SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
   
                                 FORM 10-K405/A
    
[X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
               THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                                 OR

[_]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
              THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         FOR THE TRANSITION PERIOD FROM ______________ TO _____________

                         COMMISSION FILE NUMBER: 0-20406

                            EZCONY INTERAMERICA INC.
             (Exact name of registrant as specified in its charter)

     BRITISH VIRGIN ISLANDS                                    NOT APPLICABLE
 (State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                               Craigmiur Chambers
                                   P.O. Box 71
                   Road Town, Tortola, British Virgin Islands
                    (Address of principal executive offices)

                                                                       NONE
                                                                    (Zip Code)

       Registrant's telephone number, including area code: (507) 441-6566

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

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

                           COMMON STOCK, NO PAR VALUE

                                (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 X  No ___

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-K or any amendment to this
Form 10-K. [_]

The aggregate market value of the Common Stock held by non-affiliates of the
registrant as of March 29, 1999 was approximately $86,292 based on the $.125
closing sale price for the Common Stock quoted on OTC Bulletin Board on such
date. For purposes of this computation, all executive officers and directors of
the registrant have been deemed to be affiliates. Such determination should not
be deemed to be an admission that such directors and officers are, in fact,
affiliates of the registrant.

The number of shares of Common Stock of the registrant outstanding as of March
20, 1999 was 4,510,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents have been incorporated by reference into the
parts indicated: The registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the fiscal year covered by this report - Part III.


<PAGE>

                            EZCONY INTERAMERICA INC.

                                TABLE OF CONTENTS

                                                                           Page

                                     PART I

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

                                     PART II

Item 5.   Market for Registrant's Common Stock Equity and Related
               Stockholder Matters.......................................... 4
Item 6.   Selected Financial Data........................................... 5
Item 7.   Management's Discussion and Analysis of Financial Condition
               and Results of Operations.................................... 5
Item 8.   Financial Statements and Supplementary Data....................... 5
Item 9.   Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosures.................................... 5

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant................ 5
Item 11.  Executive Compensation............................................ 5
Item 12.  Security Ownership of Certain Beneficial Owners and Management.... 5
Item 13.  Certain Relationships and Related Transactions.................... 5

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.. 6

<PAGE>



                                                      PART I

ITEM 1.    BUSINESS

GENERAL

Ezcony Interamerica Inc. ("Ezcony" or the "Company") is a leading distributor to
Latin America of major brand name consumer electronics, including but not
limited to, Sony, Pioneer, AIWA, Samsung, Sharp, Motorola, Brother and Philips.
See "Major Brand Name Products."

The Company's consumer electronics products are sold principally to other
wholesalers and distributors as well as directly to retail chains. The Company
believes that it is one of the largest independent distributors of Sony and
Pioneer products to Latin America.

MARKET OVERVIEW

Since the Company began operations in 1982, the principal Latin American markets
for its products have varied significantly. The largest Latin American markets
for the Company's products in 1998 were Colombia, Venezuela, Paraguay, and
Ecuador.

The following table illustrates, for the periods presented, the changes in the
principal Latin American markets for the Company's products by sales volume (in
thousands) and percentage of total net sales from continuing operations. A
portion of the Company's sales were made through distributors and exporters
located in the United States, however, this means of distribution has been
substantially eliminated as of the end of fiscal 1998.

   
<TABLE>
<CAPTION>
                                        1998                               1997                                   1996

                          Amount                    %           Amount                  %           Amount                  %
<S>                    <C>                        <C>        <C>                      <C>        <C>                      <C>
Colombia               $     29,000                27        $   52,996                33        $   28,421                26
Venezuela                    18,120                17            12,099                 8             1,922                 2
Paraguay                     15,728                14            28,486                18            22,552                21
Ecuador                       8,015                 7            12,401                 8            10,816                10
Others                       38,067                35            52,841                33            45,035                41
                        -----------              ----         ---------              ----         ---------
      Total             $   108,930              100%         $ 158,823              100%         $ 108,746              100%
                         ==========              ===           ========                            ========
</TABLE>
    

For a variety of political and economic reasons, the importation of
non-essential items such as consumer electronics has been restricted or
prohibited from time to time by many Latin American countries through exchange
controls, import quotas and restrictions, tariffs and other means. Changes in
the trade policies of Latin American countries affect both the market for the
Company's products as well as the Company's ability to sell its products. Future
political and economic changes in particular Latin American countries, including
changes in exchange rates, import duties or quotas, imposition or lifting of
exchange controls and other import restrictions, are likely to result in changes
in the importance to the Company of particular countries.

As described above, the Company does a substantial amount of business in Latin
America and it believes it is in compliance with all applicable governmental
regulations. There are significant "country risks" which arise in connection
with this business, including those associated with the receipt of payment for
goods sold. Colombia, which represents a significant market for the Company, is
a country in which the United States Government has taken a particular interest
in monitoring the flow of funds, especially those involving "structured
payments," e.g., payment practices using a repetitive high volume of cash or
financial instruments in "round" amounts.

The Company experienced a loss as a result of a forfeiture dispute that arose
with the United States Government over certain structured payments received in
early 1998; the resolution of this matter was "recognized" for financial
purposes, in fiscal 1997. The Company has discontinued accepting this form of
payment in connection with its Colombian receivables. The Company does not
believe that this change in payment policy will materially or adversely affect
its business; however, there can be no assurance that other, similar forms of
payment will not be challenged by the United

                                        1

<PAGE>

States Government, or that the business done in Colombia by the Company will not
be materially affected by this governmental scrutiny.

The Company believes that the consumer electronics markets in Latin America
differ from similar markets in the United States. First, the Company believes
that in Latin America independent regional distributors are usually the
principal means of distribution of consumer electronics, unlike in the United
States where direct sales by manufacturers are more typical. Although most major
consumer electronics manufacturers have single-country distributors, operating
subsidiaries or joint ventures in the major Latin American countries,
independent regional distributors such as Ezcony still represent the predominant
channel for consumer electronic sales in Latin America. The Company expects that
over a period of time this means of distribution may well evolve into a system
more like that in the United States. Second, the Company believes that
state-of-the-art technology, while an important factor in marketing consumer
electronics in the United States, is less important in Latin America where
consumers generally are willing to purchase less advanced products for longer
periods of time. Finally, Latin American markets for consumer electronics
generally are less developed than in the United States. For example, products
such as televisions and radios have reached relatively low consumer penetration
levels in Latin America compared to that of the United States.

MAJOR BRAND NAME PRODUCTS

Ezcony distributes a wide range of major brand name consumer electronics,
including televisions, video cassette recorders, cellular products, automobile
audio equipment, personal portable stereos, home audio equipment, camcorders and
appliances. In 1998, sales of Sony, Pioneer, Samsung, and AIWA products
accounted for approximately 31%, 30%, 17% and 11%, respectively, of the
Company's total net sales.

Ezcony purchases most of its major brand name consumer electronics directly from
manufacturers. As is customary with independent distributors of consumer
electronics in Latin America, Ezcony has no written distributorship agreement or
arrangement with any manufacturer. The Company has a continuing relationship
with Sony for over 15 years. The Company has not experienced difficulty in
obtaining a satisfactory supply of marketable consumer electronics from Sony,
Pioneer, Samsung, and AIWA without having written distributorship or other
agreements. From time to time, the Company has purchased major brand name
consumer electronics from other sources, including other wholesalers and
distributors.

Most of the purchases of Sony and Pioneer products, are supplied from inventory
of these manufacturers located at their respective warehouses in the Colon
Panama Free Zone. This method of supply allows the Company to limit the amount
of inventory that it must keep on hand, the related inventory holding costs and
to reduce the lead time on the placement of orders for products. Sony, Pioneer
and Samsung extend the Company credit for its purchases; during 1998 AIWA
required the Company to pay cash for shipment of products which were purchased
directly from the Far East. At December 31, 1998, the Company's trade accounts
payable to Sony, Pioneer and Samsung were approximately $3.7 million, $1.6
million and $456,000, respectively.

Sales of Sony products accounted for approximately 31%, 33% and 37% of the
Company's major brand name product sales in 1998, 1997, and 1996, respectively.
Sales of Pioneer products accounted for approximately 30%, 34% and 36% of the
Company's major brand name products sales in 1998, 1997, and 1996, respectively.
Sales of Samsung products represented 17% and 9% of the Company's major brand
name products sales in 1998 and 1997 and was not part of the Company's major
brand name products in 1996. Sales of AIWA products accounted for approximately
11%, 12% and 14% of the Company's major brand name product sales in 1998, 1997
and 1996, respectively.

DISCONTINUED OPERATIONS

In August 1997, the Company's Board of Directors approved a plan to sell or
liquidate its noncore business subsidiary, New World Interactive, Inc. ("New
World Interactive") as part of an overall restructuring program designed to
focus the Company's resources on its core business, the distribution of consumer
electronics. New World Interactive ceased all operations December 31, 1997; in
this regard, during 1998 New World Interactive returned inventory to vendors
valued at approximately $50,000, and resolved a pending legal action against it.
The Company anticipates no further corporate action in this regard; however,
there can be no assurance that additional obligations of New World Interactive
will not be asserted against it.

                                        2

<PAGE>

   
In the third quarter of 1998, the Company decided to restructure its operations
by closing the facility in the United States and transferring the operations to
the Colon Free Zone, Panama, facilities. The Company recorded restructuring
charges totaling $250,759 to recognize severance and benefits for employees to
be terminated ($45,000), lease obligations ranging from a minimum of $20,800 to
a maximum of $137,259, legal fees ($17,500), and a provision for asset
impairment ($51,000).
    

SALES AND DISTRIBUTION

Ezcony sells its products primarily to wholesalers and distributors for re-sale
in Latin America. In addition, the Company sells directly to several Latin
American retail chains. Ezcony has a direct sales staff, which regularly calls
on and visits customers and prospective customers and assists the Company in
evaluating market conditions and customers' creditworthiness in their assigned
market areas.

In certain countries sales are made to a small number of customers, while in
other countries (such as Colombia) sales are made to approximately 150
customers. The Company's customers included distributors and exporters located
in the United States, most of whom re-export the Company's products directly to
Latin America; however, this aspect of the Company's distribution has been
significantly curtailed. During the last three fiscal years, no customers
accounted for more than 10% of the Company's total net sales.

The Company maintains warehouse facilities in Panama. During 1998 the Company
also leased a warehouse in Miami, Florida, and used on an "as needed" basis a
customs-bonded warehouse also in Miami; the Company ceased using these U.S.
facilities in the last quarter of 1998. Operating from a customs-bonded
warehouse in the Colon Free Zone allows the Company to import, store and export
products without incurring customs duties unless the products are sold locally.
See "Properties", below.

Generally, sales are recorded upon delivery of merchandise to the shipper. The
Company at times sells inventory while still on board vessels inbound from the
Far East. In these instances, inbound freight containers are transloaded in port
or at public warehouses for shipment to the Company's customers to minimize
warehousing and handling costs. Since products are normally shipped to its
customers shortly after receiving an order, the Company historically has not
maintained a significant backlog of orders relative to its sales.

CUSTOMER CREDIT

The majority of sales by the Company are made on open account terms, with
payment due within 30 to 60 days after receipt of goods by the customers. All
other sales are made on the basis of payment on or in advance of delivery of
merchandise to the shipper or upon receipt of a letter of credit. Certain sales
made by the Company are collected in cash and other negotiable instruments. The
Company requires payment in U. S. dollars for all of its sales. The Company
establishes credit limits for its customers based on its knowledge of the
customer, the customer's payment history with available trade references, market
conditions and other factors. The Company performs its own analysis of the
creditworthiness of its customers, as the credit reporting systems in Latin
America do not have an extensive base. In addition to the risks customarily
associated with extending credit, the Company has experienced losses from
uncollectible receivables due to the difficulty of pursuing judicial remedies in
most Latin American countries.

COMPETITION

The Company competes in the sale of consumer electronics with numerous
wholesalers and distributors, some of which have greater financial and other
resources than the Company. The Company believes that the most important
competitive factors in the sale of consumer electronics in Latin America are
extension of customer credit, price, quality and variety of merchandise and the
ability to obtain sufficient quantities of merchandise for immediate delivery.

EMPLOYEES

At December 31, 1998, the Company had 71 full-time employees, all in Panama. As
of that date, there were no employees in the United States. None of the
Company's employees are represented by a labor union and the Company has not
experienced any material work stoppages. The Company considers its relations
with its employees to be good.

                                        3

<PAGE>

GEOGRAPHICAL SEGMENT INFORMATION

See Notes to the Company's Consolidated Financial Statements, Part II, Item 8,
for geographical segment information regarding sales, assets and operating
income for 1998, 1997 and 1996.

ITEM 2.     PROPERTIES

In October 1997, the Company transferred its warehousing operations from two
leased warehouses to a 106,000 square foot warehouse in the Colon Free Zone. In
January 1998, the Company took occupancy of its new 16,140 square feet office &
showroom in the Colon Free Zone, which was completed at a cost of approximately
$1,235,000. The Company believes that the new warehouse and office & showroom
were needed to support the current operations and future growth; these
facilities are leased from "La Zone Libre De Colon" a governmental agency which
owns the land of the Colon Free Zone. The leases of the real property underlying
the warehouse and the office & showroom land expire on July 31, 2014 and October
31, 2016, respectively, and require annual payments of $12,952 and $6,811,
respectively. The leases can be renewed for a 20-year renewal term, at the
option of the Company at the rental rate and terms which are in effect for the
Colon Free Zone at the time of renewal.

ITEM 3.    LEGAL PROCEEDINGS

The Company is from time to time involved in routine litigation. The Company
believes that presently pending actions will not have a material adverse impact
on its financial position or results of operations.

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

No matters were submitted to a vote of security holders during the quarter ended
December 31, 1998.

                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON STOCK EQUITY
           AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock trades on "OTC Bulletin Board" under the symbol
"EZCOF". The following table sets forth the high and low sales prices for the
Common Stock for each quarter during the last two fiscal years as reported by
the Nasdaq National Market, and the "OTC Bulletin Board".

                                      1997                     1998

                                High         Low         High         Low

First Quarter   3/31        $   3.81     $   1.81      $ 2.19      $ 1.06
Second Quarter  6/30            3.13         2.25        1.06        0.63
Third Quarter   9/30            3.13         1.88        0.75        0.25
Fourth Quarter 12/31            2.75         1.88        0.31        0.13

The Company is not in compliance with the new market value of public float
requirement pursuant to NASD Marketplace Rule 4450 (a) (2), which became
effective February 23, 1998. Because of this deficiency, effective August 6,
1998, the Company's common stock was no longer included in the Nasdaq SmallCap
Market, and thereafter the Company's Common Stock began trading on the "OTC
Bulletin Board" market.

There were 73 shareholders of record of the Company's Common Stock on March 20,
1999.

                                        4

<PAGE>

The Company presently has no plans to pay any dividends on its Common Stock and
has never paid any dividends. All earnings will be retained for the foreseeable
future to support operations and to finance the growth and development of the
Company's business. The payment of future cash dividends, if any, will be at the
discretion of the Board of Directors of the Company and will depend upon, among
other things, future earnings, capital requirements, the Company's financial
condition and on such other factors deemed relevant by the Board of Directors.

The Company is not currently subject to any law or regulation of the British
Virgin Islands which would restrict or affect the remittance of dividends or
other payments to any holders of its Common Stock or which require tax
withholding from any United States holders of its Common Stock. There is no
reciprocal tax treaty between the British Virgin Islands and the United States
regarding withholding.

ITEM 6.    SELECTED FINANCIAL DATA

The selected financial data for each of the years in the five-year period ended
December 31, 1998 are derived from the Company's Consolidated Financial
Statements which have been prepared in accordance with generally accepted
accounting principles in the United States and have been audited by the
Company's independent accountants. The selected financial data should be read in
conjunction with the Company's Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Part II Item 7 of this Form 10-K405/A.

   
<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,

                                                1994(1)           1995(1)           1996(1)          1997           1998
                                                                   (in thousands, except per share data)
<S>                                            <C>               <C>               <C>            <C>            <C>
INCOME STATEMENT DATA:
Net sales - continuing operations              $ 104,322         $  77,529         $ 108,746      $ 158,823      $ 108,930
Operating income (loss) from
         Continuing operations                     1,848              (370)            2,596            929           (810)
Income (loss) from continuing operations           2,073               104             1,930           (933)        (2,944)
Income (loss) from discontinued operations          (848)             (385)             (852)        (2,609)          --
Net income (loss)                                  1,225              (281)            1,078         (3,541)        (2,944)

PER COMMON SHARE:
Income (loss) from continuing operations       $    0.46         $    0.02         $    0.43          (0.21)     $   (0.65)
Income (loss) from discontinued operations         (0.19)            (0.08)            (0.19)         (0.58)          --
                                               ---------         ---------         ---------      ---------      ---------
Net income (loss)                              $    0.27         $   (0.06)        $    0.24      $   (0.79)     $   (0.65)
                                               =========         =========         =========      =========      =========
Weighted average number of
         Common shares outstanding                 4,500             4,500             4,500          4,504          4,510
                                               =========         =========         =========      =========      =========
</TABLE>

<TABLE>
                                                  1994              1995              1996            1997          1998
                                               ---------         ---------         ---------      ---------      ---------
<S>                                            <C>               <C>               <C>            <C>            <C>
BALANCE SHEET DATA:
Working capital                                $   7,603         $   7,414         $   8,386      $   3,444      $   1,609
Total assets                                      33,996            29,336            37,542         56,929         32,631
Short-term debt                                    7,903             7,728            11,765         29,057         19,524
Long-term debt                                       574               519               458          1,717          2,732
Shareholders' equity                               8,940             8,659             9,737          6,208          3,264

<FN>
----------
(1) Amounts have been restated to reflect the discontinued operations of New
    World Interactive.
</FN>
</TABLE>
    

                                        5


<PAGE>

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

   
The "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein should be read in conjunction with the Consolidated
Financial Statements and the related Notes to Consolidated Financial Statements.

The financial information in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" refers to the continuing operations of the
Company and excludes the operations of New World Interactive.

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997

NET SALES. Net sales decreased 31% to $109 million in 1998 from $159 million in
1997. The decrease is primarily attributable to the decreased sales in the
Company's existing markets, as well as the winding up of business in the United
States of America. The Company has also reduced its product lines to eliminate
low selling brand names. Decreased sales to Colombia ($24 million decrease),
Paraguay ($13 million decrease), Ecuador ($4.4 million decrease) and various
other markets could not be offset by increased sales to Venezuela ($6 million
increase), Dominican Republic ($3.0 million increase) and Guatemala ($2.8
million increase).

During 1998, sales of Sony products decreased to $33.7 million or 31% of net
sales as compared to 1997 sales of $52.4 million or 33% of net sales. Pioneer
sales were $32.3 million in 1998 or 30% of net sales compared to $54.5 million
or 34% of net sales in 1997. Samsung represented a new brand name product line
for the Company in 1997 and contributed $18 million in net sales in 1998 as
compared to $13.8 million in net sales in 1997.

GROSS PROFIT. Gross profit decreased 35% to $7.1 million in 1998 from $10.9
million in 1997. The Company's gross profit margin decreased to 6.5% in 1998
from 6.9% in 1997. The decrease is primarily attributable to excess merchandise
in the markets in which the Company sells its products, which the Company
believes to be an indirect result of the current Asian economic crisis and as a
result of this increased competition the Company experienced a reduction in its
prices for goods sold and decreased margins.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased to $7.9 million in 1998 versus $10 million in
1997. Selling, general and administrative expenses were principally affected by
charges incurred by the Company in 1998 in connection with (i) decrease in
salaries and commissions, closing a sales office, and (ii) the implementation of
a severe austerity program to reduce operating expenses to the minimum.

INTEREST. Interest income increased from $454,102 in 1997 to $495,540 in 1998
due to higher average daily balances of restricted cash.

Interest expense increased from $2.2 million in 1997 to $2.9 million in 1998
from borrowings which were a result of decreased sales.

OTHER INCOME. Other income increased to $276,268 in 1998 from $175,509 in 1997.
This increase is primarily attributable to the additional rental income derived
from partially leasing the warehouse and the yearly increase of rental income
from property leased to third parties.

INCOME (LOSS) FROM CONTINUING OPERATIONS. Loss from continuing operations was
$2.9 million ($.65 per share) in 1998 compared to a loss from continuing
operations of $933,000 ($.21 per share) in 1997. The change was primarily due to
the decrease in gross profit margins because of increasing competition and the
decreased sales volume (principally because of an increased amount of "cheaper"
Asian products), higher provisions for doubtful accounts and higher interest
expenses.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operation through short-term bank
borrowings, trade credit and, to a lesser extent, internally generated funds.
The Company has decreased its bank borrowings during 1998 due to the decreased
sales resulting from deterioration in the economic environment of the foreign
countries in which it sells its goods.

                                        6

<PAGE>

The Company generated approximately $4.3 million in cash for operating
activities in 1998. This was primarily due to a decrease in trade accounts
receivables of $8.9 million primarily as a result of reduced sales on credit
which was offset in part by $11.7 million decrease in accounts payable and $6.9
million decreased inventory.

Cash provided for investing activities was approximately $4.2 million in 1998
primarily attributable to a decrease in restricted cash and capital expenditures
related to the purchase of the new warehouse, office and showroom.

Cash used for financing activities was approximately $8.5 million in 1998
principally due to the repayment of notes and acceptances due banks and long
term debt.

The Company receives open account credit from the majority of its principal
suppliers, with the exception of AIWA in amounts determined by such
manufacturers from time to time and are due on terms which range from 30 days to
90 days after receipt of inventory.

The Company continues to have good relationships with its principal suppliers,
Sony and Pioneer. At December 31, 1998 and 1997, the Company's credit facility
with Sony was $4.8 million which was partially collateralized by $2.4 million in
stand-by letters of credit. The Company's credit facility with Pioneer at
December 31, 1998, was $6 million which was partially collateralized by $1.9
million in stand-by letters of credit as compared to $2.5 million at December
31, 1997. From time to time both Sony and Pioneer have allowed the Company to
exceed its credit line above its stated amount. At December 31, 1998, the
Company's trade payable to Sony and Pioneer was approximately $3.8 million and
$1.6 million, respectively.

The Company finances its purchases of inventory from the Far East by opening
letters of credit to the suppliers up to 45 days in advance of shipment. Upon
receipt of inventory, the related letter of credit is converted to trade
acceptances, typically maturing within 120 to 180 days. The Company incurs bank
charges for the issuance and negotiation of letters of credit as well as
interest charges for the time the promissory notes are outstanding.

At December 31, 1998, the Company had outstanding $19.1 million in notes and
acceptances principally maturing at varying dates through 1999 at varying
interest rates based on LIBOR, IBOR and prime rate ranging from 8.8% to a rate
fixed at 10.3%.

The Company's short-term borrowings are partially collateralized by
approximately $4.5 million of time deposits owned by the Company. None of the
Company's lenders is under any obligation to continue to provide credit to the
Company under currently existing terms.

Management believes that the Company's ability to repay its indebtedness must be
achieved primarily through funds generated from its operations. The Company
intends to consolidate its borrowings in an effort to obtain lower interest
rates and reduce inventory carrying costs by factoring its trade accounts
receivables which would also limit the Company's exposures to credit, political
and transfer risks. There can be no assurances that the Company will be able to
consolidate its borrowings or finance its trade accounts receivables.

As the Company reduced sales in existing markets such sales were primarily made
on a credit basis as compared to cash basis. Therefore, the number of day's
sales in accounts receivable decreased to 64 days at December 31, 1998 from 72
days at December 31, 1997. Future political and economic changes in the Latin
American countries in which the Company sells, such as the imposition or lifting
of exchange controls, may affect the Company's ability to collect its accounts
receivable.

At December 31, 1998, the Company's working capital decreased to $1.6 million
from $3.4 million at December 31, 1997, primarily due to loss from continuing
operations and maintaining a lower inventory.

At December 31, 1998, and March 31, 1999, the Company had available with seven
banks an aggregate of $28 million in bank facilities of which $22.3 million and
$23.1 million, respectively, was utilized. From time to time, the Company is
overdue with various bank lenders for periods of a few days for amounts the
Company does not consider to be significant in light of the size of its
borrowings. All of the Company's lines of credit and credit facilities from its
various lenders are "on demand".

                                        7

<PAGE>

For a variety of political and economic reasons, the importation of nonessential
items such as consumer electronics has been restricted or prohibited from time
to time by many Latin American countries through exchange controls, import
quotas and restrictions, tariffs and other means. Accordingly, changes in the
trade policies of Latin American countries affect both the market for the
Company's products as well as the Company's ability to sell its products. The
ability of the Company to sustain continued sales growth is greatly dependent on
the continuing favorable economic and political climate of the Latin American
countries that it is currently operating in, the Company's ability to maintain
or increase the profit margins on its sales within the competitive market it
operates in, availability of payment methods to our customers, and, to a lesser
extent, product availability.

SEASONALITY

The Company's operations have historically been seasonal with generally higher
sales in the third and fourth fiscal quarters. Higher third and fourth quarter
sales result from increased sales to retail chains and in anticipation of the
Christmas holiday season. Sales may also vary by fiscal quarter as a result of
the availability of merchandise for sale. Therefore, the results of any interim
period are not necessarily indicative of the results that might be expected
during a full fiscal year.

FOREIGN EXCHANGE FLUCTUATIONS

Although fluctuations in foreign exchange rates could affect the Company's cost
of inventory, such fluctuations have not been material to the Company's results
of operations since the Company makes all its purchases in U.S. dollars.
Unforeseen fluctuations in foreign exchange rates could result in the Company's
customers being unable to meet their obligations since the Company requires
payment in U.S. dollars for all of its sales.

ASSET MANAGEMENT

In 1998, the Company's inventory turnover from continuing operations was 17
times compared to 14 times for the year ended December 31, 1997. The generally
high rate of inventory turnover benefits the Company by allowing it to maximize
its sales within its limitations in supplier and bank credit. The Company
generally does not maintain significant inventory of its products. At December
31, 1998 inventories were $2.2 million compared to $9.2 million at December 31,
1997, a decrease of 76%.

At December 31, 1998 trade accounts receivable were $19.3 million compared to
$31.5 million at December 31, 1997, a decrease of 38.9%. The decrease was
primarily due to the reduced level of sales which has primarily been on credit.
At December 31, 1998, the number of days of sales from continuing operations in
accounts receivable was 64 days compared to 72 days at December 31, 1997. This
decrease was principally due to an decrease in the extension of credit and terms
to existing customers over the prior year as a result of negative economic
developments in the countries in which the Company sells its products.

The Company grants credit to its customers after considering various factors,
including reputation, location, available financial information and the number
of years in business. No formal credit reporting is available for Latin American
companies. The Company closely monitors credit sales by monitoring each
customer's payment history and other relevant information.

YEAR 2000 ISSUES

The Company's year 2000 compliance issue, is comprised of two areas, business
applications and equipment. The business applications issue consists of the
Company's business computer systems, as well as the computer systems of third
party suppliers or customers, whose year 2000 problems could potentially impact
the Company. Equipment exposures consist of personal computers, system servers
and telephone equipment whose year 2000 problems could also impact the Company.
The Company's year 2000 project is comprised of three phases: assessment of
systems and equipment affected by the year 2000 issue; development of strategies
to address affected systems and equipment; and remediation of affected systems
and equipment. The Company is in the process of completing the assessment phase.
The Company's internal accounting package is currently not in year 2000
compliance; however, the Company can secure the software to bring the accounting
system into compliance for less than $50,000. The Company is still in the
assessment phase to determine what will be required of the Company's hardware to
bring the accounting system into

                                        8

<PAGE>

compliance. The Company does not believe that the year 2000 will have any impact
on its buyers; however, the Company will initiate communications with
significant suppliers, including SONY and Pioneer, and other customers to
determine the extent to which the Company will be affected by third-party year
2000 issues. The cost of the year 2000 initiatives is not expected to be
material to the Company's results of operations, financial position or cash
flows.

Implementation is expected to be completed before September 30, 1999.

FORWARD LOOKING STATEMENTS

From time to time, the Company publishes "forward-looking statements", within
the meaning of the Private Securities Litigation Reform Act of 1995, including
certain statements in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations," of this Form 10K, which relate to such
matters as anticipated financial performance, business prospects, technological
developments, new products and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the Company
notes that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. Such factors
include, among others: (i) the successful retrenchment of the Company's
operations in Panama, (ii) the general availability of credit from its principal
suppliers and banks to the Company to finance its inventory, specifically, the
continued cooperation of its major suppliers and its banks to provide credit,
and their forbearance from time to time as well as the successful consolidation
of the Company's borrowings; (iii) the discontinuation of certain non-profit
aspects of its business, e.g., certain products and customers; (iv) the
Company's ability to maintain or increase the profit margins on its sales within
the highly competitive markets in which it operates; (v) economic developments
in those foreign countries in which the Company conducts a material amount of
business, including Colombia, Paraguay, Ecuador and Venezuela, as well as in
those markets which are the source of competition, e.g., in Asia.
    
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   
Furnished.
    

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
           ON ACCOUNTING AND FINANCIAL DISCLOSURES

         The Company was formally advised in writing on December 2, 1998, that
its independent certified public accountants were withdrawing from their
engagement to audit the Company's financial statements. The accountants' report
on the Company's financial statements for the previous two years did not contain
any adverse opinion, or disclaimer of opinion, nor were any such reports
modified as to uncertainty, audit scope or accounting principles. Further, there
have been no disagreements with the former accountants on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which disagreement, if not resolved to the satisfaction of
the accountants, would have caused the accountants to make reference to the
subject matter of the disagreement(s) in connection with their report(s) thereon
during the Company's two most recent fiscal years and the subsequent interim
period through December 2, 1998 (the date of the former accountant's
resignation). A copy of the accountants' resignation letter appears as an
exhibit hereto.

                                    PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The information with respect to directors and executive officers of the Company
is incorporated by reference to the Company's Proxy Statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A not later than
120 days after the end of the fiscal year covered by this report.

ITEM 11.   EXECUTIVE COMPENSATION

The information required in response to this item is incorporated by reference
to the Company's Proxy Statement to be

                                        9

<PAGE>

filed with the Securities and Exchange Commission pursuant to Regulation 14A not
later than 120 days after the end of the fiscal year covered by this report.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT

The information required in response to this item is incorporated by reference
to the Company's Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this report.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required in response to this item is incorporated by reference
to the Company's Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this report.

                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
           REPORTS ON FORM 8-K.

(a)  (1) FINANCIAL STATEMENTS

         Financial statements of the Company will be filed by amendment and will
be set forth in Part II, Item 8.

     (2) FINANCIAL STATEMENTS SCHEDULE

         Schedule II - Valuation and Qualifying accounts for the year ended
                           December 31, 1998, 1997 and 1996, will be filed
                           by amendment.

     (3) EXHIBITS

<TABLE>
<CAPTION>
   Exhibit
     No.                               Description                                          Method of Filing
<S>            <C>                                                                                <C>
     3 (a)     Amended and Restated Memorandum of Association and Articles of
               Association of the Registrant                                                      (2)
     3 (b)     Amendment to Amended and Restated Memorandum of Association and
               Articles of Association                                                            (3)
     4 (a)     Form of Warrant Agreement                                                          (1)
     4 (b)     Amendment to Warrant Agreement                                                     (5)
     4 (c)     Second Amendment to Warrant Agreement                                              (6)
    10.1       Amended and Restated Stock Option Plan                                             (6)
    10.2       Retirement Agreement dated February 26, 1996 with Moises Ezra Cohen                (5)
    10.3       "Poliza de Credito" from "Banco Exterior" dated January 27, 1992 (with
               accompanying   English summary)                                                    (1)
    10.4       "Poliza de Credito" from "Banco Exterior" dated September 4, 1991 (with
               accompanying English summary)                                                      (1)
    10.5       Confidentiality and Non-Competition Agreement of Enrique P. Lacs                   (1)
    10.6       "Permiso de Operacion 179" (with accompanying English summary)                     (1)
    10.7       Lease from Ezcony Trading Corporation to Hooters and Dreams, S.A. dated
               March 18, 1994 (with accompanying English summary)                                 (4)
    10.8       Hamilton Bank Security Agreement made by Ezcony Trading Corporation                (5)
</TABLE>

                                       10

                                   (continued)

<PAGE>

<TABLE>
<CAPTION>
   Exhibit
     No.                               Description                                          Method of Filing
<S>            <C>                                                                                <C>
    10.9       Loan Contract (Line of Credit) with Banco de Iberoamerica (with English
               summary)                                                                           (5)
    10.10      Addendum dated May 12, 1997 to the Distribution Agreement for Motorola
               Cellular Products dated June 17, 1996 by and between King David Com.
               Exportacao e Importacao Ltda. and Ezcony Interamerica Inc.                         (7)
    10.11      Termination Agreement dated June 18, 1997 and Confidentiality and
               Noncompetition Agreement by and between Ezcony Interamerica Inc.  and
               Subsidiaries and Ezra Homsany                                                      (7)
    10.12      "Poliza de Credito" from "Banco Exterior" dated July 8, 1997 (with
               accompanying English summary)                                                      (8)
    10.13      "Poliza de Credito" from "The Chase Manhattan Bank"  dated June 4, 1997
               (with accompanying English summary)                                                (8)
    10.14      "Poliza de Credito" from "Banco Confederado De America Latina, S.A."
               dated June 18, 1997 (with accompanying English summary)                            (8)
    10.15      "Poliza de Credito" from "Banco Panamericano, S.A." dated June 17, 1997
               (with accompanying English summary)                                                (8)
    10.16      Loan Contract (Line of Credit) with Banco de Iberoamerica (with
               accompanying English summary)                                                      (8)
    10.17      "Contrato de Compraventa De Acciones" dated September 2, 1997 (with
               accompanying English summary)                                                      (8)
    10.18      Contract for purchase of building from COFRISA dated July 28, 1997 (with
               accompanying English summary)                                                      (8)
    10.19      Credit Facility with Hamilton Bank dated December 30, 1998                        (10)
    16         Accountant's letter                                                                (9)
    22         List of subsidiaries                                                               (5)
    23         Consent of McClain & Company, L.C.                                                (10)
    27.1       Financial Data Schedule                                                           (10)
    99        Accountant's resignation letter                                                    (11)
<FN>
----------
(1)    Incorporated by reference to Ezcony's Form F-1 dated May 21, 1992 (No. 33-48061)

(2)    Incorporated by reference to Ezcony's Amendment No. 1 dated July 9, 1992 to Ezcony's Form F-1

(3)    Incorporated by reference to Ezcony's Form 10-Q for the quarterly period ended September 30, 1994

(4)    Incorporated by reference to Ezcony's Form 10-K for the year ended December 31, 1994

(5)    Incorporated by reference to Ezcony's Form 10-K for the year ended December 31, 1995

(6)    Incorporated by reference to Ezcony's Form 10-K for the year ended December 31, 1996

(7)    Incorporated by reference to Ezcony's Form 10-Q for the quarterly period ended June 30, 1997

(8)    Incorporated by reference to Ezcony's Form 10-K405/A as filed with the Securities and Exchange
       Commission on April 15, 1998

(9)    Incorporated by reference to Ezcony's Form 8-K/A as filed with the Securities and Exchange Commission
       on December 18, 1998

(10)   To be filed by amendment

(11)   Incorporated by reference to Ezcony's Form 8-K as filed with the Securities and Exchange Commission on December 7, 1998
</FN>
</TABLE>

(b)      Reports on Form 8-K

         The following reports on Form 8-K were filed in the last quarter
of the period covered by this report:

                  (1)      Form 8-K dated December 2, 1998, as filed with the
                           Securities and Exchange Commission on December 7,
                           1998

                  (2)      Form 8-K/A dated December 18, 1998, as filed with the
                           Securities & Exchange Commission on December 21,
                           1998.

                                       11

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

   
                                                       EZCONY INTERAMERICA INC.

Date:      APRIL 26, 1999                              BY: /s/ EZRA COHEN
                                                       ------------------
                                                       Ezra Cohen
                                                       Chief Executive Officer
    

Pursuant to the requirements of the Securities Exchange Act of 1934, 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/ EZRA COHEN                               Director, Chairman of the Board,                       April 26, 1999
--------------                               President and Chief Executive Officer
    Ezra Cohen

/S/ CARLOS N. GALVEZ                         Acting Chief Financial Officer                         April 26, 1999
--------------------                         (Principal Financial and Accounting
Carlos N. Galvez                             Officer)

/S/ MOISES EZRA COHEN                        Director                                               April 26, 1999
---------------------
Moises Ezra Cohen

/S/ MICHAEL DOWLING                          Director                                               April 26, 1999
-------------------
Michael Dowling

/S/ LEONARD J. SOKOLOW                       Director                                               April 26, 1999
----------------------
Leonard J. Sokolow

/S/ EZRA HOMSANY GATENO                      Director                                               April 26, 1999
-----------------------
Ezra Homsany Gateno

/S/ ENRIQUE LACS                             Director                                               April 26, 1999
-----------------------
Enrique Lacs
</TABLE>
    

                                       12

<PAGE>

                        CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996

                          EZCONY INTERAMERICA, INC. AND

                                  SUBSIDIARIES

                               ROAD TOWN, TORTOLA

                             BRITISH VIRGIN ISLANDS


<PAGE>

[MCCLAIN & COMPANY, L.C. LETTERHEAD]

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Ezcony Interamerica, Inc. and Subsidiaries
British Virgin Islands

We have audited the consolidated balance sheet of Ezcony Interamerica, Inc. and
subsidiaries as of December 31, 1998 and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year 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. The consolidated balance sheet of Ezcony Interamerica, Inc. and
subsidiaries as of December 31, 1997 and the related consolidated statements of
operations, shareholders' equity and cash flows for the years ended December 31,
1997 and 1996, were audited by other auditors whose report dated March 30, 1998,
expressed an unqualified opinion on those statements.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the 1998 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Ezcony
Interamerica, Inc. and subsidiaries as of December 31, 1998, and the
consolidated results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

                                          /s/ McClain & Company, L.C.

April 13, 1999

                                  Page 1 of 21

<PAGE>

<TABLE>
<CAPTION>
                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            (STATED IN U.S. DOLLARS)

                      ASSETS

                                                                   DECEMBER 31,
                                                          ------------------------------
                                                               1998              1997 
                                                          ------------      ------------
<S>                                                       <C>               <C>
CURRENT ASSETS
    Cash and cash equivalents                             $  1,253,073      $  1,280,887
    Trade accounts receivables, net                         19,268,099        31,510,345
    Due from directors, officers and employees, net            347,044           179,162
    Inventories                                              2,218,369         9,176,952
    Prepaid expenses and other current assets                  664,429         1,465,637
    Restricted cash                                          4,491,914         8,834,319
                                                          ------------      ------------
           Total current assets                             28,242,928        52,447,302

PROPERTY AND EQUIPMENT, NET                                  4,295,643         4,432,704

OTHER ASSETS                                                    92,281            48,616
                                                          ------------      ------------
           Total assets                                   $ 32,630,852      $ 56,928,622
                                                          ============      ============


         LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Notes and acceptances payable                         $ 19,079,097      $ 28,842,438
    Current portion of long-term debt                          444,701           214,537
    Accounts payable                                         6,453,328        18,252,706
    Accrued expenses and other current liabilities             657,138         1,693,543
                                                          ------------      ------------
           Total current liabilities                        26,634,264        49,003,224

LONG-TERM DEBT                                               2,732,386         1,717,361

           Total liabilities                                29,366,650        50,720,585
                                                          ------------      ------------
COMMITMENTS AND CONTINGENCIES (NOTES 14 AND 15)

SHAREHOLDERS' EQUITY:
    Common stock, no par value, 15,000,000 shares
        authorized; issued and outstanding 4,510,000
        shares in 1998 and 1997                             12,954,723        12,954,723
    Accumulated deficit                                     (9,690,521)       (6,746,686)
                                                          ------------      ------------
           Total shareholders' equity                        3,264,202         6,208,037
                                                          ------------      ------------
           Total liabilities and shareholders' equity     $ 32,630,852      $ 56,928,622
                                                          ============      ============
</TABLE>

See independent auditors' report and the accompanying notes to consolidated
financial statements, which are an integral part of these statements.

                                  Page 2 of 21

<PAGE>

<TABLE>
<CAPTION>
                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            (STATED IN U.S. DOLLARS)

                                                                 YEARS ENDED DECEMBER 31,
                                                   ---------------------------------------------------
                                                        1998               1997               1996 
                                                   -------------      -------------      -------------
<S>                                                <C>                <C>                <C>
NET SALES                                          $ 108,930,340      $ 158,822,628      $ 108,746,024

COST OF SALES                                        101,836,237        147,921,363        100,175,931
                                                   -------------      -------------      -------------
         Gross profit                                  7,094,103         10,901,265          8,570,093

SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES                                             7,904,052          9,971,888          5,973,991
                                                   -------------      -------------      -------------
         Operating (loss) income                        (809,949)           929,377          2,596,102

OTHER INCOME (EXPENSES)
  Interest income                                        495,540            454,102            337,246
  Interest expense                                    (2,905,694)        (2,235,660)        (1,148,697)
  Litigation expense                                        --             (255,000)              --
  Other                                                  276,268            174,509            281,667
                                                   -------------      -------------      -------------
         (Loss) income from continuing
             operations before income taxes           (2,943,835)          (932,672)         2,066,318

PROVISION FOR INCOME TAXES                                  --                 --             (136,490)
                                                   -------------      -------------      -------------
         (Loss) income from continuing
             operations                               (2,943,835)          (932,672)         1,929,828
                                                   -------------      -------------      -------------
DISCONTINUED OPERATIONS
  Loss from discontinued operations, net of
      income taxes                                          --             (733,938)          (852,174)
  Loss on disposal, including $687,106 for
      operating losses during the phase out
      period, net of income taxes
                                                      (1,874,786)              --                 --
                                                            --           (2,608,724)          (852,174)
                                                   -------------      -------------      -------------
         Net (loss) income                         $  (2,943,835)     $  (3,541,396)     $   1,077,654
                                                   =============      =============      =============

EARNINGS PER COMMON SHARE-BASIC
  AND ASSUMING DILUTION
      (Loss) income from continuing operations     $       (0.65)     $       (0.21)     $        0.43
      Loss from discontinued operations                     --                (0.58)             (0.19)
                                                   -------------      -------------      -------------
         Net (loss) income                         $       (0.65)     $       (0.79)     $        0.24
                                                   =============      =============      =============
WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING-BASIC                      4,510,000          4,503,644          4,500,000

DILUTIVE EFFECT OF STOCK OPTIONS
  AND WARRANTS                                              --                 --               21,688
                                                   -------------      -------------      -------------
WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING-ASSUMING
  DILUTION                                             4,510,000          4,503,644          4,521,688
                                                   =============      =============      =============
</TABLE>

See independent auditors' report and the accompanying notes to consolidated
financial statements, which are an integral part of these statements.

                                  Page 3 of 21

<PAGE>

<TABLE>
<CAPTION>
                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                            (STATED IN U.S. DOLLARS)

                                      NUMBER OF
                                        SHARES                                            TOTAL
                                      ISSUED AND        COMMON       (ACCUMULATED     SHAREHOLDERS'
                                     OUTSTANDING        STOCK           DEFICIT)         EQUITY
                                     -----------     -----------     -----------      -----------
<S>                                    <C>           <C>             <C>              <C>
BALANCE, January 1, 1995               4,500,000     $12,941,910     $(4,282,944)     $ 8,658,966

      Net income                            --              --         1,077,654        1,077,654
                                     -----------     -----------     -----------      -----------
BALANCE, December 31, 1996             4,500,000      12,941,910      (3,205,290)       9,736,620

  Stock options exercised                 10,000          12,813            --             12,813

      Net loss                              --              --        (3,541,396)      (3,541,396)
                                     -----------     -----------     -----------      -----------
BALANCE, December 31, 1997             4,510,000      12,954,723      (6,746,686)       6,208,037

      Net loss                              --              --        (2,943,835)      (2,943,835)
                                     -----------     -----------     -----------      -----------
BALANCE, December 31, 1998             4,510,000     $12,954,723     $(9,690,521)     $ 3,264,202
                                     ===========     ===========     ===========      ===========
</TABLE>

See independent auditors' report and the accompanying notes to consolidated
financial statements, which are an integral part of these statements.

                                  Page 4 of 21

<PAGE>

<TABLE>
<CAPTION>
                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (STATED IN U.S. DOLLARS)

                                                                       YEARS ENDED DECEMBER 31,
                                                           ------------------------------------------------
                                                               1998              1997              1996
                                                           ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net (loss) income                                      $ (2,943,835)     $ (3,541,396)     $  1,077,654
    Adjustments to reconcile net (loss) income
        to net cash provided by (used in) operating
        activities:
          Depreciation and amortization                         262,709           262,390           187,611
          Provision for doubtful accounts                     3,326,551         2,646,509           901,950
          Loss on abandonment                                    50,886              --                --
          Provision for inventory write-down                       --              12,189           166,652
          Loss on sale of fixed assets, net                        --               1,830             8,113
          Loss on disposal of discontinued
             operations                                            --           1,874,786              --
          Changes in operating assets and liabilities:
             Decrease (increase) in trade accounts
                receivable                                    8,915,695       (15,962,811)       (5,599,150)
             Decrease (increase) in due from
                affiliates, net                                   9,686              --
             Increase in due from directors, officers
                and employees, net                             (167,882)          (69,810)          (60,885)
             Decrease (increase) in inventories               6,958,583           737,357        (4,410,741)
             Decrease (increase) in prepaid
                expenses and other assets                       757,543          (332,886)         (240,398)
             (Decrease) increase in accounts payable        (11,799,378)        3,450,059         3,026,862
             (Decrease) increase in accrued expenses
                and other current liabilities                (1,044,233)        1,016,007            77,770
          Net changes in discontinued operations                   --          (1,976,643)          355,455
                                                           ------------      ------------      ------------
                  Net cash provided by (used in)
                    operating activities                      4,316,639       (11,872,733)       (4,509,107)
                                                           ------------      ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Net decrease (increase) in restricted cash                4,342,405        (2,751,395)         (951,521)
    Purchases of property and equipment                        (176,534)       (1,487,904)         (308,021)
    Proceeds from sale of property and equipment                   --              17,543            23,450
                                                           ------------      ------------      ------------
                  Net cash provided by (used in)
                    investing activities                      4,165,871        (4,221,756)       (1,236,092)
                                                           ------------      ------------      ------------
</TABLE>

See independent auditors' report and the accompanying notes to consolidated
financial statements, which are an integral part of these statements.

                                  Page 5 of 21


<PAGE>

<TABLE>
<CAPTION>
                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                            (STATED IN U.S. DOLLARS)

                                                                       YEARS ENDED DECEMBER 31,
                                                           ------------------------------------------------
                                                               1998              1997              1996
                                                           ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  (Repayment of) proceeds from notes and
      acceptances payable, net                             $ (9,755,513)     $ 17,138,752      $  3,975,810
  Proceeds from long-term borrowings                          1,450,000           500,000              --
  Repayment of long-term debt                                  (204,811)         (587,608)          (54,525)
  Issuance of common stock                                       12,813              --   
                                                           ------------      ------------      ------------
         Net cash (used in) provided by
             financing activities                            (8,510,324)       17,063,957         3,921,285
                                                           ------------      ------------      ------------
         Net (decrease) increase in cash
             and cash equivalents                               (27,814)          969,468        (1,823,914)

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR                                           1,280,887           311,419         2,135,333
                                                           ------------      ------------      ------------
CASH AND CASH EQUIVALENTS AT
  END OF YEAR                                              $  1,253,073      $  1,280,887      $    311,419
                                                           ============      ============      ============
SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION:
      Cash paid during the year for interest               $  2,425,377      $  2,435,047      $  1,429,316
                                                           ============      ============      ============
      Cash paid during the year for taxes                  $       --        $       --        $    256,263
                                                           ============      ============      ============
NON-CASH INVESTING ACTIVITIES:
  Long-term debt acquired in purchase
      of warehouse                                         $       --        $  1,500,000      $       --   
                                                           ============      ============      ============
</TABLE>

See independent auditors' report and the accompanying notes to consolidated
financial statements, which are an integral part of these statements.

                                  Page 6 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 1  - ORGANIZATION

          Ezcony Interamerica, Inc. and subsidiaries ("the Company") was
          incorporated in the British Virgin Islands on November 29, 1990.

          The Company is a wholesale distributor to Latin American markets of a
          wide range of brand name consumer electronic products, including
          televisions, videocassette recorders, home and automobile audio
          equipment, cellular products and appliances. The Company's products
          are distributed to a variety of customers, including wholesalers and
          distributors who resell to retail markets.

NOTE 2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          PRINCIPLES OF CONSOLIDATION

          The consolidated financial statements include the accounts of Ezcony
          Interamerica, Inc. and its wholly owned subsidiaries. All significant
          intercompany transactions and balances have been eliminated in
          consolidation.

          CASH AND CASH EQUIVALENTS

          Cash equivalents include all highly liquid investments with maturities
          of three months or less when acquired.

          INVENTORIES

          Inventories are stated at the lower of cost or market, using the
          first-in, first-out method. Inventories in transit are stated at cost.

          PROPERTY AND EQUIPMENT

          Property and equipment are stated at cost less accumulated
          depreciation and amortization. Depreciation on equipment is computed
          using the straight-line method over the estimated lives of these
          assets, which range from 7 years to 20 years. Depreciation on property
          is computed using the straight-line method over a period of 40 years.
          Amortization of leasehold improvements is computed using the
          straight-line method over the shorter of the lease term (including
          renewal periods) or the estimated useful life of the related asset.
          Repairs and maintenance are charged to expense as incurred while
          expenditures for major renewals and betterments are capitalized.

          INCOME TAXES

          The Company utilizes the asset and liability method of accounting for
          income taxes. Under this method, deferred tax assets and liabilities
          are determined based on the difference between the financial
          statements and tax bases of assets and liabilities using tax rates in
          effect for the year in which the differences are expected to reverse.
          A valuation allowance is established when it is more likely than not
          that some or all of the deferred tax assets will not be realized.

See independent auditors' report.

                                  Page 7 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          The Company does not file a consolidated tax return in the United
          States. The Company's United States subsidiaries file an income tax
          return for both state and federal taxes. The Company's Panamanian
          subsidiary, which operates in the Colon Free Zone, Republic of Panama,
          enjoys special tax rates granted by the Panamanian tax authorities.
          Effective January 1, 1997, all income derived from export operations
          of companies operating in the Colon Free Zone are tax exempt.

          EARNINGS PER SHARE

          In 1997, the Company adopted Statement of Financial Standards ("SFAS")
          No. 128, EARNINGS PER SHARE issued by the Financial Accounting
          Standards Board ("FASB"). SFAS No. 128 requires the presentation of
          basic earnings per common share and diluted earnings per common share.
          Basic earnings per common share are computed by dividing income
          available to common stockholders by the weighted average number of
          common shares outstanding. Diluted earnings per common share include
          the diluting effect of stock options and warrants. All prior year
          earnings per share calculations have been restated in accordance with
          the provisions of SFAS No. 128. The adoption of SFAS No. 128 did not
          have a material effect on the Company's historically disclosed
          earnings per share.

          REVENUE RECOGNITION

          The Company recognizes revenue when products are shipped to customers.

          USE OF ESTIMATES

          The preparation of financial statements in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the reported amounts of assets,
          liabilities and disclosure of contingent assets and liabilities at the
          date of the financial statements and the reported amount of revenues
          and expenses during the reporting period. These estimates primarily
          relate to the determination of the allowance for doubtful accounts.
          Although these estimates are based on management's knowledge of
          current events and actions that it may undertake in the future, actual
          results may ultimately differ from estimates.

          NEW ACCOUNTING STANDARDS

          Effective for the year ended December 31, 1998, the Company adopted
          SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
          INFORMATION, which requires a new basis of determining reportable
          business segments. This approach (contrasted with the prior
          requirement which utilized a specific classification system for
          determining segments) designates the Company's internal organizational
          structure, as used by management for making operating decisions, as
          the basis for determining business segments. On this basis, the
          Company has one reportable segment:

          Wholesale distributor of consumer electronic products.

See independent auditors' report.

                                  Page 8 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          NEW ACCOUNTING STANDARDS (CONTINUED)

          During 1998, the Company adopted SFAS No. 130, reporting comprehensive
          income. It requires disclosure of non-owner changes in stockholders'
          equity and is defined as net income, plus direct adjustments to
          stockholders' equity.

          The adoption of SFAS Nos. 131 and 130 will have no effect on the
          Company's reported net income.

          FAIR VALUES OF FINANCIAL INSTRUMENTS

          Financial Accounting Standards Board Statement No. 107, DISCLOSURES
          ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (FAS 107) requires the
          Company to disclose the fair value of financial instruments for which
          it is practicable to estimate that value. FAS 107 also requires the
          entity to disclose the method(s) and significant assumptions used to
          estimate the fair value of financial instruments.

          The following assumptions were used to estimate the fair value of each
          class of financial instruments for which it is practical to estimate
          that value:

               CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

               The carrying amounts of cash, cash equivalents, and restricted
               cash approximate their fair value.

               DUE FROM DIRECTORS, OFFICERS AND EMPLOYEES, NET

               The carrying amounts of due from directors, officers and
               employees approximate their fair value.

               NOTES PAYABLE, ACCEPTANCES PAYABLE, AND LONG-TERM DEBT

               The fair values of the notes payable, acceptances payable, and
               long-term debt are estimated based upon current rates offered to
               the Company for debt of the same remaining maturities. Carrying
               amounts of notes payable, acceptances payable and long-term debt
               are reasonable estimates of their fair values.

          RECLASSIFICATIONS

          Certain amounts included in the prior years' consolidated financial
          statements have been reclassified to conform with the current year's
          presentation.

See independent auditors' report.

                                  Page 9 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 3  - DISCONTINUED OPERATIONS

          In August 1997, the Company's Board of Directors approved a plan to
          sell or liquidate its noncore business subsidiary, New World
          Interactive, Inc. ("New World Interactive") as part of an overall
          reorganization program designed to focus the Company's resources on
          its core business, the distribution of consumer electronics. New World
          Interactive was engaged in the production and distribution of Spanish
          and Portuguese CD-ROM software. The decision to discontinue the
          subsidiary was based in part upon continuing significant working
          capital requirements and the Company's inability to obtain separate
          additional capital through bank financing, public or private placement
          debt, or a combination of these for the subsidiary, and the lack of
          sufficient sales volumes.

          Due to the significant contractual obligations existing at the time of
          approval of the plan to discontinue the subsidiary and due to the
          nature and conduct of the business, New World Interactive's creditors
          were advised that New World Interactive was experiencing significant
          cash flow problems and a deteriorating financial condition and that
          management had decided to stop the production of any "new" titles and
          continue with the production of titles already contracted for. The
          Company anticipated that upon completion of these titles, and with its
          existing inventory on completed titles, sufficient sale volumes would
          materialize as a result of the Christmas holiday season, and generate
          sufficient cash flows allowing New World Interactive to repay its
          obligations and avoid having to pay to creditors a pro rata share of
          New World Interactive's assets. New World Interactive closed its
          production facility on October 31, 1997, and ceased operations on
          December 31, 1997. Subsequent to December 31, 1997, New World
          Interactive is in the process of self-liquidating its remaining assets
          (consisting primarily of trade receivables of approximately $92,000
          and inventory of approximately $66,000) on a pro rata basis to its
          remaining creditors. New World Interactive surrendered all contract
          rights it may have had in any software to its remaining creditors and
          returned all existing inventory. These rights and inventory were given
          to the creditors without prejudice to any remaining debt or any claim
          that the creditors may have against New World Interactive. It is
          management's intentions that any claims that creditors may have
          against New World Interactive will not be defended or responded to by
          New World Interactive as there are no other remaining assets to
          distribute. The Company believes that the ultimate completion of the
          liquidation of New World Interactive, including any potential
          litigation, will not have a further material adverse impact on the
          financial condition and results of operations of the Company.

          Net liabilities of the discontinued operation at December 31, 1997,
          consist primarily of accounts payable and accrued expenses (including
          severance to a key officer and employees) offset by accounts
          receivable and inventory. The inventory is recorded at liquidation
          value and not at a potential selling price as surrendered to its
          creditors. At December 31, 1997, the loss on the disposal of New World
          Interactive totaled $1,874,786, which includes a loss of $687,106 for
          operating losses during the phase out period, and is reflected as loss
          on disposal in the accompanying Consolidated Statements of Operations.

See independent auditors' report.

                                  Page 10 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 3  - DISCONTINUED OPERATIONS (CONTINUED)

          The accompanying consolidated statements of operations have been
          reclassified to report separately the discontinued operations in the
          prior periods. Selected results of the discontinued operations were as
          follows:

<TABLE>
<CAPTION>
                                              1998            1997             1996 
                                          -----------     -----------      -----------
<S>                                       <C>             <C>              <C>
          Net sales                       $      --       $ 1,909,405      $ 3,135,047
                                          ===========     ===========      ===========
          Gross profit                    $      --       $   214,881      $   860,390
                                          ===========     ===========      ===========
          Selling, general and admin-
          istrative expenses              $      --       $   930,564      $ 1,579,878
                                          ===========     ===========      ===========

          Net loss                        $      --       $(2,608,724)     $  (852,174)
                                          ===========     ===========      ===========
</TABLE>

          In the third quarter of 1998, the Company decided to restructure its
          operations by closing the facility in the United States and
          transferring the operations to the Colon Free Zone, Panama facilities.

NOTE 4 -  RESTRICTED CASH

          At December 31, 1998 and 1997, certificates of deposit were pledged by
          the Company with various banks to guarantee the credit lines. The
          certificates of deposit were placed in various banks in the following
          locations:

                               1998           1997 
                            ----------     ----------
          United States     $1,378,003     $1,484,319
          Panama             3,113,911      7,350,000
                            ----------     ----------
                            $4,491,914     $8,834,319
                            ==========     ----------

          The certificates of deposit at December 31, 1998 and 1997 have annual
          interest rates ranging from 5.2% to 6.6% and 4.9% to 7.8%,
          respectively.

NOTE 5  - INVENTORIES

          At December 31, 1998 and 1997, inventories consisted primarily of
          consumer electronic products at the following locations:

                                                   1998             1997
                                               -----------      -----------
          Colon Panama Free Zone warehouse     $ 2,273,084      $ 7,343,318
          U.S. warehouses                             --            830,717
          In transit                                  --          1,091,712
                                               -----------      -----------
                                                 2,273,084        9,265,747
          Reserve for obsolescence                 (54,715)         (88,795)
                                               -----------      -----------
                                               $ 2,218,369      $ 9,176,952
                                               ===========      ===========

See independent auditors' report.

                                  Page 11 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 6  - PROPERTY AND EQUIPMENT

          At December 31, 1998 and 1997, property and equipment consists of the
          following:

                                                   1998             1997 
                                                -----------      -----------
          Buildings                             $ 3,950,408      $ 3,796,730
          Furniture and office equipment          1,014,103          977,765
          Transportation equipment                  319,863          355,847
          Leasehold improvements                       --             87,109
          Machinery and equipment                   237,195          251,957
                                                -----------      -----------
                                                  5,521,569        5,469,408
          Less accumulated depreciation and
             amortization                        (1,225,926)      (1,036,704)
                                                -----------      -----------
                                                $ 4,295,643      $ 4,432,704
                                                ===========      ===========

          During 1997, the Company purchased a warehouse in the Panama Colon
          Free Zone for $1,700,000 and transferred its warehousing operations
          from two leased warehouses. In addition, the construction of the
          Company's office and showroom in the Panama Colon Free Zone was
          completed in December 1997 at costs totaling approximately $1,100,000.

NOTE 7  - CONCENTRATION OF CREDIT RISK

          The Company's sales were made to customers located in, or for
          distribution in, the following countries:

<TABLE>
<CAPTION>
                                                    1998             1997             1996 
                                                ------------     ------------     ------------
<S>                                             <C>              <C>              <C>
          Colombia                              $ 29,000,026     $ 52,995,593     $ 28,420,660
          Paraguay                                15,727,964       28,486,493       22,551,519
          United States                           11,883,274       15,691,848       11,188,364
          Ecuador                                  8,015,145       12,401,457       10,815,594
          Venezuela                               18,119,708       12,099,287        1,921,862
          Mexico                                   4,461,177        4,742,561        5,441,236
          Peru                                       812,023        4,458,382        2,553,372
          Brazil                                     512,299        3,831,209        6,264,275
          All other countries (primarily in
              Latin America)                      20,398,724       24,115,798       19,589,142
                                                ------------     ------------     ------------
                                                $108,930,340     $158,822,628     $108,746,024
                                                ============     ============     ============
</TABLE>

See independent auditors' report.

                                  Page 12 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 7  - CONCENTRATION OF CREDIT RISK (CONTINUED)

          A summary of accounts receivable by country of distribution is as
          follows:

<TABLE>
<CAPTION>
                                                          1998              1997 
                                                      ------------      ------------
<S>                                                   <C>               <C>
          Paraguay                                    $  3,919,770      $ 10,186,458
          Colombia                                       7,520,378         9,849,299
          Venezuela                                      4,514,485         4,062,259
          Ecuador                                        2,430,869         3,620,585
          Argentina                                        891,977         1,005,294
          All other countries (primarily in Latin
             America)                                    6,346,816         7,406,552
                                                      ------------      ------------
                                                        25,624,295        36,130,447
          Less allowance for doubtful accounts          (6,356,196)       (4,620,102)
                                                      ------------      ------------
                                                      $ 19,268,099      $ 31,510,345
                                                      ============      ============
</TABLE>

          Certain sales made by the Company are collected in cash or other
          negotiable instruments. During 1998, 1997, and 1996, the Company had
          no major customers whose sales exceeded 10% of total net sales.

          At various times during the years ended December 31, 1998 and 1997,
          the Company maintained cash balances with financial institutions in
          excess of the amount insured by the Federal Deposit Insurance
          Corporation, $100,000.

NOTE 8  - MAJOR SUPPLIERS

          During the years ended December 31, 1998, 1997, and 1996, 31%, 33%,
          and 37%, respectively, of the Company's purchases consisted of
          products purchased from Sony Corporation of Panama, S.A. ("Sony").
          Amounts payable to Sony as of December 31, 1998 and 1997, were
          approximately $3,758,000 and $5,346,000, respectively. Beginning in
          1995, the Company significantly increased its purchases from Pioneer
          International Latin America, S.A. ("Pioneer"). Pioneer purchases
          represented 30%, 34%, and 36% of total purchases for the year ended
          December 31, 1998, 1997, and 1996, respectively. Amounts payable to
          Pioneer as of December 31, 1998 and 1997 were approximately $1,575,000
          and $5,000,000, respectively.

          The Company does not have a written agreement with either Sony or
          Pioneer to act as a distributor in any particular country. Sony and
          Pioneer could, at any time, stop or limit sales to the Company or
          prohibit the Company from distributing its products in any one or more
          countries. The Company is extended credit terms from year-to-year.

See independent auditors' report.

                                  Page 13 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 9  - GEOGRAPHICAL SEGMENT INFORMATION

          Sales originating from Panama, the United States and British Virgin
          Islands for the years ended December 31, 1998, 1997 and 1996 were as
          follows:

<TABLE>
<CAPTION>
                                         1998             1997             1996 
                                     ------------     ------------     ------------
<S>                                  <C>              <C>              <C>
          Panama                     $ 90,391,151     $139,471,528     $103,648,266
          United States                18,439,249       19,220,055        5,052,613
          British Virgin Islands           99,940          131,045           45,145
                                     ------------     ------------     ------------
                                     $108,930,340     $158,822,628     $108,746,024
                                     ============     ============     ============
</TABLE>

          Identifiable assets by geographical area are as follows:

                                         1998            1997 
                                     -----------     -----------
          Panama                     $30,714,394     $52,002,854
          United States                1,783,858       4,685,063
          British Virgin Islands         132,600         240,705
                                     -----------     -----------
                                     $32,630,852     $56,928,622
                                     ===========     ===========

          Operating income (loss) from continuing operations by geographical
          area is as follows:

<TABLE>
<CAPTION>
                                         1998             1997             1996 
                                     -----------      -----------      -----------
<S>                                  <C>              <C>              <C>        
          Panama                     $   699,225      $ 2,615,913      $ 2,953,042
          United States                 (557,112)        (802,393)         109,324
          British Virgin Islands        (952,062)        (884,143)        (466,264)
                                     -----------      -----------      -----------
                                     $  (809,949)     $   929,377      $ 2,596,102
                                     ===========      ===========      ===========
</TABLE>

          Income (loss) from continuing operations before income taxes by
          geographical area is as follows:

<TABLE>
<CAPTION>
                                         1998             1997             1996 
                                     -----------      -----------      -----------
<S>                                  <C>              <C>              <C>
          Panama                     $(1,247,559)     $   788,760      $ 2,333,567
          United States                 (756,503)        (845,755)          81,795
          British Virgin Islands        (939,773)        (875,677)        (349,044)
                                     -----------      -----------      -----------
                                     $(2,943,835)     $  (932,672)     $ 2,066,318
                                     ===========      ===========      ===========
</TABLE>

See independent auditors' report.

                                  Page 14 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 10 - NOTES AND ACCEPTANCES PAYABLE

          Acceptances payable to banks and borrowings under several lines of
          credit aggregating approximately $28,000,000 at December 31, 1998 and
          $36,500,000 at December 31, 1997, bearing interest between 8.8% to
          10.3%, maturing at varying dates through 1999, collateralized by
          certificates of deposit of $4,491,914 and $8,834,319 at December 31,
          1998 and 1997, respectively, trade accounts receivables, inventories
          and guaranteed by certain of the Company's shareholders.

          The weighted average interest rates as of December 31, 1998 and 1997
          were 9.35% and 9.62%, respectively.

NOTE 11 - LONG-TERM DEBT

          Long-term debt at December 31, 1998 and 1997 consists of the
          following:

<TABLE>
<CAPTION>
                                                                                  1998           1997 
                                                                               ----------     ----------
<S>                                                                            <C>            <C>
          Note payable, bearing interest at 10%, payable in monthly
              installments in the amount of $12,681, expiring in May 2001,
              collateralized by a first mortgage on the rental building        $  327,032     $  438,887

          Note payable, bearing interest at prime (8.5% at December 31,
              1998 and 1997) plus 2%, payable in monthly installments in
              the amount of $21,090, with the unpaid balance due in
              December 2002, collateralized by a first mortgage on the
              warehouse                                                         1,400,055      1,493,011

          Note payable, bearing interest at prime plus 2%, payable in
              monthly installments of $17,262, expiring in 2002,
              collateralized by a first mortgage on building                    1,450,000           --
                                                                               ----------     ----------
                                                                                3,177,087      1,931,898
          Less current portion                                                    414,701        214,537
                                                                               ----------     ----------
                                                                               $2,732,386     $1,717,361
                                                                               ==========     ==========
</TABLE>

          Maturities of long-term debt as follows:

           YEAR ENDING
          DECEMBER 31,
          ------------
             1999                        $444,701
             2000                         470,191
             2001                         408,936
             2002                       1,853,259
             2003                             -
             Thereafter                       -
                                       ----------
                                       $3,177,087
                                       ==========

See independent auditors' report.

                                  Page 15 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 12 - INCOME TAXES

          The provision for income taxes includes the following components:

                                         1998         1997         1996 
                                      --------     --------     --------
          United States - Federal     $   --       $   --       $   --
          Panama                          --           --        136,490
                                      --------     --------     --------
                                      $   --       $   --       $136,490
                                      ========     ========     ========

          The provision for income taxes differed from the amounts computed by
          applying the U.S. Federal income tax rate of 34% in 1998, 1997 and
          1996 to income (loss) before income tax expense as a result of the
          following:

<TABLE>
<CAPTION>
                                                   1998           1997           1996 
                                                ---------      ---------      ---------
<S>                                             <C>            <C>            <C>
          Computed "expected" United States
             tax (benefit) expense              $ 118,896      $(317,108)     $ 702,548
          Effect of foreign operations               --           29,552       (504,700)
          Valuation allowance change             (118,896)       286,282        (75,395)
          Other, net                                 --            1,274         14,037
                                                ---------      ---------      ---------
          Provision for income taxes            $    --        $    --        $ 136,490
                                                =========      =========      =========
</TABLE>

          At December 31, 1998, the Company's U.S. subsidiaries had net
          operating loss carryforwards for U.S. tax purposes of approximately
          $1,990,000 (continuing operations) and $2,845,000 (discontinued
          operations), expiring in various years through 2012. A full valuation
          allowance has been recorded by the Company since management believes
          that it is more likely than not that the deferred tax assets will not
          be realized.

          The Company's Panamanian subsidiary operates in the Colon Free Zone,
          Republic of Panama, and sells to customers abroad. Prior to January 1,
          1997, companies operating in the Colon Free Zone derived local tax
          benefits from their foreign sales. These companies enjoyed a special
          tax rate of 8.5%, as compared to a statutory rate of up to 34%, on
          profits derived from sales of merchandise re-exported from the Colon
          Free Zone to countries other than Panama. In addition, profits derived
          from sales not shipped through Panama (offshore sales) are exempt from
          Panamanian taxes. Effective January 1,1997, all income derived form
          export operation of companies operating in the Colon Free Zone are
          100% tax exempt.

See independent auditors' report.

                                  Page 16 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 13 - STOCK OPTION PLAN AND OTHER

          The Company's 1992 stock option plan ("the Plan"), adopted by the
          Board of Directors and the shareholders of the Company on April 21,
          1992, is intended to improve the Company's financial performance by
          providing long-term incentives to the Company's directors, officers
          and key employees and to aid in the recruitment of additional
          qualified and competent employees. The Plan is administered by a
          committee comprised of outside directors ("the Committee").

          On June 28, 1996, the shareholders approved the Board of Directors'
          amendment to the Plan to increase the number of shares available for
          grant from 450,000 shares to 900,000 shares.

          Under the Plan, 900,000 shares of common shares have been reserved for
          issuance upon exercise of options. The Plan provides for the granting
          of both "incentive stock options" and non-statutory stock options.
          Options can be granted under the Plan on such terms and at such prices
          as determined by the Committee, except that the per share exercise
          price of incentive stock options will not be less than the fair market
          value of the common shares on the date of grant. Each option will be
          exercisable after the period or periods specified in the option
          agreement, but no option will be exercisable within six months after
          the date of grant or after the expiration of 10 years from the date of
          grant. Options granted under the Plan are not transferable other than
          by will or by the laws of descent and distribution. The Plan
          authorizes the Company to make loans to optionee's to enable them to
          exercise their options and authorizes optionee's to exercise their
          stock options by payment with common shares, in each case at the
          discretion of the Committee.

          In connection with a public offering, in August 1992, the Company
          issued warrants to purchase 150,000 common shares to the
          representatives of the underwriters, exercisable at a price of $9.45
          per share, as adjusted, for a four-year term starting on August 6,
          1993. In November 1994, the Company's Board of Directors, in
          consideration of financial consulting and advisory services rendered
          and to be rendered by such representatives, reduced the exercise price
          on the warrants from $9.45 per share to $4.00 per share. In November
          1996, the Company's Board of Directors, in consideration of financial
          consulting and advisory services to be rendered by one such
          representative, reduced the exercise price on 97,750 warrants form
          $4.00 per share to $1.63 per share and extended the term one
          additional year.

See independent auditors' report.

                                  Page 17 of 21

<PAGE>


NOTE 13 - STOCK OPTION PLAN AND OTHER (CONTINUED)

          The following table presents additional information concerning the
          activity in the stock option plan:

<TABLE>
<CAPTION>
                                                                             WEIGHTED
                                                                            AVERAGE OF
                                                                NUMBER       EXERCISE
                                                              OF OPTIONS       PRICE
                                                              ----------    ----------
<S>                                                           <C>              <C>
          Balance at December 31, 1995                          86,000         $3.38
              Options granted                                  759,660         $1.86
              Options terminated                               (20,000)        $2.39
                                                               -------
          Balance at December 31, 1996                         825,660         $2.01
              Options granted                                   25,000         $2.55
              Options exercised                                (10,000)        $1.28
              Options terminated                              (135,630)        $2.03
                                                               -------
          Balance at December 31, 1997                         705,030         $2.04
              Options granted                                   20,000         $0.22
                                                               -------
          Balance at December 31, 1998                         725,030         $1.98
                                                               =======
          Options repriced during 1996                          97,750
                                                               =======
          1996 weighted average fair value of options         $    .80
                                                               =======
</TABLE>

          No options were repriced during 1997.

                                              1998      1997      1996
                                             -----     -----     -----
          Weighted average fair value of
             options granted during the
             year                            $0.15     $1.82     $1.63
                                             =====     =====     =====

See independent auditors' report.

                                  Page 18 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 13 - STOCK OPTION PLAN AND OTHER (CONTINUED)

<TABLE>
<CAPTION>
                                                            1998
-----------------------------------------------------------------------------------------------------------------
                                               WEIGHTED
                                               AVERAGE              WEIGHTED                            WEIGHTED
                         NUMBER               REMAINING             AVERAGE           NUMBER            AVERAGE
                      OUTSTANDING AT         CONTRACTUAL            EXERCISE        EXERCISABLE AT      EXERCISE
RANGE OF PRICES        DECEMBER 31,          LIFE (YEARS)            PRICE           DECEMBER 31,        PRICE
----------------      ---------------        ------------           --------        --------------     ----------
<S>                       <C>                     <C>                 <C>              <C>               <C>
    $0.22                  20,000                 4.76                $0.22               -                N/A
$1.25 - $1.88             277,530                 6.76                $1.77            277,530           $1.77
$1.94 - $2.56             371,500                 7.08                $1.98            364,495           $1.98
$3.50 - $4.13              56,000                 4.49                $3.72             56,000           $3.72
                          -------                                                      -------
                          725,030                                     $2.04            698,025
                          =======                                                      =======
</TABLE>

          As of December 31, 1996, the Company adopted the disclosure provisions
          of SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. Accordingly,
          the Company is required to disclose proforma net income and earnings
          per share as if compensation expense relative to the fair value of the
          options granted had been included in earnings. The fair value of each
          option grant was estimated using the Black-Scholes option-pricing
          model with the following assumptions (weighted average) used for
          grants in 1998, 1997, and 1996 expected life of 5 years in 1998, 6
          years in 1997, and 10 years for 1996; volatility factors of 80% for
          1998, 80% for 1997, and 96% for 1996; risk-free interest rates of 5.2%
          in 1998, and 6.1% for 1997 and 1996 and no dividend payments. Had
          compensation cost for the Company's option plan been determined and
          recorded consistent with SFAS No. 123, the Company's net income and
          earnings per share would have been reduced to the proforma amounts as
          follows:

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                           ---------------------------------------------------
                                                1998               1997               1996 
                                           -------------      -------------      -------------
<S>                                        <C>                <C>                <C>
          Net (loss) income
             As reported                   $  (2,943,835)     $  (3,541,396)     $   1,077,654
                                           =============      =============      =============
             Proforma                      $  (3,032,888)     $  (3,864,939)     $     300,479
                                           =============      =============      =============
          Earnings per share-basic and
             assuming dilution
                As reported                $        (.65)     $        (.79)     $         .24
                                           =============      =============      =============
                Proforma                   $        (.67)     $        (.86)     $         .07
                                           =============      =============      =============
</TABLE>

See independent auditors' report.

                                  Page 19 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 13 - STOCK OPTION PLAN AND OTHER (CONTINUED)

          The 1998, 1997, and 1996 proforma effect on net income (loss) is not
          necessarily indicative of the effect in future years because it does
          not take into consideration proforma compensation expense related to
          grants made prior to 1996 and does not reflect a tax benefit related
          to the compensation expense as such benefit would be reflected
          directly in shareholders' equity given that the options are considered
          incentive stock options.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

          The Company has entered into various operating lease agreements. The
          following is a schedule of future rental payments as of December 31,
          1998 for operating leases having initial noncancelable lease terms in
          excess of one year.

                      YEAR ENDING
                      DECEMBER 31,
                      ------------
          1999          $ 19,763
          2000            19,763
          2001            19,763
          2002            19,763
          2003            19,763
          Thereafter     224,483
                        --------
                        $323,298
                        ========

          As a result of restructuring its operations during 1998, the Company
          bought out its existing lease contract for an office facility,
          warehouse and equipment located in the United States for approximately
          $155,000.

          Rent expense was $112,372, $233,181 and $290,242 for the years ended
          December 31, 1998, 1997, and 1996, respectively.

          The Company leases its building in Panama City, Panama. Rental income
          included in other income in the accompanying Consolidated Statements
          of Operations was $223,110, $174,509, and $164,883 in 1998, 1997, and
          1996, respectively. The minimum future rental payments to be received
          on this noncancelable lease as of December 31, 1998 are as follows:

                       YEAR ENDING
                       DECEMBER 31,
                       ------------
          1999          $ 192,233
          2000            201,870
          2001            211,963
          2002            222,513
          2003                -
          Thereafter          -
                        ---------
                        $ 828,579
                        =========

See independent auditors' report.

                                  Page 20 of 21

<PAGE>

                   EZCONY INTERAMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (STATED IN U.S. DOLLARS)

NOTE 14 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

          At December 31, 1998, the Company had standby letters of credit in the
          amount of $4,400,000, collateralizing the trade accounts of various
          vendors, primarily Sony and Pioneer.

          The Company is currently in the process of evaluating its computer
          software and databases to determine whether or not modifications will
          be required to prevent problems related to the year 2000. Management
          does not currently anticipate any significant or material impact on
          the Company as a result of implications associated with this issue.

NOTE 15 - LEGAL MATTERS

          In 1998, the Company was notified of a forfeiture action against
          certain funds deposited by the Company. The action requested the
          forfeiture of the seized funds to the United States Government. The
          Company believes there is no basis for the seizure or forfeiture.
          Nonetheless, to avoid the expense and disruption of litigation and
          also the use of the seized funds for an extended period of time, the
          Company reached an agreement to settle the forfeiture civil action
          against these funds. Terms of the agreement require the return of all
          funds seized less $255,000. The Company has recorded the settlement
          amount as litigation (expense) reversal in the accompanying
          Consolidated Statement of Operations, and as accrued expense and other
          current liabilities in the accompanying Consolidated Balance Sheet as
          the seized funds related to 1997 sales.

          The Company is also engaged in ordinary litigation incidental to its
          business. The Company does not believe that such ordinary routine
          litigation will have a material adverse effect on its consolidated
          financial position or results of operations.

See independent auditors' report.

                                  Page 21 of 21
<PAGE>

                                 EXHIBIT INDEX

EXHIBIT         DESCRIPTION
-------         -----------
 10.19          Credit Facility with Hamilton Bank dated December 30, 1998
 23             Consent of McClain & Company, L.C.
 27.1           Financial Data Schedule