<PAGE>


                                    FORM 10-K/A


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

For the fiscal year ended March 31, 1999

                                       OR

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

For the transition period from __________ to ___________

Commission File Number 0-28868

                          LEADING EDGE PACKAGING, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Delaware                                          22-3432883
-------------------------------                        -------------------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)

176 Northfield Ave., Bldg. 409, Raritan Ctr., Edison, NJ 08837
--------------------------------------------------------------------------------
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code: (732) 225-6868

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

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

                                  Common Stock
--------------------------------------------------------------------------------
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 the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

      The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the $1.25 last sales price reported by NASDAQ/NMS on
April 13, 1999, was $1,796,875.

<PAGE>

As of June 30, 1999 the registrant had issued and outstanding 5,562,500 shares
of Common Stock, which include 2,250,000 shares of common stock which are
currently held in the name of Bondy & Schloss LLP, the Company's counsel,
subject to direction by the officers of the Company and are deemed non-voting.

                       DOCUMENTS INCORPORATED BY REFERENCE

      The following documents, or indicated portions thereof, have been
incorporated herein by reference:

      (1) Information in the Registrant's definitive proxy material for its 1999
Annual Meeting of Stockholders is incorporated by reference as Part III hereof,
which definitive proxy material shall be filed not later than 120 days after the
Registrant's fiscal year ended March 31, 1999.


                                       2
<PAGE>

                                     PART I

Item 1. Business

General

      Leading Edge Packaging, Inc. ("Leading Edge"), together with its
subsidiaries described below (collectively, the "Company"), manufactures and
distributes packaging products used primarily in the sale of luxury consumer
goods. Its packaging products include metal and plastic jewelry cases, optical
cases, pouches and bags, and paper gift boxes. The Company also sells display
units for retail merchandising of jewelry, watches, eyeglasses, pens, cosmetics
and gold coins. The Company manufactures its products primarily in its
manufacturing facility in China and distributes them in North America, Europe,
Asia and the Middle East. The Company's customers are mainly wholesalers and
distributors of packaging products and consumer product manufacturers. Leading
Edge purchases substantially all of its inventory from LEPI China Limited
("LEPI-China"), a Hong Kong company and the Company's wholly-owned subsidiary.
LEPI-China is the direct parent of LEPI (Zhong Shan) Manufacturing Company
Limited ("LEPI Manufacturing"), the Company's China-based wholly-owned
manufacturing subsidiary.

      As part of its marketing strategy, the Company's goal is to consolidate
the process by which high-end packaging products are distributed in North
America and, through its subsidiaries, in Europe, Asia and the Middle East. The
Company intends to accomplish this by purchasing and customizing high quality
packaging products from the Company's low-cost Asian manufacturing subsidiaries
and distributing the products in North America and, through its distribution
subsidiaries, in Europe, Asia and the Middle East.

      To effect this strategy in North America, the Company leases a 2,000
square-foot office and showroom in the Empire State Building in New York City,
and a 35,000 square-foot warehouse and distribution center in Raritan Center,
Edison, New Jersey, for the Company's warehousing, customization and
distribution operations. The Company believes that its warehousing and
customizing capabilities located in the United States, coupled with its Asian
low-cost manufacturing supply, give it an advantage over its competitors in the
North American market by enabling the Company to fill orders and customize
products on a "just in time" basis. The Company also believes that its
manufacturing facilities in Asia allow it to capitalize on lower production
costs obtainable overseas, while maintaining the high quality of its products.

      The Company follows industry practice regarding its general working
capital and inventory. The Company maintains an inventory of finished goods in
its New Jersey warehouse of between $2 million and $3 million to cover an
adequate inventory level for the packaging products it intends to distribute to
the North American retail market. This is generally adjusted upwards or
downwards and the composition revised in accordance with market demand. Its
inventory level of raw materials and components are targeted at a minimum of $6
million and will increase as its turnover increases.  Management's objective
is to maintain a 5-6 times turnaround on its inventory. The Company has
approximately $2.3 million in confirmed backlog orders.


                                       3
<PAGE>

      Historically, the Company has maintained trade terms in line with the
industry and sold on COD, letter-of-credit and 30-90 days credit terms based on
the financial standing and history of each customer. Where the Company is
promoting a certain category of packaging products or when it is promoting the
sale of a certain type of material, the Company will consider extended payment
terms on a case by case basis. The Company currently purchases most of its raw
materials on either a COD, letter of credit or cash basis and is operating with
virtually no banking facilities. This, coupled with the terms being extended to
its customers, results in working capital shortfalls. The Bank of Central Asia
discounts the Company's bills receivable on a case by case basis, but management
does not believe that the Company can rely on this.

      In the United States, the Company is attempting to phase out its reliance
upon customers who themselves are distributors of packaging products and has
embarked on a more aggressive direct marketing campaign to OEM customers. The
Company hopes to establish more direct distribution channels to the consumer
product manufacturers who use its packaging and other products. The Company
cannot be certain that it will succeed in this attempt to reach the OEM market
directly or that doing so will automatically increase its sales. In addition, as
a result of the recent disruption in production of the Company's packaging
products (which is discussed in greater detail below), the Company may have
difficulty reestablishing the OEM customer base which it has thus far developed.

The Company's Subsidiaries

LEPI China Holdings, Inc.

      LEPI China Holdings, Inc. ("LEP Holdings") is a Delaware corporation and
Leading Edge's wholly-owned subsidiary. LEP Holdings serves solely as a holding
company for the Company's overseas subsidiaries.


                                       4
<PAGE>

LEPI China Limited

      LEPI China Limited ("LEPI-China") is a wholly-owned subsidiary of LEPI
Holdings and is incorporated in Hong Kong. LEPI-China coordinates the
distribution of packaging products produced by its subsidiary to its customers
throughout Europe, the Middle East, and Asia and, through Leading Edge, to North
America. LEPI-China has a sales force in Hong Kong to deal directly with its
Asian and European customers. The packaging products distributed by LEPI-China
are essentially the same types of products distributed by Leading Edge in North
America. LEPI- China owns 100% of the capital stock of LEPI Manufacturing.

LEPI (Zhong Shan) Manufacturing Company Limited

      LEPI (Zhong Shan) Manufacturing Company Limited ("LEPI Manufacturing") is
a wholly foreign owned enterprise in the People's Republic of China, formed
under China's Wholly Foreign Owned Enterprise Law. LEPI Manufacturing operates
the Company's factory located in China's National Zhongshan Torch Hi-Tech
Industrial Developmental Zone. The factory, which occupies approximately 230,000
square feet, can employ approximately 2,500 workers and is managed with a focus
on worker safety and welfare. Currently, the Company has approximately 1,880
workers at the factory. It is a fully integrated plant which is equipped with
computerized injection molding machines, automatic printing equipment, automatic
stamping presses, an automatic vacuum forming machine, high precision paper
cutters, CNC wire cutters, a high precision milling machine, a lathe, sewing
machines and heating conveyor systems to air dry all products. The Company
believes that it is the only plant in the industry which has its own fully
equipped laboratory including a spectrometer, gas chromatograph, ph
microprocessor, colorimeter, hardness tester, bonding/stress tester and a
titration system which enables the testing of all raw materials to meet specific
standards. The plant is designed to improve productivity and efficiency over
that of the Company's prior joint venture factory. The Company believes that
this is important in order for it to remain competitive in the industry and
position the Company for future growth.

LEP Products, Inc.

      LEP Products, Inc. was engaged in the sale and distribution of watches and
plastic gift bags and was the exclusive distributor of Hang TenTM brand watches
in the United States. In October 1998, the Company ceased distribution of Hang
TenTM watches when the licensee from whom it sub-licensed these watches entered
liquidation in Hong Kong. As a result of the termination of its sub-license,
this subsidiary currently conducts no operations.


                                       5
<PAGE>

LEP Marketing & Sales, Inc. and LEP Distributors, Inc.

      In addition to its operating subsidiaries described above, the Company has
two wholly-owned subsidiaries in the United States, each of which is
incorporated in Delaware. These are LEP Marketing & Sales, Inc. and LEP
Distributors, Inc. To date, neither LEP Marketing & Sales nor LEP Distributors,
Inc. has commenced operations.

Justrite Investments Limited

      Justrite Investments Limited previously served as the investment holding
company for the Company's other overseas operating subsidiaries. Justrite has
ceased its activities due to the liquidation of all of its operating
subsidiaries. See "Recent Developments".

Leading Edge Packaging Limited (Hong Kong)

      Leading Edge Packaging Limited ("LEP-Hong Kong") was formerly the primary
operating subsidiary of Justrite. LEP-Hong Kong is currently in liquidation in
Hong Kong. See "Recent Developments".

Breakspear Limited

      Breakspear Limited was the holding company for the Company's interest in
its joint venture in China. Because of the liquidation of the joint venture,
Breakspear Limited currently conducts no operations. See "Recent Developments".

Recent Developments

      The past year has been a tumultuous one for the Company in which it has
faced many challenges, including the cessation of operations of its China joint
venture manufacturing facility, establishment of a new, wholly owned
manufacturing subsidiary in China, litigation with its former majority
stockholder, liquidation of a major subsidiary and establishment of a new
corporation to fulfill the functions of that subsidiary. The Company's stock was
delisted from trading on the Nasdaq National Market effective April 14, 1999. In
addition, the Company received an investment of capital from a preferred
stockholder which now holds a controlling interest. It has been a year of
unanticipated changes and of rebuilding and reshaping the Company's business.

Share Exchange Agreement

      On January 23, 1998, Leading Edge entered into a Share Exchange Agreement
(the "Share Exchange Agreement") with its then corporate parent, Chung Hwa
Development Holdings Limited, a Bermuda company ("Chung Hwa"). Chung Hwa is
currently undergoing a creditors' restructuring. Pursuant to the Share Exchange
Agreement, the Company received all of the issued and outstanding shares of
Justrite Investments Limited, then a wholly owned subsidiary of Chung Hwa, in
exchange for 2,250,000 shares of Leading Edge's common stock, which at the time
was valued at $6.00 per share for purposes of the transaction (the "Exchange").


                                       6
<PAGE>

      Justrite was the parent corporation of Leading Edge Packaging Limited
(f/k/a Rich City International Packaging Limited), a Hong Kong company
("LEP-Hong Kong"), which had previously been the Company's supplier of packaging
products for distribution in North America. LEP-Hong Kong distributed its own
packaging products in other parts of the world, including Europe, the Middle
East and Asia. Justrite also owned several other subsidiaries, including
Breakspear Limited, a British Virgin Islands company, which in turn held a 60%
interest in a joint venture in the People's Republic of China. The Company
believed that the acquisition would enable it to consolidate the manufacture and
distribution of its packaging products and to expand its sales into additional
territories.

      After the closing of the Exchange, the Company discovered certain
liabilities incurred by Chung Hwa in the name of LEP-Hong Kong which were not
settled. Pursuant to a letter agreement by and between Leading Edge and Chung
Hwa, the 2.25 million shares due Chung Hwa under the Share Exchange Agreement
were issued in the name of Chung Hwa but were delivered, along with executed
stock powers, to Company counsel for safe keeping. The letter agreement
contemplated that the shares would be disposed of and the proceeds used to
satisfy the debt owed by Chung Hwa to LEP- Hong Kong. The Company has explored
various possibilities for disposing of the shares, but it has not disposed of
them to date. The letter agreement also placed the shares under the control of
the Company's management. These shares are currently held in the name of the
Company's counsel subject to instructions from the Company's officers.

Dispute with China Joint Venture Partner; Cessation of Production and
Establishment of New Production Facility

      The failure of Chung Hwa to pay its debt to LEP-Hong Kong
led to a working capital shortfall in the China joint venture factory. The
Company's management discussed with Chung Hwa the possibility of disposing of
all of its interest in the Company, including shares held by it prior to the
Exchange, but such a disposition never occurred. In addition, the Company
entered negotiations with its China joint venture partner for a buy-out by the
Company of the joint venture partner's interest in the joint venture. This would
have placed the factory under the control of a wholly foreign-owned enterprise
which in turn would have been under the exclusive control of the Company. This
would have saved the Company the expense of the management fees it was required
to pay to the joint venture partner.


                                       7
<PAGE>

      However, in November 1998, these negotiations collapsed as the joint
venture partner alleged that the Company owed it $300,000 in unpaid wages. The
joint venture partner unilaterally acted to seize the factory and its assets,
including its inventory of finished packaging products, 60% of which belonged to
the Company. This action by the joint venture partner resulted in the cessation
of production at the factory. Because this factory was the Company's sole source
of supply for its packaging products, the cessation of production caused a major
disruption in the Company's business and a significant loss of revenue. The
Company instructed its legal counsels in both Hong Kong and China to file claims
on the assets of the joint venture to which it is entitled by virtue of its 60%
interest in the joint venture. The Company continues to pursue litigation
against its former joint venture partner with assistance from the Commercial
Services division of the U.S. Consul General in Guangzhou, China. While the
Company is pursuing these claims, the probability of reclaiming the assets it
lost in the seizure by its joint venture partner is highly uncertain due to the
complexity of Chinese law.

      The disruption in the Company's business was compounded by the non-payment
of the debt owed by Chung Hwa. This was a major setback for the Company. The
Company learned that Chung Hwa was insolvent. In December 1998, the Company's
management determined that it was in the best interests of the Company to
appoint liquidators to wind up LEP-Hong Kong and let the liquidators collect the
debt owed by Chung Hwa to LEP-Hong Kong. Leading Edge is a creditor in the
liquidation because of certain trade advances that it made to LEP-Hong Kong in
the approximate amount of $6.8 million.

      The Company formed LEPI China Limited, a Hong Kong company ("LEPI-China"),
in December 1998 to assume the functions which LEP-Hong Kong had previously
provided for the Company in coordinating the manufacture and distribution of the
packaging products. In addition, in January 1999, the Company formed LEPI (Zhong
Shan) Manufacturing Company Limited ("LEPI Manufacturing"), a wholly owned
foreign enterprise under the Wholly Owned Foreign Enterprise Law of the Peoples
Republic of China. The Company, through LEPI Manufacturing, has established a
new factory located in China's National Zhongshan Torch Hi-Tech Industrial
Developmental Zone. The lease on the plant was executed by mid January 1999. In
February, the Company commenced improvements to the factory and recruitment and
training of workers. The factory was fully completed and operational by early
April 1999. The Company hosted a grand opening ceremony on April 20, 1999, which
was attended by customers and suppliers from around the world, officials from
the U.S. Consulate General of Guangzhou and various Chinese government officials
and dignitaries.


                                       8
<PAGE>

      The factory occupies approximately 230,000 square feet, can employ
up to approximately 2,500 workers and is managed with a focus on worker safety
and welfare. It is a fully integrated plant which is equipped with computerized
injection molding machines, automatic printing equipment, automatic stamping
presses, automatic vacuum forming machine, high precision paper cutters, CNC
wire cutters, a high precision milling machine, a lathe, sewing machines and
heating conveyor systems to air dry all products. The Company believes that it
is the only plant in the industry which has its own fully equipped laboratory
including a spectrometer,gas chromatograph, ph microprocessor, colorimeter,
hardness tester, bonding/stress tester and a titration system which enables the
testing of all raw materials to meet specific standards. The plant is designed
to improve productivity and efficiency over that of the Company's prior joint
venture factory. The Company believes that this is important in order for it to
remain competitive in the industry and position the Company for future growth.

Issuance of Preferred Stock

      In order to solve its liquidity problems, the Company sought help from its
regular banker. The bank orally notified the Company that it planned to suspend
its lines of credit and requested more collateral. The Company's management
turned to other sources and secured a verbal commitment from BroadAsia LLC, an
affiliate of Broadmark Capital Corporation, to provide it with funds to finance
the new factory. BroadAsia agreed in principle to provide financing, but, in
exchange, it required preferred stock and some assurance as to the continuity of
the Company's management. Specifically, BroadAsia required that the preferred
stock have supervoting rights in all matters to be voted on by the stockholders.
In addition, the preferred stockholders are entitled to elect two
representatives to the Company's board of directors and any successors of their
representatives.

      The Company considered the proposal by BroadAsia, and, on December 7,
1998, the Company's board of directors voted unanimously to designate the
Preferred Stock and to issue it in accordance with the terms negotiated with
BroadAsia. The officers then proceeded, on direction from the board of
directors, to complete the negotiations with BroadAsia. The Company created
three series of preferred stock, Series A, B and C 8% Redeemable Preferred
Stock, for issuance to BroadAsia and other investors. BroadAsia at that time had
agreed to purchase 1,000,000 shares of the Series A 8% Redeemable Preferred
Stock. In accordance with BroadAsia's proposal, the voting rights of each series
were as follows: Series A, ten votes per share, Series B, five votes per share,
and Series C, three votes per share.


                                       9
<PAGE>

      While the details of the issuance were finalized, BroadAsia advanced the
Company the purchase price of $750,000 to deal with the situation in China,
which at that time had become critical. The provincial leaders in Dongguan
Province, where the Company's former joint venture was located, had begun to
damage the Company's reputation in Zhong Shan, where the Company was attempting
to establish a wholly owned foreign enterprise and to obtain a lease for factory
space. The Company needed to show the authorities in Zhong Shan that it had
sufficient funds on account to satisfy the obligations it would incur by
establishing the new production facility. To address this need while the details
of the Preferred Stock issuance were finalized, BroadAsia advanced the purchase
price of the Preferred Stock to the Company, in two separate installments,
pursuant to two demand notes. The Company and BroadAsia had an understanding
that the Company would not spend the proceeds until the issuance of the
Preferred Stock was complete. The shares were finally issued as of January 25,
1999.

      On January 8, 1999, the Company had to make an earnest money payment on
its lease to the Zhong Shan authorities. Notwithstanding the cuts it had made to
costs in its U.S. operations, the Company was also struggling to meet its
obligations for its New York and New Jersey facilities and to its creditors. The
Company was coming under increasing pressure from its bankers to pay down its
loans or offer more collateral, neither of which was possible. Although it had
agreed not to use the proceeds until the Series A Preferred Stock was issued,
the Company, with the consent of BroadAsia, of necessity used $100,000 of the
proceeds on deposit from BroadAsia.

      The Company has filed a new Certificate of Designations designating Series
A, B and C 8% Cumulative Redeemable Preferred Stock, which is intended to
replace the originally designated Series A, B and C 8% Redeemable Preferred
Stock. The Company has issued 500,000 shares of Series B 8% Cumulative
Redeemable Preferred Stock to BroadAsia and 500,000 shares of Series C 8%
Cumulative Redeemable Preferred Stock to two other investors. The Series B
shares were funded in February 1999 and the Series C in March 1999. In addition,
BroadAsia is exchanging the 1,000,000 shares of Series A 8% Redeemable Preferred
Stock for 1,000,000 shares of Series A 8% Cumulative Redeemable Preferred Stock.
Once the exchange of the Series A shares is complete, the Company plans to file
a Certificate Eliminating Reference to the original Series A, B and C 8%
Redeemable Preferred Stock from its certificate of incorporation.

Dispute with Chung Hwa

      In addition to the dispute with the Company's joint venture partner, Chung
Hwa began sending threatening letters to management in late November and
December 1998. The letters suggested that Chung Hwa would try to unwind the
Share Exchange Agreement. Management believed that Chung Hwa was attempting to
"build" its own balance sheet, at the Company's expense, in order to salvage its
own business which was facing severe financial difficulties in Hong Kong.


                                       10
<PAGE>

      As of December 3, 1998, ABSA Asia Limited ("ABSA"), a creditor of Chung
Hwa, obtained voting control over the 1,875,000 shares then held in the name of
Chung Hwa and also had the power to transfer such shares into its own name, both
by operation of a certain Share Mortgage, dated December 3, 1998. Under the
Share Mortgage, Chung Hwa had pledged the 1,875,000 shares as collateral to
ABSA.

      On December 12, 1998, the directors and officers of the Company began
receiving notices from Chung Hwa that it had taken action on December 10,
purportedly as majority stockholder, to oust the board and install its own slate
of directors, who in turn had elected replacement officers. Chung Hwa no longer
had the right to vote as the majority stockholder on December 10, 1998. In
addition to its Share Mortgage in favor of ABSA, Chung Hwa had also pledged back
to the Company the 2,250,000 shares of the Company's Common Stock, which it had
received in the share exchange, which were intended to be sold and the proceeds
used to pay the debt to LEP-Hong Kong (now in liquidation). As a result, Chung
Hwa had no voting rights in the Company's stock. Nevertheless, Chung Hwa brought
an action in Delaware Chancery Court to determine who were the proper directors
and officers of the Company. The action was subsequently dismissed. Because of
this action by Chung Hwa, in the midst of the turmoil in China and management's
negotiation of the terms of the Preferred Stock issuance, the Company had to
devote time and resources to defending the baseless suit. This exacerbated the
Company's troubles.

Nasdaq De-Listing

      Effective April 14, 1999 the Company's securities are no longer listed on
the Nasdaq National Market. In a letter received by the Company from Nasdaq, the
Nasdaq staff indicated that the Company's securities were removed from listing
due to its inability to regain compliance with certain maintenance criteria
required for listing on the National Market. The letter also referred to the
Company's financing activities described above which were intended to provide
liquidity for its continuing operations. The Company's officers are working with
counsel to address these compliance issues and possibly to secure listing of the
Company's Common Stock on an alternative trading market. There can be no
assurance that the Company will be able either to regain compliance or to obtain
listing on another market.


                                       11
<PAGE>

Competition

      The Company is aware of 20 substantial foreign-based manufacturers and of
ten North American distributors whose products are in direct competition with
various of its packaging products. The Company believes that the cost of
manufacturing packaging products in North America and Europe is relatively high,
causing manufacturers to seek out overseas suppliers to fill their orders.

      The Company believes that it will be able to compete by having the
flexibility to respond quickly to orders and catering to changes in customers'
design specifications; by endeavoring to offer a wider range of products than
its competitors; and by capitalizing on lower production costs obtainable in
Asia, while maintaining the high quality of its products. The Company believes
it can offer its North American customers a quick response time on short orders
because of its customization facilities in the United States.

      There is substantial competition in the packaging products industry. The
Company competes with distributors and manufacturers of packaging products based
in the U.S. and overseas. Many of the Company's competitors have name
recognition in the market and longer operating histories and in many cases are
substantially larger and better financed than the Company. Such competitors may
use their economic strength to influence the market to continue to buy their
existing or newly developed products. New competitors may arise and may market
products which compete with the Company's products. The Company believes that
several companies currently distribute products in North America in direct
competition with the Company's packaging products, including International
Packaging Inc., Gem Case Inc., Fuller Corporation, Rocket Jewelry Box Inc.,
Noble Inc., Jewel Case Factory, Unique Packaging Inc. and Gunther Mele Inc. Some
of the Company's current customers presently, or at some future point may,
compete with the Company.

      Competition in the packaging products industry has recently intensified in
Asia as a result of the economic crisis which has plagued the region over the
past several months. This has caused demand for packaging products in Asia to
decline. In addition, it has caused other Asian producers and distributors of
packaging products in Asia to lower their prices in order to maintain liquidity.

Significant Customers

      Two customers, Rocket Jewelry Box Inc. and Gatto L. & C. Astucci Srl.,
accounted for 35%, and 17%, respectively, of the Company's sales for the year
ended March 31, 1999. Because Rocket Jewelry Box Inc is itself a distributor of
packaging products, the Company has reduced its business with Rocket during the
current fiscal year as it moves forward with its direct marketing strategy.
These two customers' percentages are mainly based on North American sales during
the fiscal year because all international sales, except for those conducted
through LEPI China after the liquidation of LEP-Hong Kong (which were
insignificant), were not accounted for in the Company's financial statements due
to the unavailability of records for them. The Company believes that inclusion
of international sales would significantly reduce the percentage for Rocket and
slightly increase the percentage for Gatto L. & C. Astucci Srl. For the year
ended March 31, 1998, two customers, Rocket Jewelry Box Inc. and Talbot's
(Birmingham) Limited, each accounted for 10% of the Company's revenues.


                                       12
<PAGE>

Government Regulation: Import/Export

      China currently enjoys Normal Trade Relations ("NTR") status (formerly
known as "Most Favored Nation" status) granted by the United States, which
results in imports into the United States from China being subject to the lowest
applicable tariffs. The United States annually reconsiders the renewal of NTR
trading status for China. There can be no assurance, however, that the China's
NTR status will be renewed in future years. The Company believes that the
non-renewal of NTR trading status would adversely affect the pricing of any
inventory of the Company consisting of products manufactured within China.
Failure by the United States to renew China's NTR status, could cause an
increase in the cost to import packaging products to Hong Kong from China, and,
after transfer of sovereignty over Hong Kong, from Hong Kong to the United
States.

      At current rates an import duty of between 5% and 20% will be payable by
the Company on the import price of metal and plastic cases imported into the
U.S. and Canada. If the PRC were to lose NTR status, then the Company's products
may be subject to higher tariffs and import duties in the U.S. Although it is
not possible to quantify the potential impact of higher tariffs and duties, the
Company believes that, due to the comparatively low cost of production in China,
it would be able to withstand an increase in tariffs while still being able to
compete profitably in the U.S. market.

Raw Materials

      The Company historically has obtained raw materials for the packaging
products mainly from the United States, Korea, Japan and other countries in
Europe and Asia. In order to save shipping and other costs, the Company has
recently begun to shift its raw materials purchases to sources located in China.
The Company has never experienced a shortage of materials as it attempts to
maintain an alternative source for each material it uses. For example, Styrene,
velour and ecosuede can all be sourced form the United States, Europe or Taiwan;
steel can be sourced from Korea, Japan or China; and plastic resins can be
sourced from Taiwan, Thailand or Japan.

Employees

      As of March 31, 1999, the Company employed approximately 2,000 employees
(including employees of LEPI-China). These employees include 16 staff in the
United States, 11 staff in Hong Kong and the balance at the Company's facilities
in China. In the United States, the Company has five management level employees,
six marketing and sales personnel, four accounting, administrative and
supervisory personnel and three light assembly and distribution workers.
LEPI-China currently has approximately 2,000 employees, including 18 employees
at the management level, 100 administrative, accounting and supervisory
employees and approximately 1,880 employees who make and distribute the
packaging products.


                                       13
<PAGE>

Financial Information about Foreign and Domestic Operations and Export Sales

      Justrite is engaged in one business segment which is the manufacture, sale
and distribution of packaging products. An analysis of sales by geographic
destination for the years ended March 31, 1998, 1998 and 1997 follows:

--------------------------------------------------------------------------------
Net sales:                            1999               1998               1997
--------------------------------------------------------------------------------
North America                      $ 6,067            $11,309            $12,987
--------------------------------------------------------------------------------
Europe                                 303              5,177              5,908
--------------------------------------------------------------------------------
Asia and others                         45              5,782              4,984
--------------------------------------------------------------------------------
                                     6,415             22,268             23,880
--------------------------------------------------------------------------------
                                 (In Thousands)


                                       14
<PAGE>

      The following are the Company's operating data by geographic area:

--------------------------------------------------------------------------------
                                       1999               1998              1997
--------------------------------------------------------------------------------
Net sales:
North America                      $  6,067           $ 11,309          $ 12,987
--------------------------------------------------------------------------------
Hong Kong and other
parts of China                          348             10,959            10,893
--------------------------------------------------------------------------------
                                      6,415             22,268            23,880
--------------------------------------------------------------------------------
Operating (loss) income:
North America                       (12,842)             1,611             3,359
--------------------------------------------------------------------------------
Hong Kong and other
parts of China                       (5,342)             2,042             1,802
--------------------------------------------------------------------------------
                                    (18,184)             3,653             5,161
--------------------------------------------------------------------------------
Assets at end of year:
North America                         4,358              8,568            13,867
--------------------------------------------------------------------------------
Hong Kong and other
parts of China                        3,085             21,044            29,740
--------------------------------------------------------------------------------
                                      7,443             29,612            43,607
--------------------------------------------------------------------------------
                                 (In Thousands)
Item 2. Properties

Leases

      Leading Edge leases a 2,000 square-foot space for its offices and showroom
in the Empire State Building, 350 Fifth Avenue, Suite 3922, New York, New York
for a five-year period commencing July 1, 1996 at an annual rent of $42,096. The
Company also has leased for the warehousing and customization of its products a
33,000 square-foot facility in Raritan, New Jersey, for a period of five years
commencing November 1, 1996, at an annual rent of $150,336 plus 30% of certain
common charges for the building in which the facility is located. The facility
was expanded for a time to 65,000 square feet, but effective July 1, 1999, the
Company has surrendered its lease for the additional space.

      LEPI China leases approximately 3,400 square feet of office space and
approximately 4,000 square feet of warehouse space in Hong Kong at an aggregate
annual rent of approximately $89,620.92. LEPI Manufacturing leases factory space
of approximately 226,000 square feet for its manufacturing facility in
Zhongshan, China at an annual rent of approximately $317,800.20. In addition,
LEPI Manufacturing leases residential spaces near the factory in Zhongshan for
workers' dormitories. Leases on this space total approximately $182,326.56 in
aggregate annual rent.


                                       15
<PAGE>

Item 3. Legal Proceedings

United States

      The Company has filed a complaint against Boxco Ltd. for non-payment of
invoices for goods sold to Boxco in the amount of $97,666 plus interest and
consequential damages. The Company has made full provision for
non-recoverability of this debt in its financial statements. In addition, the
Company has filed a motion for summary judgment in lieu of complaint against
Astucci U.S. Limited for a claim in the amount of $154,272.20 plus interest and
fees. The claim arises out of a prior Settlement Agreement under which Astucci
had agreed to pay certain amounts in settlement of invoices for goods sold. The
Company has not yet received a response to its motion, which response was due
July 13, 1999.

      On December 12, 1998, the directors and officers of the Company began
receiving notices from Chung Hwa that it had taken action on December 10,
purportedly as majority stockholder, to oust the board and install its own slate
of directors, who in turn had elected replacement officers. Chung Hwa no longer
had the right to vote as the majority stockholder on December 10, 1998. In
addition to its Share Mortgage in favor of ABSA, Chung Hwa had also pledged back
to the Company the 2,250,000 shares of the Company's common stock, which it had
received in the share exchange, which were intended to be sold and the proceeds
used to pay the debt to LEP-Hong Kong (now in liquidation). As a result, Chung
Hwa had no voting rights in the Company's stock. Nevertheless, Chung Hwa brought
an action in Delaware Chancery Court to determine who were the proper directors
and officers of the Company. The action was dismissed on January 18, 1999. No
further action has been taken on this matter. See "Item 1. Business--Recent
Developments".

China and Hong Kong

      In November 1998, the Company's China joint venture partner alleged that
the Company owed it $300,000 in unpaid wages. The joint venture partner
unilaterally acted to seize the factory and its assets, including its inventory
of finished packaging products 60% of which belonged to the Company. This action
by the joint venture partner resulted in the cessation of production at the
factory. Because this factory was the Company's sole source of supply for its
packaging products, the cessation of production caused a major disruption in the
Company's business and a temporary but significant loss of revenue. The Company
instructed its legal counsels in both Hong Kong and China to file claims on the
assets of the joint venture to which it is entitled by virtue of its 60%
interest in the joint venture. The Company estimates that these assets had a
value of approximately $6,100,000. The Company continues to pursue litigation
against its former joint venture partner, but whether it will ever recover the
amount owed it is uncertain. See "Item 1. Business--Recent Developments".


                                       16
<PAGE>

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

      There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 31, 1999.

                                     PART II

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

      The range of the high and low sales prices per share of the Leading Edge's
Common Stock during the last fiscal year, as reported by the National Market, is
set forth below:

                                                            High     Low
                                                            ----     ---
      Fiscal 1997
        3rd Quarter ....................................    7        6.25
        4th Quarter ....................................    7        5

      Fiscal 1998

        1st Quarter ....................................    6.5      5.125
        2nd Quarter ....................................    6.438    5
        3rd Quarter ....................................    6.438    6.25
        4th Quarter ....................................    6.875    5.25

      Fiscal 1999

        1st Quarter ....................................    5.282    5.056
        2nd Quarter ....................................    2.292    2.138
        3rd Quarter ....................................    1.203    1.104
        4th Quarter ....................................    1.017     .912

      Effective April 15, 1999, Leading Edge's shares were delisted from the
Nasdaq National Market. No public market currently exists for trading Leading
Edge's stock.

      As of June 18, 1999, there were approximately 351 beneficial holders of
record of Leading Edge's Common Stock.

      Leading Edge has never paid cash dividends on its Common Stock. Payment of
dividends, if any, will be within the discretion of the Leading Edge's Board of
Directors and will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company. At the
present time, the Company's anticipated capital requirements are such that it
intends to follow a policy of retaining earnings, if any, in order to finance
the development of its business.


                                       17
<PAGE>

Item 6. Selected Financial Data

      The selected financial data for the three years ended March 31, 1999 is
qualified by and should be read in conjunction with the Company's combined
financial statements and notes thereto and "Management's Discussion and Analysis
of financial Condition and Results of Operations" appearing elsewhere herein.

================================================================================
                           Fiscal Year ended March 31,
                 (In thousands, except selected operating data)
                 ----------------------------------------------
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                             1999          1998         1997         1996          1995
                             ----          ----         ----         ----          ----
<S>                   <C>            <C>          <C>          <C>          <C>
Income Statement
Data:
---------------------------------------------------------------------------------------
      Net sales       $     6,415    $   22,268   $   23,880   $   21,972   $    16,692
---------------------------------------------------------------------------------------
      Gross (loss)
      profit                  (70)       10,601       11,144        9,868         7,038
---------------------------------------------------------------------------------------
      Operating
      (loss) income       (18,184)        3,653        5,161        4,792         2,139
---------------------------------------------------------------------------------------
      (Loss) income
      before income
      taxes               (18,311)        3,388        5,079        4,693         2,076
---------------------------------------------------------------------------------------
      Income taxes         (1,560)          125        1,329          192          (110)
---------------------------------------------------------------------------------------
      Net income          (16,751)        3,263        3,750        4,501         2,186
---------------------------------------------------------------------------------------
      Net (loss)
      income per
      common share    $     (3.01)   $     0.59   $     0.82   $     2.00   $      0.97
---------------------------------------------------------------------------------------
      Weighted
      average
      common shares
      outstanding       5,562,500     5,562,500    4,597,603    2,250,000     2,250,000
=======================================================================================
Balance Sheet
Data:
---------------------------------------------------------------------------------------
      Working
      Capital
      (deficiency)    $    (2,130)   $   11,508   $   22,309   $   11,013   $     6,443
---------------------------------------------------------------------------------------
      Total assets          7,443        29,612       43,607       28,597        18,230
---------------------------------------------------------------------------------------
      Total
      liabilities           9,366        13,224       16,243       11,013         6,188
---------------------------------------------------------------------------------------
      Minority
      Interests                --         1,550        1,552        1,554         1,554
---------------------------------------------------------------------------------------
      Stockholders
      equity               (1,923)       14,838       25,812       14,990        10,488
=======================================================================================
</TABLE>


                                       18
<PAGE>

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

      The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto contained elsewhere herein. All
statements, trend analysis and other information contained in this report
relative to markets for the Company's products and trends in the Company's
operations or financial results, as well as other statements including words
such as "anticipate", "believe", "plan", "estimate", "expect", "intend", and
other similar expressions, constitute forward-looking statements under the
Private Securities Litigation Reform Act of 1995, and such statements are
subject to certain risks and uncertainties.

      The Company has faced a number of major unanticipated setbacks during the
past fiscal year, which have had a strong impact on its results of operations
and financial condition. The temporary cessation of production of its packaging
products due to the closing of its joint venture factory in China caused a major
disruption in sales for the third and fourth quarters of the fiscal year. In
addition, the Company's wholly-owned subsidiary in Hong Kong, Leading Edge
Packaging Limited ("LEP-Hong Kong"), entered voluntary liquidation. Because of
the liquidation of both LEP-Hong Kong and the China joint venture, certain books
and records of the Company were not accessible at year end to enable the Company
and its auditors to determine the net asset value of these subsidiaries in
liquidation and their results of operations for the period from April 1, 1998 to
the date of their entry into liquidation. Therefore, the financial statements
for the year ended March 31, 1999 have been prepared as if these subsidiaries
had been equity accounted as an unconsolidated subsidiary up to September 30,
1998, the latest date for which information was available, and a loss calculated
as of that date representing the Company's interest in the net assets of these
subsidiaries. Thus these financial statements reflect a drastic reduction in
sales and a net operating loss. The Company does not expect any residual value
from the subsidiaries in liquidation and is writing off any remaining assets to
the income statement.

Results of Operations

Comparison of Year Ended March 31, 1999 to Year Ended March 31, 1998

      Net Sales decreased $15,853,309 (71%) from $22,267,966 in fiscal 1998 to
$6,414,657 in fiscal 1999. This decrease was primarily due to the
discontinuation of operations at the Company's joint venture factory in China
and the liquidation of LEP-Hong Kong.


                                       19
<PAGE>

      Cost of Sales decreased $5,182,370 (44%) from $11,666,712 in fiscal 1998
to $6,484,342 in fiscal 1999. This decrease corresponded to the decrease in net
sales and the cost savings from lost sales.

      Gross (Loss) Profit decreased $10,670,939 (100.7%) from a gross profit of
$10,601,254 in fiscal 1998 to a gross loss of $(69,685) in fiscal 1999. This
decrease resulted from a decrease in net sales due to discontinuation of
operations at the Company's joint venture factory in China and the liquidation
of LEP-Hong Kong.

      Selling, General and Administrative Expenses increased $354,817 (5.3%)
from $6,574,704 in fiscal 1998 to $6,929,521 in fiscal 1999. This increase
resulted from fixed marketing and sales expenses that do not decrease with the
value of sales. Certain additional marketing staff and advertising expenditures
were already committed and could not be reduced due to the unexpected disruption
in production as could the cost of sales.

      Equity in Profit of Subsidiaries Closed represented the unaudited results
up to September 30, 1998 based on financial information available up to that
date.

      Operating (Loss) Income decreased $ 21,836,900 (598%) from income of
$3,652,622 in fiscal 1998 to a loss of $(18,184,278) in fiscal 1999. This
decrease resulted almost entirely from the reduction in net sales, and, to a
lesser extent, from higher selling, general and administrative expenses.

      (Loss) Income before Taxes decreased $21,698,131 (641%) from income of
$3,387,181 in fiscal 1998 to a loss of $(18,310,950) in fiscal 1999. This
decrease resulted from lower operating income, which in turn resulted primarily
from the decrease in net sales.

      Net (Loss) Income, as a result of the above, decreased $20,013,549 (613%)
from net income of $3,262,599 in fiscal 1998 to a net loss of $(16,750,950) in
fiscal 1999. This decrease resulted almost entirely from lower net sales due to
the closing of the joint venture factory in China and the liquidation of
LEP-Hong Kong, and, to a lesser extent, to an increase in selling, general and
administrative expenses.

Comparison of Fiscal 1998 to Fiscal 1997

      Net Sales decreased $1,611,857 (6.7%) from $23,879,823 in fiscal 1997 to
$22,267,966 in fiscal 1998. This decrease resulted from fewer sales. Certain of
the companies competitors reduced their prices to maintain liquidity in the wake
of the Asian economic crisis. Management decided not to react to pressure from
customers to compete by lowering the Company's prices without an acceptable
profit. The Company intends to gauge the developments in Asia before
strategically repricing its products.


                                       20
<PAGE>

      Cost of Sales decreased $1,069,505 (8.4%) from $12,736,217 in fiscal 1997
to $11,666,712 in fiscal 1998. This decrease corresponded to the decrease in net
sales.

      Gross Profit decreased $542,352 (4.9%) from $11,143,606 in fiscal 1997 to
$10,601,254 in fiscal 1998. This decrease resulted from a decrease in net sales
and the corresponding cost of sales. As a percentage of net sales, gross profit
remained relatively stable.

      Selling, General and Administrative Expenses increased $592,099 (9.9%)
from $5,982,605 in fiscal 1997 to $6,574,704 in fiscal 1998. This increase
resulted from the impact of the fully realized costs of maintaining the
Company's U.S. operations for the full fiscal year and higher marketing
expenses, the benefit of which may not be realized during the current fiscal
year.

      In addition, the Company had a non-recurring expense of $373,928 resulting
from the misappropriation of cash by a manager of its China factory. The manager
has agreed to re-pay the amount over three years. The Company has fully provided
for the amount in the financial statements and intends to account for any
recoveries on a cash basis. The Company has since reviewed its security system
and implemented more stringent control to avoid the recurrence of such a
misappropriation.

      Operating Income decreased $1,508,379 (29.2%) from $5,161,001 in fiscal
1997 to $3,652,622 in fiscal 1998. This decrease resulted from lower net sales,
higher selling, general and administrative expenses, and the non-recurring
expense described above.

      Income before Taxes decreased $1,691,351 (33.3%) from $5,078,532 in fiscal
1997 to $3,387,181 in fiscal 1998. This decrease resulted from lower operating
income coupled with a higher interest expense.

      Income Taxes decreased $1,204,046 (91.0%) from $1,328,628 in fiscal 1997
to $124,582 in fiscal 1998. This decrease resulted from lower operating income
coupled with a write-back of an over provision for overseas taxes in previous
years.

      Net Income, as a result of the above, decreased $487,305 (13.0%) from
$3,749,904 in fiscal 1997 to $3,262,599 in fiscal 1998. This decrease resulted
from lower net sales, an increase in selling, general and administrative
expenses, and the non-recurring expense described above.


                                       21
<PAGE>

                   Percentage Comparison as a Factor of Sales

                                                              Fiscal
                                                  1999         1998        1997
                                                  ----         ----        ----
Net sales (compared to
    previous year)                               (71%)         (7%)        8.7%
Cost of sales
    (% of net sales)                             101%          52%        53.3%
Gross (loss) profit
    (% of net sales)                              (1%)         48%          47%
Selling, general and
 administrative expenses
    (% of net sales)                             108%          30%          25%
Non-recurring expenses
    (% of net sale)                              N/A            2%         N/A
Operating (loss)income
    (% of net sales)                            (283%)         16%          22%
Income (loss) before taxes
    (% of net sales)                            (285%)         15%          21%
Income taxes (% of net sales)                   24.3%         0.5%         5.6%
Net (loss) income
    (% of net sales)                            (261%)         15%          16%

1998 net income is 1% less than 1997. This is a result of a higher selling,
general and administrative expenses (5%), a non-recurring expense (2%) offset by
a tax provision write-back giving a net decrease (5%) and a marginal improvement
in gross profit (1%) in 1998 compared to 1997.

Liquidity and Capital Resources

      The Company's primary sources of working capital are its outstanding bank
debt and the new infusion of capital attributable to the issuance of preferred
stock. The Company had negative working capital of approximately $(2,129,202) at
March 31, 1999 compared with positive working capital of $11,508,218 at March
31, 1998, respectively. During fiscal 1999 the Company's operating activities
used $2,840,702 in cash compared with $10,475,413 during fiscal 1998. The
Company's operations consumed $187,910 for inventories and $364,080 in income
taxes payable. At March 31, 1999, the Company had no short-term borrowing
reflected on its balance sheet. The Company's debt included long-term debt of
$27,923 in fiscal 1999. At March 31, 1999, the Company's credit facilities were
terminated and it had borrowings under previously available facilities.

      Historically, the Company has maintained trade terms in line with the
industry and sold on COD terms, letter-of-credit terms and 30-90 days credit
terms based on the financial standing and history of each customer. Where the
Company is promoting a certain category of packaging products or when it is
promoting the sale of a certain type of material, the Company will consider
extended payment terms on a case by case basis. The Company currently purchases
most of its raw materials on either a COD, letter of credit or cash basis and is
operating with virtually no banking facilities. This, coupled with the terms
being extended to its customers, results in working capital shortfalls. The Bank
of Central Asia discounts the Company's bills receivable on a case by case
basis, but management does not believe that the Company can rely on this.


                                       22
<PAGE>

      Management anticipates that it will have to supplement its cash flows from
operating activities with funds from the issuance of additional debt or equity
in order to support the Company's current business program and seasonal working
capital needs for the foreseeable future. The Company anticipates that it will
need to raise significant funds in order to fund its operations in the near
term. However, the Company cannot ensure that it will be able to raise funds or
that if it is able to raise funds, that they will suffice for operation of its
business. The Company has received non-binding letters of continuing support
from its majority preferred stockholder, BroadAsia LLC, and its financial
advisor, Broadmark Capital Corporation.

Seasonality

      Generally, the Company's business depends on the buying seasons of the
luxury goods which are sold using its packaging products, with a significant
portion of its sales and most of its income generated during the second and
third fiscal quarters ending March 31. The Company has historically experienced
lower net sales in each of its first and fourth quarters. The bulk of sales in
the jewelry and watch packaging category occur from July to November, with most
other sales occurring between February and June. December and January tend to be
slow months for jewelry and watch packaging sales. In the optical case category,
the highest number of sales occur from September to January, the second highest
number of sales occurring between February and June, and the lowest number in
July and August. During the fiscal year ended March 31, 1999, however, the
seasonal trend was affected by the disruption in production due to the closing
of the joint venture factory in China and the liquidation of LEP-Hong Kong. This
caused a downturn in sales in the third and fourth quarters. The Company has
opened a new manufacturing facility and is taking steps to rebuild its
relationships with its customer base. As it does so, management anticipates that
the affect of the disruption in production will continue to affect its seasonal
trends in the upcoming fiscal year. A variety of other factors may also affect
the revenue results of the Company, including U.S. and international economic
conditions, the retail sales environment and the Company's ability to otherwise
execute its business and marketing strategy.


                                       23
<PAGE>

Item 8. Financial Statements and Supplementary Data

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

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

      None.

                                    PART III

Incorporated by reference to the Company's Proxy Statement for its Annual
Meeting to be held on August 13, 1999.

                                     PART IV

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

      The following documents are being filed as a part of this report:

(a)   (1)   Financial Statements

      (2)   Financial Statement Schedules

            All other schedules are omitted since the required information is
            either not present or not present in amounts sufficient to require
            submission of the schedule

(b)   Exhibits

      3.1   Certificate of Incorporation, as amended, is hereby incorporated by
            reference to Amendment No. 2 to the Company's Registration
            Statement, which was filed with the SEC on November 13, 1996.

      3.2   Amended and Restated By-laws are hereby incorporated by reference to
            Amendment No. 2 to the Company's Registration Statement, which was
            filed with the SEC on November 13, 1996.

      3.3   Certificate of Amendment to Certificate of Incorporation, dated
            November 12, 1998, as filed with the Delaware Secretary of State on
            November 17, 1998.

      3.4   Certificate of Designations, dated January 19, 1999, as filed with
            the Delaware Secretary of State on January 19, 1999, designating
            Series A, B and C 8% Redeemable Preferred Stock.


                                       24
<PAGE>

      3.5   Certificate of Designations, dated June 9, 1999, as filed with the
            Delaware Secretary of State on June 11, 1999, designating Series A,
            B and C 8% Cumulative Redeemable Preferred Stock.

      3.6   Second Amended and Restated By-laws.

      3.7   Third Amended and Restated By-laws.

      4.1   Specimen Certificate for Shares of Common Stock is hereby
            incorporated by reference to Amendment No. 2 to the Company's
            Registration Statement, which was filed with the SEC on November 13,
            1996.

      4.2   Representative's Warrant Agreement and Certificate are hereby
            incorporated by reference to Amendment No. 2 to the Company's
            Registration Statement, which was filed with the SEC on November 13,
            1996. (Expired)

      4.3   1996 Incentive Stock Option Plan is hereby incorporated by reference
            to Amendment No. 1 to the Company's Registration Statement, which
            was filed with the SEC on October 10, 1996.

      4.4   1997 Associate Stock Option Plan is hereby incorporated by reference
            to the Company's Proxy Statement as filed with the SEC on Schedule
            14A on July 7, 1997.

      4.5.1 Specimen Certificate for Shares of Series A 8% Redeemable Preferred
            Stock;

      4.5.2 Specimen Certificate for Shares of Series A 8% Cumulative Redeemable
            Preferred Stock;

      4.5.3 Specimen Certificate for Shares of Series B 8% Cumulative Redeemable
            Preferred Stock;

      4.5.4 Specimen Certificate for Shares of Series C 8%Cumulative Redeemable
            Preferred Stock

      10.1  Assignment and Distribution Agreement is hereby incorporated by
            reference to the Company's Registration Statement, which was filed
            with SEC on September 27, 1996. (Rescinded)

      10.2  Employment Agreement between the Company and Lip-Boon Saw is
            incorporated by reference to the Company's Registration Statement,
            which was filed with the SEC on September 27, 1996. (Lapsed)


                                       25
<PAGE>

      10.3  Employment Agreement between the Company and Peter Yu-Siu Chu is
            incorporated by reference to the Company's Registration Statement,
            which was filed with the SEC on September 27, 1996. (Rescinded)(No
            longer employed with the Company)

      10.4  Employment Agreement between the Company and Dan Ben-Moshe is
            incorporated by reference to the Company's Registration Statement,
            which was filed with the SEC on September 27, 1996. (Rescinded)(No
            longer employed with the Company)

      10.5  Employment Agreement between the Company and Casey K. Tjang is
            incorporated by reference to the Company's Registration Statement,
            which was filed with the SEC on September 27, 1996.(Lapsed)

      10.6  Lease between the Company and Empire State Building Company is
            incorporated by reference to the Company's Registration Statement,
            which was filed with the SEC on September 27, 1996.

      10.7  Lease between the Company and Center Realty, L.P. are incorporated
            by reference to the Company's Registration Statement, which was
            filed with the SEC on September 27, 1996.

      10.8  Form of Distribution Agreement, dated July 28, 1997, by and between
            the Company and HBL, Limited is hereby incorporated by reference to
            the Company's Quarterly Report on Form 10-Q for the three months
            ended June 30, 1997. (Terminated)

      10.9  Loan and Security Agreement, dated September 25, 1997, by and
            between the Company and First Union National Bank.

      10.10 Agreement between LEPI China Limited and Hang Seng Real Estate
            Management Limited (for lease of office and warehouse space in Hong
            Kong)

      10.11 Form of Lease agreement respecting factory and dormitory space in
            Zhongshan, China

      10.12 Space Reduction Agreement between the Company and Federal Storage
            Warehouse, Inc. (Successor in interest to Center Realty, L.P.)
            (reducing the warehouse space to approximately 33,000 square feet).

      10.13 Form of Contract on Dormitory Lease in Zhongshan, China.

      On July 17, 1998, the Company filed a Report on Form 8-K disclosing the
completion of the Share Exchange by which it acquired Justrite Investment
Limited and its subsidiaries from the Company's former parent, Chung Hwa
Development Holdings Limited, in exchange for 2.25 million shares of the common
stock of Leading Edge. This report was amended on September 11, 1999.


                                       26
<PAGE>

      On January 28, 1999, the Company filed a Report on Form 8-K discussing the
following:

      The change in control of the Company resulting from the issuance of
1,000,000 shares of Preferred Stock to BroadAsia LLC;

      The threatened de-listing of the Company's securities from the Nasdaq
National Market; and

      The closing of the Company's joint venture factory in China and the
planned opening of a new factory under the Company's "wholly owned foreign
enterprise" subsidiary.

(c)   See Item 14(a)(3), above

(d)   Not applicable


                                       27
<PAGE>

                             LEADING EDGE PACKAGING, INC.
                             ----------------------------

                             Consolidated Financial Statements
                             For the year ended March 31, 1999

<PAGE>

                          Leading Edge Packaging, Inc.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report                                               F - 1

Consolidated Balance Sheets                                                F - 3

Consolidated Statements of Operations                                      F - 4

Consolidated Statements of Shareholders' Equity (Deficit)                  F - 5

Consolidated Statements of Cash Flows                                      F - 6

Notes to Consolidated Financial Statements                                 F - 7

<PAGE>

                          Leading Edge Packaging, Inc.

                          INDEPENDENT AUDITORS' REPORT

The Shareholders and The Board of Directors
Leading Edge Packaging, Inc.

We have audited the accompanying consolidated balance sheets of Leading Edge
Packaging, Inc. and its subsidiaries as of March 31, 1999 and 1998 and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for each of the three years in the period ended March 31, 1999.
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.

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

As described in Note 1(i) to the financial statements, disputes with minority
shareholders of a subsidiary of Justrite Investments Limited ("Justrite"), have
resulted in the closure on liquidation of its two principal operating
subsidiaries, Leading Edge Packaging Limited and Dongguan Walford Ornaments
Packaging Co. Ltd.. Because of this situation, we have been unable to obtain
access to the complete accounting records of Justrite for the year ended March
31, 1999 and, thus we have been unable to satisfy ourselves as to the amounts
designated as "Equity in profit to date of closure of $798,000" and "Loss on
closure of $11,983,072" in the consolidated statement of operations for the year
ended March 31, 1999.


                                      F-4
<PAGE>

                          Leading Edge Packaging, Inc.

                    INDEPENDENT AUDITORS' REPORT - continued

In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to gather sufficient
evidence regarding the classification of the caption "Loss on closure of
subsidiaries" in the statement of operations for the year ended March 31, 1999
referred to in the preceeding paragraph, the financial statements referred to in
the first paragraph above present fairly, in all material respects, the
financial position of Leading Edge Packaging, Inc. and its subsidiaries as of
March 31, 1999 and 1998 and the results of their operations and their cash flows
for each of the three years in the period ended March 31 1999 in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements for the year ended March 31, 1999 have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note 2 to the financial statements, the Company's loss in the
current year and the resulting deficiency of shareholders' equity raise
substantial doubt as to its ability to continue as a going concern. Managements'
plans with respect to this matter are also discussed in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Deloitte Touche Tohmatsu
Hong Kong
June 25, 1999


                                      F-5
<PAGE>

                          Leading Edge Packaging, Inc.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                     March 31,
                                                                                     ---------
                                                                           1999                 1998
                                                                           ----                 ----
<S>                                                                    <C>                 <C>
                                   ASSETS
Current assets:
  Cash and cash equivalents                                            $   226,785         $    951,167
  Accounts receivable, net of allowance for doubtful
    accounts - 1999, $1,324,425; 1998, $218,560;                           750,986            2,295,719
  Bills receivable (Note 4)                                                 54,363              935,564
  Inventories (Note 5)                                                   2,608,496            6,589,704
  Receivable from Chung Hwa Group (Note 13)                                     --           12,746,138
  Income taxes receivable (Note 7)                                       1,602,798                   --
  Prepaid expenses and other current assets                                215,058              505,353
                                                                       -----------          -----------
Total current assets                                                     5,458,486           24,023,645
  Property, plant and equipment, net of accumulated
    depreciation - 1999, $238,480; 1998, $3,160,360 (Note 6)             1,984,653            5,588,272
                                                                       -----------          -----------
Total assets                                                           $ 7,443,139         $ 29,611,917
                                                                       -----------          -----------

                 LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
  Short-term borrowings (Note 8)                                       $ 5,194,774         $  5,865,232
  Current portion of long-term debt (Note 9)                                10,128              273,395
  Bills payable (Note 4)                                                        --            1,250,727
  Accounts payable                                                         295,490            2,424,570
  Amount payable to a related company (Note 13)                            420,521                   --
  Accrued liabilities                                                    1,647,651            2,154,250
  Income taxes payable (Note 7)                                                 --              547,253
  Dividend payable                                                          19,124                   --
                                                                       -----------          -----------
Total current liabilities                                                7,587,688           12,515,427
                                                                       -----------          -----------

Long-term liabilities:
  Deferred income taxes                                                         --               51,095
  Long-term debt (Note 9)                                                   27,923              656,784
                                                                       -----------          -----------
Total long-term liabilities                                                 27,923              707,879
                                                                       -----------          -----------
Minority interests                                                              --            1,550,387
                                                                       -----------          -----------

Commitments and contingencies (Note 15)

Redeemable Preferred Stock, Authorized 5,000,000 shares:
  Series A, $0.01 par value, with a redemption and liquidation
    value of $0.75 per share; 1,000,000 shares issued and
    outstanding                                                            750,000                   --
  Series B, $0.01 par value, with a redemption and liquidation
    value of $1.00 per share; 500,000 issued and outstanding               500,000                   --
  Series C, $0.01 par value, with a redemption and liquidation
    value of $1.00 per share; 500,000 issued and outstanding               500,000                   --
                                                                       -----------          -----------
                                                                         1,750,000                   --
                                                                       -----------          -----------

Common shareholders' equity:
Leading Edge:
  Common stock, $0.01 par value.  Authorized 8,000,000
    shares; 5,562,500 shares issued and outstanding                         55,625               33,125
Justrite:
  Common stock, $1.00 par value.  Authorized 50,000 shares;
  (1999: no shares issued and outstanding; 1998: 100 shares)                    --                  100
                                                                       -----------          -----------
                                                                            55,625               33,225
Additional paid-in capital                                               7,298,288            7,320,688
(Deficit) retained earnings                                             (9,276,385)           7,493,689
Foreign currency translation adjustment                                         --               (9,378)
                                                                       -----------          -----------
Total common shareholders' (deficit) equity                             (1,922,472)          14,838,224
                                                                       -----------          -----------
Total liabilities and shareholders' (deficit) equity                   $ 7,443,139         $ 29,611,917
                                                                       -----------          -----------
</TABLE>



                                      F-6
<PAGE>

                          Leading Edge Packaging, Inc.

           See accompanying Notes to Consolidated Financial Statements


                                      F-7
<PAGE>

                          Leading Edge Packaging, Inc.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             Year ended March 31,
                                                             --------------------
                                                     1999            1998            1997
                                                     ----            ----            ----
<S>                                              <C>             <C>             <C>
Net sales                                        $  6,414,657    $ 22,267,966    $ 23,879,823
Cost of sales                                       6,484,342      11,666,712      12,736,217
                                                 ------------    ------------    ------------
Gross (loss) profit                                   (69,685)     10,601,254      11,143,606
Loss on closure of subsidiaries (Note 1)
  Equity in profit to date of closure                 798,000              --              --
  Loss on closure                                 (11,983,072)             --              --
                                                 ------------    ------------    ------------
                                                  (11,185,072)             --              --
                                                 ------------    ------------    ------------
Selling, general and administrative expenses        6,929,521       6,574,704       5,982,605
Non-recurring expense (Note 12)                            --         373,928              --
                                                 ------------    ------------    ------------
Operating (loss) income                           (18,184,278)      3,652,622       5,161,001
Interest expense                                     (187,138)       (530,946)       (353,468)
Interest income                                        20,750         102,305          37,675
Other income                                           39,716         163,200         233,324
                                                 ------------    ------------    ------------
(Loss) income before income taxes                 (18,310,950)      3,387,181       5,078,532
Income taxes (Note 7)                               1,560,000        (124,582)     (1,328,628)
                                                 ------------    ------------    ------------
Net (loss) income                                 (16,750,950)   $  3,262,599    $  3,749,904
Cumulative preferred stock dividend                   (19,124)             --              --
                                                 ------------    ------------    ------------
Net (loss) income attributable to common stock
  shareholders                                   $(16,770,074)   $  3,262,599    $  3,749,904
                                                 ------------    ------------    ------------
Basic and diluted (loss) earnings per share      $      (3.01)   $       0.59    $       0.82
                                                 ------------    ------------    ------------
</TABLE>

           See accompanying Notes to Consolidated Financial Statements


                                      F-8
<PAGE>

                          Leading Edge Packaging, Inc.

        CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                            Common Stock
                         --------------------------------------------------
                           Leading Edge
                          Packaging, Inc.   Justrite                                       Foreign
                           shareholders'   Investments          Additional                 currency                        Total
                             Shares         Limited              paid-in      Retained    translation   Comprehensive  Shareholders'
                             equity         Shares    Amount     capital      earnings    adjustments   income (loss)      Equity
                            ---------       ------    -------  ------------  -----------   ------------ -------------  -------------
<S>                           <C>               <C>     <C>      <C>           <C>            <C>            <C>
Balance at April 1, 1996         1,500          100    $ 1,600  $  258,988  $ 14,729,891  $         --                 $ 14,990,479
Issuance of common stock
  and share split            1,873,500           --     17,250          --            --            --                       17,250
Contribution by Rich City
  of part of accounts
  payable to Rich City *            --           --         --     481,250            --            --                      481,250
Issuance of common stock
  in a public offering       1,437,500           --     14,375   6,580,450            --            --                    6,594,825
Net income for the year             --           --         --   3,749,904            --  $  3,749,904    $ 3,749,904     3,749,904
Translation adjustments             --           --         --          --       (21,600)      (21,600)       (21,600)      (21,600)
                                                                                                          -----------  ------------
Comprehensive income                                                                                      $ 3,728,304
                             ---------         ----    -------  ----------  ------------  ------------    -----------
Balance at March 31, 1997    3,312,500          100     33,225   7,320,688    18,479,795       (21,600)                  25,812,108

Net income for the year             --           --         --   3,262,599            --     3,262,599    $ 3,262,599     3,262,599
Translation adjustments             --           --         --          --        12,222        12,222         12,222        12,222
                                                                                                          -----------  ------------
Comprehensive income                                                                                      $ 3,724,821
                                                                                                          -----------
Dividend paid by Justrite
  to Chung Hwa                      --           --         --          --   (14,248,705)           --                  (14,248,705)
                             ---------         ----    -------  ----------  ------------  ------------                 ------------
Balance at March 31, 1998    3,312,500          100     33,225   7,320,688     7,493,689        (9,378)                  14,838,224
Issuance of common stock in
  exchange for shares in
  Justrite (Note 1)          2,250,000         (100)    22,400     (22,400)           --            --                           --
Net loss                            --           --         --          --   (16,770,074) $(16,770,074)  $(16,770,074)  (16,770,074)
Adjustment on closure of
  Justrite (Note 1(i))              --           --         --          --            --         9,378          9,378         9,378
                                                                                                         ------------  ------------
Comprehensive loss                                                                                       $(16,760,696)
                             ---------         ----    -------  ----------  ------------  ------------   ------------
Balance at March 31, 1999    5,562,500           --    $55,625  $7,298,288  $ (9,276,385) $         --                 $ (1,922,472)
                             ---------         ----    -------  ----------  ------------  ------------                 ------------
</TABLE>


*     Rich City International Packaging Limited ("Rich City") was the former
      holding company of Leading Edge Packaging, Inc.

           See accompanying Notes to Consolidated Financial Statements


                                      F-9
<PAGE>

                          Leading Edge Packaging, Inc.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Year ended March 31,
                                                                               --------------------
                                                                       1999            1998           1997
                                                                       ----            ----           ----
<S>                                                               <C>             <C>             <C>
Cash flows from operating activities:
  Net (loss) income                                               $(16,750,950)   $  3,262,599    $  3,749,904
Adjustments to reconcile net (loss) income to net cash provided
    by (used in) operating activities:
    Deferred income taxes                                                   --         (13,954)        (13,596)
    Depreciation                                                       139,379         643,941         619,169
    Loss on closure of subsidiaries                                 11,185,072              --              --
    Loss on sale of property, plant and equipment                          573              --              --
    Provision for doubtful accounts                                  3,244,982              --         218,560
    Changes in operating assets and liabilities:
        Long-term receivable                                                --              --         566,000
        Accounts receivable                                            133,863       6,638,517      (5,786,665)
        Bills receivable                                               548,129         958,576      (1,516,988)
        Inventories                                                   (187,910)       (750,709)        (81,204)
        Income taxes receivable                                     (1,602,798)             --              --
        Prepaid expenses and other current assets                      191,472        (133,756)        143,749
        Accounts payable                                                72,857          51,255         701,753
        Bills payable                                               (1,059,166)        988,237         110,470
        Accrued liabilities                                          1,607,875         326,552         335,841
        Income taxes payable                                          (364,080)     (1,495,845)      1,339,309
                                                                  ------------    ------------    ------------
  Net cash (used in) provided by operating activities               (2,840,702)     10,475,413         386,302
                                                                  ------------    ------------    ------------
Cash flows from investing activities:
  Purchase of property, plant and equipment                         (1,781,501)       (182,055)       (583,061)
                                                                  ------------    ------------    ------------
Cash flows from financing activities:
  Bank loan raised                                                   5,194,774       4,594,476         143,376
  Repayments of long-term borrowings                                        --        (246,541)       (458,476)
  Net proceeds from issuance of preferred stock                      1,750,000              --              --
  Net proceeds from issuance of common stock                                --              --       7,093,325
  Payment of capital lease obligations                                  (7,029)         (1,057)        (28,679)
  Repayments from Chung Hwa Group                                           --      15,716,978       3,219,763
  Advances from a related company                                      420,521              --              --
  Advances to Chung Hwa Group                                               --     (34,515,488)     (4,923,208)
  Advances to Justrite                                              (3,460,445)             --              --
                                                                  ------------    ------------    ------------
  Net cash provided by (used in) financing activities                3,897,821     (14,451,632)      5,046,101
                                                                  ------------    ------------    ------------
Effect of exchange rate changes on cash and cash
  equivalents                                                               --           9,715         (24,114)
                                                                  ------------    ------------    ------------
Net (decrease) increase in cash and cash equivalents                  (724,382)     (4,148,559)      4,825,228
Cash and cash equivalents at beginning of year                         951,167       5,099,726         274,498
                                                                  ------------    ------------    ------------
</TABLE>


                                      F-10
<PAGE>

                          Leading Edge Packaging, Inc.

<TABLE>
<S>                                                               <C>             <C>             <C>
Cash and cash equivalents at end of year                          $    226,785    $    951,167    $  5,099,726
                                                                  ------------    ------------    ------------
Supplemental disclosures of cash flow information:
  Interest paid                                                   $    187,138    $    530,946    $    352,421
  Income taxes paid                                                     20,750       1,634,381           2,915
</TABLE>

           See accompanying Notes to Consolidated Financial Statements


                                      F-11
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND BASIS OF PRESENTATION

      Leading Edge Packaging, Inc ("Leading Edge" or "the Company") is a limited
      company incorporated in Delaware engaged in the sale, manufacture and
      distribution of packaging products in North America. On December 2, 1996,
      Leading Edge issued 1,437,500 shares in a public offering in the United
      States.

      On January 23, 1998, Leading Edge entered into a Share Exchange Agreement
      (the "Agreement") with its former ultimate holding company, Chung Hwa
      Development Holdings Limited ("Chung Hwa"). Chung Hwa is a Bermuda company
      and its shares are listed on The Stock Exchange of Hong Kong Limited.
      Pursuant to the Agreement, Leading Edge received all of the issued and
      outstanding shares of Justrite Investments Limited ("Justrite"), a wholly
      owned subsidiary of Chung Hwa incorporated in the British Virgin Islands,
      in exchange for 2,250,000 shares of Leading Edge's common stock valued at
      $6.00 per share. Justrite was engaged in the manufacture, sale and
      distribution of packaging products. Leading Edge and Chung Hwa completed
      the transaction on March 13, 1998.

      As Leading Edge and Justrite were under common control during the period
      ended March 31, 1998, the financial statements at March 31, 1998 and for
      the two years' then ended have been prepared using the
      pooling-of-interests method to reflect the combined financial position,
      results of operations and cash flows of Leading Edge and Justrite for all
      the periods presented at historical cost as if the structure of the
      Company resulting from the above transactions had been in existence for
      the periods presented.

      (i)   Loss on closure of Justrite

            Through Justrite, the Company had two principal subsidiaries,
            Leading Edge Packaging, Limited ("LEP HK") in Hong Kong, an
            international trading company, and a manufacturing joint venture,
            Dongguan Walford Ornaments Packaging Co. Ltd., ("Dongguan Walford"),
            in China. The Company held a 60% interest in Dongguan Walford and
            the other 40% interest was held by a Chinese joint venture partner,
            Hua Nam Enterprises Limited ("Hua Nam") since 1994. On November 24,
            1998, Hua Nam unilaterally acted to seize the factory and its assets
            as a result of management fees owed to it. The assets of the joint
            venture company were subsequently sold by the liquidators in the
            PRC. This action by the joint venture partner resulted in the
            cessation of production at the factory. Because this factory was the
            Company's sole source of supply for its packaging products, the
            cessation of production caused a major disruption in the Company's
            business and a significant loss of revenue. On December 14, 1998,
            LEP HK filed for a voluntary liquidation and other subsidiaries
            holding properties associated with LEP HK were also placed into
            liquidation which included the receivable from Chung Hwa (Note 13).

            As a consequence of the above events the Company is unable to obtain
            access to the accounting and other records of Justrite and its
            subsidiaries.


                                      F-12
<PAGE>

                          Leading Edge Packaging, Inc.

            The Company has accounted for its interest in Justrite and its
            subsidiaries by the equity method as an unconsolidated subsidiary
            for the period up to September 30, 1998, the latest available date
            for which financial information was available, and recorded a loss
            on the closure of Justrite, representing the net asset values of the
            Justrite at that date. Management does not believe there will be any
            return of assets arising from the liquidation and all amounts have
            been written off.


                                      F-13
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND BASIS OF PRESENTATION - continued

      (ii)  In addition to Justrite and its subsidiaries, at March 31, 1999, the
            Company had the following principal subsidiaries:

                                            Percentage of         Place of
            Name of subsidiary               shareholding       incorporation
            ------------------               ------------       -------------

            LEPI China Limited                   100%        Hong Kong
            LEPI (Zhongshan) Manufacturing       100%        Other region of the
              Company Limited                                People's Republic
                                                             of China ("PRC")

            All significant intra-group transactions and balances have been
            eliminated on consolidation.

            The accompanying financial statements have been prepared in
            accordance with accounting principles generally accepted in the
            United States of America and are presented in U.S. dollars as the
            Company's sales are predominantly denominated in U.S. dollars.

2.    GOING CONCERN

      The consolidated financial statements have been prepared on the going
      concern basis of accounting which assumes the Company will realize its
      assets and discharge its liabilities in the normal course of business. The
      Company is currently operating at a loss and has a deficiency in
      shareholders' equity. Should the Company be unable to continue as a going
      concern it may be required to realize its assets and settle its
      liabilities at amounts substantially different from the current carrying
      values. The Company's ability to continue as a going concern is dependent
      on the continued financial support of its principal controlling
      shareholder.


                                      F-14
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Cash and cash equivalents - Cash and cash equivalents include cash on
      hand, demand deposits, interest bearing savings accounts, and time
      certificate of deposits with an original maturity of three months or less.

      Property, plant and equipment - Property, plant and equipment is stated at
      cost. Depreciation is provided to write off the cost of property, plant
      and equipment over its estimated useful lives using the straight line
      method, at the following rates per annum:

      Land held on long-term leases         Over the terms of the leases
      Land held on medium-term leases       2.5% or over the terms of the
                                              respective leases whichever is
                                              shorter
      Buildings                             2.5% or over the terms of the
                                              respective leases whichever is
                                              shorter
      Leasehold improvements                10% - 20% or over the terms of the
                                              respective leases whichever is
                                              shorter
      Furniture, fixtures and equipment     10% - 33 1/3%
      Plant and machinery                   10%
      Molds                                 10%
      Motor vehicles                        20%

      Leased assets - Leases that transfer substantially all the rewards and
      risks of ownership of assets to the Company are accounted for as capital
      leases. At the inception of a capital lease, the cost of the leased asset
      is capitalized at the present value of the minimum lease payments and
      recorded together with the obligation, excluding the interest element, to
      reflect the purchase and financing. Assets held under capital leases are
      included in property, plant and equipment and are depreciated over their
      estimated useful lives.

      Inventories - Inventories held for resale are stated at the lower of cost,
      determined by the first-in, first-out method, or value determined by the
      market. Finished goods inventories consist of raw materials, direct labor,
      and overhead associated with the manufacturing process.

      Valuation of long-lived assets - The Company periodically evaluates the
      carrying value of long-lived assets to be held and used, including
      goodwill and other intangible assets, when events and circumstances
      warrant such a review. The carrying value of a long-lived asset is
      considered impaired when the anticipated undiscounted cash flow from such
      asset is separately identifiable and is less than its carrying value. In
      that event, a loss is recognized based on the amount by which the carrying
      value exceeds the fair market value of the


                                      F-15
<PAGE>

                          Leading Edge Packaging, Inc.

      long-lived asset. Fair market value is determined primarily using the
      anticipated cash flows discounted at a rate commensurate with the risk
      involved. Losses on long-lived assets to be disposed of are determined in
      a similar manner, except that fair market values are reduced for the costs
      to dispose.


                                      F-16
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

      Net sales - Net sales represent the invoiced value of products sold less
      discounts and returns. Sales are recognized when products are shipped to
      customers or when title passes, if later.

      Income taxes - The Company has adopted the liability method of accounting
      for income taxes, as set forth in Statement of Financial Accounting
      Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under the
      liability method, deferred taxes are determined based upon the difference
      between the financial statement and tax bases of assets and liabilities at
      enacted tax rates in effect in the years in which the differences are
      expected to reverse. Deferred tax expense (benefit) represents the change
      in the deferred tax balances.

      Foreign currency translation - Assets and liabilities of foreign
      operations are translated using period-end exchange rates. Revenues and
      expenses of foreign operations are translated using average monthly
      exchange rates. The impact of exchange rate changes is shown as "Foreign
      Currency Translation Adjustment" in shareholders' equity. Gains or losses
      from foreign currency transactions, which are immaterial for all periods
      presented, are included in net income.

      Employee benefits - The Company does not provide any post retirement
      benefits other than the defined contribution plan, and post employment
      benefits, if any, are not material.

      Earnings per share - Earnings per common share are based on the weighted
      average number of shares of common stock outstanding as if the shares
      pursuant to the Agreement in note 1 had been issued on April 1, 1995. The
      weighted average number of shares of common stock outstanding, including
      2,250,000 shares issued during the year ended March 31, 1999 under the
      Agreement, during each of the three years ended March 31, 1999, 1998 and
      1997, was 5,562,500, 5,562,500 and 4,597,603, respectively. The Company
      has adopted Statement of Financial Accounting Standards ("SFAS") No. 128,
      "Earnings Per Share". This pronouncement provides for the calculation of
      basic and diluted earnings per share which is different from the current
      calculation of primary and fully diluted earnings per share. Common stock
      equivalents had no material dilutive effect on earnings per share.

      Effects of recent accounting standards - In 1998 the Company adopted SFAS
      No. 130, "Reporting Comprehensive Income", SFAS No. 131, "Disclosures
      about Segments of an Enterprise and Related Information" and SFAS No. 132,
      "Employers' Disclosures about Pensions and Other Post retirement
      Benefits". The adoption of these new standards had no significant impact
      on the Company.

      SFAS No. 130, requires that an enterprise reports, by major components and
      as a single total, the change in its net assets during the period from
      non-owner


                                      F-17
<PAGE>

                          Leading Edge Packaging, Inc.

      sources. The Company has presented its comprehensive income (loss) in the
      consolidated statements of changes in shareholders' equity (deficit).


                                      F-18
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

      SFAS No. 131, which superseded SFAS No. 14, "Financial Reporting for
      Segments of Business Enterprise", established standards for the way that
      public enterprises report information about operating segments in
      financial statements issued to the public. It also establishes standards
      for disclosures regarding products and services, geographic areas and
      major customers. The adoption of SFAS No. 131 did not require any changes
      to the Company's existing financial statement disclosures.

      SFAS No. 132 amends the disclosure requirements for pensions and other
      post-retirement benefits. The adoption of SFAS No. 132 had no significant
      impact on the Company's current financial statement disclosures.

      New accounting standards not yet adopted - The Financial Accounting
      Standards Board has issued a new standard SFAS No. 133, "Accounting for
      Derivative Instruments and Hedging Activities". Management has not yet
      completed the analysis of the impact this would have on the financial
      statements of the Company.

      Use of estimates - The preparation of financial statements in conformity
      with general accepted accounting principles requires the use of estimates.
      Actual results could differ from those estimates.

4.    BILLS RECEIVABLE AND PAYABLE

      Bills receivable and payable represent accounts receivable and payable in
      the form of bills of exchange, whose acceptances and settlements are
      handled by banks.

      During each of the years ended March 31, 1999, 1998 and 1997, the Company
      had factored gross bills receivable of $Nil, $5,475,381 and $7,671,466,
      respectively, with financial institutions with recourse to the Company.
      The net proceeds after discounts during each of these years amounted to
      $Nil, $5,319,333 and $7,452,829. There were no repurchase terms except for
      the recourse under the terms of the factoring agreement in the event of
      customer default.

5.    INVENTORIES

      Inventories by major categories are summarized as follows:

                                                       March 31,
                                                       ---------
                                                1999               1998
                                                ----               ----

      Raw materials                          $1,021,460         $2,647,834


                                      F-19
<PAGE>

      Finished goods                          1,587,036          3,941,870
                                             ----------         ----------

                                             $2,608,496         $6,589,704
                                             ----------         ----------


                                      F-20
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.    PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment consists of the following:

                                                         March 31,
                                                         ---------
                                                    1999         1998
                                                    ----         ----

      Leasehold land and buildings               $       --   $3,271,049
      Leasehold improvements                        523,533    1,078,705
      Furniture, fixtures and equipment             574,810    1,113,802
      Plant and machinery                           606,453    3,237,710
      Molds                                         478,047           --
      Motor vehicles                                 40,290       47,366
                                                 ----------   ----------

      Total                                       2,223,133    8,748,632
      Less: Accumulated depreciation                238,480    3,160,360
                                                 ----------   ----------

      Net book value                             $1,984,653   $5,588,272
                                                 ----------   ----------

      Included in property, plant and equipment of the Company are assets
      acquired under capital leases with the following net book value:

                                                        March 31,
                                                        ---------
                                                    1999         1998
                                                    ----         ----

      At cost:

      Furniture, fixtures and equipment          $   47,889   $    7,599
      Less: Accumulated depreciation                 (7,616)      (1,900)
                                                 ----------   ----------

                                                 $   40,273   $    5,699
                                                 ----------   ----------

      Depreciation of capital lease assets included in depreciation expense in
      the accompanying consolidated statements of income was $5,716, $1,520 and
      $380 for the years ended March 31, 1999, 1998 and 1997, respectively.


                                      F-21
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.    INCOME TAXES

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

                                                   Year ended March 31,
                                                   --------------------
                                               1999        1998         1997
                                               ----        ----         ----

      United States                       $(12,731,952) $1,556,450  $ 3,433,307
      Foreign subsidiaries operating in:
        Hong Kong                             (245,062)   (186,033)  (1,003,243)
        Others                              (5,333,936)  2,016,764    2,648,468
                                          ------------  ----------  -----------

                                          $(18,310,950) $3,387,181  $ 5,078,532
                                          ------------  ----------  -----------

      The Company is subject to Hong Kong taxation on its activities conducted
      in Hong Kong. During the three years ended March 31, 1999, the Company's
      manufacturing operations were outside Hong Kong and the majority of income
      was not subject to tax in Hong Kong or in other jurisdictions. During the
      year ended March 31, 1997, the Company established operations in the
      United States and revenues derived from the Company's U.S. operations were
      subject to income tax in the United States and income tax expense has been
      computed using a rate of 38% for U.S. Federal and State income taxes.

      The provision for income taxes expense (credit) attributable to the
      Company consists of the following:

                                                 Year ended March 31,
                                                 --------------------
                                          1999           1998           1997
                                      -----------    -----------    -----------

      Current
        Hong Kong                     $        --    $        --    $        --
        U.S. Federal                   (1,560,000)       549,000      1,130,324
        U.S. State                             --        107,000        211,900
        Overseas                               --       (517,464)            --
      Deferred
        Hong Kong                              --        (13,954)       (13,596)
                                      -----------    -----------    -----------
                                      $(1,560,000)   $   124,582    $ 1,328,628
                                      -----------    -----------    -----------


                                      F-22
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.    INCOME TAXES - continued

      A reconciliation between the provision for income taxes computed by
      applying the statutory tax rates in the United States for 1999, 1998 and
      1997 to income before income taxes and the actual provision for income
      taxes is as follows:

<TABLE>
<CAPTION>
                                                          Year ended March 31,
                                                          --------------------
                                                   1999           1998           1997
                                                   ----           ----           ----
<S>                                            <C>            <C>            <C>
      US statutory rate                                 34%            34%            34%
                                               -----------    -----------    -----------

      Provision for income taxes at statutory
        rate on income for the period          $(6,225,723)   $ 1,151,641    $ 1,726,701
      State income taxes                                --        107,000        211,900

      International rate differences                44,111         32,556        175,568
      Loss (income) not subject to taxation      1,813,538       (685,700)      (900,479)
      Prior years' overprovision                        --       (517,464)            --
      Increase in valuation allowance            2,845,846             --             --
      Other                                        (37,772)        36,549        114,938
                                               -----------    -----------    -----------
      Income tax (credit) provision            $(1,560,000)   $   124,582    $ 1,328,628
                                               -----------    -----------    -----------
</TABLE>

      Deferred income taxes reflect the net tax effect of temporary differences
      between the amounts of assets and liabilities for income tax purposes
      compared with the respective amounts for financial statement purposes. At
      March 31, 1998 and 1999 deferred income taxes comprised the following:

<TABLE>
<CAPTION>
                                                                 At March 31,
                                                                 ------------
                                                               1999        1998
                                                               ----        ----
<S>                                                        <C>           <C>
      Deferred tax assets (liabilities):
      Excess of tax over financial reporting depreciation  $    (6,059)  $(58,566)
      Net operating loss carryforwards                       2,863,898     70,559
                                                           -----------   --------
                                                             2,857,839     11,993
      Valuation allowance                                   (2,857,839)   (11,993)
                                                           -----------   --------

                                                           $        --   $     --
                                                           -----------   --------
</TABLE>


                                      F-23
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.    SHORT-TERM BORROWINGS

      These include borrowings in the form of trade acceptances, loans and
      overdrafts with various banks:

                                                                March 31,
                                                                ---------
                                                           1999         1998
                                                           ----         ----

      Credit facilities available at end of year         $     Nil   $8,389,516
      Utilized at end of year                            5,194,774    5,865,232
      Weighted average interest rate on borrowings
        at end of year                                           8%          12%

      The Company previous maintained short-term bank credit lines in the
      countries in which it operates, however, such facilities were terminated
      as at March 31, 1999. Interest rates are generally based on the banks'
      prime lending rates.

9.    LONG-TERM DEBT
                                                                March 31,
                                                                ---------
                                                           1999         1998
                                                           ----         ----
      Long-term debt consists of:

      Mortgage loan bearing interest at March 31, 1998
        ranging from 10.75% to 12.5% repayable
        over 6 years in monthly instalments and
        secured on leasehold land and buildings
        with an aggregate net book value of
        $2,008,932                                       $      --   $  537,793
      Capital lease obligation, interest ranging
        from 3.980% to 7.861%                               38,051        4,789
      Other long-term borrowing                                 --      387,597
                                                         ---------   ----------
      Total                                                 38,051      930,179
      Current portion of long-term debt                    (10,128)    (273,395)
                                                         ---------   ----------
      Long-term debt, less current portion               $  27,923   $  656,784
                                                         ---------   ----------

      Maturities of long-term debt as at March 31, 1999 are as follows:

      Year ending March 31

      2000                                                           $   10,128
      2001                                                               10,589
      2002                                                               10,701
      2003                                                                6,633
                                                                     ----------
      Total                                                          $   38,051
                                                                     ----------


                                      F-24
<PAGE>

                          Leading Edge Packaging, Inc.

10.   CAPITAL STOCK

      (i)   Common stock

            In connection with the public offering on December 2, 1996, the
            Company agreed to issue and sell to the Underwriter and/or its
            designees, at the closing of the underwriting, for nominal
            consideration, five year Underwriter's Warrants (the "Underwriter's
            Warrants") to purchase 125,000 shares of common stock. The
            Underwriter's Warrants are exercisable at a price of $8.40 per share
            of common stock at any time during a period of four years from
            December 2, 1997 and are restricted from sale, transfer, assignment
            or hypothecation for a period of twelve months from the date of the
            offering, except to officers of the Underwriter. The Underwriter's
            Warrants contain anti-dilution provisions providing for adjusting of
            the number of shares of common stock and exercise price under
            certain circumstances. The Underwriter's Warrants grant to the
            holders thereof and to the holders of the underlying securities
            certain rights of registration of the underlying securities certain
            rights of registration of the securities underlying the
            Underwriter's Warrants. The fair value of the Underwriter's Warrants
            is not material.

      (ii)  Preferred stock

            Pursuant to the authority granted to the board of directors of the
            Company, in the fourth quarter of 1999 the board of directors
            created three series of Preferred Stock, par value $0.01 per share
            (the "Preferred Stock"), of the Company. The shares of Preferred
            Stock are designated in the following series and number of shares
            constituting each series:

            (i) 1,000,000 shares of Series A 8% cumulative redeemable Preferred
            Stock;
            (ii) 500,000 shares of Series B 8% cumulative redeemable Preferred
            Stock and
            (iii) 500,000 shares of Series C 8% cumulative redeemable Preferred
            Stock.

            All shares of each series are identical.

            Holders of each share of Preferred Stock are entitled to vote
            together with the holders of shares of common stock as a single
            class on all matters submitted for a vote of stockholders.

            Each holder of Series A Preferred Stock is entitled to cast ten
            votes for each share of Series A Preferred Stock. Each holder of
            Series B Preferred Stock and Series C Preferred Stock for each share
            of Preferred Stock is entitled to cast five votes and three votes,
            respectively.


                                      F-25
<PAGE>

                          Leading Edge Packaging, Inc.

            The holders of each series of Preferred Stock are entitled to
            receive cumulative dividends in the amount per share of eight
            percent per annum of the original issue price.

            The Company shall, at the option of any holder of shares, redeem the
            shares from time to time on or after February 15, 2000 and March 15,
            2000 for Series B and Series C Preferred Stock, respectively.


                                      F-26
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.   INCENTIVE STOCK OPTION PLAN

      In 1997, the Company established the 1997 Incentive Stock Option Plan (the
      "1997 Plan") in addition to the 1996 Incentive Stock Option Plan ("1996
      Plan"). The 1997 Plan contains terms substantially the same as the 1996
      Plan. Options under both Plans may be granted to directors and officers of
      the Company permitting the purchase in the aggregate of not more than
      400,000 shares of the Company's common stock, par value, $0.01 per share
      provided that until December 5, 1998 the number of share issuable pursuant
      to options granted under the 1997 Plan shall not, when aggregated with the
      shares issuable pursuant to options granted under the Company's 1996 Plan,
      exceed 312,500 shares. On December 11, 1996, options (the "1996 Options")
      to purchase up to 250,000 shares of Common Stock in the aggregate were
      granted to officers and directors of the Company and 100,000 options were
      cancelled in 1998. One-third of the 1996 Options become exercisable after
      each of 12 months, 30 months and 60 months, respectively. The stock
      options granted under the 1996 Plan are intended to qualify as incentive
      stock options within the meaning of Section 422 of the Internal Revenue
      Code of 1986, as amended. The per share option price of the Common Stock
      subject to each of the 1996 and 1997 options was $7.15, which was equal to
      one hundred ten percent (110%) of the fair market value of a share of
      Common Stock on the date that the options were granted. Shares of Common
      Stock issued in exchange for options under the Plan will be restricted
      against resale as necessary to qualify for exemption from registration
      under the Securities Act of 1933, as amended (the "Securities Act"),
      unless and until the Company deems it appropriate to register such shares
      under the Securities Act. No further options have been granted and none
      have been exercised save as mentioned above.

      A summary of stock option transactions for the three year ended March 31,
      1999 is as follows:

                                                                  Shares
                                                               under option
                                                               ------------

      Outstanding at Mach 31, 1996                                     --
      Granted                                                     250,000
                                                                 --------
      Outstanding at March 31, 1997                               250,000
      Granted                                                     162,500
      Canceled                                                   (100,000)
                                                                 --------
      Outstanding at March 31, 1998 and 1999                      312,500
                                                                 --------


                                      F-27
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.   INCENTIVE STOCK OPTION PLAN - continued

      The Company has elected to continue to apply Accounting Principles Board
      Opinion No. 25 "Accounting for Stock Issued to Employees" to account for
      stock options granted under the plan. If the fair value method specified
      in Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
      for Stock-Based Compensation" had been used, net income and earnings per
      share for the years ended March 31, 1999, 1998 and 1997 would have been as
      follows:

                                                 Year ended March 31,
                                                 --------------------
                                          1999            1998          1997
                                          ----            ----          ----
                                           HK$            HK$           HK$
      Net (loss) income:
        As Reported                   $(16,770,074)    $3,262,599    $3,749,904
        Pro Forma                      (16,791,140)     3,241,533     3,714,794

      Net income (loss) per share:
      Basic and diluted
        As Reported                   $      (3.01)    $     0.59    $     0.82
        Pro Forma                            (3.02)          0.58          0.81

      The fair value of the options granted in the year ended March 31, 1996 and
      1997 were estimated as $118,500 using the Black-Scholes option pricing
      model with the following assumptions: risk-free interest free-5,87%;
      expected life of options- 3 years; expected volatility - 15.5%; expected
      dividend yield - Nil.

12.   NON-RECURRING EXPENSE

      The amount in prior year represented misappropriation of cash by a manager
      of the Company's factory established in the PRC. The manager agreed to
      repay the Company by installments over 3 years however, there have been no
      recoveries. Full provision for the amount was made in the 1998 financial
      statements and any recoveries will be accounted for on a cash basis.


                                      F-28
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.   RELATED PARTY TRANSACTIONS

      (i)   Chung Hwa Group

      Chung Hwa was the Company's former ultimate holding company. Advances
      from/to Chung Hwa and its subsidiaries ("Chung Hwa Group") were made on an
      interest-free basis during the years.

      Prior to the closing of the transaction pursuant to Share Agreement of
      January 28, 1998 (see Note 1), Justrite was wholly-owned by Chung Hwa and
      participated in Chung Hwa's consolidated cash system. The following table
      summarizes the movements between the Company and the Chung Hwa Group:

      Balance as of April 1, 1996                                  $  6,492,888
      Advances to Chung Hwa Group                                     4,923,208
      Repayments from Chung Hwa Group                                (3,219,763)
                                                                   ------------
      Balance as of March 31, 1997                                    8,196,333
      Repayments from Chung Hwa Group                               (15,716,978)
      Advances to Chung Hwa Group                                    34,515,488
      Dividend paid to Chung Hwa Group                              (14,248,705)
                                                                   ------------
      Balance as of March 31, 1998                                   12,746,138
      Write off of receivable arising from liquidation of Justrite  (10,825,581)
      Provision for receivables due to the Company                   (1,920,557)
                                                                   ------------
      Balance as of March 31, 1999                                 $         --
                                                                   ------------

      As a consequence of the situation with Justrite described in Note 1,
      information on the other movements in the year ended March 31, 1999 is not
      available and accordingly, the net balance at April 1, 1998 is included in
      the net loss on closure of subsidiaries.

      In November 1998, the Chung Hwa group faced a sudden liquidity problem due
      to deteriorating operating conditions and its bankers withdrew their lines
      of credit. As Justrite was unable to collect its receivable from Chung
      Hwa, it in turn was unable to satisfy its obligation to its creditors,
      including the minority shareholder, Hua Nam. As a result, Hua Nam seized
      control of all of the assets of Justrite's joint venture, thus leading to
      the subsequent liquidation of Justrite's other subsidiaries, including the
      receivable from Chung Hwa. The write off of all of these assets of
      Justrite including the receivable from Chung Hwa, is included in


                                      F-29
<PAGE>

                          Leading Edge Packaging, Inc.

      the loss on disposal of subsidiary in the statement of operations for the
      year ended March 31, 1999 (See Note 1(i)). Likewise, amounts owed to the
      Company by Chung Hwa have been written off as a bad debt expense in the
      year ended March 31, 1999 as Chung Hwa is in financial difficulty and it
      is not anticipated there will be any significant recovery by the Company.


                                      F-30
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.   RELATED PARTY TRANSACTIONS - continued

      (ii)  Related Company

                                                                   March 31,
                                                                   ---------
                                                                1999      1998
                                                                ----      ----

            Amount payable to L.B. Saw & Associates Limited   $420,521   $   --
                                                              --------   ------

            On February 12, 1999, the Company entered into a loan agreement with
            L.B. Saw & Associates Limited, a company in which L.B. Saw, the
            Company's director, has a beneficial ownership interest. The amount
            advanced by L.B. Saw & Associates Limited is non-interest bearing,
            repayable on demand and is secured by 5,000,000 shares of LEPI China
            Limited, a subsidiary of the Company.

14.   CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

      Customers accounting for 10% or more of the total net sales for each of
      the three years in the period ended March 31, 1999, 1998 and 1997 are
      detailed as follows:

                                                         Year ended March 31,
                                                         --------------------
                                                       1999      1998      1997
                                                       ----      ----      ----

      Customer A                                        35%       10%       23%
      Customer B                                        --         5%       20%
      Customer C                                        --        10%       --
      Customer D                                        17%       --        --

      Details of the accounts receivable from the five customers with the
      largest receivable balances at March 31, 1999, 1998 and 1997 are as
      follows:

                                                        Percentage of accounts
                                                      receivable as at March 31,
                                                      --------------------------
                                                       1999      1998      1997
                                                       ----      ----      ----

      Five largest receivable balances                  72%       54%       34%

      Bad debt expense relating to trade receivables was $1,324,425, $Nil and
      $218,560 for the years ended March 31, 1999, 1998 and 1997, respectively.


                                      F-31
<PAGE>

                          Leading Edge Packaging, Inc.

15.   COMMITMENTS AND CONTINGENCIES

      The Company leases premises and equipment under various operating leases
      which do not contain any renewal and escalation clauses. Rental expense
      under operating leases was $511,085, $1,113,769 and $796,290 for the years
      ended March 31, 1999, 1998 and 1997, respectively.

      At March 31, 1999, the Company was obligated under operating leases
      requiring minimum rentals as follows:

      Year ending March 31,

      2000                                                           $  878,159
      2001                                                              761,829
      2002                                                              552,049
      2003                                                               10,440
                                                                     ----------
      Total minimum lease payments                                   $2,202,477
                                                                     ----------

16.   RETIREMENT PLAN

      For the years ended March 31, 1998 and 1997, the Company had a defined
      contribution retirement plan covering substantially all employees in Hong
      Kong. Under this plan, eligible employees may contribute amounts through
      payroll deductions which are equal to 5% of individual salary,
      supplemented by employer contributions at 5% of individual salary, for
      investment in various funds established by the plan. The expense related
      to this plan was $34,781 and $29,668, for the years ended March 31, 1998
      and 1997, respectively. The plan was terminated in 1998 following the
      liquidation of the principal subsidiaries and no contribution was made for
      the year ended March 31, 1999.

17.   ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

      The following disclosure of the estimated fair value of financial
      instruments is made in accordance with the requirements of Statement of
      Financial Accounting Standards No. 107, "Disclosures about Fair Value of
      Financial Instruments". The estimated fair value amounts have been
      determined by the Company, using available market information and
      appropriate valuation methodologies. The estimates presented herein are
      not necessarily indicative of the amounts that the Company could realize
      in a current market exchange. The carrying amounts of cash, accounts
      receivable, bills receivable, accounts payable, bills payable and payable
      to a related company are short term in nature and therefore reflect their
      fair value. All the financial instruments are for trade purposes.


                                      F-32
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.   SEGMENT INFORMATION

      The Company is engaged in one business segment which is the manufacture,
      sale and distribution of packaging products. An analysis of sales by
      geographic destinations for the relevant years is as follows:

<TABLE>
<CAPTION>
                                                     Year ended March 31,
                                                     --------------------
                                              1999           1998          1997
                                              ----           ----          ----
<S>                                       <C>            <C>           <C>
      Net sales:
        North America                     $  6,066,693   $ 11,308,861  $ 12,987,263
        Europe                                 302,829      5,176,973     5,908,333
        Asia and others                         45,135      5,782,132     4,984,227
                                          ------------   ------------  ------------
                                          $  6,414,657   $ 22,267,966  $ 23,879,823
                                          ------------   ------------  ------------
</TABLE>

      The following is the Company's operating information by geographic area:

<TABLE>
<S>                                       <C>            <C>           <C>
      Net sales:
        North America                     $  6,066,693   $ 11,308,861  $ 12,987,263
        Hong Kong and other parts of PRC       347,964     10,959,105    10,892,560
                                          ------------   ------------  ------------
                                          $  6,414,657   $ 22,267,966  $ 23,879,823
                                          ------------   ------------  ------------

      Operating (loss) income:
        North America                      (12,841,868)     1,610,870     3,358,866
        Hong Kong and other parts of PRC    (5,342,410)     2,041,752     1,802,135
                                          ------------   ------------  ------------
                                           (18,184,278)     3,652,622     5,161,001
                                          ------------   ------------  ------------

      Assets at end of year:
        North America                        4,358,319      8,568,218    13,866,879
        Hong Kong and other parts of PRC     3,084,820     21,043,699    29,739,807
                                          ------------   ------------  ------------
</TABLE>


                                      F-33
<PAGE>

                          Leading Edge Packaging, Inc.

<TABLE>
<S>                                       <C>            <C>           <C>
                                          $  7,443,139   $ 29,611,917  $ 43,606,686
                                          ------------   ------------  ------------

      Long-lived assets at end of year:
        North America                          274,558        302,814       273,734
        Hong Kong and other parts of PRC     1,710,095      5,285,458     5,776,424
                                          ------------   ------------  ------------
                                          $  1,984,653   $  5,588,272  $  6,050,158
                                          ------------   ------------  ------------
</TABLE>


                                      F-34
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.   QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                          June 30   September 30   December 31   March 31
                                          -------   ------------   -----------   --------
                                           $'000        $'000         $'000        $'000
<S>                                       <C>          <C>           <C>          <C>
      Fiscal 1999
      Net Sales:
      Balance as per 10Q or 10K            4,439        4,801         1,437          786
      Deconsolidations adjustment
        on Justrite                       (2,410)      (2,638)           --           --
                                          ------       ------        ------       ------
      Consolidated amount                  2,029        2,163         1,437          786
                                          ------       ------        ------       ------
      Gross profit:
      Balance as per 10Q or 10K            1,671        1,536           163       (1,376)
      Deconsolidations adjustment
        on Justrite                         (948)      (1,116)           --           --
                                          ------       ------        ------       ------
      Consolidated amount                    723          420           163       (1,376)
                                          ------       ------        ------       ------
      Net income (loss):
      Balance as per 10Q or 10K              333          279        (9,492)      (7,073)
      Deconsolidations adjustment
        on Justrite                         (279)        (519)           --           --
                                          ------       ------        ------       ------
      Consolidated amount                     54         (240)       (9,492)      (7,073)
                                          ------       ------        ------       ------
      Earnings (loss) per share:
      Balance as per 10Q or 10K             0.06         0.06         (1.70)       (1.28)
      Adjustment on disposal of Justrite   (0.05)       (0.10)           --           --
                                          ------       ------        ------       ------
      Consolidated amount                   0.01        (0.04)        (1.70)       (1.28)
                                          ------       ------        ------       ------
</TABLE>


                                      F-35
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.   QUARTERLY FINANCIAL DATA (UNAUDITED) - continued

<TABLE>
<CAPTION>
                                          June 30   September 30    December 31   March 31
                                          -------   ------------    -----------   --------
                                           $'000       $'000           $'000        $'000
<S>                                       <C>         <C>             <C>          <C>
      Fiscal 1998
      Net Sales:
      Balance as per 10Q or 10K
        - Leading Edge                    $ 2,751     $ 3,029         $ 3,262      $    --
      Adjustment on combination with
        Justrite                            1,535       1,731           4,071        5,889
                                          -------     -------         -------      -------
      Combined amount                       4,286       4,760           7,333        5,889
                                          -------     -------         -------      -------
      Gross profit:
      Balance as per 10Q or 10K
        - Leading Edge                      1,141         996           1,056           --
      Adjustment on combination with
        Justrite                              766       1,168           2,258        3,216
                                          -------     -------         -------      -------
      Combined amount                       1,907       2,164           3,314        3,216
                                          -------     -------         -------      -------
      Net income:
      Balance as per 10Q or 10K
        - Leading Edge                        465         262             229           --
      Adjustment on combination with
        Justrite                               46          79             679        1,503
                                          -------     -------         -------      -------
      Combined amount                         511         341             908        1,503
                                          -------     -------         -------      -------
      Earnings per share:
      Balance as per 10Q or 10K
        - Leading Edge                       0.14        0.08            0.07           --
      Adjustment on combination with
        Justrite                            (0.05)      (0.02)           0.09         0.28
                                          -------     -------         -------      -------
      Combined amount                     $  0.09     $  0.06         $  0.16      $  0.28
                                          -------     -------         -------      -------
</TABLE>


                                      F-36
<PAGE>

                          Leading Edge Packaging, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.   QUARTERLY FINANCIAL DATA (UNAUDITED) - continued

<TABLE>
<CAPTION>
                                          June 30    September 30   December 31   March 31
                                          -------    ------------   -----------   --------
                                           $'000         $'000         $'000        $'000
<S>                                       <C>           <C>           <C>          <C>
      Fiscal 1997
      Net Sales:
      Balance as per 10Q or 10K
        - Leading Edge                    $ 2,505       $ 3,047       $ 3,696      $ 3,740
      Adjustment on combination with
        Justrite                            2,261         3,957         2,803        1,871
                                          -------       -------       -------      -------
      Combined amount                       4,766         7,004         6,499        5,611
                                          -------       -------       -------      -------
      Gross profit:
      Balance as per 10Q or 10K
        - Leading Edge                        808         1,007         1,151        1,615
      Adjustment on combination with
        Justrite                            1,418         2,205         1,947          993
                                          -------       -------       -------      -------
      Combined amount                       2,226         3,212         3,098        2,608
                                          -------       -------       -------      -------
      Net income:
      Balance as per 10Q or 10K
        - Leading Edge                        451           504           510          626
      Adjustment on combination with
        Justrite                              489         1,279           777         (886)
                                          -------       -------       -------      -------
      Combined amount                         940         1,783         1,287         (260)
                                          -------       -------       -------      -------
      Earnings per share:
      Balance as per 10Q or 10K
        - Leading Edge                       0.24          0.26          0.21         0.18
      Adjustment on combination with
        Justrite                            (0.04)        (0.15)         0.05        (0.23)
                                          -------       -------       -------      -------
      Combined amount                     $  0.20       $  0.41       $  0.26      $ (0.05)
                                          -------       -------       -------      -------
</TABLE>


                                      F-37
<PAGE>

                               S I G N A T U R E S

      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.

                                         LEADING EDGE PACKAGING, INC.


                                         By: /s/Lip-Boon Saw
                                             ----------------------------------
Date: August 19, 1999                        Lip-Boon Saw,
                                             Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

Signature                     Title                        Date
---------                     -----                        ----


/s/ Stephen J. DeGroat        Chairman and Director        August 19, 1999
-------------------------
Stephen J. DeGroat


/s/ Lip-Boon Saw              Chief Executive              August 19, 1999
-------------------------     Officer and Director
Lip-Boon Saw


/s/ Casey K. Tjang            President, Chief
-------------------------     Financial Officer            August 19, 1999
Casey K. Tjang                (Principal Accounting)
                              and Director

/s/ John Fee                  Senior Vice                  August 19, 1999
-------------------------     President-
John Fee                      Marketing


/s/ Bernard Esquenet          Secretary and Director       August 19, 1999
-------------------------
Bernard Esquenet


/s/ Peter L. Coker            Director                     August 19, 1999
-------------------------
Peter L. Coker


/s/ Richard Fung-Gea Wong     Director                     August 19, 1999
-------------------------
Richard Fung-Gea Wong