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

                                   FORM 10-KSB

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

         For the fiscal year ended February 28, 1998

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

         Commission File No.:  1-7948

                             AIC INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)
     
          Delaware                                     11-2192898
(State or other jurisdiction of                     (I.R.S. Employer
 incorporation or organization)                    Identification No.)

            117 East 57th Street, Room 21-H, New York, New York 10022
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:  (212) 838-3220

Securities registered pursuant to Section 12(b) of the Exchange Act:  None.

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

                     Common Stock, par value $.10 per share
                                (Title of Class)

     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 [ ] No [x]

     Indicate by check mark if disclosure of delinquent  filers pursuant 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-KSB or any  amendment to
this Form 10-KSB. [ ]

     The total revenue of the Company for fiscal 1998 was $13,478,000.

     The  aggregate  market  value  of  the  shares  of  Common  Stock  held  by
non-affiliates of the Company is unavailable.

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common equity, as of the latest practicable date:


      Class of                                                    Number of
    Common Equity                                                   Shares
    -------------                                                 ---------
    Common Stock                                                  4,207,379
    par value $.10


<PAGE>



                                     PART I

     Item 1. Business

     The Company

     AIC International,  Inc., and its subsidiaries (collectively the "Company")
are engaged in the importation, merchandising and wholesale distribution of high
quality  photographic  equipment.   Currently,   the  Company's  operations  are
conducted  exclusively  in  Germany,  through  Soligor  GmbH,  Foto Optik  Video
Elektronik (f/k/a A.I.C.  Fototechnik GmbH), a wholly-owned German subsidiary of
the Company's  wholly owned  subsidiary,  Allied Impex  Corporation,  a New York
corporation.  The Company does not  presently  conduct any  business  activities
other than Soligor GmbH.

     Historically,  the Company's  primary  business has been the sale of lenses
for 35mm  single  lens  reflex  (SLR)  camera,  which  has  declined  due to the
popularity of auto focus cameras and compact cameras.  In fiscal 1998, the sales
of  interchangeable  lenses for SLR cameras were at approximately the same level
as for fiscal 1997,  despite the stagnancy of the German domestic  market.  This
situation is expected to continue into fiscal 1999,  with the rising  popularity
of more advanced new models of cameras equipped with zoom lenses.

     Since 1989, the Company's domestic activities were comprised of maintaining
a small  administrative  office with a minimal staff. The Company has no present
plans to expand its  business  activities  in the U.S.;  however,  Soligor  GmbH
continues to remain active in the photographic industry. U.S. operating expenses
are funded through dividends from Soligor GmbH.

     Products

     The Company,  through Soligor GmbH,  markets Soligor  photographic  lenses,
autofocus  (shutter)  cameras,  electronic  flash  equipment and  accessories in
Germany and other European  countries on an exclusive  distributorship  basis, a
common practice in the industry. Most of the Company's photographic equipment is
intended for sophisticated amateur users, as well as professional photographers.
Equipment  sold by the Company is  manufactured  exclusively  for the Company by
various manufacturers in Japan, Hong Kong, Taiwan, Korea, and China. All Soligor
lenses,  as well as the other  equipment,  are  warranted  by the  Company.  The
periods of such  warranties vary from one to five years depending on the type of
equipment.

     The Company has been  marketing  and  distributing  Soligor  brand  lenses,
exposure  meters and  accessories  since 1956.  Accessories  available under the
Soligor name include tripods,  electronic flash units,  camera bags,  binoculars
and  optical  devices.  Soligor  sales  represented  approximately  84.6% of the
Company's overall consolidated sales for the fiscal year 1998 and 85% for fiscal
year 1997. The Company owns the Soligor  trademark and has registered it in many
countries around the world.

     Since 1972, Soligor GmbH has been the exclusive  distributor in Germany for
Elmo products,  formerly a manufacturer of film cameras and projectors,  who now
produces  AV  equipment  and CCD  surveillance  cameras  in  Japan.  Elmo  sales
represented 14.6% and 14.9%, respectively, of the Company's overall consolidated
sales for the fiscal years ended 1998 and 1997.

<PAGE>
     In 1986, the Company began purchasing flashes and winders for cameras to be
marketed by the Company and Soligor  GmbH under the name of Soligor from Maxwell
Electronics,  Ltd. ("Maxwell"),  a Hong Kong corporation all of whose shares are
owned by Daniel  C.K.  Yu,  Chairman  of the Board,  principal  shareholder  and
chairman of the Company.  Mr. Yu is also the sole  shareholder of AIC Investment
Ltd., a Hong Kong  corporation  which owns 77.6% of the Company's  Common Stock.
For  fiscal  years  1998  and  1997,  sales  of  Maxwell  products   represented
approximately  3% and 3.4%,  respectively,  of consolidated net sales of Soligor
products.  In the period from 1986 to March 1989,  Maxwell extended financing to
the Company and, as of February 28, 1998, was owed an aggregate of $1,468,620 by
the Company,  including  accrued  interest of $795,346.  See Note 8 to Financial
Statements.

     Distribution and Repair Operation

     The Company  distributes its merchandise by utilizing its warehouse located
in Leinfelden-Echterdingen near Stuttgart, Germany. Warranty repairs and service
operations  for the U.S.  are now being  performed on behalf of the Company by a
third party repairer.  Customers are billed for repairs made after expiration of
the applicable warranty period. The Company had liability for product warranties
for fiscal 1998 and 1997 of $83,000 and $96,000, respectively.

     Foreign Operations & Competitive Conditions:

     In spite of the  economic  upturn in Western  Europe  during  1997,  due to
rising  unemployment  and an increase in German taxes and social  security fees,
consumer  spending  in Germany,  especially  during the 1997  Christmas  season,
decreased.  As a result, the Company expects most of the photographic  industry,
especially technical consumer products,  to suffer.  Technical consumer products
under the Soligor name include optical goods,  photographic equipment, and video
and surveillance  equipment,  which are manufactured in Japan,  Korea, China and
Taiwan,  and distributed by Soligor GmbH worldwide.  Despite the downturn in the
technical  consumer area,  the Company's  German  subsidiary,  Soligor GmbH, had
revenues in fiscal 1998 of  approximately  DM24.1 million  compared to the prior
year's DM24.2 million.  The Company's  export turnover  increased 11.4% from the
previous  year,  with the  largest  share of  export  business  coming  from the
European Common Market and Eastern European states. However, the German domestic
market sales decreased by 6.3% from the previous year to DM15 million.  Sales in
the German  domestic  market  represent  62.8% of the Company's  total  revenue,
compared to the prior  year's  66.8%,  while  exports  represent  37.2% of total
revenue  compared to the prior year's 33.2%.  Due to unexpectedly  poor sales in
the 1997  Christmas  season,  the  inventories  at the end of  fiscal  year 1998
increased to DM6.6 million compared to the previous year's DM5.5 million.

     Since the  Company  expects  little  positive  change in the  economic  and
unemployment  situation  in Western  Europe  during  the next  fiscal  year,  no
increase  in  turnover  is  expected.  The  economic  turmoil in Asia in 1998 is
expected  to  lead  to  stronger  competition  throughout  these  countries.  In
addition,  the fluctuation in exchange rates will likely influence  competition.
Under the current  circumstances,  the Company  believes that the ability of the
market to absorb additional quantities of products is limited, which will likely
result in falling  sales  prices  and  turnover.  Furthermore,  the trend of the
photographic  industry  appears to be moving away from  specialty  stores with a
wide range of photographic  products and professional services to large sundries
markets  with limited  product  ranges and no expert  services.  To address this
trend,  Soligor GmbH plans to stimulate  sales by enlarging  its  assortment  of
optical and surveillance equipment items as well as digital cameras.

<PAGE>

     Material Licenses

     The Company has an exclusive distribution agreement with Elmo Co. Ltd. (for
an unstated  period of time) for the  distribution  of Elmo AV equipment and CCD
surveillance cameras in Germany.

     Employees

     As of February  28,  1998,  the Company  employed  one person in the United
States and Soligor GmbH employed 40 persons in Germany.

     Item 2. Properties

     The Company's  executive  office is located at 117 East 57th Street,  Suite
21H, New York,  New York 10022,  in a  condominium  owned by the Chairman of the
Board and  principal  shareholder  of the  Company and is occupied on a month to
month basis  pursuant to which the Company pays  building  maintenance  fees and
property taxes. In August 1997, the Company's German  subsidiary,  Soligor GmbH,
purchased  the office  building  located at  Schulze-Delitzsch  Str. 7, D-70711,
Leinfelder, Echterdingen, Germany, for DM 1,628,000.

     Item 3. Legal Proceedings

     The  inquiry  by the New  York  State  Tax  Department  regarding  taxes in
connection  with fiscal years 1980 through 1982,  which arose in connection with
the Company's  payment of deficiencies  assessed by the Internal Revenue Service
in February 1995, is still pending.

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

     None.


<PAGE>


                                     PART II

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

     The Company's  Common Stock, par value $.10 per share (the "Common Stock"),
was traded on the  American  Stock  Exchange  (APH) until March 9, 1985 at which
time it was delisted. To the best of the Company's knowledge, there is no active
trading market in the Common Stock. Accordingly, the Company is unable to obtain
price information for the Common Stock.

     The number of  recordholders of the Common Stock as of November 14, 1998 is
916.

     No cash or stock  dividends  were paid  during  fiscal  1997 and 1998.  The
future payment by the Company of dividends,  if any, is  discretionary  with the
Board  of  Directors  and  will  depend  upon the  Company's  earnings,  capital
requirements and financial  condition,  as well as other relevant  factors.  The
Company is not contractually restricted in its ability to pay dividends.

     Item 6.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operation

     Selected Financial Data

<TABLE>
<CAPTION>
                                                                      Year Ended
                                    Feb. 28           Feb. 28           Feb. 29            Feb. 28        Feb. 28
                                      1998              1997              1996               1995           1994
                                                          (000s omitted except per share data)
<S>                                 <C>               <C>               <C>                 <C>             <C>
Income Statement Data
Net Sales                           $13,478           $15,523           $14,274             $10,703         $9,916
Net Income (Loss)                       116                67               (36)               (592)          (125)
Average Number of
 Outstanding Shares                   4,207             4,207             4,207               4,207          4,207
Net Gain (Loss) Per Share of
Common Stock                            .03               .02              (.01)               (.14)          (.03)
Cash Dividends                         None              None               None               None           None
Balance Sheet Data
--------- --------
Total Assets                          6,821             5,408             5,735               6,377          6,312
Working Capital                       1,284             1,611             2,040               2,121          2,181
Long Term Obligations                   690                --               127                 133            105
Stockholders' Equity                  1,506             1,613             1,993               2,073          2,147
</TABLE>
<PAGE>


     Financial Condition of Discontinued Operations

     Maintaining the Company's  presence in New York,  which has been reduced to
minimal  operations,  is funded by dividends generated from the Company's German
subsidiary.  The Company  has no  intention  to operate  sales other than of the
German  subsidiary,  which has managed worldwide sales  successfully in the past
years.

     Results of Operations

     Due to the weakened  spending power of consumers in Germany,  the Company's
net sales decreased in fiscal 1998 by $2,045,434 to $13,477,823 from $15,523,257
in the prior year.  As adjusted for the  fluctuating  exchange  rate of the U.S.
Dollar  and the  German  Deutsche  Mark,  the sales  for  fiscal  1998  actually
decreased by DM55,360 to DM24,145,725 from DM24,201,085 in the prior year.

     Cost of Sales

     As a percentage of sales, the Company's cost of sales decreased to 67.1% in
fiscal  1998  from  69.1% in 1997.  The main  reason  for the  decrease  was the
fluctuation of exchange rate of the Deutsche Mark and Asian currencies.

     Operating Expenses

     The Company's total selling,  general and administrative expenses decreased
to  $3,175,000  from  $3,701,000  the  previous  year,  as a result of decreased
Soligor GmbH operating expenses and fluctuating of exchange rates.

     In fiscal 1998,  operating  expenses of Soligor GmbH decreased by DM154,800
(approximately U.S. $88,000) compared to the prior year.

     The Company  incurred  expenses of $110,000 in fiscal 1998 and  $112,000 in
fiscal 1997 in connection with maintaining a New York office.

     Taxes on Income

     Taxes on income for fiscal 1998 were  $411,000 and consist  principally  of
foreign income tax.

     The  Company  and  its  domestic   subsidiaries  have  net  operating  loss
carryforwards  of  approximately  $5,056,000 which is available to offset future
domestic  income through 2012.  The deferred tax assets  resulting from possible
utilization  of the net  operating  loss  carryforwards  have  been  offset by a
valuation   reserve  of  the  same  amount  because  of  uncertainty  of  future
realization.

     Summary

     In fiscal 1998, due to a stronger Deutsche Mark as compared to the Japanese
yen and other Asian currencies, lower purchasing costs of products resulted in a
net income of $116,000 compared to $67,000 in the prior year.

<PAGE>

     Liquidity

     The Company's  working  capital at February 28, 1998 was $1,284,000 and was
$1,611,000  at  February  28,  1997.  The ratio of  current  assets  to  current
liabilities  was 1.28 to 1 at February 28,  1998,  and 1.44 to 1 at February 28,
1997.

     Net cash  provided  by  operating  activities  was  $498,000 in fiscal 1998
compared to net cash  provided  by  operating  activities  of $736,000 in fiscal
1997. There will be no commitment of capital expenditures in fiscal 1999.

     Net cash for capital  expenditures in fiscal 1998 was $948,000  compared to
$60,000 in fiscal 1997.

     Net borrowings of $1,061,000 from banks in fiscal 1998 compared to net cash
repayments  to banks of $247,000 in fiscal 1997.  The Company  believes its cash
flow, working capital,  internally generated funds and the funds available under
its line of credit is sufficient to meet its current working capital needs.

     As of February 28, 1998,  the Company had access to several lines of credit
which aggregate to approximately DM7,500,000 ($4,314,000).  The credit lines are
also available for discounted  notes  receivable and for letters of credit.  Two
credit lines of DM2,500,000  ($1,378,000)  each are  collateralized by inventory
and accounts receivable, respectively of the German subsidiary.

     New Accounting Standards

     In June 1997,  the  Financial  Accounting  Standards  Board  issued two new
disclosure statements.

     Statement  of  Financial  Accounting  Standards  No. 130 ("SFAS No.  130"),
"Reporting  Comprehensive  Income",  establishes  standards  for  reporting  and
display of  comprehensive  income,  its  components  and  accumulated  balances.
Comprehensive  income is defined to include all changes in equity  except  those
resulting from investments by owners and  distributions  to owners.  Among other
disclosures,  SFAS No.  130  requires  that all items  that are  required  to be
recognized  under current  accounting  standards as components of  comprehensive
income be reported in a restated financial  statement that is displayed with the
same prominence as other restated financial statements.

     Statement  of  Financial  Accounting  Standards  No. 131 ("SFAS No.  131"),
"Disclosures  about  Segments of an Enterprise and Related  Information",  which
supersedes  SFAS  No.  14,  "Financial  Reporting  for  Segments  of a  Business
Enterprise",  establishes  standards for the way that public  enterprises report
information about operating  segments in interim restated  financial  statements
issued to the public.  It also establishes  standards for disclosures  regarding
products  and  services,  geographic  areas and major  customers.  SFAS No.  131
defines  operating  segments as components of an enterprise about which separate
financial  information  is available  that is  evaluated  regularly by the chief
operating  decision maker in deciding how to allocate resources and in assessing
performance.

     Both of these new standards are effective for restated financial statements
for  periods   beginning  after  December  15,  1997  and  require   comparative
information  for  earlier  years  to  be  restated.  The  Company's  results  of
operations and financial  position will be unaffected by implementation of these
new standards.

<PAGE>

     In February 1998, the Financial Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No.  132  ("SFAS  No.  132"),  "Employers'
Disclosures   about   Pensions  and  Other   Postretirement   Benefits",   which
standardizes the disclosure  requirements for pensions and other  postretirement
benefits.  The  adoption of SFAS No. 132 in 1998 is not  expected to  materially
impact the Company's current disclosures.

     Year 2000 Compliance

     The Year 2000  ("Y2000")  issue exists  because many  computer  systems and
applications  use two-digit date fields to designate a year. As the century date
change occurs, date sensitive systems may not be able to recognize the year 2000
or may do so  incorrectly  as the year 1900.  This  inability  to  recognize  or
properly  interpret  the year 2000 may  result in the  incorrect  processing  of
financial and operational information.

     The Company is  currently  in the  process of  evaluating  its  information
technology  infrastructure  for Y2000 compliance.  Based upon its identification
and  assessment  efforts  to date,  the  Company  believes  that  certain of its
computer  equipment and software that it currently uses may require  replacement
or  modification.  In  addition,  in the ordinary  course of replacing  computer
equipment and software, the Company is attempting to obtain replacements that it
believes  are Y2000  compliant.  Utilizing  internal  resources  to identify and
assess needed Y2000  remediation,  the Company  currently  anticipates  that its
Y2000  identification,  assessment,  remediation,  and testing  efforts  will be
timely completed, and that such efforts will be completed prior to any currently
anticipated impact on its computer equipment and software.  The Company does not
believe that the cost to modify its information technology  infrastructure to be
material  to its  financial  condition  or  results of  operations  nor does the
Company  anticipate  any material  disruption of its operations as a result of a
failure by the Company to be compliant.  However, there can be no assurance that
there will not be a delay in, or increased  costs  associated  with, the need to
address Y2000 issues.

     The Company also relies, directly and indirectly,  on other businesses such
as  third  party  service  providers,   creditors,  financial  institutions  and
governmental  entities.  The Company  may,  in the future,  be subject to claims
based on Y2000 compliance  issues related to products provided by third parties,
modifications to the Company's products made by third parties, or issues arising
from the integration of the Company's products with other products.  The Company
has not been  involved in any  proceeding  involving its products or services in
connection  with  Y2000  compliance,  however,  there is no  assurance  that the
Company will not, in the future,  be required to defend its products or services
in such proceedings against claims of Y2000 compliance issues, and any resulting
liability of the Company for damages could have a material adverse effect on the
Company's  business  operating  results  and  financial  condition.  Even if the
Company's  computer systems are not materially  adversely  affected by the Y2000
issue,  the Company's  business and  operations  could be  materially  adversely
affected by  disruptions  in the  operations  of other  entities  with which the
Company interacts.


     Item 7. Financial Statements

     This information is contained on Pages F-1 through F-17 hereof.

     Item 8. Changes in and  Disagreements  with  Accountants  on Accounting and
Financial Disclosure

     None.



<PAGE>


                                    PART III

     Item 9. Directors and Executive Officers of the Registrant

     Each of the  following  individuals  was a  director  of the  Company as of
February 28, 1998.
<TABLE>
<CAPTION>


                                        Position with the Company Business
                                        Experience During   the Past Five
                                        Years and    Other Public
          Name                  Age     Directorships                          Director Since

<S>                             <C>                                                 <C> 
Daniel C.K. Yu                  62      Chairman and Director of the                1986
                                        Company, Managing Director of
                                        Maxwell Electronics, Ltd.
James B. Wong                   66      Director and President of the               1987
                                        Company
Stephen P.Y. Chow               70      Director of the Company, Director           1987
                                        of Top-Q-A Development Ltd.,
                                        Top-Q-S Investment Ltd., P.Y. Chow
                                        (Secretaries) Ltd., P.Y. Chow
                                        (Consultants) Ltd. and Kiangsu and
                                        Chekiang Residents (H.K.)
                                        Association
Robert I. Campbell              50      President of Stratheden Investment          1988
                                        Ltd. of Monrovia, Liberia,
                                        Solicitor & Notary Public
                                        qualified in England & Wales, Hong
                                        Kong and Australia
</TABLE>

     The term of office of each  director  will  continue  until the next annual
meeting of stockholders or until his earlier death, resignation or removal.

     The  executive  officers of the Company as of February 28,  1998,  together
with their ages are:

Name                            Age           Office
James B. Wong                   66            President
Stephen Lai                     44            Secretary, Chief Financial Officer
                                              and Vice President
<PAGE>

     Item 10. Executive Compensation

     The  following  table  sets forth the  compensation  paid or accrued by the
Company during the three fiscal years ended February 28, 1998, February 28, 1997
and February  29, 1996 to the  Company's  President.  For the fiscal years ended
February 28,  1998,  February  28,  1997,  and  February 29, 1996,  no executive
officer received cash compensation in excess of $100,000.

                                             SUMMARY COMPENSATION TABLE

       Name and Principal Position           Year           Salary
       ---------------------------           ----           ------
James B. Wong...........................     1998           $36,000
 President..............................     1997           $36,000
                                             1996           $36,000

     The Company  also pays an annual  service fee of DM10,000 to members of the
Advisory Council of Soligor GmbH and a service fee of $3,000 to directors of the
Company.

     Item 11. Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth certain  information as of February 28, 1998
based on information  obtained from the persons named below, with respect to the
beneficial  ownership  of shares of Common Stock by (i) each person known to the
Company to  beneficially  own more than 5% of the  outstanding  shares of Common
Stock,  (ii) each executive  officer and director of the Company,  and (iii) all
officers and directors of the Company as a group.  Except as otherwise indicated
each  beneficial  owner has sole voting and  investment  power over such owner's
shares.
<TABLE>
<CAPTION>

                    Name                                    Shares                   Percent of Class
                    ----                                    ------                   ----------------
<S>                                                        <C>                             <C>  
AIC Investment Ltd., Hong Kong                             3,267,361                       77.6%
Estate of Rose Silverman, Forest Hills, New                 424,851                        10.1%
York
All Directors and Officers as a group                         01                            01
(five persons)
</TABLE>

     Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively, the "Reporting Persons")
to file reports of ownership and changes in ownership  with the  Securities  and
Exchange  Commission  and to furnish the Company  with copies of these  reports.
Based solely on the Company's  review of the copies of such forms received by it
during the Company's  fiscal year ended February 28, 1998, the Company  believes
that all filing  requirements  applicable to the reporting persons were complied
with.

     1 Does not include 3,267,361 shares owned by AIC Investment Ltd., Hong Kong
which is indirectly  controlled  by Daniel C.K. Yu,  chairman of the Board and a
Director of the Company.
<PAGE>

     Item 12. Certain Relationships and Related Transactions

     In 1986, the Company began purchasing flashes and winders for cameras to be
marketed by the Company and Soligor  GmbH under the name of Soligor from Maxwell
Electronics,  Ltd.  ("Maxwell").  Maxwell,  a Hong Kong corporation all of whose
shares are owned by Daniel C.K. Yu, Chairman of the Board, principal shareholder
and a  Director  of the  Company.  Mr.  Yu is also the sole  shareholder  of AIC
Investment  Ltd.,  a Hong Kong  corporation  which owns  77.6% of the  Company's
Common  Stock.  For  fiscal  years  1998 and  1997,  sales of  Maxwell  products
represented  approximately 3% and 3.4%, respectively,  of consolidated net sales
of Soligor  products.  In the period from 1986 to March 1989,  Maxwell  extended
financing to the Company and, as of February 28, 1998,  was owed an aggregate of
$1,468,620 by the Company, including accrued interest of $795,346.

     Item 13. Exhibits and reports on Form 8-K

     (a) EXHIBITS

3(i)     Certificate  of  Incorporation  of the  Company,  incorporated  by 
         reference  to Exhibit  3(a) to the  Company's  Registration
         Statement No. 2-29168.

3(ii)    Certificate of Amendment to Certificate of Incorporation of the Company
         incorporated  by reference to the Company's  Annual Report on Form 10-K
         for the fiscal year ended February 28, 1988.

3(iii)   By-Laws of the Company,  incorporated by reference to Exhibit 3(b) to 
         the Company's Registration Statement No. 2-29168.

22       Subsidiaries of the Company.

27       Financial Data Schedule

(b)(1)   REPORTS ON FORM 8-K

                  None.


<PAGE>


                                   SIGNATURES

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



                                              AIC INTERNATIONAL, INC.
                                                   Registrant



                                           By: /s/Stephen Lai             
                                               -----------------------------
                                               Stephen Lai, President


Dated:  February 10, 1999



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

<TABLE>
<CAPTION>

               Signature                                      Title                               Date
<S>                                        <C>                                              <C>
/s/ Daniel C.K. Yu                         Director and Chairman of the Board               February 10, 1999
------------------------
Daniel C.K. Yu 

/s/Stephen Lai                             President and Director                           February 10, 1999
------------------------
Stephen Lai

/s/John Chau                               Vice President, Secretary and Chief              February 10, 1999
------------------------                   Financial Officer
John Chau      

              
/s/ Stephen P.Y. Chow                      Director                                         February 10, 1999
------------------------
Stephen P.Y. Chow
                         
/s/ Robert I. Campbell                     Director                                         February 10, 1999
------------------------
Robert I. Campbell
</TABLE>
<PAGE>



                             AIC International, Inc.
                                and Subsidiaries
                        Consolidated Financial Statements
                     Years Ended February 28, 1998 and 1997




                                       F-1


<PAGE>


                             AIC International, Inc.
                                and Subsidiaries


                                    Contents




                                      
Report of independent certified public accountants                   F-3

Consolidated balance sheets:
   February 28, 1998 and 1997                                        F-4

Consolidated financial statements for the years
   ended February 28, 1998 and 1997:

      Statements of operations                                       F-5

      Statement of stockholders' equity                              F-6

      Statements of cash flows                                       F-7


Summary of accounting policies                                F-8 - F-10

Notes to consolidated financial statements                   F-11 - F-17

                                       F-2
<PAGE>


                             
                                       
Report of Independent Certified Public Accountants


AIC International, Inc.
New York, New York


     We  have  audited  the  accompanying  consolidated  balance  sheets  of AIC
International,  Inc. and  subsidiaries as of February 28, 1998 and 1997, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in  all  material  respects,  the  financial  position  of AIC
International,  Inc. and its subsidiaries at February 28, 1998 and 1997, and the
results  of their  operations  and their  cash flows for the years then ended in
conformity with generally accepted accounting principles.




/s/BDO SEIDMAN LLP
---------------------
BDO SEIDMAN LLP

Melville, New York
April 30, 1998

                                      F-3
<PAGE>


                             AIC International, Inc.
                                and Subsidiaries


                           Consolidated Balance Sheets
                      (000s omitted except per share data)


                                      
<TABLE>
<CAPTION>

Year ended February 28,                                                                         1998                        1997
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>                         <C>
Assets
Current:
   Cash                                                                                         $842                        $454
   Trade receivables, less allowances of $138 and $78 for possible                             1,159                       1,507
      losses (Note 5)
   Merchandise inventories (Note 5)                                                            3,655                       3,242
   Prepaid expenses and other current assets                                                     151                          95
------------------------------------------------------------------------- --------------------------- ---------------------------
           Total current assets                                                                5,807                       5,298
Property and equipment, at cost less accumulated depreciation and                                996                          91
   amortization (Note 2)
Other assets                                                                                      18                          18
------------------------------------------------------------------------- --------------------------- ---------------------------
                                                                                              $6,821                      $5,407
------------------------------------------------------------------------- --------------------------- ---------------------------
Liabilities and Stockholders' Equity
Current:
   Bank loans and current portion of long-term debt (Note 5)                                  $1,689                      $1,318
   Accounts payable - trade                                                                      153                         108
   Due to related party (Note 8)                                                               1,490                       1,353
   Income taxes payable                                                                          594                         309
   Other taxes payable                                                                           185                         198
   Liability for product warranties                                                               83                          96
   Accrued payrolls, commissions and other liabilities                                           329                         305
------------------------------------------------------------------------- --------------------------- ---------------------------
           Total current liabilities                                                           4,523                       3,687
Long-term debt (Note 5)                                                                          690                           -
Accrued pension costs (Note 7)                                                                   102                         107
------------------------------------------------------------------------- --------------------------- ---------------------------
           Total liabilities                                                                   5,315                       3,794
------------------------------------------------------------------------- --------------------------- ---------------------------
Commitments and Contingencies (Notes 6 and 7)
Stockholders' equity:
   Common stock, $.10 par - shares authorized, 10,000,000; issued,                               424                         424
      4,244,879
   Additional paid-in capital                                                                  6,720                       6,720
   Deficit                                                                                   (6,132)                     (6,248)
   Accumulated translation adjustment                                                            607                         830
   Treasury stock, at cost - 37,500 shares                                                     (113)                       (113)
------------------------------------------------------------------------- --------------------------- ---------------------------
           Total stockholders' equity                                                          1,506                       1,613
------------------------------------------------------------------------- --------------------------- ---------------------------
                                                                                              $6,821                      $5,407
------------------------------------------------------------------------- --------------------------- ---------------------------
</TABLE>
                                                                                
     See accompanying  summary of accounting  policies and notes to consolidated
financial statements.

                                      F-4
<PAGE>


                             AIC International, Inc.
                                and Subsidiaries


                      Consolidated Statements of Operations
                      (000s omitted except per share data)

                                       
<TABLE>
<CAPTION>

Year ended February 28,                                                                        1998                         1997
----------------------------------------------------------------------- ---------------------------- ----------------------------
<S>                                                                                         <C>                          <C>
Net sales (Note 3)                                                                          $13,478                      $15,523
Cost of sales (Note 8)                                                                        9,044                       10,720
----------------------------------------------------------------------- ---------------------------- ----------------------------
   Gross profit                                                                               4,434                        4,803
----------------------------------------------------------------------- ---------------------------- ----------------------------
Operating expenses:
   Selling, general and administrative (Notes 6 and 7)                                        3,175                        3,701
   Advertising                                                                                  572                          695
----------------------------------------------------------------------- ---------------------------- ----------------------------
      Total operating expenses                                                                3,747                        4,396
----------------------------------------------------------------------- ---------------------------- ----------------------------
      Income from operations                                                                    687                          407
----------------------------------------------------------------------- ---------------------------- ----------------------------
Other income (expense):
   Interest expense (Note 8)                                                                  (211)                        (227)
   Net foreign exchange gain                                                                     39                           70
   Other                                                                                         12                           95
----------------------------------------------------------------------- ---------------------------- ----------------------------
      Other income (expense) - net                                                            (160)                         (62)
----------------------------------------------------------------------- ---------------------------- ----------------------------
   Income before income tax expense (Note 3)                                                    527                          345
Income tax expense (Note 4)                                                                     411                          278
----------------------------------------------------------------------- ---------------------------- ----------------------------
Net income                                                                                     $116                          $67
----------------------------------------------------------------------- ---------------------------- ----------------------------
Net income per share -- basic and diluted                                                     $0.03                        $0.02
----------------------------------------------------------------------- ---------------------------- ----------------------------
Average number of shares used in computation of net income per share                      4,207,379                    4,207,379
----------------------------------------------------------------------- ---------------------------- ----------------------------
</TABLE>
                                                                                
     See accompanying  summary of accounting  policies and notes to consolidated
financial statements.

                                      F-5
<PAGE>


                             AIC International, Inc.
                                and Subsidiaries

                           Consolidated Statements of
                              Stockholders' Equity
                      (000s omitted except per share data)

                                      
<TABLE>
<CAPTION>


For the two years ended February 28, 1998
--------------------------------------------------- -------------------------------- ------------------- --------------------- ----
                                                         Common Stock
                                                       Authorized 10,000
                                                       Shares, $.10 Par
                                                    ----------------------------
                                                    Shares Issued      Amount   Additional   Deficit    Accumulated      Treasury
                                                                                 Paid-in                Translation       Stock,
                                                                                 Capital                Adjustment       At Cost
-----------------------------------------------------------------------------------------------------------------------------------
<S>            <C>                                     <C>              <C>      <C>        <C>           <C>             <C>   
Balance, March 1, 1996                                 4,245            $424     $6,720     $(6,315)      $1,276          $(113)
   Year ended February 28, 1997:
       Net income                                          -               -          -          67            -              -
       Foreign currency translation adjustment             -               -          -           -         (446)             -
-----------------------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1997                             4,245             424      6,720      (6,248)         830           (113)
   Year ended February 28, 1998
       Net income                                          -               -          -         116            -              -
       Foreign currency translation adjustment             -               -          -           -         (223)             -
-----------------------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1998                             4,245            $424     $6,720     $(6,132)        $607          $(113)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                                                               
     See accompanying  summary of accounting  policies and notes to consolidated
financial statements.

                                      F-6
<PAGE>


                             AIC International, Inc.
                                and Subsidiaries


                 Consolidated Statements of Cash Flows (Note 9)
                                 (000s omitted)

                                       
<TABLE>
<CAPTION>


Year ended February 28,                                                                        1998                         1997
-------------------------------------------------------------------- ------------------------------- ----------------------------
<S>                                                                                            <C>                           <C>
Cash flows from operating activities:
   Net income                                                                                  $116                          $67
   Items in net income not affecting cash:
      Depreciation and amortization                                                              43                           30
      Increase (decrease) in provision for possible losses on                                  (60)                            -
        accounts receivable
   Increase  (decrease)  in cash flows  from  changes  in  operating  assets and
      liabilities:
      Accounts receivable                                                                       408                         (27)
      Inventories                                                                             (413)                          287
      Prepaid expenses and other current assets                                                (56)                           79
      Accounts payable                                                                           45                          (2)
      Due to related parties                                                                    137                           97
      Income taxes payable                                                                      285                          226
      Other liabilities                                                                         (7)                         (21)
-------------------------------------------------------------------- ------------------------------- ----------------------------
        Net cash provided by operating activities                                               498                          736
-------------------------------------------------------------------- ------------------------------- ----------------------------
Cash flows from investing activities:
   Capital expenditures, net of proceeds from sale of equipment                               (141)                         (60)
-------------------------------------------------------------------- ------------------------------- ----------------------------
Cash flows from financing activities:
   Borrowings from bank                                                                       1,572                            -
   Repayments to banks                                                                      (1,318)                        (247)
-------------------------------------------------------------------- ------------------------------- ----------------------------
Net cash provided by (used in) financing activities                                            254                         (247)
-------------------------------------------------------------------- ------------------------------- ----------------------------
Effect of exchange rate changes on cash                                                       (223)                        (446)
-------------------------------------------------------------------- ------------------------------- ----------------------------
Net increase (decrease) in cash                                                                388                          (17)
Cash, at beginning of year                                                                     454                          471
-------------------------------------------------------------------- ------------------------------- ----------------------------
Cash, at end of year                                                                          $842                         $454
-------------------------------------------------------------------- ------------------------------- ----------------------------
</TABLE>
                                                                                
     See accompanying  summary of accounting  policies and notes to consolidated
financial statements.

                                      F-7
<PAGE>


                             AIC International, Inc.
                                and Subsidiaries


                         Summary of Accounting Policies
                      (000s omitted except per share data)

                                     
Organization and  Business

     The Company is a 77.6% owned subsidiary of AIC Investments, Ltd. which is a
wholly-owned  subsidiary of Maxwell Electronics,  Ltd. Its principal business is
the  importation,  merchandising  and  wholesale  distribution  of  photographic
equipment. The principal portion of its operations are in Germany.

Consolidation                    

     The  consolidated   financial   statements  include  the  accounts  of  AIC
International,  Inc. and its subsidiaries (all wholly-owned), with the exception
of its immaterial Hong Kong and Japanese subsidiaries.

Use of Estimates

     In preparing  financial  statements in conformity  with generally  accepted
accounting principles,  management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues and expenses  during the  reporting  periods.
Actual results could differ from those estimates.

Concentrations of Credit Risk

     Financial   instruments   which   potentially   subject   the   Company  to
concentrations of credit risk consist  principally of accounts  receivable.  The
Company engages in the sale of photographic equipment to customers, the majority
of whom are in the retail industry. Concentration of credit risk with respect to
accounts  receivable  from one  industry is limited due to the diverse  group of
distributors to whom the Company sells.  Also, the Company  attempts to minimize
credit risk by reviewing all customers'  credit history before extending credit,
and by monitoring  customers'  credit  exposure on a regular basis.  The Company
established an allowance for accounts  receivable based upon factors surrounding
the credit risk of specific customers, historical trends and other information.

Merchandise Inventory

     Inventories,  which consist only of finished goods, are valued at the lower
of cost or market. Cost is determined by the first-in, first-out (FIFO) method.
   
                                   F-8

<PAGE>

Property,  Equipment and Depreciation

     Depreciation and amortization are computed principally by the straight-line
method over the estimated useful lives of the assets.

Translation of Foreign Currency Financial Statements

     Substantially all assets and liabilities of the Company's German subsidiary
are  translated  at year-end  exchange  rates,  while  income and  expenses  are
translated at average  exchange rates for the year.  Gains and losses  resulting
from  translation of foreign currency  financial  statements are classified as a
separate component of stockholders' equity.

Product Warranties

     The Company  sells its products  with  warranties  ranging from one to five
years. The estimated cost of repairs under existing warranties has been provided
for in the consolidated financial statements.

Advertising Costs

     The Company expenses advertising costs when they are incurred.

Per Share Data

     In 1997, the Financial  Accounting  Standards Board issued Standard No. 128
("SFAS No. 128"),  Earnings per Share.  SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share.  Under the new standard  basic  earnings per share is computed  using the
weighted average number of shares of common stock  outstanding,  plus the shares
of common  stock  issued at nominal  considerations  for all periods  presented.
Diluted  earnings per share is computed using the basic weighted  average shares
of common stock issued plus outstanding stock options.  The adoption of SFAS No.
128 had no effect on earnings per share  because the Company has no  outstanding
stock options.

Statement of Cash Flows

     For purposes of the  statement  of cash flows,  the Company  considers  all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

Accounting  for  the  Impairment of Long-Lived Assets

     The Company reviews long-lived assets and certain identifiable  intangibles
for impairment  whenever  events or changes in  circumstances  indicate that the
carrying amount of an asset may not be recoverable.
   
                                   F-9

<PAGE>
New Accounting Standards

     In June 1997,  the  Financial  Accounting  Standards  Board  issued two new
disclosure  statements.

     Statement  of  Financial  Accounting  Standards  No. 130 ("SFAS No.  130"),
Reporting Comprehensive Income,  establishes standards for reporting and display
of comprehensive income, its components and accumulated balances.  Comprehensive
income is defined to include all changes in equity except those  resulting  from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting  standards as  components  of  comprehensive  income be reported in a
restated financial statement that is displayed with the same prominence as other
restated financial  statements.  

     Statement  of  Financial  Accounting  Standards  No. 131 ("SFAS No.  131"),
Disclosures  about  Segments of an  Enterprise  and Related  Information,  which
supersedes  SFAS  No.  14,  Financial  Reporting  for  Segments  of  a  Business
Enterprise,  establishes  standards for the way that public  enterprises  report
information about operating  segments in interim restated  financial  statements
issued to the public.  It also establishes  standards for disclosures  regarding
products  and  services,  geographic  areas and major  customers.  SFAS No.  131
defines  operating  segments as components of an enterprise about which separate
financial  information  is available  that is  evaluated  regularly by the chief
operating  decision maker in deciding how to allocate resources and in assessing
performance.

     Both of these new standards are effective for restated financial statements
for  periods   beginning  after  December  15,  1997  and  require   comparative
information  for  earlier  years  to  be  restated.  The  Company's  results  of
operations and financial  position will be unaffected by implementation of these
new standards. 

     In February 1998, the Financial Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  132  ("SFAS  No.  132")  Employers'
Disclosures about Pensions and Other Postretirement Benefits, which standardizes
the disclosure requirements for pensions and other postretirement  benefits. The
adoption  of SFAS No.  132 in 1998 is not  expected  to  materially  impact  the
Company's current disclosures.

                                      F-10
<PAGE>


                             AIC International, Inc.
                                and Subsidiaries

                              Notes to Consolidated
                              Financial Statements
                      (000s omitted except per share data)

                            
     1.Business


     Since  1988,  the  Company's   domestic   business   activities  have  been
substantially  curtailed  in order to reduce  operating  losses and the level of
operating  funds needed from the German  subsidiary.  During 1997 and 1998,  the
Company's   domestic   activities   were   comprised  of   maintaining  a  small
administrative  office and a minimum  staff.

     At present  there are no plans to expand the United  States  operations  to
prior  levels.  As a result,  Soligar  GmbH,  FotoOptikVideoElektronik,  Germany
(formerly A.I.C. Fototechnik GmbH) became autonomous, developed its own supplier
relationships and imports merchandise directly. The Germany subsidiary continues
to account for  substantially  all of the consolidated  1998 and 1997 assets and
revenues.  Management plans to continue operating the Company in this manner and
is funding the  operating  expenses in the United  States  with  dividends  from
Germany.

     2.Property and Equipment

     Major classes of property and equipment are as follows:
<TABLE>
<CAPTION>

February 28,                                      1998            1997     Estimated
                                                                         useful lives
-----------------------------------------------------------------------------------------
<S>                                               <C>               <C>         <C>     
Building                                          $898              $-          50 years
Office furniture and equipment                     403             334       4 -10 years
Leasehold improvements                               -              52     Term of lease
-----------------------------------------------------------------------------------------
                                                 1,301             386
Less accumulated depreciation and                (305)           (295)
       amortization
-----------------------------------------------------------------------------------------
                                                  $996             $91
-----------------------------------------------------------------------------------------
</TABLE>
     The amount shown under leasehold improvements in previous years will now be
shown  under  office  furniture  and  equipment  due to the  acquisition  of the
building on August 15, 1997.

                                      F-11
<PAGE>



     3.Information about the Company's Operations in Different Geographic Areas

     The  Company  operates  in  one  business  segment  - the  importation  and
wholesale  distribution  of  photographic  equipment.  Operations  in  different
geographic  areas are summarized on this page for 1998 and on the following page
for 1997.
<TABLE>
<CAPTION>


                                             1998
-----------------------------------------------------------------------------------------------
                                  Germany        United       Adjustments and      Consolidated
                                                 States       Eliminations
-----------------------------------------------------------------------------------------------
                                                                (in thousands)
<S>                               <C>               <C>                  <C>           <C>
Revenues:
  Sales to unaffiliated           $13,478            $-                  $-            $13,478
    customers
-----------------------------------------------------------------------------------------------
Income before income tax              764           413                 650                527
  expense
-----------------------------------------------------------------------------------------------
Identifiable assets:
  Current assets                    3,206         2,601                   -              5,807
  Property and equipment              996             -                   -                996
  Investment in                         -         4,302             (4,302)                  -
    subsidiary
  Other assets                          -            18                   -                 18
-----------------------------------------------------------------------------------------------
                                   $4,202        $6,921            $(4,302)             $6,821
-----------------------------------------------------------------------------------------------
</TABLE>


                                      F-12
<PAGE>



     3.Information about the Company's  Operations in Different Geographic Areas
(concluded)

<TABLE>
<CAPTION>


                                            1997
----------------------------------------------------------------------------------------------
                                 Germany        United     Adjustments and      Consolidated
                                                States       Eliminations
----------------------------------------------------------------------------------------------
                                                              (in thousands)
<S>                               <C>               <C>                <C>            <C>
Revenues:
    Sales to                      $15,523           $-                 $-             $15,523
       unaffiliated
       customers
----------------------------------------------------------------------------------------------
Income (loss) before                  525        (180)                  -                 345
  income tax expense
  (recovery)
----------------------------------------------------------------------------------------------
Identifiable assets:
  Current assets                    2,517        2,781                  -               5,298
  Property and equipment               90            1                  -                  91
  Investment in                         -        3,096            (3,096)                   -
    subsidiary
Other assets                            -           18                  -                  18
----------------------------------------------------------------------------------------------
                                   $2,607       $5,896           $(3,096)              $5,407
----------------------------------------------------------------------------------------------
</TABLE>


     4.Income Tax Expense

     Income tax expense consists of the following:

<TABLE>
<CAPTION>

                                                         1998                       1997
-----------------------------------------------------------------------------------------
<S>                                                       <C>                        <C>
Current:
   Federal                                                $-                         $-
   State                                                    4                          4
   Foreign                                                407                        274
-----------------------------------------------------------------------------------------
                                                         $411                       $278
-----------------------------------------------------------------------------------------
</TABLE>

                                      F-13

<PAGE>


     Reconciliations  for the  difference  between the reported tax expenses and
the  amounts  computed  by using the  statutory  Federal  income tax rate are as
follows:
<TABLE>
<CAPTION>


                                                             1998                    1997
------------------------------------------------------------------------------------------
<S>                                                          <C>                     <C> 
Federal income tax expense at statutory                      $179                    $117
   rate based on pretax income
Domestic losses which did not result in                        81                      61
   tax benefit (net operating loss
   carryforwards)
Foreign tax at rates higher than U.S.                         147                     100
   statutory rate
Other                                                           4                       -
------------------------------------------------------------------------------------------
                                                             $411                    $278
------------------------------------------------------------------------------------------
</TABLE>

     The  Company  and  its  domestic   subsidiaries  have  net  operating  loss
carryforwards  of  approximately  $6,056,  which is available  to offset  future
domestic  income through 2012.  The deferred tax assets  resulting from possible
utilization  of the net  operating  loss  carryforwards  have  been  offset by a
valuation reserve because of uncertainty of future realization.


                                      F-14
<PAGE>


     5.Bank Loans and Long Term Debt

     Bank loans  payable and long term debt consist of the following at February
28, 1998:
         
<TABLE>
<CAPTION>


                                                                   1998              1997
------------------------------------------------------------------------------------------
<S>                                                              <C>               <C>   
Bank demand loans with an average interest rate of               $1,572            $1,318
4.1% for 1998 and 3.04% for 1997
Mortgage with an interest rate of 4.7% per annum on                 162                 -
land and building with payments due monthly in the
amount of $9 through July 31, 1999
Mortgage with an interest rate of 4.75% per annum on                645                 -
land and building with payments semi-annually
starting March 2000 through September 2007, in the
amount of $40
------------------------------------------------------------------------------------------
                                                                  2,379             1,318
Less current portion                                              1,689             1,318
------------------------------------------------------------------------------------------
                                                                   $690                $-
------------------------------------------------------------------------------------------
</TABLE>

     Annual  maturities  of the  Company's  debt for the  next  five  years  and
thereafter are as follows:



1999                                                                      $1,689
2000                                                                         125
2001                                                                          81
2002                                                                          81
2003                                                                          81
Thereafter                                                                   322
--------------------------------------------------------------------------------
                                                                          $2,379
--------------------------------------------------------------------------------
                                        
     As of February  28, 1998 the Company had access to several  lines of credit
which aggregate to  approximately  DM 7,500 ($4,314).  The credit lines are also
available for discounted notes receivable and for letters of credit.  Two credit
lines of DM 2,500  ($1,378)  each are  collateralized  by inventory and accounts
receivable, respectively of the German subsidiary.

                                      F-15
<PAGE>


     6.Commitments and Contingencies

     (a) The Company rents office  equipment and motor vehicles under  operating
leases. Rent expense for the years ended February 28, 1998 and 1997 totalled $59
and $118, respectively.

Year ending February 28,
--------------------------------------------------------------------------------
1999                                                                         $63
2000                                                                          42
2001                                                                          22
2002                                                                          12
--------------------------------------------------------------------------------
                                                                            $139
--------------------------------------------------------------------------------

     (b) The  Company's  New York State income tax returns for 1980,  1981,  and
1982 are  presently  under  examination  by the New  York  State  Department  of
Taxation. At this time no adjustments have been proposed, and the Company has no
basis for determining the amount of any potential adjustment.

     7.Retirement Plan

     The Company's  unfunded  foreign  retirement plan provides  benefits to the
foreign subsidiary's directors based on length of service and compensation.  The
actuarial  present  value of vested plan  benefits at February 28, 1998 and 1997
aggregated  approximately  $102 and $107,  respectively.  Plan costs  charged to
expense for the years ended February 28, 1998 and 1997, were  approximately  $16
and $11, respectively. Payments are currently being made to the directors.

                                      F-16
<PAGE>


     8.Related Party Transactions

     Due to related parties are as follows:
<TABLE>
<CAPTION>


Year ended February 28,                                            1998              1997
------------------------------------------------------------------------------------------
<S>                                                              <C>               <C>   
Due to Maxwell Electronics, Ltd.                                 $1,468            $1,341
Due to other related entities                                        22                12
------------------------------------------------------------------------------------------
                                                                 $1,490            $1,353
------------------------------------------------------------------------------------------
</TABLE>

     Due to Maxwell  Electronics,  Ltd.  arose from the purchase of  merchandise
before March 1989. Interest on this indebtedness is accrued at the prime rate of
Hong Kong & Shanghai Banking Corp. Accrued interest thereon at February 28, 1998
and 1997 of $796 and $668, respectively, is included in the above Due to Maxwell
Electronics,  Ltd.  amounts.  Purchases from Maxwell  Electronics,  Ltd. for the
years ended  February 28, 1998 and 1997,  totalled $171 and $276,  respectively.
Interest  expenses  accrued to Maxwell  Electronics,  Ltd.  for the years  ended
February 28, 1998 and 1997, were $128 and $109, respectively.

     9.Supplemental Disclosures of Cash Flow Information

     (1) Cash paid during the year for:


                                                          1998              1997
--------------------------------------------------------------------------------
Interest                                                   $73              $123
--------------------------------------------------------------------------------
Taxes                                                       $-                $-
--------------------------------------------------------------------------------

     (2) Non cash transaction
                                      

     On August 15, 1997, the Company  purchased a building and secured mortgages
in the amount of $807.

                                      F-17