working to enhance cooperation and participation by United States 
companies in assembly and packaging technology.  In 1998, 1997 and 1996, the 
Company's research and development expenses were approximately $1,101,000, 
$1,276,000, and $1,053,000, respectively.  The Company expects to continue to 
invest significant resources in research and development.

     The Company has focused its manufacturing resources on plastic QFPs for
use with SMT, and the Company has neither the capability nor the intent to
provide services to other substantial segments of the semiconductor packaging
market.  For example, the Company has no capacity to manufacture packages for
use with PTH technology, nor does the Company presently intend to manufacture
packages using materials other than plastic, such as ceramic.  BGA packaging
currently represents a very small, but increasing, portion of the Company's
overall revenues and a relatively small portion of the overall semiconductor
packaging market.  Technological change in the semiconductor packaging industry
is continuous and in the future semiconductor manufacturers are expected to
require increased technological and manufacturing expertise.  The introduction
of new packaging technologies, a reduction or shift away from QFP's, or the 
failure of the market for BGA packaging to develop would result in a material 
adverse effect on the Company's business, financial condition and results of 
operations.

Intellectual Property

     The Company's success depends in part on its ability to obtain patents and 
licenses and to preserve other intellectual property rights relating to its 
manufacturing processes.  As of December 31, 1998, the Company held ten U.S. 
patents, which expire, between 2012 and 2015, and four additional patent 
applications have been filed and are pending.  The Company expects to continue 
to file patent applications when appropriate to protect its proprietary 
technologies; however, the Company believes that its continued success depends 
primarily on factors such as the technological skills and innovation of its 
personnel rather than on its patents.  The process of seeking patent 
protection can be expensive and time consuming.  There can be no assurance 
that patents will issue from pending or future applications or that, if 
patents are issued, they will not be challenged, invalidated or circumvented, 
or that rights granted thereunder will provide meaningful protection or other 
commercial advantage to the Company.  Moreover, there can be no assurance that 
any patent rights will be upheld in the future or that the Company will be 
able to preserve any of its other intellectual property rights.

     As is typical in the semiconductor industry, the Company may receive 
communications from third parties asserting patents on certain of the 
Company's technologies.  The Company has received one such letter from a 
competitor. However, in this case and in the event any other third party were 
to make a valid claim and a license were not available on commercially
reasonable terms, the Company's business, financial condition and results of
operations could be materially and adversely affected.  Litigation, which
could result in substantial cost to and diversion of resources of the Company,
may also be necessary to enforce patents or other intellectual property

                                    Page 8

<PAGE>

rights of the Company or to defend the Company against claimed infringement
of the rights of others.  The failure to obtain necessary licenses or the
occurrence of litigation relating to patent infringement or other intellectual
property matters could have a material adverse effect on the Company's
business, financial condition and results of operations.

Environmental Matters

     The semiconductor packaging process involves a significant amount of 
chemicals and gases which are subject to extensive governmental regulations.  
For example, liquid waste is produced at the stage at which silicon wafers are 
diced into chips with the aid of diamond saws and cooled with running water.  
In addition, excess materials on leads and moldings are removed from packaged 
semiconductors in the trim and form process.  The Company has installed 
equipment to collect certain solvents used in connection with its 
manufacturing process and has contracted with independent waste disposal 
companies to remove such hazardous material.

     In 1998, the Company installed an advanced electroplating system at a 
leased facility in Milpitas, California.  This plating operation involves the 
use of significant quantities of certain hazardous substances.  Although the 
Company has designed procedures to ensure such materials are handled in 
compliance with applicable regulations, there can be no assurance that the 
operation of such facility will not expose the Company to additional costs in 
complying with environmental regulations or result in future liability to the 
Company.

     Federal, state and local regulations impose various controls on the 
storage, handling, discharge and disposal of chemicals used in the Company's 
manufacturing process and on the facility occupied by the Company.  The 
Company believes that its activities conform to present environmental and land 
use regulations applicable to its operations and its current facility.  
Increasing public attention has, however, been focused on the environmental 
impact of semiconductor manufacturing operations and the risk to neighbors of 
chemical releases from such operations.  There can be no assurance that 
applicable land use and environmental regulations will not in the future 
impose the need for additional capital equipment or other process requirements 
upon the Company or restrict the Company's ability to expand its operations.  
The adoption of new ordinances or similar measures or any failure by the 
Company to comply with applicable environment and land use regulations or to 
restrict the discharge of hazardous substances could subject the Company to 
future liability or cause its manufacturing operations to be curtailed or 
suspended.

Employees

     As of December 31, 1998, the Company had 245 full time employees, 218 of 
whom were engaged in manufacturing, 5 in research and development, 8 in sales 
and customer service and 14 in finance and administration.  The Company's 
employees are not represented by any collective bargaining agreement, and the 
Company has never experienced a work stoppage.  The Company believes that its 
employee relations are good. The success of the Company's future operations 
depends in large part on the Company's ability to attract and retain highly 
skilled technical, manufacturing and management personnel.  There can be no 
assurance that the Company will be successful in attracting and retaining key 
personnel.

                                     Page 9

<PAGE>

Executive Officers

     The executive officers of the Company are as follows:

<TABLE>
<CAPTION>

Name                           Age               Position(s)
----------------------------  ----   ---------------------------------------
<S>                           <C>    <C>
 
Patrick Verderico...........   55    President, Chief Executive Officer and
                                     Director
Ernest G. Barrieau III......   43    Executive Vice President, Sales and
                                     Marketing
Gerald K. Fehr..............   61    Executive Vice President, Operations and
                                     Chief Technology Officer
Alfred V. Larrenaga.........   51    Executive Vice President, Finance and
                                     Chief Financial Officer

</TABLE>

     Patrick Verderico joined the Company in April 1997 as its Chief Operating 
Officer and was appointed the Company's President and Chief Executive Officer 
and a Director in July 1997.  From 1996 to 1997, Mr. Verderico was Chief 
Operating Officer and Executive Vice President of Maxtor Corporation, a disk 
drive manufacturer.  From 1994 to 1996, Mr. Verderico was Chief Financial 
Officer and Vice President Finance and Administration of Creative Technology, 
a multi media products company.  From 1992 to 1994, Mr. Verderico was Chief 
Financial Officer and Vice President Finance and Administration of Cypress 
Semiconductor.  Prior to 1992, Mr. Verderico held various management positions 
in finance and operations with Coopers & Lybrand, Philips Semiconductors and 
National Semiconductor.  Mr. Verderico is also a Director of Catalyst 
Semiconductor and Micro Component Technology, Inc.

     Ernest G. Barrieau joined the Company in October 1997 as its Executive
Vice President, Sales and Marketing.  From 1996 to 1997, Mr. Barrieau was Vice
President North American Sales of Alphatec Group, a semiconductor packaging 
company.  From 1991 to 1996, Mr. Barrieau was Corporate Vice President World 
Wide Sales and Marketing, and Director of Thai Micro Systems, a semiconductor 
packaging company. Prior to 1991, Mr. Barrieau held various management 
positions in sales and operations with Amkor Electronics and Fairchild 
Semiconductor.

     Gerald K. Fehr is a co-founder of the Company and has served as Vice 
President, Technology of the Company since March 1993 and Executive Vice 
President, Operations and Chief Technology Officer since December 1997.  From 
January 1991 to March 1993, Dr. Fehr served as an independent consultant in 
the semiconductor packaging industry.  From March 1981 to January 1991, Dr. 
Fehr served as Director of Packaging and Assembly for LSI Logic, Inc., a 
semiconductor company.  From June 1978 to March 1981, Dr. Fehr served as 
Manager of Packaging Operations of Burroughs, a semiconductor company.  From 
May 1975 to June 1978, Dr. Fehr served as Manager of Packaging Operations of 
Fairchild, a semiconductor corporation.  From 1968 to 1975, Dr. Fehr served as 
Manager of Assembly and Packaging for Intel Corporation.

     Alfred V. Larrenaga joined the Company in August 1997 as Vice President, 
Finance and Chief Financial Officer and became Executive Vice President, 
Finance and Chief Financial Officer in April 1998.  From 1988 to 1997, Mr. 
Larrenaga was Senior Vice President and Chief Financial Officer of Southwall 
Technologies Inc., a thin film technology company.  Prior to 1988, Mr. 
Larrenaga held various management positions in finance with Asyst Technologies 
Inc., the Farinon Division of Harris Corporation and Arthur Andersen & Co. 
LLP.

     The Company's success depends to a significant extent upon the continued 
service of its key management and technical personnel, each of whom would be 
difficult to replace.  The competition for qualified employees is intense, and 
the loss of the services of key personnel or the inability to attract, retain 
and motivate qualified new personnel could have a material adverse effect on 
the Company's business, financial condition and results of operations. 

     Officers serve at the discretion of the Board and are appointed annually.  
There are no family relationships between the directors or officers of the 
Company.

                                     Page 10

<PAGE>

Item 2.  Properties
-------------------  

     In January 1998, the Company sold its facility, which consisted of land
and two buildings comprising approximately 138,000 square feet, and entered
into a lease, with a initial term of ten years, for the approximately 82,000
square foot building which it occupies and it uses for its manufacturing
operations, executive offices and product development.  In November 1997, the
Company leased a separate 2,500 square foot building, approximately 2 miles
from the Company's principal facility, for its advanced electroplating system.
The Company believes its existing facilities are adequate to meet its needs for
the foreseeable future.  Since the Company does not currently operate multiple 
facilities in different geographic areas, a disruption of the Company's 
manufacturing operations resulting from various factors, including sustained 
process abnormalities, human error, government intervention or a natural 
disaster such as fire, earthquake or flood, could cause the Company to cease 
or limit its manufacturing operations and consequently would have a material 
adverse effect on the Company's business, financial condition and results of 
operations.


Item 3.  Legal Proceedings
--------------------------   

     At the end of the second quarter of 1998, the Company ceased making 
scheduled repayments of its debt balance outstanding relating to its Equipment 
Notes Payable and its capital leases.  Certain of these debt facilities 
require that the Company maintain certain financial covenants.  The Company 
has been out of compliance with certain of these covenants since the second 
quarter of 1998.  As a result of the covenant noncompliance and failure to 
make scheduled repayments, the Company is in default under these agreements.

     On October 13, 1998, Commerica Bank commenced an action against the
Company in Superior Court, Santa Clara County, California (Case #CV 777252).
Comerica seeks monetary damages of approximately $2,000,000 and recovery of
leased personal property.  The Company has stipulated to the entry of a Writ of
Possession and Comerica Bank has agreed to forbear execution of the Writ until 
after May 31, 1999.

     On September 22, 1998, Heller Financial, Inc. commenced an action against
the Company in Superior Court, Santa Clara County, California (Case # CV 
776830).  Heller Financial, Inc. seeks monetary damages of approximately 
$1,050,000 and recovery of leased personal property.  The Company has 
stipulated to the entry of a Writ of Possession and Heller Financial, Inc. has 
agreed to forbear an execution of the Writ until after May 31, 1999.

     On September 28, 1998, The CIT Group/Equipment Financing, Inc. commenced
an action against the Company in Superior Court, Santa Clara County, California
(Case # CV 776836).  The CIT Group/Equipment Financing, Inc. seeks monetary 
damages of approximately $1,250,000 and recovery of leased personal property.  
The Company has stipulated to the entry of a Writ of Possession and the CIT 
Group/Equipment Financing, Inc. has agreed to forbear execution of the Writ 
until after May 31, 1999.

     On November 18, 1998, Transamerica Business Credit Corporation commenced
an action against the Company in Superior Court, Santa Clara County,
California, (Case # CV778142).  Transamerica seeks monetary damages of
approximately $3,800,000 and recovery of leased personal property.  The Company
has stipulated to the entry of a Writ of Possession and Transamerica has agreed
to forbear execution of the Writ until after May 31, 1999.

     On November 24, 1998, Phoenix Leasing Incorporated commenced an action 
against the Company in Superior Court, San Francisco County, California (Case 
#CV999461).  Phoenix seeks monetary damages of approximately $240,000 and 
recovery of leased personal property.  The Company has stipulated to the entry 
of a Writ of Possession and Phoenix Leasing has agreed to forbear the 
execution of the Writ until after May 31, 1999.

                                     Page 11

<PAGE>


     The Company has also entered into forbearance agreements through May 31, 
1999 with three other secured creditors who have not yet commenced litigation 
against the Company.

     The Company does not have any material defenses to these actions.  An 
adverse outcome in any of these actions would have a material adverse effect 
on the Company.  If the forbearance agreements with the creditors do not 
remain in effect, the Company will be forced to seek protection under the 
bankruptcy laws or cease operations.

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

         Not Applicable.

                                     Page 12

<PAGE>

                                     Part II
                                     -------  

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters
------------------------------------------------------------------------------ 

     The Company effected the initial public offering of its Common Stock on 
February 28, 1996.  As of February 11, 1999, there were approximately 1,500 
beneficial owners of the Company's Common Stock.  The Company's Common Stock 
was delisted from the Nasdaq Stock Market in November 1998.  The Company's 
Common Stock is listed for quotation on the OTC Bulletin Board under the 
Symbol "IPAC."  The following table sets forth for the periods indicated, the 
high and low prices of the Company's Common Stock.  


<TABLE>
<CAPTION>
                                           High       Low    
                                        ---------- ----------
<S>                                     <C>        <C>       
Fiscal Year Ended December 31, 1999
 
  First Quarter.........................    $8.50      $3.50 
  Second Quarter........................     5.00       2.50 
  Third Quarter.........................     4.00       2.00 
  Fourth Quarter........................     2.50       0.50 
                                                             
Fiscal Year Ended December 31, 1998        High       Low
                                        ---------- ----------

  First Quarter.........................    $1.59      $0.69 
  Second Quarter........................     1.37       0.50 
  Third Quarter.........................     1.00       0.13 
  Fourth Quarter........................     0.25       0.06 
                                                             
</TABLE>


     The trading price of the Company's Common Stock is expected to continue to 
be subject to wide fluctuations in response to quarter-to-quarter variations 
in operating results, announcements of technological innovations or new 
products by the Company or its competitors, general conditions in the 
semiconductor industry, changes in earnings estimates or recommendations by 
analysts, the failure of the Company to meet or exceed published earnings 
estimates or other events or factors.  In addition, the public stock markets 
have experienced extreme price and trading volume volatility in recent months.  
This volatility has significantly affected the market prices of securities of 
many high technology companies for reasons frequently unrelated to the 
operating performance of the specific companies.  These broad market 
fluctuations may adversely affect the market price of the Company's Common 
Stock.  

     The Company has not paid any cash dividends on its Common Stock and 
currently intends to retain any future earnings for use in its business.  
Accordingly, the Company does not anticipate that any cash dividends will be 
declared or paid on the Common Stock in the foreseeable future.

                                     Page 13

<PAGE>

Item 6.  Selected Financial Data
--------------------------------   
                                       
<TABLE>
<CAPTION>
                                          Year Ended December 31, (1)         
                                  -------- -------- -------- -------- --------
                                    1994     1995     1996     1997     1998  
                                  -------- -------- -------- -------- --------
                                     (In thousands, except per share data)    
<S>                               <C>      <C>      <C>      <C>      <C>     
 
Statement of Operations Data:                                                 
   Revenues....................... $3,451  $20,764  $36,402  $19,744  $23,281 
   Cost of revenue................  3,438   15,627   28,840   24,089   29,114 
                                  -------- -------- -------- -------- --------
  Gross profit (loss).............     13    5,137    7,562   (4,345)  (5,833)
  Operating expenses:                                                         
    Selling, general and                                                      
      administrative..............  1,309    2,229    3,488    5,167    4,068 
    Research and development......    170      694    1,053    1,276    1,101 
    Provision for impairment                                                  
     of assets....................     --       --       --    3,000   18,200 
                                  -------- -------- -------- -------- --------
      Total operating expenses....  1,479    2,923    4,541    9,443   23,369 
                                  -------- -------- -------- -------- --------
  Operating income (loss)......... (1,466)   2,214    3,021  (13,788) (29,202)
  Interest and other income.......     54      551    1,210      971    1,209 
  Interest expense................   (674)  (1,074)  (1,384)  (2,185)  (1,783)
                                  -------- -------- -------- -------- --------
  Income (loss) before income                                                 
    taxes......................... (2,086)   1,691    2,847  (15,002) (29,776)
  Provision for income taxes......     --     (141)    (530)      --       -- 
                                  -------- -------- -------- -------- --------
  Net income (loss)............... (2,086)   1,550    2,317  (15,002) (29,776)
                                  ======== ======== ======== ======== ========
  Diluted net income (loss)                                                   
    per share (1)................. ($1.02)   $0.16    $0.16   ($1.08)  ($2.12)
                                  ======== ======== ======== ======== ========
  Number of shares used to                                                    
    compute diluted per share                                                 
    data (1)......................  2,051    9,603   14,157   13,898   14,046 
                                  ======== ======== ======== ======== ========
                                                                              
                                     1994     1995     1996     1997     1998 
                                  -------- -------- -------- -------- --------
  Balance Sheet Data:                                                         
    Working capital............... $2,075   $4,773  $15,614  ($5,877) ($16,086)
    Total assets.................. 13,310   28,260   69,639   55,482   18,728 
    Long-term obligations /                                                   
      deferred gains..............  5,371    7,015   16,926   14,249    1,249 
    Mandatorily redeemable                                                    
      convertible preferred stock.  8,020   15,981       --       --       -- 
    Total shareholders' equity                                                
      (deficit)................... (2,764)    (918)  40,761   26,238   (3,207)
                                                                              
</TABLE>

(1) See Note 1 of Notes to Financial Statements for an explanation of the
method used to shares used in computing per share amounts.


                                     Page 14

<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and 
         Results of Operations
------------------------------------------------------------------------  

     This Management's Discussion and Analysis of Financial Condition and 
Results of Operations contains forward looking statements within the meaning 
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of 
the Securities Exchange Act of 1934, as amended.  The forward looking 
statements contained herein are subject to certain factors that could cause 
actual results to differ materially from those reflected in the forward 
looking statements.  Such factors include, but are not limited to, those 
discussed as follows and elsewhere in this Report on Form 10-K.

Overview

     As a result of a reduction in orders from the Company's customers, the 
Company has had significant excess production capacity since the first quarter 
of 1997.  The reduction in revenues and underutilization of capacity and 
resultant underabsorption of fixed costs resulted in operating losses that 
have continued throughout 1998. At the end of the second quarter of 1998, the 
Company ceased making scheduled repayments of its debt balance outstanding 
relating to its Equipment Notes Payable and its capital leases.  Certain of 
these debt facilities require that the Company maintain certain financial 
covenants.  The Company has been out of compliance with certain of these 
covenants since the second quarter of 1998.  As a result of the covenant 
noncompliance and failure to make scheduled repayments, the entire balance due 
has been classified as a current liability since June 1998. Certain of the 
Company's secured creditors commenced legal actions against the Company 
seeking monetary damages and recovery of the financed equipment.  In December 
1998 the Company entered into a $7 million bank line of credit that is 
guaranteed by a third party and the Company obtained forbearance agreements 
from its secured creditors through May 31, 1999.  The forbearance agreements 
require, among other things, that the Company make monthly payments through 
May 31, 1999. The Company does not have any material defenses against the 
legal actions brought by its secured creditors.  An adverse outcome in any of 
the actions would have a material adverse effect on the Company and if the 
forbearance agreements do not remain in effect for each of these lenders, the 
Company will be forced to seek protection under the bankruptcy laws or cease 
operations.  As a result of the operating losses and cost of capital 
additions, the Company is currently seeking immediate additional financing to 
meet its projected working capital and other cash requirements.  The Report of 
Independent Accountants included on page 25 contains a going concern 
statement.

     The Company's operating results are affected by a wide variety of factors 
that have in the past and could in the future materially and adversely affect 
revenues, gross profit and operating income.  These factors include the 
Company's ability to secure additional financing, the short-term nature of its 
customers' commitments, timing and volume of orders relative to the Company's 
production capacity, long lead times for the manufacturing equipment required 
by the Company, evolutions in the life cycles of customers' products, timing 
of expenditures in anticipation of future orders, lack of a meaningful 
backlog, effectiveness in managing production processes, changes in costs and 
availability of labor, raw materials and components, costs to obtain materials 
on an expedited basis, mix of orders filled, the impact of price competition 
on the Company's average selling prices and changes in economic conditions.  
Unfavorable changes in any of the preceding factors have in the past and may 
in the future adversely affect the Company's business, financial condition and 
results of operations.

     The Company's business is substantially affected by market conditions in 
the semiconductor industry, which is highly cyclical and, at various times, 
has been subject to significant economic downturns and characterized by 
reduced product demand, rapid erosion of average selling prices and excess 
production capacity.  In addition, rapid technological change, evolving 
industry standards, intense competition and fluctuations in end-user demand 
characterize the markets for integrated circuits.  Since the Company's
business is entirely dependent on the requirements of semiconductor companies 
for independent packaging foundries, any future downturn in the semiconductor
industry is expected to have an adverse effect on the Company's business,
financial condition and results of operations.  In this regard, since late
1996, the

                                     Page 15

<PAGE>

Company's results of operations have been materially adversely affected by
reduced orders from several major customers in the PC graphics segment of
the semiconductor industry.

     To date, the Company has been substantially dependent on a relatively 
small number of customers.  Specifically Atmel, Cirrus Logic and Ford 
accounted for 39%, 11%, and 11%, respectively, of the Company's revenues in 
1998.  Cirrus Logic, Intel Corporation and Atmel accounted for 17%, 16% and 
14%, respectively, of the Company's revenues in 1997.  Cirrus Logic, Tseng 
Laboratories, and Intel Corporation account for 32%, 17%, and 14%, 
respectively, of the Company's revenues in 1996.  The Company anticipates 
significant customer concentration will continue, although the companies which 
constitute the Company's largest customer may change from period to period.  
In this regard, Ford recently announced that it will stop manufacturing the 
automotive component that the Company packages, by the end of 1999.  As a 
result, the Company does not expect any significant revenue from Ford during 
the second half of 1999.

     During the second quarter of 1998, the Company recorded charges related to 
the impairment of its manufacturing equipment of $18.2 million. These charges 
related to recording reserves against the carrying value of manufacturing 
equipment.  The impairment is a result of continued adverse conditions in the 
semiconductor industry, and historical as well as forecasted manufacturing 
equipment underutilization, resulting in the estimation that the value of the 
manufacturing equipment will not be fully recovered.  The fair value of 
manufacturing equipment was based upon an independent estimate of fair values

     Since 1996, the Company has experienced a decline in the average selling 
prices for its services and expects that average-selling prices for its 
services will decline in the future, principally due to intense competitive 
conditions.  A decline in average selling prices of the Company's services, if 
not offset by reductions in the cost of performing those services, would 
decrease the Company's gross margins and materially and adversely affect the 
Company's business, financial condition and results of operations.  There can 
be no assurance that the Company will be able to reduce its cost per unit.

     The Company must continue to hire and train significant numbers of 
additional personnel to operate the highly complex capital equipment required 
by its manufacturing operations.  There can be no assurance that the Company 
will be able to hire and properly train sufficient numbers of qualified 
personnel or to effectively manage such growth and its failure to do so could 
have a material adverse effect on the Company's business, financial condition 
and results of operations.  Furthermore, since the Company's expense levels 
are based in part on anticipated future revenue levels, if revenue were to 
fall below anticipated levels, the Company's operating results would be 
materially adversely affected.

                                     Page 16

<PAGE>


Results of Operations

     The following table sets forth, for the periods indicated, certain items
in the Company's statement of operations as a percentage of revenues:


<TABLE>
<CAPTION>
                                                Year Ended December 31,      
                                           ---------   ---------   --------- 
                                             1996        1997        1998    
                                          ----------- ----------- -----------
<S>                                       <C>         <C>         <C>        
 
Revenues..................................     100.0%      100.0%      100.0%
Cost of revenues..........................      79.2       122.0       125.0 
                                          ----------- ----------- -----------
Gross profit (loss).......................      20.8       (22.0)      (25.0)
Operating expenses:                                                          
   Selling, general and administrative....       9.6        26.2        17.5 
   Research and development...............       2.9         6.4         4.7 
   Provision for impairment of assets.....        --        15.2        78.2 
                                          ----------- ----------- -----------
      Total operating expenses............      12.5        47.8       100.4 
                                          ----------- ----------- -----------
Operating income (loss)...................       8.3       (69.8)     (125.4)
Interest and other income.................       3.3         4.9         5.2 
Interest expense..........................      (3.8)      (11.1)       (7.7)
                                          ----------- ----------- -----------
Income (loss) before income taxes.........       7.8       (76.0)     (127.9)
Provision for income taxes................      (1.4)         --          -- 
                                          ----------- ----------- -----------
Net income (loss).........................       6.4%     (76.0%)    (127.9%)
                                          =========== =========== ===========
                                                                             
</TABLE>



Revenues

     The Company recognizes revenues upon shipment of products to its
customers.  Revenues increased 18% to $23.3 million in 1998, from $19.7 million
in 1997.  Revenues decreased 46% to $19.7 million in 1997, from $36.4 million
in 1996.  The increase in revenues in 1998 was primarily due to increased
orders offset in part by a reduction in average selling prices due to changes
in product mix and a decline in selling prices. The decrease in 1997 revenues
was primarily due to lower orders from customers, coupled with operational
problems in quality and delivery. 

     A substantial portion of the Company's net revenues in each quarter
results from shipments during the last month of that quarter, and for that
reason, among others, the Company's revenues are subject to significant
quarterly fluctuations.  In addition, the Company establishes its targeted
expenditure levels based on expected revenues.  If anticipated orders and
shipments in any quarter do not occur when expected, expenditure levels could
be disproportionately high and the Company's operating results for that quarter
would be materially adversely affected.

Gross Profit (Loss)

     Cost of revenues includes materials, labor, depreciation and overhead
costs associated with semiconductor packaging.  Gross (loss) increased to
$(5.8) million in 1998 from ($4.3) million in 1997.  Gross profit was $7.6
million in 1996. Gross profit (loss) as a percentage of revenues was (25.0%) in
1998, (22.0%) in 1997 and 20.8% in 1996.  These declines in gross profit were
primarily the result of lower average selling prices, caused by changes in 
product mix and industry competition, and higher costs for depreciation, labor 
and manufacturing overhead and low capacity utilization. 

     Depreciation for certain production machinery and equipment acquired
prior to 1997 is calculated using the units of production method, in which
depreciation is calculated based upon the units produced in a given period
divided by the estimate of total units to be produced over its life following 
commencement of use. Such estimate is reassessed when facts and circumstances
suggest a revision may be necessary. Based upon reduced utilization of 
machinery and equipment in relation to plan, the estimate for total throughput
was reduced in late 1996

                                     Page 17

<PAGE>
 
causing the depreciation rate per unit to increase in late 1996.  Such higher
depreciation rate continued into 1997 and 1998.  In all cases, the asset will
be fully depreciated by the end of its estimated six year life.  Compared with 
straight line depreciation, the units of production method generally results 
in lower depreciation expense during the early life of the equipment and 
relatively higher depreciation expense once the equipment is in full 
production.  All machinery and equipment acquired after 1996 is depreciated 
using the straight line depreciation method.  After the write down of impaired 
assets (see "Write Down of Impaired Assets" on page 18) in June 1998, 
depreciation expense for the second half of 1998 was significantly lower than 
the first half of 1998.

Selling, General and Administrative

     Selling, general and administrative expenses consist primarily of costs 
associated with sales, customer service, finance, administration and 
management personnel, as well as advertising, public relations, legal and 
facilities costs.  Selling, general and administrative expenses were $4.1 
million in 1998, $5.2 million in 1997 and $3.5 million in 1996.  The decrease 
in 1998, compared to 1997, was due primarily to reduced spending in 
administration and sales.  The increase in 1997, compared to 1996, was due 
primarily to increases in staff, marketing efforts, and facilities to support 
the Company's expansion.

     As a percentage of revenues, selling, general and administrative expenses 
decreased to 17.5% in 1998 compared to 26.2% in 1997.  In 1996, the percentage 
was 9.6%.  The fluctuation in percentages reflects the changes in absolute 
spending and revenue.

Research and Development

     Research and development expenses consist primarily of the costs
associated with research and development personnel, the cost of related
materials and services, and the depreciation of development equipment.
Research and development expenses were $1.1 million in 1998, $1.3 million in
1997, and $1.1 million in 1996. 

     As a percentage of revenues, research and development expenses were 4.7%
in 1998, 6.4% in 1997 and 2.9% in 1996.  The changes in such expenses as a
percentage of revenues reflected changes in absolute spending and revenue. 

Write Down of Impaired Assets

     During the second quarter of 1998, the Company recorded charges related to
the impairment of its manufacturing equipment of $18.2 million. These
adjustments related to recording reserves against the carrying value of
manufacturing equipment.  The impairment is a result of continued adverse 
conditions in the semiconductor industry, and historical as well as forecasted 
manufacturing equipment underutilization, resulting in the estimation that the 
value of the manufacturing equipment will not be fully recovered.  The fair 
value of manufacturing equipment was based upon an independent estimate of 
fair values.

     During the second quarter of 1997, the Company took a $3 million charge
for impaired assets.  This charge included a $2.4 million reserve related to
equipment used for the production of certain products with limited future 
demand, and a $500,000 reserve for the cancellation of purchase orders for 
equipment which the Company has determined to be surplus in relation to 
current demand.

                                     Page 18

<PAGE>

 
Interest and Other Income

     Interest income in 1998, 1997, and 1996 was $83,000, $573,000, and 
$982,000, respectively. The reductions were due to lower investment balances, 
which resulted from the losses from operations and capital expenditures. 
Interest income for 1996, was the result of interest earned on proceeds from 
the Company's initial public offering which was completed in February 1996. In 
1998, other income included a gain of $700,000 from the sale of the land and 
building not occupied by the Company.  See "Liquidity and Capital Resources".  
In 1997 and 1996, other income included $124,000 and $228,000, which was 
earned for development work with a semiconductor industry consortium.  In 
1997, other income also included approximately $270,000 from the sublease of a 
portion of the Company's facilities complex, which was sold in 1998.  

Interest Expense

     Interest expense consists primarily of interest payable on bank debt, and 
capital leases and term loans secured by equipment.  The Company has financed 
its manufacturing equipment primarily through capital leases and term loans 
secured by equipment with terms ranging from four to five years, and carrying 
imputed interest rates ranging from 7.5% to 15.5% per annum.   Interest 
expense for 1998, 1997, and 1996 was $1.8 million, $2.2 million and 
$1.4 million, respectively.

Provision for Income Taxes

     In 1998 and 1997, due to the losses from operations, the Company recorded 
no tax provision. The Company's provision for taxes in 1996 was $530,000, 
representing an effective tax rate of approximately 19%.  The effective tax 
rate represents alternative minimum tax ("AMT") resulting from limits on the 
use of net operating loss carry forwards for AMT purposes and tax accelerated 
depreciation on all machinery and equipment. 

Liquidity and Capital Resources

     During 1998, the Company's net cash used in operations was $6.7 million. 
Net cash used in operations was comprised primarily of a net loss of $29.8 
million, partially offset by $7.0 million of non-cash charges for depreciation 
and amortization and write down of impaired assets of $18.2 million and a net 
decrease in working capital items of $2.1 million.  The net decrease in 
working capital items primarily reflected a $3.3 million reduction in accounts 
payable and the reclassification of long-term debt to current liabilities as a 
result of the covenant non-compliance and the failure to make scheduled 
payments, as discussed previously.  As of December 31, 1998, the Company had 
no cash balance and is operating under bank lines obtained in October and 
December 1998.

     The Company had capital expenditures of $4.6 million, including $3.1 
million under a capital lease, during 1998. The capital expenditures were 
incurred primarily for the purchase of production equipment and improvements 
to the Company's facilities. Most of the Company's production equipment has 
been funded either through capital leases or term loans secured by production 
equipment.  The production equipment acquired in 1995 and 1996 was funded 
through several term loans.  The Company borrowed $4.9 million and $9.8 
million on such term loans in 1995 and 1996, respectively.  During 1997, the 
Company borrowed $3.5 million on such term loans for the purchase of 
production equipment.

     In March 1997, the Company secured a mortgage loan with an insurance 
company, which provided the Company with a $6.7 million five year term loan.  
The loan was secured by the real estate and buildings purchased by the Company 
in December 1996.  The loan accrued interest at 8.5%, and was payable in equal 
monthly installments of $58,000, with a balloon payment of $5.9 million due 
after five years.  The proceeds of this mortgage loan were used to pay off and 
retire the $6.5 million real estate loan which was entered into in December
1996 to provide temporary financing for the acquisition of the Company's
building complex.

                                     Page 19

<PAGE>

The loan accrued interest at 2.25% over the rate for 30 day certificates of
deposit and was collateralized by a certificate of deposit of equivalent
value.

     In December 1997, the Company entered into a line of credit agreement with 
a bank that provided, for borrowings up to the lesser of $5,000,000 or 80% of 
eligible accounts receivable. Borrowings under the line of credit accrued 
interest at the bank's prime rate (8.5% per annum at December 31, 1997) plus 
1.25% and were collateralized by the assets of the Company.  The agreement 
requires the Company to maintain certain financial covenants, including a 
liquidity ratio, minimum tangible net worth, maximum debt to tangible net 
worth, quarterly profitability and prohibited the Company from the payment of 
dividends without prior approval by the bank.  Since July 5, 1998, the Company 
has not been in compliance with such covenants.  This line was replaced with 
an accounts receivable factoring agreement in October 1998.

     On January 20, 1998, the Company completed the sale of its facilities, 
which consists of land and two buildings with a total of 138,336 square feet 
of building space, and agreed to lease back the 82,290 square foot building 
that it occupies.  Net proceeds from the sale were $7.3 million, net of the 
elimination of $6.6 million of mortgage debt, fees, commissions and closing 
costs.  The sale and lease back transaction resulted in a gain of $2,100,000, 
of which $700,000 from the sale of the land and building not occupied by the 
Company was recognized in the first quarter of 1998.  The remaining gain of 
approximately $1,400,000 will be amortized as a reduction of lease expense 
over the initial ten year term of the lease for the building that the Company 
occupies.

     In June 1998, the Company entered in a capital lease for approximately
$3.1 million of production equipment.  The lease expires in 2002.  In
conjunction with the lease, the Company issued warrants to purchase 171,428
shares of common stock at $1.31 per share and are exercisable for seven years.
The warrants were valued at $132,000 using a Black-Scholes valuation model.

     At December 31, 1998, the aggregate principal and interest amount 
outstanding under all equipment loans was $12.9 million.  Certain of the 
credit facilities require the Company to maintain certain financial covenants 
including minimum tangible net worth, a ratio of total liabilities to tangible 
net worth, and quarterly revenues and quarterly income before interest, taxes, 
depreciation and amortization (EBITDA).  At December 31, 1998, the Company was 
not in compliance with such covenants.

     At the end of the second quarter of 1998, the Company ceased making 
scheduled repayments of its debt balance outstanding relating to its Equipment 
Notes Payable and its capital leases. Certain of these debt facilities require 
that the Company maintain certain financial covenants.  The Company has been 
out of compliance with certain of these covenants since the second quarter of 
1998.  As a result of the covenant noncompliance and failure to make scheduled 
repayments, the entire balance due has been classified as a current liability 
since June 1998.

     In October 1998, the Company entered into an accounts receivable factoring 
agreement with its bank that replaced its bank line of credit.  The agreement 
was amended in December 1998, and provides, through June 1, 1999, for 
borrowings up to the lesser of $2.8 million or 80% of eligible accounts 
receivable.  The bank charges an administration fee of 0.5% of the gross 
accounts receivable factored and a monthly interest charge of 1.25% of the 
average balance owed.

     In December 1998, the Company obtained an additional $7 million bank line 
of credit.  This line, which is guaranteed by a third party, is available to 
finance operations and working capital needs through May 31, 1999.  The line 
provides for monthly borrowings and interest acquired at the bank's prime 
rate, (7 3/4% per annum at December 31, 1998).  Certain of the Company's 
secured creditors commenced legal actions against the Company seeking monetary
damages and recovery of the financed equipment.  In connection with the
December 1998 bank financing, the Company obtained forbearance agreements
from the secured creditors through May 31, 1999.

                                     Page 20

<PAGE>

The forbearance agreements require, among other things, that the Company make
monthly payments through May 31, 1999.

     The Company is currently seeking immediate additional financing, to
address its working capital needs and to provide funding for capital
expenditures.  There can be no assurance, however, that financing will be
available on terms acceptable to the Company, if at all.  If additional funds
are raised through the issuance of equity securities, the percentage ownership
of the Company's stockholders will be substantially diluted and such equity
securities may have rights, preference or privileges senior to those of the
holders of the Company's Common Stock.  If adequate funds are not available on
acceptable terms, the Company's business, financial condition and results of
operations would be materially adversely affected.  In such event, the Company
would be required to substantially curtail, cease or liquidate its operations
and reorganize its indebtedness.  Although the Company is pursuing additional
equity and debt financing, there can be no assurance that such financing will 
be obtained.  The Company is also evaluating the possible sale or merger of 
the Company, but there can be no assurance that such a transaction can be 
completed on terms acceptable to the Company, if at all.

Year 2000

     The information provided below constitutes a "Year 2000 Readiness 
Disclosure" for purposes of the Year 2000 Information and Readiness Disclosure 
Act.

     The Year 2000 ("Y2K") problem arises from the use of a two-digit field to 
identify years in computer programs, e.g., 85=1985, and the assumption of a 
single century, the 1900s.  Any program so created may read or attempt to 
read, "00" as the year 1900.  There are two other related issues which could 
also, lead to incorrect calculations or failure, such as (i) some systems' 
programming assigns special meaning to certain dates, such as 9/9/99 and (ii) 
the year 2000 is a leap year.  Accordingly, some computer hardware and 
software including programs embedded within machinery and parts will need to 
be modified prior to the year 2000 in order to remain functional.  To address 
the issue, the Company created an internal task force to assess its state of 
readiness for possible "Year 2000" issues and take the necessary actions to 
ensure Year 2000 compliance.  The task force has and continues to evaluate 
internal business systems, production equipment, software and other components 
which affect the Company's products, and the Company's vulnerability to 
possible "Year 2000" exposures due to suppliers' and other third parties' lack 
of preparedness for the year 2000.

     The Company is in the process of assessing its production equipment and
its information system and does not anticipate any material Year 2000 issues
from its equipment or its own information system, databases or programs.
Certain software packages are currently being upgraded to compliant versions.
The costs incurred to date and expected to be incurred in the future are not
material to the Company's financial condition or result of operations.  In
addition, the Company has been in contact with its suppliers and other third 
parties to determine the extent to which they may be vulnerable to "Year 2000" 
issues.  As this assessment progresses, matters may come to the Company's 
attention, which could give rise to the need for remedial measures which have 
not yet been identified.  As a contingency, the Company may replace the 
suppliers and third party vendors who cannot demonstrate to the Company that 
their products or services will be Year 2000 compliant.  The Company cannot 
currently predict the potential effect of third parties' "Year 2000" issues on 
its business.

                                     Page 21

<PAGE>

     The Company believes that its Year 2000 compliance project will be 
completed in advance of the Year 2000 date transition and will not have a 
material adverse effect on the Company's financial condition or overall trends 
in the results of operations.  However, there can be no assurance that 
unexpected delays or problems, including the failure to ensure Year 2000, 
compliance by systems or products supplied to the Company by a third party, 
will not have an adverse effect on the Company, its financial performance, or 
the competitiveness or customer acceptance of its products.

Certain Factors Affecting Operating Results

     The Company's operating results are affected by a wide variety of factors 
that could materially and adversely affect revenues, gross profit, operating 
income and liquidity.  These factors include the Company's ability to secure 
additional financing, the short term nature of its customers' commitments, the 
timing and volume of orders relative to the Company's production capacity, 
long lead times for the manufacturing equipment required by the Company, 
evolutions in the life cycles of customers' products, timing of expenditures 
in anticipation of future orders, lack of a meaningful backlog, effectiveness 
in managing production processes, changes in costs and availability of labor, 
raw materials and components, costs to obtain materials on an expedited basis, 
mix of orders filled, the impact of price competition on the Company's average 
selling prices and changes in economic conditions.  The occurrence or 
continuation of unfavorable changes in any of the preceding factors would 
adversely affect the Company's business, financial condition and results of 
operations. 

Default Upon Senior Securities; Need for Immediate Financing; Risks of 
Bankruptcy

     At the end of the second quarter of 1998, the Company ceased making 
scheduled repayments of its debt balance outstanding relating to its Equipment 
Notes Payable and its capital leases. Certain of these debt facilities require 
that the Company maintain certain financial covenants.  The Company has been 
out of compliance with certain of these covenants since the second quarter of 
1998.  As a result of the covenant noncompliance and failure to make scheduled 
repayments, the entire balance due has been classified as a current liability 
since June 1998.
	
     In October 1998, the Company entered into an accounts receivable factoring 
agreement with its bank that replaced its bank line of credit.  The agreement 
was amended in December 1998, and provides, through June 1, 1999, for 
borrowings up to the lesser of $2.8 million or 80% of eligible accounts 
receivable.

     In December 1998, the Company obtained an additional $7 million bank line 
of credit.  This line, which is guaranteed by a third party, is available to 
finance operations and working capital needs through May 31, 1999.

     All of the Company's secured creditors commenced legal actions against the 
Company seeking monetary damages and recovery of the financed equipment.  In 
connection with the December 1998 bank financing, the Company obtained 
forbearance agreements from the secured creditors through May 31, 1999.  The 
forbearance agreements require, among other things, that the Company make 
monthly payments through May 31, 1999.

     The Company is currently seeking immediate additional financing, to
address its working capital needs and to provide funding for capital
expenditures.  There can be no assurance, however, that financing will be
available on terms acceptable to the Company, if at all.  If additional funds
are raised through the issuance of equity securities, the percentage ownership
of the Company's stockholders will be substantially diluted and such equity
securities may have rights, preference or privileges senior to those of the
holders of the Company's Common Stock.  If adequate funds are not available on
acceptable terms, the Company's business, financial condition and results of
operations would be materially adversely affected.  In such event, the Company
would be required to substantially curtail, cease or liquidate its operations
and reorganize its indebtedness.  Although the Company is pursuing additional
equity and debt financing, there can be no

                                     Page 22

<PAGE>

assurance that such financing will be obtained.  The Company is also
evaluating the possible sale or merger of the Company, but there can be no
assurance that such a transaction can be completed on terms acceptable to
the Company, if at all.

Delisting of Common Stock on Nasdaq National Market

     In June 1998, the Company was notified by The Nasdaq Stock Market that its 
Common Stock did not comply with Nasdaq's $1.00 minimum bid price requirement 
and that the Company's Common Stock would be delisted.  Effective November 18, 
1998, the Company's Common Stock was delisted from the Nasdaq Stock Market.  
The Common Stock of the Company is currently traded on the OTC Bulletin Board.


Item 7a.  Quantitative and Qualitative Disclosures about Market Risk
--------------------------------------------------------------------  

     The Company has various debt instruments outstanding that mature by 2002.  
Certain of these instruments have interest rates that are based on associated 
rates that may fluctuate over time based on economic changes in the 
environment, such as the Prime Rate.  The Company is subject to interest rate 
risk, and could be subjected to increased interest payments if market interest 
rates fluctuate.  The Company estimates that a ten percent increase in 
interest rates would cause interest expense to increase by an immaterial 
amount.

                                     Page 23

<PAGE>


Item 8.  Financial Statements and Supplementary Data
------------------------------------------------------

INDEX TO FINANCIAL STATEMENTS 

Financial Statements:

                                                                 Page
                                                                 ----
Report of Independent Accountants..............................   25
Balance Sheet as of December 31, 1997 and 1998.................   26
Statement of Operations for the Years Ended December 31, 1996,
          1997 and 1998........................................   27
Statement of Shareholders' Equity for the Years Ended
          December 31, 1996, 1997 and 1998.....................   28
Statement of Cash Flows for the Years Ended December 31, 1996,
          1997 and 1998........................................   29
Notes to Financial Statements..................................   30
 

Financial Statement Schedules:

	All schedules are omitted because they are not applicable or the required 
information is shown in the financial statements or notes thereto.

                                     Page 24

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


To The Board of Directors and Shareholders of 
Integrated Packaging Assembly Corporation

     In our opinion, the financial statements listed in the accompanying index 
on page 24 present fairly, in all material respects, the financial position of 
Integrated Packaging Assembly Corporation at December 31, 1997 and 1998, and 
the results of its operations and its cash flows for each of the three years 
in the period ended December 31, 1998, in conformity with generally accepted 
accounting principles.  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 of these 
statements in accordance with generally accepted auditing standards which 
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, assessing the accounting principles 
used and significant estimates made by management, and evaluating the overall 
financial statement presentation.  We believe that our audits provide a 
reasonable basis for the opinion expressed above.

     The accompanying financial statements have been prepared assuming that the 
Company will continue as a going concern.  As discussed in Note 1 to the 
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern.  Management's plans in regard to these matters
are also described in Note 1.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



PricewaterhouseCoopers LLP
San Jose, California
February 8, 1999

                                     Page 25

<PAGE>

               Integrated Packaging Assembly Corporation
                             Balance Sheet
                 (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                        Year Ended      
                                                       December 31,     
                                                   ---------  --------- 
                                                      1997       1998   
                                                   ---------- ----------
<S>                                                <C>        <C>       
Assets                                                                  
  Current assets:                                                       
    Cash and cash equivalents......................   $2,928        $-- 
    Accounts receivable, net of allowance for                           
      doubtful accounts of $263 and $263...........    3,096      2,105 
    Inventory......................................    2,337      1,704 
    Prepaid expenses and other current assets......      757        792 
                                                   ---------- ----------
    Total current assets...........................    9,118      4,601 
                                                                        
  Property and equipment, net......................   46,127     13,930 
  Other assets.....................................      237        197 
                                                   ---------- ----------
    Total asssets..................................  $55,482    $18,728 
                                                   ========== ==========
                                                                        
Liabilities and Shareholders' Equity                                    
  Current liabilities:                                                  
    Current portion of bank debt and notes payable.   $4,576    $11,399 
    Current portion of capital leases obligations..    1,972      4,324 
    Accounts payable...............................    5,478      2,155 
    Accrued expenses and other liabilities.........    2,969      2,808 
                                                   ---------- ----------
      Total current liabilities....................   14,995     20,686 
                                                   ---------- ----------
  Long term portion of notes payable...............   14,166         -- 
                                                   ---------- ----------
  Long term portion of capital leases obligations..       83         -- 
                                                   ---------- ----------
  Deferred gain on sale of facilities..............       --      1,249 
                                                   ---------- ----------
  Commitments and contingencies (notes 1,5 and 10)
    Shareholders' equity                                                  
    Common stock, $.001 par value; 75,000,000                           
      shares authorized; 13,828,348 and 14,090,794                      
      shares issued and outstanding................       14         14 
    Additional paid-in Capital.....................   40,276     40,607 
    Accumulated earnings (deficit).................  (14,052)   (43,828)
                                                   ---------- ----------
      Total shareholders' equity (deficit).........   26,238     (3,207)
                                                   ---------- ----------
      Total liabilities and shareholders' equity...  $55,482    $18,728 
                                                   ========== ==========
</TABLE>

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


                                     Page 26

<PAGE>



                  Integrated Packaging Assembly Corporation
                           Statement of Operations
                    (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                Year Ended December 31,      
                                           ---------   ---------   --------- 
                                             1996        1997        1998    
                                          ----------- ----------- -----------
<S>                                       <C>         <C>         <C>        
 
   Revenues...............................   $36,402     $19,744     $23,281 
   Cost of revenues.......................    28,840      24,089      29,114 
                                          ----------- ----------- -----------
  Gross profit (loss).....................     7,562      (4,345)     (5,833)
  Operating expenses:                                                        
    Selling, general & administrative.....     3,488       5,167       4,068 
    Research & development................     1,053       1,276       1,101 
    Provision for impairment of assets....        --       3,000      18,200 
                                          ----------- ----------- -----------
      Total operating expenses............     4,541       9,443      23,369 
                                          ----------- ----------- -----------
  Operating income (loss).................     3,021     (13,788)    (29,202)
  Interest & other income.................     1,210         971       1,209 
  Interest expense........................    (1,384)     (2,185)     (1,783)
                                          ----------- ----------- -----------
  Income (loss) before income taxes.......     2,847     (15,002)    (29,776)
  Provision for income taxes..............      (530)         --          -- 
                                          ----------- ----------- -----------
  Net income (loss).......................    $2,317    ($15,002)   ($29,776)
                                          =========== =========== ===========
  Per Share data:                                                            
    Net income (loss) per share                                              
      Basic...............................     $0.20      ($1.08)     ($2.12)
                                          =========== =========== ===========
      Diluted.............................     $0.16      ($1.08)     ($2.12)
                                          =========== =========== ===========
  Number of shares used to compute                                           
    per share data:                                                          
    Basic.................................    11,730      13,898      14,046 
                                          =========== =========== ===========
    Diluted...............................    14,157      13,898      14,046 
                                          =========== =========== ===========
</TABLE>

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


                                     Page 27

<PAGE>

                 Integrated Packaging Assembly Corporation
                     Statement of Shareholder's Equity
                               (In thousands)
<TABLE>
<CAPTION>

                                                          Accumulated
                                           Common Stock     Earnings
                                          Shares   Amount  (Deficit) Totals
                                         -------- -------- -------- --------
<S>                                      <C>      <C>      <C>      <C>     
 
Balance at December 31, 1995.............  2,530     $449  ($1,367)   ($918)
  Sales of common stock, net of issuance                                    
    cost of $935.........................  3,450   23,111       --   23,111 
  Conversion of Mandatorily Redeemable                                      
    Convertible Preferred Stock into                                        
    Common Stock.........................  7,862   15,981       --   15,981 
  Common stock issued under stock plans..     93      182       --      182 
  Common stock repurchased under stock                                      
    plans................................    (73)     (17)      --      (17)
  Issuance of warrants...................     --       57       --       57 
  Amortization of deferred compensation..     --       48       --       48 
  Net income.............................     --       --    2,317    2,317 
                                         -------- -------- -------- --------
Balance at December 31, 1996............. 13,862   39,811      950   40,761 
  Common stock issued under stock plans..    127      352       --      352 
  Common stock repurchased under stock                                      
    plans................................   (161)     (15)      --      (15)
  Issuance of warrants...................     --       94       --       94 
  Amortization of deferred compensation..     --       48       --       48 
  Net (loss).............................     --       --  (15,002) (15,002)
                                         -------- -------- -------- --------
Balance at December 31, 1997............. 13,828   40,290  (14,052)  26,238 
  Common stock repurchased under stock                                      
    plans................................    266      152       --      152 
  Common stock repurchased under stock                                      
    plans................................     (2)      (1)      --       (1)
  Issuance of warrants...................     --      132       --      132 
  Amortization of deferred compensation..     --       48       --       48 
  Net (loss).............................     --       --  (29,776) (29,776)
                                         -------- -------- -------- --------
Balance at December 31, 1998............. 14,092  $40,621  ($43,828) ($3,207)
                                         ======== ======== ======== ========
</TABLE>

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

                                     Page 28

<PAGE>

                  Integrated Packaging Assembly Corporation
                           Statement of Cash Flows
                           Increase (Decrease) Cash
                                (In thousands)
<TABLE>
<CAPTION>
                                                    Year Ended December 31,   
                                                 --------- --------- ---------
                                                   1996      1997      1998   
                                                 --------- --------- ---------
<S>                                              <C>       <C>       <C>      
 
Cash flows from Operating Activities:                                         
  Net income (loss)..............................   2,317   (15,002)  (29,776)
                                                                              
  Adjustments:                                                                
    Depreciation and amortization................   3,316     6,426     6,957 
    Write down of impaired assets................      --     3,000    18,200 
    Gain on sale of facilities, net..............      --        --      (827)
    Changes in assets and liabilities:                                        
      Accounts receivable........................  (3,238)    3,045       990 
      Inventory..................................     164      (360)      633 
      Prepaid expenses and other assets..........    (161)     (320)     (233)
      Accounts payable...........................     679     2,944    (3,323)
      Accrued expenses and other liabilities.....   1,921    (1,369)      633 
                                                 --------- --------- ---------
  Net cash provided by (used in) operating                                    
    activities...................................   4,998    (1,636)   (6,746)
                                                 --------- --------- ---------
Cash flows provided by (used in) investing                                    
activities:                                                                   
  Acquisition of property and equipment.......... (27,744)  (12,351)   (1,507)
  Purchase of short-term investments............. (25,025)       --        -- 
  Sales & redemption of short-term investments...  22,000     3,025        -- 
  Proceeds from sale of facilities, net..........      --        --     7,312 
                                                 --------- --------- ---------
    Net cash provided by (used in) investing                                  
      activities................................. (30,769)   (9,326)    5,805 
                                                 --------- --------- ---------
Cash flows provided by (used in) financing                                    
activities:                                                                   
  Payments under capital lease obligations.......  (1,593)   (1,958)     (990)
  Principal payments on note payable.............  (1,819)  (10,506)   (4,639)
  Proceeds from note payable.....................  16,300    10,200     3,490 
  Proceeds from issuance of common stock, net....  23,276       337       152 
                                                 --------- --------- ---------
    Net cash provided by (used in) financing                                  
      activities.................................  36,164    (1,927)   (1,987)
                                                 --------- --------- ---------
Net increase (decrease) in cash..................  10,393   (12,889)   (2,928)
Cash and cash equivalents at beginning of period.   5,424    15,817     2,928 
                                                 --------- --------- ---------
Cash and cash equivalents at end of period....... $15,817    $2,928       $-- 
                                                 ========= ========= =========
Supplemental disclosure of cash flow information                              
  Cash paid for interest.........................  $1,240    $2,074    $1,124 
Supplemental disclosure of noncash financing                                  
activities                                                                    
  Acquisition of equipment under capital leases..    $147        $0    $3,139 
  Issuance of warrants...........................     $57       $94      $132 
                                                                              
</TABLE>

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

                                     Page 29

<PAGE>
	
                INTEGRATED PACKAGING ASSEMBLY CORPORATION

                      NOTES TO FINANCIAL STATEMENTS 


NOTE 1-THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 

     Integrated Packaging Assembly Corporation (the "Company"), an independent 
semiconductor packaging foundry, was incorporated in California on April 28, 
1992 and reincorporated in Delaware on June 19, 1997. The Company assembles 
and packages integrated circuits from wafers consigned by its customers.  The 
Company's focus is on quad flat packages ("QFPs"), thin quad flat packages 
("TQFPs"), ball grid array packages ("BGAs") and chip scale packaging 
("CSPs"), which are used in complex integrated circuits with high pin-counts 
in the personal computer and telecommunications industries.  The Company's 
operations are considered a single business segment within the United States.

Basis of Presentation	

     As a result of a reduction in orders from the Company's customers, the 
Company has significant excess production capacity.  The reduction in revenues 
and underutilization of capacity and resultant underabsorption of fixed costs 
resulted in operating losses which have continued into 1999.  As a result of 
the operating losses and cost of capital additions, the Company believes that 
it will need additional financing to meet its projected working capital and 
other cash requirements through 1999.  While there can be no assurance that 
the Company can obtain such financing when needed, the Company has taken 
actions to improve liquidity.

     In June 1998, the Company was notified by the Nasdaq Stock Market that its 
common stock did not comply with Nasdaq's $1.00 minimum bid price requirement 
and that the Company's Common Stock would be delisted.  Effective November 18, 
1998, the Company's Common Stock was delisted from the Nasdaq Stock Market.  
The Common Stock of the Company is currently traded on the OTC Bulletin Board.

     At the end of the second quarter of 1998, the Company ceased making 
scheduled repayments of its debt balance outstanding relating to its Equipment 
Notes Payable and its capital leases. Certain of these debt facilities require 
that the Company maintain certain financial covenants.  The Company has been 
out of compliance with certain of these covenants since the second quarter of 
1998.  As a result of the covenant noncompliance and failure to make scheduled 
repayments, the entire balance due has been classified as a current liability 
since June 1998.

     In October 1998, the Company entered into an accounts receivable factoring 
agreement with its bank that replaced its bank line of credit.  The agreement 
was amended in December 1998, and provides, through June 1, 1999, for 
borrowings up to the lesser of $2.8 million or 80% of eligible accounts 
receivable.

     In December 1998, the Company obtained an additional $7 million bank line 
of credit.  This line, which is guaranteed by a third party, is available to 
finance operations and working capital needs through May 31, 1999.

     Certain of the Company's secured creditors commenced legal actions against 
the Company seeking monetary damages and recovery of the financed equipment.  
In connection with the December 1998 bank financing, the Company obtained 
forbearance agreements from the secured creditors through May 31, 1999.  The 
forbearance agreements require, among other things, that the Company make 
monthly payments through May 31, 1999.

                                     Page 30

<PAGE>


              INTEGRATED PACKAGING ASSEMBLY CORPORATION
                    NOTES TO FINANCIAL STATEMENTS

     The Company does not have any material defenses against these legal 
actions.  An adverse outcome in any of the actions would have a material 
adverse effect on the Company and if the Company forbearance agreements do not 
remain in effect for each of the lenders, the Company will be forced to seek 
protection under the bankruptcy laws or cease operations.

     The Company is in the process of determining compliance of its systems 
as part of a program to address the risks related to the Year 2000 problem.  
The ability of the Company to complete the program is dependant upon the 
availability of sufficient financial resources to address any issue that may 
arise.  An inability to address the Year 2000 problem may have a material 
adverse effect on the Company.

     The Company is currently seeking immediate additional financing, to
address its working capital needs and to provide funding for capital
expenditures.  There can be no assurance, however, that financing will be
available on terms acceptable to the Company, if at all.  If additional funds
are raised through the issuance of equity securities, the percentage ownership
of the Company's stockholders will be substantially diluted and such equity
securities may have rights, preference or privileges senior to those of the
holders of the Company's Common Stock.  If adequate funds are not available on
acceptable terms, the Company's business, financial condition and results of
operations would be materially adversely affected.  In such event, the Company
would be required to substantially curtail, cease or liquidate its operations
and reorganize its indebtedness.  Although the Company is pursuing additional
equity and debt financing, there can be no assurance that such financing will 
be obtained.  The Company is also evaluating the possible sale or merger of 
the Company, but there can be no assurance that such a transaction can be 
completed on terms acceptable to the Company, if at all.

     These financial statements have been prepared on a going concern basis
and, therefore, do not include any adjustment that might result from these
uncertainties.

Fiscal year

     In 1997, the Company changed its fiscal year end to December 31. Prior to 
1997, the Company's fiscal quarters and year ended on the Sunday nearest the 
calendar quarter end and December 31, respectively. For purposes of financial 
statement presentation, each fiscal year is presented as having ended on 
December 31 and each fiscal quarter is presented as having ended on the 
calendar quarter end.  Fiscal year 1996 consisted of 52 weeks or 364 days. 
Fiscal 1997 consisted of 367 days.  Fiscal 1998 consisted of 365 days.  The 
effect of the different number days in the fiscal years on revenues and net 
income (loss) was insignificant. 

Cash equivalents and short term investments

     The Company considers all highly liquid investments purchased with an 
initial maturity of 90 days or less to be cash equivalents, and investments 
with original maturities of greater than 90 days to be short term investments.  
As of December 31, 1997, $1.1 million of the Company's cash and cash 
equivalents were restricted as collateral for letters of credit issued during 
1997 for the purchase of equipment.  

Inventory 

     Inventory, which primarily consists of raw material supplies such as gold 
wire, lead frames and mold compound, is stated at the lower of cost, 
determined by the first-in, first-out basis, or market. The Company holds 
product on consignment from its customers while services are being performed. 

                                     Page 31

<PAGE>


              INTEGRATED PACKAGING ASSEMBLY CORPORATION

                    NOTES TO FINANCIAL STATEMENTS


Property and equipment 

     Property and equipment are recorded at cost. For certain production 
machinery and equipment acquired prior to 1997, depreciation is calculated 
using the units of production method, in which depreciation is calculated 
based upon the units produced in a given period divided by the estimate of 
total units to be produced over its life following commencement of use. Such 
estimate is reassessed when facts and circumstances suggest a revision may be 
necessary.  In all cases the asset will be fully depreciated by the end of its 
estimated six-year life.  In late 1996, due to lower than expected 
utilization, the Company reduced its estimates of the number of units to be 
produced over the useful equipment life.  Accordingly, the depreciation rate 
per unit was increased and was not material to 1996 results.  The higher rate 
continued into 1997 and will continue until the assets are fully depreciated.   
Depreciation for all other property and equipment and all production machinery 
and equipment acquired after 1996 is computed using the straight-line method 
over the estimated useful lives of the assets, generally 3 to 6 years.

     In December 1996, the Company acquired a real estate parcel and
facilities, including the building that it had operated in since 1993, for
$9.2 million.  The Company has allocated its purchase cost among land,
buildings and improvements in proportion to fair market value.  The building
was depreciated over 30 years, with building improvements depreciated over 5 to
15 years.  In January 1998, the real estate parcel and buildings on the parcel
were sold and the Company entered into a lease for the building that it
occupies.  See Note 5.

Revenue recognition 

     Revenue is generally recognized upon shipment. A provision for estimated 
future returns is recorded at the time revenue is recognized.

Income taxes 

     The Company accounts for income taxes using the asset and liability
approach which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in
the Company's financial statements or income tax returns.  In estimating future
tax consequences, the Company generally considers all expected future events
other than enactments of changes in the tax law or rates. 

Stock options 

     The Company accounts for stock-based compensation in accordance with 
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to 
Employees".  Accordingly, compensation for stock options is generally measured 
as the excess, if any, of the quoted market price of the Company's stock at 
the date of the grant over the amount an employee must pay to acquire the 
stock.  The Company adopted the disclosure only requirements of SFAS 123.

                                     Page 32

<PAGE>


                INTEGRATED PACKAGING ASSEMBLY CORPORATION

                      NOTES TO FINANCIAL STATEMENTS


Net income (loss) per share 

     The Company adopted Statement of Financial Accounting Standards No. 128, 
"Earnings Per Share" ("SFAS 128") during the fourth quarter of 1997.  This 
statement simplifies the standards for computing earnings per share (EPS) 
previously defined in Accounting Principles Board Opinion No. 15, "Earnings 
Per Share." All prior-period earnings per share data has been restated in 
accordance with SFAS 128. SFAS 128 requires presentation of both Basic EPS and 
Diluted EPS on the face of the Statement of Operations. Basic EPS is computed 
by dividing net income (loss) available to common shareholders (numerator) by 
the weighted average number of common shares outstanding (denominator) during 
the period.  Diluted EPS gives effect to all dilutive potential common shares 
outstanding during the period including stock options and warrants, using the 
treasury stock method, and convertible preferred stock, using the if-converted 
method. In computing Diluted EPS, the average stock price for the period is 
used in determining the number of shares assumed to be purchased from the 
exercise of stock options and warrants. 

                                     Page 33

<PAGE>



            INTEGRATED PACKAGING ASSEMBLY CORPORATION 

                  NOTES TO FINANCIAL STATEMENTS 

     Following is a reconciliation of the numerator and denominator of the
basic and diluted earnings per share computations under SFAS 128:


                                        
                    (In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                  Year Ended December 31,       
                                            ---------   ---------   ---------   
                                              1996        1997        1998      
                                           ----------- ----------- -----------  
<S>                                        <C>         <C>         <C>          
Basic EPS Computation:                                                          
Net income (loss)..........................    $2,317    ($15,002)   ($29,776)  
                                           =========== =========== ===========  
Weighted-average common shares outstanding.    11,730      13,898      14,046   
                                           =========== =========== ===========  
Basic earnings (loss) per share............     $0.20      ($1.08)     ($2.12)  
                                           =========== =========== ===========  
Diluted EPS Computation:                                                        
Net income (loss)..........................    $2,317    ($15,002)   ($29,776)  
                                           =========== =========== ===========  
Weighted-average common shares outstanding.    11,730      13,898      14,046   
                                                                                
Plus shares from assumed conversions:                                           
  Convertible preferred stock..............     1,310          --          --   
  Effect of dilutive options and warrants..     1,117          --          --   
                                           ----------- ----------- -----------  
Weighted-average common shares used for                                         
  diluted earnings (loss) per share........    14,157      13,898      14,046   
                                           =========== =========== ===========  
Diluted earnings (loss) per share..........     $0.16      ($1.08)     ($2.12)  
                                           =========== =========== ===========  
                                                                                
Antidilutive Securities*                                                        
Options and warrants outstanding at end of                                      
  period...................................       216       2,186       2,501   
                                           =========== =========== ===========  
                                                                                
Weighted-average exercise price............     $9.49       $3.04       $1.43   
                                           =========== =========== ===========  
</TABLE>

*  Antidilutive securities consist of options and warrants not included in the
computation of dilutive earnings per share because i) the exercise price of
each of these options was greater that the average market price of the 
Company's Common Stock during the period or ii) the Company incurred a net
loss during the period resulting in all options and warrants outstanding being
antidilutive.

Use of estimates

     The preparation of these financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities at the 
date of the financial statements and the reported amounts of revenues and 
expenses during the reporting period.  Actual results could vary from these 
estimates.

                                     Page 34

<PAGE>


                INTEGRATED PACKAGING ASSEMBLY CORPORATION 

                      NOTES TO FINANCIAL STATEMENTS 


Recently Issued Accounting  Standard:

     In June 1998, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments 
and Hedging Activities" ("SFAS 133").  SFAS 133 establishes a new model for 
accounting for derivatives and hedging activities and supercedes and amends a 
number of existing accounting standards.  SFAS 133 requires that all 
derivatives be recognized in the balance sheet at their fair market value, and 
the corresponding derivative gains or losses be either reported in the 
statement of operations or as a deferred item depending on the type of hedge 
relationship that exists with respect to such derivative.  Adopting the 
provisions of SFAS 133 are not expected to have a material effect on the 
Company 's financial statements.  The standard is effective for the Company in 
fiscal 2000.

                                     Page 35

<PAGE>


               INTEGRATED PACKAGING ASSEMBLY CORPORATION 

                     NOTES TO FINANCIAL STATEMENTS 


NOTE 2 - BALANCE SHEET COMPONENTS:
         (In thousands)

<TABLE>
<CAPTION>
                                                  December 31,     
                                              ---------  --------- 
                                                 1997       1998   
                                              ---------- ----------
<S>                                           <C>        <C>       
Inventory                                                          
  Raw Materials...............................   $2,176     $1,509 
  Work in process.............................      161        195 
                                              ---------- ----------
                                                 $2,337     $1,704
                                              ========== ==========
                                                                   
Property and equipment                                             
  Land........................................   $3,827        $-- 
  Buildings and improvements..................    8,890        701 
  Machinery and equipment.....................   42,784     29,533 
  Office and computer equipment...............      793        705 
  Furniture and fixtures......................      312        257 
  Deposits on machinery and equipment.........      595         -- 
                                              ---------- ----------
                                                 57,201     31,196 
  Less: accumulated depreciation..............  (11,074)   (17,266)
                                              ---------- ----------
                                                $46,127    $13,930 
                                              ========== ==========
                                                                   
Property and equipment acquired under capital                      
leases included above                                              
  Machinery and equipment.....................   $7,819     $8,688 
  Office and computer equipment...............       36         36 
  Furniture and fixtures......................       57         57 
                                              ---------- ----------
                                                  7,912      8,781 
  Less: accumulated depreciation..............   (3,919)    (5,052)
                                              ---------- ----------
                                                 $3,993     $3,729 
                                              ========== ==========
                                                                   
Accrued expenses and other liabilities                             
  Accrued payroll and related expenses........     $762       $771 
  Accrued income tax..........................      456        456
  Other accrued liabilities...................    1,751      1,581
                                              ---------- ----------
                                                 $2,969     $2,808
                                              ========== ==========
                                                                   
</TABLE>


                                     Page 36

<PAGE>


               INTEGRATED PACKAGING ASSEMBLY CORPORATION 

                     NOTES TO FINANCIAL STATEMENTS

NOTE 3-RESEARCH AND DEVELOPMENT ARRANGEMENT: 

     In February 1995, the Company joined a consortium (the "Consortium") of 
semiconductor companies which entered into a research and development contract 
with the Advance Research Projects Agency (ARPA), a United States Government 
agency. Under this agreement, ARPA will provide funds based on the completion 
of milestones approved by ARPA and the Consortium. The agreement expired in 
1997. Income generated from the research and development contract was 
recognized upon the completion of milestones, which approximates the 
percentage of completion method.  Accordingly, amounts totaling $228,000 and 
$123,500 were recognized under this agreement during 1996 and 1997, 
respectively, and included in interest and other income. Additionally during 
1996, the Company received $289,000 from ARPA which it used to reduce the cost 
of equipment acquired.  The Company is not obligated to repay funding 
regardless of the outcome of its development efforts; however, the agreement 
requires the Company to use its best efforts to achieve specified results as 
per the agreement. The Company retains ownership of the intellectual property 
developed under the contract. 

NOTE 4-EQUIPMENT IMPAIRMENT CHARGE:

     In March 1995, the FASB issued 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).  SFAS 121 requires that long-lived 
assets held and used by the Company be reviewed for impairment whenever events 
or changes in circumstances indicate that the net book value of an asset will 
not be recovered through expected future cash flows (undiscounted and before 
interest) from use of the asset.  The amount of impairment loss is measured as 
the difference between the net book value of the assets and the estimated fair 
value of the related assets.

     During the second quarter of 1998, the Company recorded charges related to
the impairment of its manufacturing equipment of $18.2 million.  These
adjustments related to recording reserves against the carrying value of 
manufacturing equipment.  The impairment is a result of continued adverse 
conditions in the semiconductor industry, and historical as well as forecasted 
manufacturing equipment underutilization, resulting in an estimation that the 
value of the manufacturing equipment will not be fully recovered.  The fair 
value of manufacturing equipment was based upon an independent estimate of 
fair values.

     During the second quarter of 1997, the Company took a $3 million charge
for impaired assets.  This charge included a $2.4 million reserve related to
equipment used for the production of certain products with limited future 
demand, and a $500,000 reserve for the cancellation of purchase orders for 
equipment which the Company has determined to be surplus in relation to 
current demand.


NOTE 5 - LEASING ARRANGEMENTS AND COMMITMENTS: 

     The Company leases certain machinery and equipment, office and computer 
equipment, and furniture and fixtures under long-term lease agreements which 
are reported as capital leases.  The terms of the leases range from three to 
five years, with options to purchase or release the equipment at the end of 
the respective lease terms. The Company intends to exercise such options.

     In June 1998, the Company entered in a capital lease for approximately
$3.1 million of production equipment.  The lease expires in 2002.  In
conjunction with the lease, the Company issued warrants to

                                     Page 37

<PAGE>


                INTEGRATED PACKAGING ASSEMBLY CORPORATION 

                      NOTES TO FINANCIAL STATEMENTS 

purchase 171,428 shares of common stock at $1.31 per share and are exercisable 
for seven years.  The warrants were valued at $132,000 using a Black-Scholes 
valuation model.

     At the end of the second quarter of 1998, the Company ceased making 
scheduled payments on its capital leases.  All of the lessors have commenced 
legal actions against the Company seeking monetary damages and recovery of
the leased equipment.  In December 1998, the Company obtained forbearance
agreements from the lessors through May 31, 1999.  All capital lease
obligations, including purchase options, are classified as current liabilities 
as of December 31, 1998.

     The Company incurred rent expense under a noncancelable operating lease 
until December 1996 when the Company purchased the facility it had been 
leasing. In January 1998, in connection with the sale of its facility (see 
Note 5), the Company entered into a noncancelable operating lease for the 
82,390 square foot building on the facility that it occupies.  The lease is 
for ten years, with options to extend.  In November 1997, the Company entered 
into a noncancelable operating lease for a 2500 square foot portion of a 
building for its plating operations.  The lease is for five years, with an 
option to extend.  Rent expense was $216,000, $46,000 and $1,054,000 in 1996, 
1997 and 1998, respectively.   

     Future minimum lease payments over the next five years and thereafter
under operating leases at December 31, 1998 are as follows (in thousands):


<TABLE>
<CAPTION>
                               Building 
                                Leases  
                              ----------
<S>                           <C>       
 
Year ending December 31:                
1999..........................   $1,059 
2000..........................    1,162 
2001..........................    1,166 
2002..........................    1,264 
2003..........................    1,370 
Thereafter....................    5,405 
                              ----------
Total minimum payments........  $11,426 
                              ==========
                                        
</TABLE>


     In 1993, 1994, 1996, and 1998 in connection with arranging capital leases, 
the Company issued to the lessors warrants to purchase an aggregate of 628,978 
shares of common stock at exercise prices ranging from $0.77 to $8.00. The 
estimated value of these warrants at the time of issuance, as determined by 
the Company, is being amortized as interest expense over the period the leases 
are outstanding. The warrants are exercisable at any time prior to 2001 
(28,750 shares), 2003 (100,000 shares), 2004 (328,800 shares) and 2005 
(171,428 shares).  None of the warrants had been exercised at December 31, 
1998. 

                                     Page 38

<PAGE>


             INTEGRATED PACKAGING ASSEMBLY CORPORATION

                   NOTES TO FINANCIAL STATEMENTS 


NOTE 6 - BANK DEBT and DEBT NOTES PAYABLE:

<TABLE>
<CAPTION>
                                 December 31,    
                              --------------------
                                1997      1998   
                              --------- ---------
<S>                           <C>       <C>      
 
  Bank debt...................     $--    $2,816 
  Bank term note payable......   2,375        -- 
  Equipment notes payable.....   9,766     8,583 
  Real estate loan............   6,601        -- 
                              --------- ---------
                                18,742    11,399 
  Less current portion........  (4,576)       -- 
                              --------- ---------
                               $14,166   $11,399 
                              ========= =========
                                                 
</TABLE>


Bank Debt

     In December 1997, the Company entered into a line of credit agreement 
with a bank, which provides, through December 1998, for borrowings up to the 
lesser of $5,000,000 or 80% of eligible accounts receivable.  At December 31, 
1997, no amounts were outstanding under this line of credit.  Borrowings under 
the line of credit accrued interest at the bank's prime rate (8.5% per annum 
at December 31, 1997) plus 1.25% and were collateralized by the assets of the 
Company.  The agreement required the Company to maintain certain financial 
covenants, including a liquidity ratio, minimum tangible net worth, maximum 
debt to tangible net worth, quarterly profitability and prohibits the Company 
from the payment of dividends without prior approval by the bank.  At December 
31, 1997, the Company was in compliance with such covenants.

     In October 1998, the Company entered into an accounts receivable 
factoring agreement with its bank that replaced its bank line of credit.  
Borrowings under the agreement are collateralized by the assets of the 
Company.  The agreement was amended in December 1998, and provides, through 
June 1, 1999, for borrowing up to the lesser of $2.8 million or 80% of 
eligible accounts receivable.  The bank charges an administration fee of 0.5% 
of the gross accounts receivable factored and a monthly interest charge of 
1.25% of the average balance owed.  As of December 31, 1998, the Company owed 
$1,461,000 under this agreement.

     In December 1998, the Company obtained an additional $7 million bank 
line of credit.  This line, which is guaranteed by a third party, is available 
to finance operations and working capital needs through May 31, 1999.  The 
line, which includes limits on monthly borrowings, accrues interest at the 
bank's prime rate (7 3/4% per annum at December 31, 1998).  As of December 31, 
1998, $1,355,000 was outstanding under this line.

Bank Term Note Payable

     The Company was in default under certain of the required financial 
covenants at the end of the second quarter of 1998 and the loan was paid in 
full August 1998.

                                     Page 39

<PAGE>


             INTEGRATED PACKAGING ASSEMBLY CORPORATION

                   NOTES TO FINANCIAL STATEMENTS 

Equipment Notes Payable

     In 1995 and 1997, the Company entered into borrowing facilities with a 
number of lenders, allowing the Company to finance 70% to 80% of the cost of 
collateralized machinery and equipment.  Borrowings under these facilities 
accrued interest at rates ranging from 7.75% to 14.0% per annum with terms 
ranging from 36 to 48 months.  Certain of the credit facilities require the 
Company to maintain certain financial covenants including minimum tangible net 
worth, quarterly revenues and quarterly income before taxes, depreciation and 
amortization (EBITDA).

     At the end of the second quarter of 1998, the Company ceased making 
scheduled payments on the equipment notes and was in default under certain of 
the required financial covenants.  All of the note holders have commenced 
legal actions against the Company seeking monetary damages and recovery of 
financial equipment.  In connection with the December 1998 bank financing, the 
Company obtained forbearance agreements from the note holders through May 31, 
1999.  All equipment note obligations are classified as current liabilities as 
of December 31, 1998.

Real Estate Loans

     In December 1996, the Company borrowed $6.5 million from a bank to 
provide temporary financing for the acquisition of its facilities.  The loan 
accrued interest at 2.25% over the rate for 30 day certificates of deposit and 
was collateralized by a certificate of deposit of equivalent value.  The 
Company has classified this loan as long-term at December 31, 1996 based on 
the refinancing disclosed as follows.

     On March 25, 1997, the Company closed a mortgage loan with an insurance 
company, which provided the Company with a $6.7 million five year term loan.  
The loan was secured by the land, buildings and improvements purchased in 
December 1996.  The loan accrued interest at 8.5% and was payable in equal 
monthly installments of $58,000 with a balloon payment of $5.9 million due 
after five years.  The proceeds of this mortgage loan were used to pay off and 
retire the $6.5 million real estate loan.  In January 1998, the Company sold 
its facility that consisted of land and two buildings with approximately 
138,336 square space of building space.  Net proceeds from the sale of the 
facilities were $7.3 million, net of the elimination of $6.6 million of 
mortgage debt, fees, commissions and closing costs.

     The Company is now leasing the approximately 82,390 square foot building 
on the facility that it occupies.  See Note 5.

Warrants

     In connection with the bank debt and various loan agreements, the 
Company issued to the lenders warrants to purchase an aggregate of 202,483 
shares of common stock at exercise prices ranging from $3.30 to $4.60.  The 
estimated value of these warrants at the time of issuance, as determined by 
the Company, is being amortized as interest expense over the terms of the 
loans.  The warrants are exercisable at any time prior to 2000 (21,740 
shares), 2002 (10,000 shares), 2004 (72,917 shares) and 2005 (97,826 shares).  
None of the warrants had been exercised at December 31, 1998.

                                     Page 40

<PAGE>


              INTEGRATED PACKAGING ASSEMBLY CORPORATION

                    NOTES TO FINANCIAL STATEMENTS 

NOTE 7 - STOCK PLANS: 

1993 Stock Option Plan

     In April 1993, the Board of Directors and shareholders adopted the 1993
Stock Option Plan (the "Plan") which as amended, provides for the grant of 
incentive stock options (ISOs) and nonqualified stock options  (NSOs) to
purchase up to 2,514,921 shares of Common Stock.  ISOs may be granted to
employees and NSOs may be granted to either employees or consultants.  In
accordance with the Plan, the stated exercise price shall not be less than 100%
and 85% of the estimated fair market value of Common Stock on the date of grant
for ISOs and NSOs, respectively, as determined by the Board of Directors. The
Plan provides that the options shall be exercisable over a period not to exceed
ten years and shall vest as determined by the Board of Directors. Substantially
all of the options vest 25% one year after the date of grant and 1/48 each
month thereafter.  Compensation expense of approximately $200,000 was
recognized on stock options granted between June and November 1995, and is
being amortized over the four year vesting period.

Director Stock Option Plan 

     In December 1995, the Company adopted a Director Stock Option Plan (the 
"Director Plan"). A total of 100,000 shares of Common Stock have been 
authorized for issuance under the Director Plan. The Director Plan provides 
for the grant of NSOs to non-employee directors of the Company. The Director 
Plan provides that each non-employee director who joins the Board will 
automatically be granted an NSO to purchase 20,000 shares of Common Stock on 
the date upon which such person first becomes a non-employee director (the 
"Initial Grant"). In addition, each non-employee director will automatically 
receive an NSO to purchase 5,000 shares of Common Stock upon such director's 
annual re-election to the Board, provided the director has been a member of 
the Board for at least six months upon the date of such re-election (the 
"Subsequent Grant"). The Initial Grant vests and becomes exercisable as to 
25% of the shares one year after the date of grant and as to 1/48 of the 
shares each month thereafter, and each Subsequent Grant shall become 
exercisable as to 1/12 of the shares each month following the date of grant, 
both subject to the director's continuous service.  The exercise price of all 
stock options granted under the Director Plan is equal to the fair market 
value of the Company's Common Stock on the date of grant. Options granted 
under the Director Plan have a term of ten years. Unless terminated sooner, 
the Director Plan will terminate in 2006. Options for 20,000 shares were 
granted in 1997 under the Director Plan.

1997 Non Statutory Stock Plan

     In October 1997, the Board of Directors adopted the 1997 Non-Statutory 
Stock Plan, which, as amended, provides for the grant of non-qualified stock 
options to purchase up to 750,000 shares of Common Stock.  The NSOs may only be
granted to non-executive officer employees.  In accordance with the Plan, the 
stated exercise price shall not be less than 85% of the estimated fair market 
value of the Common Stock on the date of grant of the NSO. The options shall 
be exercisable over a period not to exceed ten years and shall vest 25% after 
the year of grant and 1/48 each month thereafter.  Options for 463,000 shares 
were granted in 1998 under this plan. 

                                     Page 41

<PAGE>


               INTEGRATED PACKAGING ASSEMBLY CORPORATION

                     NOTES TO FINANCIAL STATEMENTS 

Repricing of Employee Stock Options

     As approved by the Board of Directors on January 27, 1998 and effective 
as of January 30, 1998, the Company allowed all employee holders of 
outstanding stock options to exchange higher priced  options for new stock 
options at an exercise price of $1.06 per share, the fair market value of the 
Company's Common Stock at the close of trading on January 30, 1998. Those 
options vested at the time of the exchange would vest on January 31, 1999, and 
those options unvested at the time of the exchange would vest on the original 
option schedule, but would not be exercisable until January 31, 1999.  Options 
for 1,035,124 shares were exchanged.

Restricted Common Stock

     In September 1995, 398,333 shares of restricted Common Stock were sold to
employees upon exercise of stock options then outstanding.  Each unvested share
of this restricted Common Stock is subject to repurchase by the Company at the
employees' exercise price if an employee terminates before such shares vest. In
1996 and 1997, respectively, 170,312 and 67,082 vested shares were converted
into unrestricted shares, and 73,750 and 55,314 shares were repurchased by the
Company from terminated employees. The remaining 31,875 restricted shares
outstanding were fully vested as of December 31, 1998.

1996 Employee Stock Purchase Plan

     The Company's 1996 Stock Purchase Plan (the "Purchase Plan") was adopted 
by the Company's Board of Directors and shareholders in December 1995, and 
became effective upon the closing of the Company's initial public offering on 
February 28, 1996.  Under the Purchase Plan, a total of 400,000 shares of 
Common Stock has been reserved for issuance to eligible employees.  The 
Purchase Plan allows employees to purchase shares through payroll deductions 
at 85% of the fair market value of the Common Stock at the beginning or the 
end of the applicable twelve-month purchase period. The Purchase Plan is 
intended to qualify as an "employee stock purchase plan" under Section 423 
of the U.S. Internal Revenue Code. Unless terminated sooner, the Purchase Plan 
will terminate ten years from its effective date.  During 1996, 1997, and 
1998, respectively, 25,062, 59,656 and 155,051 shares, respectively, were 
issued under the Plan.

                                     Page 42

<PAGE>


                INTEGRATED PACKAGING ASSEMBLY CORPORATION 
                      NOTES TO FINANCIAL STATEMENTS

Summary of Option Activity

     The following table summarizes the Company's stock option activity and 
related weighted average exercise price within each category for each of the 
years ended December 31, 1996, 1997, and 1998.


<TABLE>
<CAPTION>
                            1996                1997                1998
                    ------------------- ------------------- -------------------
                               Weighted            Weighted            Weighted
                               Average             Average              Average
                      Shares    Price     Shares    Price     Shares     Price
                    ---------- -------- ---------- -------- ----------- -------
<S>                 <C>        <C>      <C>        <C>      <C>         <C>     
Options outstanding                                                             
  at Jan. 1.........  550,633    $1.04    890,200    $4.85   1,599,154    $3.18 
Options granted.....  484,848    $8.74  1,295,745    $3.03   1,498,124    $1.02 
Options canceled....  (68,126)   $0.33   (519,829)   $5.90  (1,307,386)   $3.76 
Options exercised...  (77,155)   $6.04    (66,962)   $1.35    (109,895)   $0.22 
                    ---------- -------- ---------- -------- ----------- -------
Options outstanding
at Dec. 31........    890,200    $4.85  1,599,154    $3.18   1,679,997    $1.00
                    ========== ======== ========== ======== =========== =======
Options exercisable
at Dec. 31........    147,944    $0.88    219,400    $4.52     592,322    $0.91
                    ========== ======== ========== ======== =========== =======
Available for grant
at Dec. 31........    509,301             483,385              792,647
                    ==========          ==========          ===========

</TABLE>


     Significant option groups outstanding at December 31, 1998, after giving 
effect to the repricing discussed previously, and the related weighted average 
exercise price and remaining contractual life information are as follows:


<TABLE>
<CAPTION>
                                                                Weighted
                                                                Average
                                                               Remaining
Options with exercise         Outstanding        Exercisable      Life
prices ranging from:       Shares    Price    Shares    Price    (Years)
                         ---------- ------- ---------- ------- ----------
<S>                      <C>        <C>     <C>        <C>     <C>
 
$0.10 - $0.97............  337,404   $0.51    146,525   $0.32          8
$1.00 - $1.50............1,294,093   $1.06    436,806   $1.06          9
$1.59 - $3.50............   48,000   $2.54      8,637   $3.06          9
$9.50....................      500   $9.50        354   $9.50          7
                         ---------- ------- ---------- ------- ----------
Options outstanding
at Dec. 31...............1,679,997   $1.00    592,322   $0.91          8
                         ========== ======= ========== ======= ==========
                                                                            
</TABLE>


Fair Value of Stock Options and Employee Purchase Rights

     The Company has four stock option plans, which reserve shares of Common 
Stock for issuance to employees, officers, directors and consultants.  The 
Company applies APB Opinion 25 and related interpretations in accounting for 
its plans.  Accordingly, no compensation cost has been recognized in the 
accompanying statement of operations for the stock option plans, except for 
$200,000 which was recognized on stock options granted between June and 
November 1995, and which is being amortized over a four year vesting period.  
In January 1996, The Company adopted the disclosure only provisions of 
Statement of Financial Accounting Standards No. 123, "Accounting for Stock 
Based Compensation".

                                     Page 43

<PAGE>


              INTEGRATED PACKAGING ASSEMBLY CORPORATION 

                    NOTES TO FINANCIAL STATEMENTS

     For the Stock Option Plan, the fair value of each option grant  is 
estimated on the date of grant using the Black-Scholes option pricing model 
with the following weighted average assumptions used for grants in 1996, 1997 
and 1998 respectively: dividend yield of 0% in all three years; expected life 
of 4 years for each year; expected volatility of 57%, 65% and 65%; and risk-
free interest rates of 6.2%, 6.1% and 5.8%.   The weighted-average fair value 
of those stock options granted in 1996, 1997 and 1998 was $4.33, $1.72 and 
$0.55 per option, respectively.

     The fair value of the employees' purchase rights for the Purchase Plan, 
which was initiated on February 28, 1996, was estimated at the beginning of 
the offering period using the Black-Scholes option pricing model with the
following assumptions used for 1996, 1997, and 1998, respectively: dividend 
yield of 0%; an expected life of six months; expected volatility of 56%, 65% 
and 65%; and risk-free interest rate of 5.3%. The weighted-average fair value 
of these purchase rights granted in 1996, 1997 and 1998 was $2.20, $3.12 and 
$0.64, respectively, per right.

     Had the Company recorded compensation costs based on the estimated grant 
date fair value, as defined by SFAS 123, for awards granted under its stock 
option plans and stock purchase plan, the Company's net income (loss) and 
income (loss) per share would have been reduced to the following pro forma 
amounts (in thousands, except per share amounts):


<TABLE>
<CAPTION>
                                           1996        1997        1998    
                                        ----------- ----------- -----------
<S>                                     <C>         <C>         <C>        
Net income (loss) as reported...........    $2,317    ($15,002)   ($29,776)
Net income (loss), pro forma............    $1,923    ($15,708)   ($30,633)
                                                                           
Net income (loss) per share as reported                                    
  Basic.................................     $0.20      ($1.08)     ($2.12)
  Diluted...............................     $0.16      ($1.08)     ($2.12)
Net income (loss) per share, pro forma                                     
  Basic.................................     $0.16      ($1.13)     ($2.18)
Diluted.................................     $0.13      ($1.13)     ($2.18)
                                                                           
</TABLE>

     The pro forma amounts reflect compensation expense related to 1996, 1997 
and 1998 stock option grants and purchase rights only.  In future years, the 
annual pro forma compensation expense will increase relative to the fair value 
of stock options granted in those future years.

                                     Page 44

<PAGE>


               INTEGRATED PACKAGING ASSEMBLY CORPORATION 
                     NOTES TO FINANCIAL STATEMENTS

NOTE 8 - INCOME TAXES: 

     In 1997 and 1998, the Company incurred net operating losses and recorded 
no provision for income taxes. The tax provision for 1996 current taxes 
consists of the following (in thousands): 

<TABLE>
<CAPTION>
                              December 31,
                                 1996     
                              ----------  
<S>                           <C>         
 
Current:                                  
  Federal.....................      $13   
  State.......................      169   
                              ----------  
                                    182   
                              ----------  
Deferred:                                 
  Federal.....................      489   
  State.......................     (141)  
                              ----------  
                                    348   
                              ----------  
                                   $530   
                              ==========  
</TABLE>

     The tax provision reconciles to the amount computed by multiplying income 
before tax by the U.S. statutory rate (34%) as follows (in thousands):

<TABLE>
<CAPTION>
                                                
                                    December 31,
                                       1996     
                                    ----------  
<S>                                 <C>         
 
Provision at statutory rate.........     $968   
Benefits of carryforwards...........      (68)  
State taxes, net of federal benefit.      175   
Use of valuation allowance..........     (475)  
Other...............................      (70)  
                                    ----------  
                                         $530   
                                    ==========  
</TABLE>

     Deferred income tax assets comprise the following (in thousands): 

<TABLE>
<CAPTION>
                                           December 31,     
                                          1997       1998   
                                       ---------- ----------
<S>                                    <C>        <C>       
 
Federal and state credit carryforwards.   $1,689     $2,437 
Federal and state net operating loss                        
  carryforwards........................    8,631     14,282 
Provision for impaired assets..........       --      7,568 
Leases, treated as operating for tax...   (1,592)    (2,961)
Depreciation...........................   (3,165)    (4,154)
Reserves and accruals..................      587        763 
Other..................................     (201)       (16)
                                       ---------- ----------
Deferred tax assets (liability)........    5,949     17,919 
Less valuation allowance...............   (5,949)   (17,919)
                                       ---------- ----------
  Net deferred tax asset (liability)...      $--        $-- 
                                       ========== ==========
</TABLE>

                                     Page 45

<PAGE>

               INTEGRATED PACKAGING ASSEMBLY CORPORATION 

                     NOTES TO FINANCIAL STATEMENTS

     At December 31, 1998, the Company had federal and state net operating 
loss and tax credit carryforwards ("NOLs") of approximately $35,000,000 and 
$20,000,000, respectively, which can be used to reduce future taxable income.  
These NOLs expire through 2014, if not utilized.  The availability and timing 
of these carry forwards to offset the taxable income maybe limited due to the 
occurrence of  certain events, including change of ownership.

     The Tax Reform Act of 1996 limits the use of NOLs in certain situations 
where changes occur in the stock ownership of a company.  The Company 
experienced such an ownership change as a result of the Company's initial 
public offering in 1996, resulting in a limitation of the annual utilization 
of the NOLs generated through the date of the initial public offering.

NOTE 9 - CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS:

Concentration of credit risk

     The Company performs ongoing credit evaluations of its customers, which
are semiconductor companies, and maintains reserves for estimated credit
losses.  Write-offs of accounts receivable were insignificant in all periods
presented.  At December 31, 1997, four customers accounted for 19%, 15%, 13%
and 10%, respectively, of accounts receivable.   At December 31, 1998,  two
customer accounted for 27% and 16%, respectively.

Significant customers

<TABLE>
<CAPTION>
                                               Year Ended December 31, 
                                              ------- ------- -------  
                                               1996    1997    1998    
                                              ------- ------- -------  
<S>                                           <C>     <C>     <C>      
Customers comprising 10% or more of the                                
Company's revenues for the periods indicated:                          
    A.........................................     2%     14%     39%  
    B.........................................    32%     17%     11%  
    C.........................................    --%      1%     11%  
    D.........................................    14%     16%      1%  
    E.........................................    17%      4%      1%  
                                                                       
</TABLE>

NOTE 10 - LEGAL PROCEEDINGS:

     At the end of the second quarter of 1998, the Company ceased making 
scheduled repayments of its debt balance outstanding relating to its Equipment 
Notes Payable and its capital leases. Certain of these debt facilities require 
that the company maintain certain financial covenants.  The Company has been 
out of compliance with certain of these covenants since the second quarter of 
1998.  As a result of the covenant noncompliance and failure to make scheduled 
repayments, the entire balance due has been classified as a current liability 
since June 1998.

     Certain of the Company's secured creditors commenced legal actions against 
the Company seeking 

                                     Page 46

<PAGE>

             INTEGRATED PACKAGING ASSEMBLY CORPORATION

                   NOTES TO FINANCIAL STATEMENTS

monetary damages and recovery of the financed equipment.  In connection with 
the December 1998 financing, the Company obtained forbearance agreements from 
the secured creditors through May 31, 1999.  The forbearance agreements 
require, among other things, that the Company make monthly payments through 
May 31, 1999.

     The Company does not have any material defenses against these legal 
actions.  An adverse outcome in any of the actions would have a material 
adverse effect on the Company and if the Company cannot obtain further 
extensions from all of these Plaintiffs, it will be forced to seek protection 
under the bankruptcy laws or cease operations.

NOTE 11 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

Summarized quarterly financial data for 1997 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                                   
                              First    Second     Third    Fourth  
                            --------- --------- --------- ---------
<S>                         <C>       <C>       <C>       <C>      
1997:                                                              
Net revenues................  $5,575    $3,953    $4,214    $6,002 
Gross profit (loss).........    (920)   (1,086)   (1,244)   (1,095)
Net income (loss)...........  (2,473)   (6,088)   (3,271)   (3,170)
Net income (loss) per share                                        
  Basic.....................   (0.18)    (0.44)    (0.23)    (0.23)
  Diluted...................   (0.18)    (0.44)    (0.23)    (0.23)
                                                                   
1998:                                                              
Net revenues................   6,965     5,759     5,816     4,741 
Gross profit (loss).........  (1,450)   (2,142)   (1,114)   (1,127)
Net income (loss)...........  (2,406)  (21,943)   (2,637)   (2,790)
Net income (loss) per share                                        
  Basic.....................   (0.17)    (1.57)    (0.19)    (0.20)
  Diluted...................   (0.17)    (1.57)    (0.19)    (0.20)
                                                                   
</TABLE>

Per share amounts, based on average shares outstanding and potential
dilutive shares each quarter, may not add to the total for the year.

                                     Page 47

<PAGE>

Item 9.  Changes in and Disagreement with Accountants on Accounting and 
         Financial Disclosure
-----------------------------------------------------------------------   

	Not applicable.


                                     Page 48

<PAGE>


PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------  

          (a)  Executive Officers - See the section entitled "Executive
               Officers" in Part I, Item 1 hereof.

          (b)  The Company's Board of Directors consists of the following
               four (4) individuals:

<TABLE>
<CAPTION>

Name                            Age   Principal Occupation
----                            ---   --------------------
<S>                             <C>   <C>

Patrick Verderico..............  55   Chief Executive Officer and President of
                                      the Company
Philip R. Chapman..............  37   General Partner, Adler & Company
Gill Cogan.....................  47   General Partner, Weiss, Peck & Greer
Erice A. Young.................  43   General Partner, Canaan Partners

</TABLE>

   Except as set forth below, each director has been engaged in his principal 
occupation described above during the past five (5) years.  There is no family 
relationship among any directors or executive officers of the Company.

   Patrick Verderico joined the Company in April 1997 as its Chief Operating 
Officer and was appointed the Company's President and Chief Executive Officer 
and a director in July 1997.  From August 1996 to April 1997, Mr. Verderico 
was an independent business consultant.  From April 1996 to July 1996, Mr. 
Verderico was Chief Operating Officer and Executive Vice President of Maxtor 
Corporation, a disk drive manufacturer.   From January 1994 to March 1996, Mr. 
Verderico was Chief Financial Officer and Vice President Finance and 
Administration of Creative Technology, a multi-media company.  From October 
1992 to January 1994, Mr. Verderico was Chief Financial Officer and Vice 
President Finance and Administration of Cypress Semiconductor, Inc., a 
manufacturer of integrated circuits.  Prior to 1992, Mr. Verderico had various 
management positions in finance and operations with Coopers & Lybrand, Philips 
Semiconductors and National Semiconductor.  Mr. Verderico is also a director 
of Catalyst Semiconductor and Micro Component Technology, Inc.

   Philip Chapman has been a director of the Company since March 1993.  
Mr. Chapman has been a principal of Adler & Company, a venture capital 
management firm, since September 1991 and became a general partner of Adler & 
Company in January 1995.  From September 1989 to May 1991, Mr. Chapman was a 
senior consultant with Booz Allen & Hamilton International, a management 
consultant company. Mr. Chapman is also a director of Global Pharmaceutical 
Corporation and Shells Seafood Restaurants.

   Gill Cogan has been a director of the Company since March 1993. Mr. Cogan, 
a managing director of Weiss, Peck & Greer, L.L.C and a general partner of 
Weiss, Peck & Greer Venture Partners, L.P., has over 14 years of venture 
capital experience in computer software, communications and semiconductors.  
From 1986 to 1990, he served as a partner of Adler & Company, a venture 
capital group handling technology-related investments.  From 1983 to 1985, 
Mr. Cogan was chief executive officer of Formtek, Inc., an imaging and data 
management computer company.  He is also a director of Electronics for 
Imaging, Inc., P-Com Inc. and several privately held companies.

   Eric Young has been a director of the Company since June 1995.  Mr. Young 
was a co-founder of Canaan Partners, a venture capital investment firm, and 
has served as general partner since its inception in 1987.  From 1979 to 1987, 
Mr. Young held various management positions with General Electric Co. and G.E. 
Venture Capital, a venture capital investment firm and subsidiary of General
Electric.  Mr. Young is also a director of Spectrian Corporation, Visigenic
Software, Inc. and several privately held companies.

                                     Page 49

<PAGE>


          (c)  Section 16(a) Beneficial Ownership Reporting Compliance 

Based solely on its review of copies of filings under Section 16(a) of the 
Securities Exchange Act of 1934, as amended, received by it, or written 
representations from certain reporting persons, the Company believes that 
during fiscal 1998 all Section 16 filing requirements were met.

Item 11.  Executive Compensation
--------------------------------  

Compensation of Executive Officers

     The following table sets forth all compensation received for services
rendered to the Company and the Company's subsidiaries in all capacities 
during the last three fiscal years by (i) the Company's Chief Executive 
Officer and (ii) the three other executive officers of the Company whose total 
annual salary and bonus exceeded $100,000 during fiscal 1998 (collectively, 
the "Named Executive Officers"):


<TABLE>
<CAPTION>
                       Summary Compensation Table
                                                                    Long-term
                                                                   Compensation
                                                                      Award    
                                                                    Securities
                                                      Annual        Underlying
                                                  Compensation(1)   All Other
                                         Year   Salary     Bonus   Compensation
                                         ----- --------- --------- ------------
<S>                                      <C>   <C>       <C>       <C>
Patrick Verderico (2)....................1998  $318,269  $116,500           -- 
   Chief Executive Officer and President.1997   214,617    50,000      400,000 
                                                                               
Ernest G. Barrieau III (3)...............1998   190,956    48,985           -- 
   Executive Vice President, Sales and...1997    54,983    12,015      150,000 
   Marketing                                                                   
                                                                               
Gerald K. Fehr...........................1998   173,460    24,933      100,000 
   Executive Vice President, Operations..1997   183,996     6,000           -- 
   and Chief Technology Officer..........1996   143,000    25,000       10,000 
                                                                               
Alfred V. Larrenaga (4)..................1998   167,307    28,995           -- 
   Executive Vice President, Finance.....1997    53,538     6,000      125,000 
   and Chief Financial Officer                                                 
                                                                               
</TABLE>


--------------------------
(1)  Excludes perquisites and other personal benefits which for each Named 
Executive Officer did not exceed the lesser of $50,000 or 10% of the total 
annual salary and bonus for such officer during any fiscal year.

(2)  Mr. Verderico joined the Company in April 1997.

(3)  Mr. Barrieau joined the Company in October 1997.

(4)  Mr. Larrenaga joined the Company in July 1997.

Option Information

The following tables set forth information regarding stock options granted to
the Named Executive Officers during fiscal 1998, as well as options held by
such officers as of December 31, 1998.

                                     Page 50

<PAGE>

<TABLE>
<CAPTION>

                    Option Grants in Last Fiscal Year

                                                         Potential Realizable
                                                          Values at Assumed
                          Individual Grants (1)            Annual Rates of
                            % of                         Stock Price (Through
                           Total   Exercise              Expiration Date) (2)
                Option    Options    Price  Expiration    5% per     10% per               
Name            Grants    Granted   ($/sh)      Date       Year       Year
                -------   -------  -------- ----------   ---------  --------
<S>             <C>       <C>      <C>      <C>          <C>        <C>

Gerald K. Fehr  100,000    21.8%   $1.0625   01/27/08     $66,820   $169,335

</TABLE>

(1)  Each of these options was granted pursuant to the Company's 1993 Stock
     Option Plan (the "Option Plan") and is subject to the terms of such
     plan.  These options were granted at an exercise price equal to the
     fair market value of the Company's Common Stock as determined by the
     Board of Directors of the Company on the date of grant and, as long as
     the optionee maintains continuous employment with the Company, vest over
     a four year period at a rate of 25% of the shares subject to the option
     on the first anniversary of the date of grant and an additional 1/48th
     of the shares subject to the option at the end of each one-month period
     thereafter.

(2)  Potential gains are net of the exercise price but before taxes associated
     with the exercise.  Amounts represent hypothetical gains that could be
     achieved for the respective options if they were exercised at the end
     of the option term.  The assumed 5% and 10% rates of stock appreciation
     are based on appreciation from the exercise price per share.  These rates
     are provided in accordance with the rules of the Securities and Exchange
     Commission and do not represent the Company's estimate or projection of
     the future Common Stock price.  Actual gains, if any, on stock option
     exercises are dependent on the future financial performance of the
     Company, overall stock market conditions and the option holders' continued
     employment through the vesting period.


              Aggregated Option Exercises in Last Fiscal Year And
                       Fiscal Year-End Option Values

<TABLE>
<CAPTION>
                                             Number of            Value of
                                            Unexercised         Unexercised
                         Shares              Options at          Options at
                        Acquired           Fiscal Year End     Year End End
                           on     Value           (1)                (2)
Name                    Exercise Realized   Vested   Unvested  Vested  Unvested
                        -------- -------- ---------- -------- ---------- ------
<S>                     <C>      <C>      <C>        <C>      <C>        <C>
Patrick Verderico.......      -        -    166,667  233,333          -      -
Ernest G. Barrieau III..      -        -     43,750  106,250          -      -
Gerald K. Fehr..........      -        -      6,042  103,958          -      -
Alfred V. Larrenaga.....      -        -     41,667   83,333          -      -


</TABLE>

-----------------------
(1)  In January 1998, all outstanding options were exchanged for new options
     with an exercise price of $1.0625 per share, which represented the fair
     market value of the Common Stock on the date of approval for such
     repricing. 

(2)  The value of unexercised options at fiscal year end represents the
     difference between the exercise price of the options and the closing
     price of the Company's Common Stock on December 31, 1998 of $0.08 per
     share.  As of such date, the exercise price of such options was less
     than the fair market value of the Common Stock.

Ten Year Option Repricings

     The following table sets forth certain information with respect to the 
Company's exchange of outstanding options with its executive officers.  For 
further information with respect to such option exchanges, see "Report of the 
Compensation Committee of the Board of Directors."

                                     Page 51

<PAGE>


<TABLE>
<CAPTION>

                                                                     Length of
                                                                      Original
                                               Market               Option Term
                                   Securities Price of   Exercise    Remaining
                                   Underlying Stock at   Price at   (In Years)
                                    Options   Time of    Time of     at Date of
Name                       Date    Repriced   Repricing  Repricing   Repricing
------------------------ -------- ----------- ---------- ---------- -----------
<S>                      <C>      <C>         <C>        <C>        <C>
Patrick Verderico....... 01/27/98    300,000    $1.0625    $4.2500       9
                         01/27/98    100,000     1.0625     3.0625       9
Ernest G. Barrieau III.. 01/27/98    150,000     1.0625     2.0313       9
Gerald K. Fehr.......... 01/27/98     10,000     1.0625     8.7500       8
Alfred V. Larrenaga..... 01/27/98    125,000     1.0625     3.0625       9

</TABLE>


(1)  The market price of stock at the time of the repricing is the new exercise
     price of each such option.

Compensation of Directors

     Directors receive no cash remuneration for serving on the Board of 
Directors.  Non-employee directors participate in the Company's Director Stock 
Option Plan (the "Director Plan").  The Director Plan provides for the grant 
of nonstatutory stock options to non-employee directors.  A total of 100,000 
shares of Common Stock has been authorized for issuance under the Director 
Plan.  Each non-employee director who joins the Board will automatically be 
granted a nonstatutory option to purchase 20,000 shares of Common Stock on the 
date upon which such person first becomes a director (the "Initial Grant").  
In addition, each non-employee director will automatically receive a 
nonstatutory option to purchase 5,000 shares of Common Stock upon such 
director's annual re-election to the Board, provided the director has been a 
member of the Board for at least six months upon the date of such re-election 
(the "Subsequent Grant").  The exercise price of each option granted under the 
Director Plan must be equal to the fair market value of the Common Stock on 
the date of grant.  The Initial Grant vests over a four-year period, with 25% 
of the shares subject to the Initial Grant vesting on the first anniversary of 
the Initial Grant and the remainder vesting monthly thereafter, and the 
Subsequent Grant vests monthly over a 12 month period, in each case unless 
terminated sooner upon termination of the optionee's status as a director or 
otherwise pursuant to the Director Plan. In the event of a merger of the 
Company with or into another corporation or a consolidation, acquisition of 
assets or other change in control transaction involving the Company, each 
option becomes exercisable in full or will be assumed or an equivalent option 
substituted by the successor corporation. Unless terminated sooner, the 
Director Plan will terminate in 2006.  The Director Plan is currently 
administered by the Board of Directors. The Board has authority to amend or 
terminate the Director Plan, provided that no such action may impair the 
rights of any optionee without the optionee's consent.  No options were 
granted under the Director Plan in fiscal 1998.

Compensation Committee Interlocks and Insider Participation

     The Compensation Committee of the Board of Directors consists of Messrs. 
Chapman and Cogan, neither of whom is an officer or employee of the Company.  
No member of the Compensation Committee or executive officer of the Company 
has a relationship that would constitute an interlocking relationship with 
executive officers or directors of another entity.

Report of the Compensation Committee of the Board of Directors

     The Compensation Committee (the "Committee") is comprised of Messrs. 
Chapman and Cogan, each of whom is a non-employee director. The Committee 
sets, reviews and administers the Company's executive compensation program.
The role of the Committee is to establish and recommend salaries and other

                                     Page 52

<PAGE>

compensation paid to executive officers of the Company and to administer the
Company's stock option plans and employee stock purchase plan. The Committee
approves all stock option grants to executive officers, all executive officer
base salaries and any cash bonus payments to executive officers and reviews
all stock option grants to employees.

     The Company's executive pay programs are designed to attract and retain 
executives who will contribute to the Company's long-term success, to mesh 
executive and stockholder interests through stock option based plans and to 
provide a compensation package that recognizes individual contributions and 
Company performance.

     The Committee has determined that the most effective means of compensation 
are base salaries, incentive bonuses and long-term incentives through the 
Company's stock option programs.

     Base Salary.  The base salaries of executive officers are initially 
determined by evaluating the responsibilities of the position held and the 
experience and performance of the individual, with reference to the 
competitive marketplace for executive talent, including a comparison to base 
salaries for comparable positions in high growth, technology-based companies 
of reasonably similar size.  The Committee reviews executive salaries annually 
and adjusts them as appropriate to reflect changes in the market conditions 
and individual performance and responsibility.  During fiscal 1998, salaries 
for executive officers were increased by 6% to 8%.  The Chief Executive 
Officer's salary was increased from $300,000 to $325,000.

     Bonus.  The Company maintains a bonus plan for executive officers which 
provides for bonuses based on achievement of individual and company 
performance goals.  Specifically, each executive officer can earn from 50% to 
63% of his annual base salary in the form of incentive bonus payments if all 
company and individual performance goals are satisfied. The target Bonus 
factor for the Chief Executive Officers is 63%.  The bonus is based 50% upon 
achievement of individual performance goals and 50% upon achievement of 
company performance goals.  This bonus program reflects the Committee's view 
that bonuses should only be paid when the Company and the individual executive 
achieve predetermined performance goals.  Messrs.  Verderico, Barrieau, Fehr 
and Larrenaga were paid bonuses in 1998 in the amounts of $116,500, $48,985, 
$24,933 and $28,995, respectively.  All such bonuses were paid based on 
achievement of management business objectives.

     Stock Options.  Under the Company's Option Plan, stock options may be 
granted to executive officers and other employees of the Company.  Upon 
joining the Company, an individual's initial option grant is based on the 
individual's responsibilities and position.  The size of any annual stock 
option awards is based primarily on an individual's performance and 
responsibilities.  The Committee believes stock option grants are an effective 
method of ensuring that the executive is taking a longer term view of the 
Company's performance and that the executive's and the stockholder's interests 
are in alignment.

     The options granted to the Company's executive officers include a 
provision that provides that the options shall become fully vested and 
exercisable in the event of a change in control of the Company.  

     In January 1998, the Company's Board of Directors approved the repricing 
of options for all employees that held options with exercise prices in excess 
of $1.0625 per share and such employees were offered the opportunity to 
exchange such options for new options at $1.0625 per share, which was the fair 
market value of the Common Stock on the date of the approval.  In order to 
participate in the option exchange program, employees were required to not 
exercise their options until January 30, 1999.  The Board undertook this 
action in light of the reduction in the trading price of the Company's Common 
Stock and in consideration of the importance to the Company of retaining its 
employees by offering them appropriate equity incentives.  The Board also
considered the highly competitive environment for obtaining and retaining
qualified employees and the overall benefit to the Company's stockholders
from a highly motivated group of employees.

                                     Page 53

<PAGE>

     Other.  Other elements of executive compensation include Company-wide 
medical and life insurance benefits and the ability to defer compensation 
pursuant to a 401(k) plan.  The Company does not currently match contributions 
under the 401(k) plan.

     The Company's Chief Executive Officer does not receive any other special 
or additional compensation other than as described above.

     The Committee has considered the potential impact of Section 162(m) of the 
Internal Revenue Code and the regulations thereunder (the "Section").  The 
Section disallows a tax deduction for any publicly-held corporation for 
individual compensation exceeding $1 million in any taxable year for any of 
the Named Executive Officers, unless such compensation is performance-based.  
Since the cash compensation of each of the Named Executive Officers is below 
the $1 million threshold and the Committee believes that any options granted 
under the Option Plan will meet the requirements of being performance-based, 
the Committee believes that the Section will not reduce the tax deduction 
available to the Company.  The Company's policy is to qualify, to the extent 
reasonable, its executive officers' compensation for deductibility under 
applicable tax laws.  However, the Committee believes that its primary 
responsibility is to provide a compensation program that will attract, retain 
and reward the executive talent necessary to the Company's success.

     Consequently, the Committee recognizes that the loss of a tax deduction 
could be necessary in some circumstances.


                  Compensation Committee of the Board of Directors

                  Philip R. Chapman
                  Gill Cogan


Comparison of Total Cumulative Stockholder Return

     The following table sets forth the Company's total cumulative stockholder 
return as compared to the Standard & Poor's 500 Index and the Philadelphia 
Semiconductor Index for the period February 28, 1996 (the date of the 
Company's initial public offering) through December 31, 1998.  Total 
stockholder return assumes $100 invested at the beginning of the period in the 
Common Stock of the Company, the stocks represented in the Standard & Poor's 
500 Index and the stocks represented in the Philadelphia Semiconductor Index, 
respectively.  Total return also assumes reinvestment of dividends; the 
Company has paid no dividends on its Common Stock.

     Historical stock price performance should not be relied upon as indicative
of future stock price performance.

                                     Page 54

<PAGE>
                                       
<TABLE>
<CAPTION>
                                     2/29/96   12/31/96   12/31/97   12/31/98 
                                   ---------- ---------- ---------- ----------
<S>                                <C>        <C>         <C>        <C>
Historical stock price performance:

IPAC...............................   7.5000     8.0781     0.6250     0.0800 
                                                                              
S&P 500............................   644.75     740.74     970.43    1229.23 
                                                                              
Philadelphia Semiconductor Index...   196.45     240.30     263.63     350.56


Total cumulative stockholder return:

IPAC...............................    100        108         .08        .01
                                                                              
S&P 500............................    100        115         151        191
                                                                              
Philadelphia Semiconductor Index...    100        122         134        178
 
                                                                              
</TABLE>


                                     Page 55

<PAGE>



Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------ 

Principal Share Ownership

     As of April 19, 1999, the following persons were known by the Company to 
be the beneficial owners of more than 5% of the Company's Common Stock:


                                    
<TABLE>
<CAPTION>
                                                    Number      Percent  
                                                  ----------- -----------
<S>                                               <C>         <C>
Weiss, Peck & Greer Venture Partners (1).......... 2,524,009        17.9%
Gill Cogan                                                               
  555 California Street, Suite 4760                                      
  San Francisco, California 94104                                        
                                                                         
Entities Affiliated with Frederick R. Adler (2)...   977,624         6.9 
  1520 South Ocean Boulevard                                             
  Palm Beach, Florida 33480                                              
                                                                         
BankAmerica Corporation (3).......................   880,405         6.2 
  950 Tower Lane, Suite 700                                              
  Foster City, California 94404                                          
                                                                         
Canaan Partners (4)...............................   786,358         5.6 
Eric A. Young                                                            
  2884 Sand Hill Road                                                    
  Building 1, Suite 115                                                  
  Menlo Park, California 94025                                           
                                                                         
</TABLE>


------------
(1)  Includes 1,338,308 shares held by WPG Enterprise Fund, L.P. ("Enterprise
     Fund"), 967,228 shares held by Weiss, Peck & Greer Venture Associates II,
     L.P. ("VA II"), 206,975 shares held by Weiss, Peck & Greer Venture
     Associates II (Overseas) Ltd. ("Overseas") and 11,498 shares held directly
     by Mr. Cogan. Weiss, Peck & Greer Venture Partners II, L.P. ("VP II") is
     the general partner of Enterprise Fund, VA II and WPG Venture.

(2)  Based solely on information contained in a Schedule 13G/A filed with the
     Securities and Exchange Commission on February 11, 1999.  Includes 732,180
     shares held by Euro America-I, L.P. ("Euro America"), 203,514 shares held
     directly by Mr. Adler and 41,930 shares held by Catherine Adler, Mr.
     Adler's wife, as trustee for the benefit of Mr. Adler's minor children.
     Mr. Adler disclaims beneficial ownership of the shares held by Euro
     America, except to the extent that he derives a monetary benefit
     therefrom.  Mr. Chapman, a director of the Company, serves as a venture
     manager for Euro America.  Mr. Chapman holds no voting or dispositive
     control over shares held by Euro America, and he disclaims beneficial
     ownership of such shares.

(3)  Based solely on information contained in a Schedule 13G/A filed with the
     Securities and Exchange Commission on February 4, 1999.  Includes 697,865
     shares held by BankAmerica Ventures, 90,000 shares held by BankAmerica
     Capital Corporation, 87,540 shares held by BA Venture Partners I and 5,000
     shares held by NB Holdings Corporation.

(4)  Includes 391,304 shares held by Canaan S.B.I.C., L.P. ("SBIC"), 349,434
     shares held by Canaan Capital Offshore Limited Partnership C.V.
     ("Offshore"), 41,870 shares held by Canaan Capital Limited Partnership
     ("CCLP") and 3,750 shares directly held by Mr. Young.  Mr. Young is a
     director of the Company and is a general partner of each of SBIC, Offshore
     and CCLP.


Security Ownership of Management

     The following table sets forth the beneficial ownership of the Company's 
Common Stock as of April 19, 1999 (i) by each director of the Company, (ii) by 
the Company's Chief Executive Officer and the three other most highly 
compensated executive officers of the Company whose total annual salary and 
bonus exceeded $100,000 during fiscal year 1998 (collectively, "Named 
Executive Officers"), and (iii) by all current directors and executive 
officers as a group:

                                     Page 56

<PAGE>

<TABLE>
<CAPTION>
                                          Number       Percent
                                        of Shares      of Total
                                        ---------      --------
<S>                                     <C>            <C>
Gill Cogan (1).......................... 2,529,009      17.9%
Eric A. Young (2).......................   791,358       5.6 
Gerald K. Fehr (3)......................   703,450       5.0 
Patrick Verderico (4)...................   208,333        * 
Ernest G. Barrieau (5)..................    62,500        * 
Alfred V. Larrenaga (6).................    57,292        * 
Philip R. Chapman (7)...................    12,187        * 
All execuitve officers and                             
directors as a group (7 persons) (8).... 4,364,129      30.1 
                                                       
</TABLE>



*    Less than 1%

(1)  Includes shares held by funds affiliated with Weiss, Peck & Greer.
     Mr. Cogan disclaims beneficial ownership of all such shares, except as
     to the pecuniary interest therein arising from his interest in such
     funds.  See "Principal Share Ownership."  Also includes 5,000 shares
     issuable upon exercise of options to purchase Common Stock which are
     exercisable within 60 days of April 19, 1999.

(2)  Includes shares held by funds affiliated with Canaan Partners.  Mr. Young
     disclaims beneficial ownership of all such shares, except as to the
     pecuniary interest therein arising from his interest in such funds.  See
     "Principal Share Ownership."  Also includes 5,000 shares issuable upon
     exercise of options to purchase Common Stock which are exercisable within
     60 days of April 19, 1999.

(3)  Includes 40,625 shares issuable upon exercise of options to purchase
     Common Stock which are exercisable within 60 days of April 19, 1999.

(4)  Includes 208,333 shares issuable upon exercise of options to purchase
     Common Stock which are exercisable within 60 days of April 19, 1999.

(5)  Includes 62,500 shares issuable upon exercise of options to purchase
     Common Stock which are exercisable within 60 days of April 19, 1999.

(6)  Includes 57,292 shares issuable upon exercise of options to purchase
     Common Stock which are exercisable within 60 days of April 19, 1999.

(7)  Includes 63,027 shares held directly by Mr. Chapman and 12,550 shares
     held by Susan Chapman, Mr. Chapman's wife, in her name and as trustee
     for the benefit of Mr. Chapman's children.  Also includes 5,000 shares
     issuable upon exercise of options to purchase Common Stock which are
     exercisable within 60 days of April 19, 1999.

(8)  Includes 383,750 shares issuable upon exercise of options to purchase
     Common Stock which are exercisable within 60 days of April 19, 1999.


Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

          None.

                                     Page 57

<PAGE>



Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------------------------------------------------------------------------

14(a)  Exhibits
---------------

Exhibit
Number       Description of Document
-------      -----------------------  

3.1!         Restated Articles of Incorporation.
3.4!         Bylaws, as amended.
10.1!        Form of Indemnification Agreement.
10.2!*       1993 Stock Option Plan and form of Stock Option Agreement.
10.3!*       1996 Employee Stock Purchase Plan and form of Subscription 
             Agreement.
10.4!*       1996 Director Stock Option Plan and form of Stock Option
             Agreement.
10.5!        Registration Rights Agreement dated March 24, 1993, as amended.
10.6!        Lease Agreement dated June 16, 1993 between the Company and 
             WVP Income Plus VI.
10.7!        Sublease Agreement dated July 15, 1995 between the Company and
             Peripheral Computer Support, Inc.
10.8!        Loan and Security Agreement dated September 15, 1995 between 
             the Company and The CIT Group/Equipment Financing, Inc.
10.9!        Warrant to Purchase Series A Preferred Stock, issued to MMC/
             GATX Partnership No. 1 as of October 7, 1993, as amended.
10.10!       Warrant to Purchase Series A Preferred Stock, issued to 
             Phoenix Leasing Incorporated as of October 7, 1993.
10.11!       Warrant to Purchase Series A Preferred Stock, issued to
             Comdisco, Inc. as of March 10, 1994.
10.12!       Warrant to Purchase Series A Preferred Stock, issued to Silicon
             Valley Bank as of July 10, 1995.
10.13!       Warrant to Purchase Series A Preferred Stock, issued to Silicon
             Valley Bank as of July 10, 1995.
10.14!       Warrant to Purchase Series A Preferred Stock, issued to CIT
             Group/Equipment Financing, Inc. as of September 15, 1995.
10.15!       Warrant to Purchase Series A Preferred Stock, issued to
             Comdisco, Inc. as of January 3, 1996.
10.16!!      Sublease Agreement between the Company and Peripheral Computer
             Support dated March 8, 1996.
10.17!!!     Warrant to Purchase Common Stock, issued to MMC/GATX
             Partnership No. 1, dated September 5, 1997.
10.18!!!     Amendment to Warrant to Purchase Series A Preferred Stock,
             issued to MMC/GATX Partnership No. 1, dated September 5, 1997.
10.19!!!     Amendment to Warrant to Purchase Series A Preferred Stock,
             issued to MMC/GATX Partnership No. 1, dated September 5, 1997.
10.20!!!     Lease Agreement dtaed November 1, 1997, between the Company and
             Jaswinder S. Saini and Surinder K. Saini.
10.21!!!!    Purchase and Sale Agreement dated November 20, 1997, between 
             the Company and Lincoln Property Company N.C., Inc.
10.22!!!!    Lease Agreement dated January 20, 1997, between the Company and
             Lincoln Property Company N.C., Inc.
10.23*       1997 Nonstatutory Stock Option Plan and form of Stock Option
             Agreement.
10.24!!!!!   Amended and Restated Loan and Security Agreement dated December
             31, 1997 between the Company and Silicon Valley Bank.
10.25!!!!!   Warrant to Purchase Stock, issued to Silicon Valley Bank as of
             December 31, 1997.
10.26!!!!!!  Accounts Receivable Purchase Agreement dated October 27, 1998,
             between the Company and Silicon Valley Bank.
10.27!!!!!!  Accounts Receivable Purchase Agreement Modification Agreement 
             dated Decmeber 8, 1998, between the Company and Silicon Valley
             Bank.
10.28!!!!!!  Accounts Receivable Purchase Agreement Modification dated 
             December 16, 1998, between the Company and Silicon Valley Bank.
10.29!!!!!!  Loan and Security Agreement dated as of December 16, 1998,
             between the Company and Silicon Valley Bank.
23.1         Consent of PricewaterhouseCoopers LLP, Independent Accountants.
27.1!!!!!!   Financial Data Schedule.

!      Incorporated by reference from the Registrant's Registration
       Statement on Form SB-2 (file no. 333-326-LA), as amended, filed on
       January 17, 1996.
!!     Incorporated by reference from the Registrant's Quarterly Report on
       Form 10-Q for the quarter ended June 30, 1996.

                                     Page 58

<PAGE>

!!!    Incorporated by reference from the Registrant's Quarterly Report on
       Form 10-Q for the quarter ended September 30, 1997.
!!!!   Incorporated by reference from the Registrant's Current Report on
       Form 8-K, filed on January 30, 1997.
!!!!!  Incorporated by reference from the Registrant's Annual Report on
       Form 10-K, for the year ended December 31, 1997.
!!!!!! Incorporated by reference from the Registrant's Annual Report on
       Form 10-K for the year ended December 31, 1998.
*      Management contract or compensatory plan or arrangement required to be
       filed as an exhibit to this form.

(b)    Reports on Form 8-K.

       None		

(c)    Exhibits.

       See Item 14(a) hereof.

(d)    Financial Statement Schedules.

       All financial statement schedules have been omitted because they are
not applicable or the required information is shown in the financial statements
or the notes thereto.

                                     Page 59

<PAGE>




                                  SIGNATURES

   In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"), the Registrant caused this Amendment to its Report
on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on April 27, 1999.

                            INTEGRATED PACKAGING ASSEMBLY CORPORATION

                            By: /s/ ALFRED V. LARRENAGA
                                -------------------------------	
                                    Alfred V. Larrenaga
                                    Chief Financial Officer


   In accordance with the Exchange Act, this amendment has been signed below
on April 27, 1999 by the following persons on behalf of the Registrant and in
the capacities indicated.  



Signature                                 Title
---------------------------------- --------------------------------------

/s/ PATRICK VERDERICO *            President and Chief Executive Officer
----------------------------------
    Patrick Verderico              (Principal Executive Officer)

/s/ ALFRED V. LARRENAGA            Chief Financial Officer
----------------------------------
    Alfred V. Larrenaga            (Principal Financial and 
                                    Accounting Officer)

/s/ PHILIP R. CHAPMAN *            Director
----------------------------------
    Philip R. Chapman

/s/ GILL COGAN *                   Director
----------------------------------
    Gill Cogan

/s/ ERIC A. YOUNG *                Director
----------------------------------
    Eric A. Young


*By: /s/ ALFRED V. LARRENAGA            
     ----------------------------------
         Alfred V. Larrenaga
         Attorney-in-fact

                                     Page 60

<PAGE>