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

                                   Form 10-KSB

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

                   For the fiscal year ended December 31, 1998


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


                         Commission File Number 0-26886

                             INTERNET HOLDINGS, INC.
               (Exact name of Company as specified in its charter)


            Utah                                          13-3758042
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                     Identification Number)


c/o  Beckman, Millman & Sanders, LLP
     116 John Street - Suite 1313
     New York, New York                                     10038
     (Address of principal executive offices)             (Zip Code)


Company's telephone number, including area code:   (212) 406-4700

Securities registered under Section 12(b) of the
Exchange Act:                                              None

Securities registered under Section 12(g) of the
Exchange Act:                                              None

Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period
that the registrant was required to file such reports),
and (2) had been subject to such filing requirements
for the past 90 days.                                      Yes [_]   No [X]

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

State issuer's revenue for its most recent
fiscal year:                                                 $ 79


State the aggregate  market value of the
voting  stock  held  by   non-affiliates
computed  by  reference  to the price at
which the stock was sold, or the average
bid and asked price of such stock, as of
a  specified  date  within  the  past 60
days:                                              $4,503,873 as of
                                                   December 30, 1998


State the  number of shares  outstanding
of each of the  Registrant's  classes of
common   equity   as   of   the   latest           2,119,470 shares as of
practicable date:                                  December 31, 1998



                                       -1-
<PAGE>


                                     PART I

Item 1.   Description of Business

     Internet  Holdings,  Inc.  (the  "Company"  or  the  "Registrant")  had  no
operations  during this  reporting  period,  following  the  divestiture  of the
Company's only operating subsidiary Chiron Systems Ltd. ("CSL") with effect from
December 19, 1997; pursuant to the acquisition agreement dated May 22, 1997. The
structure  of  the  divestiture  was  that  the  Company  delivered  to  certain
shareholders  of the Company who had  previously  owned CSL all the  outstanding
shares in CSL. The CSL  shareholders  returned to the Company the shares held by
them pursuant to the acquisition agreement.

     On July 28, 1998, CSL's creditors placed CSL into involuntary  liquidation.
As a result of the  collapse and  insolvency  of CSL, the Company was advised by
its  lawyers  that any  rights it may have had under the  acquisition  agreement
against CSL were not worth  pursuing  because even if a judgment were  obtained,
there was no prospect of any payment being made to the Company.

     As a result of this  divestiture  and the  failure of CSL,  the Company was
unable to deliver  products and technology as contracted  under  agreements with
its joint venture partners.  This failure led to legal proceedings.  The Company
countercharged  that the assets  purchased by it from its joint venture partners
had not been  effectively  transferred.  During  the  period  September  1997 to
October  1999 the Company  was unable to raise  funds to develop  its  business,
unable to settle the outstanding  litigation  relating to its joint ventures and
had its indebtedness  been demanded the Company would have been unable to repay.
In November  1999,  the Company  finally  settled  these legal  proceedings  and
entered into a  comprehensive  settlement  agreement.  The  adjudication of this
matter enabled the Company to move forward. By this agreement the Company agreed
not to pursue claims  against  certain  assets  purchased from the joint venture
partners,  the joint venture  partners  agreed not to pursue claims  against the
Company  for  alleged  negligence  and breach of  contract  and the  Company was
released  from debts  totaling  approximately  $300,000.  This resulted in a net
write off to the Company of $1.9 million.

     Following  the  planned  appointment  of  additional   management  and  the
settlement of the legal  proceedings  the Company can now proceed to rebuild its
business.

     Marketing

The Company had no sales during the year.

     Employees

None


                                       2
<PAGE>


Item 2.   Description of Property

     During the year, the Company did not maintain  offices.  A mailing  address
and facility for meetings is maintained  at the offices of the  Company's  legal
counsel Beckman, Millman & Sanders, LLP.


Item 3.   Legal Proceedings

     During the period of the  Company's  ownership of CSL, in addition to other
matters, the Company devoted considerable  resources to expanding the market for
CSL's products in Asia and Africa.  Both these regions  possess  rapidly growing
markets where there is substantial demand for new telephony technology.

     The  efforts in these new  markets  were  extremely  successful  with joint
ventures being agreed in both Asia and Africa.  However, the collapse of CSL and
the  consequent  inability of the Company to supply  products or  technology  to
either  joint  venture  left the  Company  exposed to  allegations  of breach of
contract.

     The continuing defense against legal proceedings meant that the Company was
unable to raise funds to continue its business.


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

None


                                       3
<PAGE>


                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters

     The Company's Common Stock has been traded on the Over-The-Counter Bulletin
Board (OTC - Bulletin  Board) since July 22, 1977 and is currently  traded under
the symbol  "HTTP".  The following are reported high and low  quotations for the
Company's Common Stock for the periods  indicated and do not include dealer mark
ups, mark downs or commissions nor do they represent actual sale prices:

                                    Low                       High
First Quarter 1998                  3/32                      5/16
Second Quarter 1998                 3/8                       3/8
Third Quarter 1998                  5/32                      5/8
Fourth Quarter 1998                 1/8                       2 1/8


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

Liquidity and Sources of Capital

     As of December  31,  1998,  the  Registrant  had current  assets of $271 as
compared to $35,600 as of  December  31,  1997.  On October 27, 1999 the Company
filed a Form 8-K setting out a contingent  acquisition,  which,  if consummated,
would provide the Company with  $2,160,000 in cash and liquid  securities.  This
agreement is conditional on the settlement of all  outstanding  litigation,  the
filing of outstanding  periodic and annual reports under the Securities Exchange
Act of 1934, as amended,  and the maintenance of the Company's  quotation on the
OTC - Bulletin Board.

Results of Operations

     The Company had no operations during the period.

Item 7.   Financial Statements

Attached.

Item 8.   Changes  In and  Disagreements  With  Accountants  on  Accounting  and
          Financial Disclosure.

Not applicable.


                                       4
<PAGE>


                                    PART III

Item 9.   Directors,  Executive  Officers,  Promoters  and  Control  Persons  in
          Compliance With Section 16(a) of the Exchange Act

     Christopher  J.  Wilkes,  aged 33,  became a  Director  of the  Company  on
September 30, 1996.  Mr. Wilkes also holds the offices of Chairman and President
of the  Company.  He holds  these  offices and  positions  until the next annual
meeting  of  the  Company.  Mr.  Wilkes  is the  Senior  Partner  of  Levenworth
Management,  a management consulting company based in the United Kingdom,  which
he founded  in 1992.  He has  advised on the  restructuring  and  operations  of
companies  in  a  number  of  different  industries  and  has  an  international
clientele.

     Lewis M. Klee,  aged 44,  served as a Director of the Company  beginning on
September 30, 1996.  Although Mr. Klee no longer holds this  position,  he still
serves as  Secretary  of the  Company.  On August 1, 1996 Mr.  Klee  became  the
Managing  Partner of the Law Office of Lewis M. Klee Esq.,  prior to this he was
of counsel to the Law Office of Steven A. Sanders P.C.


Item 10.  Executive Compensation

     Mr. Wilkes was paid $12,178 in consultancy fees during the period.


Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The  following  table sets forth  information  with  respect to  beneficial
ownership  of  Common  Stock by (i) each  person  known  by the  Company  to own
beneficially more than five percent (5%) of the outstanding  Common Stock of the
Company, (ii) each director of the Company, and (iii) all directors and officers
of the Company as a group.  Except as other wise  indicated the named person has
sole voting and investment power with respect to such person's shares.

                                         Number of Common shares
Name                                     Beneficially owned              Percent

Christopher J. Wilkes                         253,304                    11.9%
President & Director
22 Parrotts Field
Hoddesdon
Heretfordshire EN11 OQU
United Kingdom

Lewis M. Klee                                  25,000                    1.2%
Secretary
The Law Office of Lewis M. Klee,
40 Exchange Place, 8th Floor
New York, NY 10005


All executive officers and directors
As a group:                                   278,304                    13.1%


                                       5
<PAGE>


Item 12.  Certain Relationships and Related Transactions

None


Item 13.  Exhibits and Reports on Form 8-K

None filed this quarter.


                                       6
<PAGE>


                                   SIGNATURES

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

                                            Internet Holdings, Inc.

Date: December 13, 1999                     By: /s/ Christopher J. Wilkes
                                                -------------------------
                                                    Christopher J. Wilkes
                                                    President


                                       7
<PAGE>


                             INTERNET HOLDINGS, INC.
                              FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 1998 and 1997
                         TOGETHER WITH AUDITORS' REPORT


<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
 Internet Holdings, Inc.:

     We have audited the accompanying  balance sheet of Internet Holdings,  Inc.
(the  "Company"),  as of  December  31,  1998,  and the  related  statements  of
operations,  stockholders'  deficit and cash flows for the years ended  December
31, 1998 and 1997.  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 generally accepted auditing  standards.  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial  statements are free of material  misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In  our  opinion,  with  respect  to the  1998  financial  statements,  the
financial statements referred to above present fairly, in all material respects,
the financial position of Internet  Holdings,  Inc. as of December 31, 1998, and
the  results  of its  operations  and  cash  flows  for the year  then  ended in
conformity  with generally  accepted  accounting  principles.  We were unable to
audit the  financial  statements of Chiron  Systems Ltd. (a former  wholly-owned
subsidiary of the Company in England,  the "Subsidiary") for the period from May
22, 1997 to December  19,  1997.  Furthermore,  we were unable to audit  certain
joint venture transactions in Asia and Africa during the year ended December 31,
1997.  The   activities  of  the   Subsidiary   and  joint  ventures   comprised
substantially all of the Company's operations during the year ended December 31,
1997. Because of the significance of the operations of the Company's  Subsidiary
and joint ventures which we were unable to audit,  the scope of our work was not
sufficient  to enable us to express,  and we do not  express,  an opinion on the
1997 financial statements.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company presently has no revenue producing operations
or activities and has suffered  recurring losses from operations.  These factors
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note 1. The  financial  statements  do not  include any  adjustments  that might
result from the outcome of this uncertainty.


                                                      /s/ CALLAGHAN NAWROCKI LLP
                                                      --------------------------
                                                      CALLAGHAN NAWROCKI LLP

Melville, New York
December 13, 1999


                                       F-1
<PAGE>


                             INTERNET HOLDINGS, INC.
                                  BALANCE SHEET
                                DECEMBER 31, 1998




                                     ASSETS

CURRENT ASSETS:
  Cash                                                  $       271
                                                        -----------

       Total current assets                                     271
                                                        -----------
                                                        $       271
                                                        ===========

                                 LIABILITIES AND
                              STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Accounts payable and accrued expenses                 $    13,520
                                                        -----------

               Total current liabilities                     13,520
                                                        -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
  Common stock, $.001 par value, 50,000,000 shares
  authorized, 2,119,470 shares issued and outstanding         2,119
  Additional paid-in capital                              5,723,560
  Accumulated deficit                                    (5,738,928)
                                                        -----------

               Total stockholders' deficit                  (13,249)
                                                        -----------

                                                        $       271
                                                        ===========


              The accompanying notes to financial statements are an
                        integral part of this statement.

                                       F-2


<PAGE>


                                        INTERNET HOLDINGS, INC.
                                       STATEMENTS OF OPERATIONS
                            FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997


                                                        1998            1997
                                                    -----------     -----------

REVENUES                                            $        79     $     3,813

EXPENSES                                                 28,548         130,974
                                                    -----------     -----------

          Loss from continuing operations               (28,469)       (127,161)

LOSS FROM DISCONTINUED OPERATIONS                          --        (2,359,612)
                                                    -----------     -----------

          Net loss                                  $   (28,469)    $(2,486,773)
                                                    ===========     ===========


PER SHARE DATA:

          Loss from continuing operations           $     (0.01)    $     (0.07)
                                                    ===========     ===========

          Loss from discontinued operations         $      --       $     (1.30)
                                                    ===========     ===========

          Net loss                                  $     (0.01)    $     (1.37)
                                                    ===========     ===========

          Weighted average number of common
            shares outstanding                        2,119,470       1,813,706
                                                    ===========     ===========


              The accompanying notes to financial statements are an
                       integral part of these statements.

                                       F-3


<PAGE>



                             INTERNET HOLDINGS, INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>

                                                            Common Stock             Additional                        Total
                                                    ---------------------------       Paid-In       Accumulated     Stockholders'
                                                       Shares          Amount         Capital         Deficit      Equity (Deficit)
                                                    -----------     -----------     -----------     -----------    ---------------
<S>                                                  <C>            <C>             <C>             <C>             <C>
BALANCE, JANUARY 1, 1997                              1,697,858     $     1,698     $ 3,151,481     $(3,223,686)    $   (70,507)

8 to 1 reverse stock split                           (1,484,603)         (1,485)          1,485            --              --
Shares issued pursuant to acquisition                 2,640,313           2,640         657,360            --           660,000
Shares issued in satisfaction of obligations            150,000             150          37,350            --            37,500
2 to 1 reverse stock split                           (1,501,180)         (1,501)          1,501            --              --
Shares issued in private placement                    1,483,935           1,484       2,373,516            --         2,375,000
Shares issued pursuant to conversion
  of loan note                                          250,000             250         124,750            --           125,000
Shares cancelled pursuant to divestiture             (1,320,157)         (1,320)       (658,680)           --          (660,000)
Shares issued in satisfaction of obligations            203,304             203          34,797            --            35,000
Net loss for the year                                      --              --              --        (2,486,773)     (2,486,773)
                                                    -----------     -----------     -----------     -----------     -----------

BALANCE, DECEMBER 31, 1997                            2,119,470           2,119       5,723,560      (5,710,459)         15,220

Net loss for the year                                      --              --              --           (28,469)        (28,469)
                                                    -----------     -----------     -----------     -----------     -----------

BALANCE, DECEMBER 31, 1998                            2,119,470     $     2,119     $ 5,723,560     $(5,738,928)    $   (13,249)
                                                    ===========     ===========     ===========     ===========     ===========
</TABLE>


             The accompanying notes to financial statements are an
                       integral part of these statements.

                                       F-4


<PAGE>


                             INTERNET HOLDINGS, INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                  1998                     1997
                                                               -----------              -----------
<S>                                                            <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                       $   (28,469)             $(2,486,773)
Adjustments to reconcile net loss to net cash
  used by operating activities:
    Loss from discontinued operations                                 --                  2,359,612
    (Increase) decrease in other receivable                         34,000                  (34,000)
    Decrease in accounts payable
      and accrued expenses                                          (6,860)                 (87,239)
                                                               -----------              -----------

      Net cash used by operating activities                         (1,329)                (248,400)
                                                               -----------              -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Shares issued in private placement                                    --                  2,375,000
Proceeds from convertible loan note                                   --                    125,000
                                                               -----------              -----------

      Net cash provided by financing activities                       --                  2,500,000
                                                               -----------              -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture                                           --                 (2,250,000)
                                                               -----------              -----------

      Net cash used by investing activities                           --                 (2,250,000)
                                                               -----------              -----------

NET INCREASE (DECREASE) IN CASH                                     (1,329)                   1,600

CASH, BEGINNING OF YEAR                                              1,600                     --
                                                               -----------              -----------

CASH, END OF YEAR                                              $       271              $     1,600
                                                               ===========              ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Corporation acquired by issuance of common shares              $      --                $   660,000
Corporation divested by cancellation of common shares                 --                   (660,000)
Shares issued in satisfaction of other obligations                    --                     72,500
Shares issued pursuant to conversion of
  loan note                                                           --                    125,000
</TABLE>


             The accompanying notes to financial statements are an
                       integral part of these statements.

                                       F-5
<PAGE>


                             INTERNET HOLDINGS, INC.
                          NOTES TO FINANCIAL STATEMENTS


(1)  Business and organization

     Internet Holdings,  Inc. (the "Company") was originally incorporated in the
     State  of Utah on July  22,  1977,  under  the  name of  Western  Corn  Dog
     Factories.  The Company has had a series of mergers  with other  companies,
     all  accounted for as reverse  acquisitions,  with the Company in each case
     changing  its name to that of or similar to the reverse  acquiror.  In this
     regard,  the Company's  previous names were:  Resources West,  Inc.,  Magma
     Resources, Inc., Cellular Telecommunications & Technologies, Inc. and China
     Biomedical Group, Inc. The name Internet Holdings, Inc. was adopted on July
     12, 1996.

     In 1993,  the  Company  acquired  Cellular  Payphones,  Inc.,  ("CPI"),  (a
     Delaware Corporation),  whereby all of the issued and outstanding shares of
     CPI were  exchanged  for  approximately  90% of the issued and  outstanding
     stock of the  Company.  This  transaction  was  accounted  for as a reverse
     acquisition purchase, in which CPI was the acquiring  corporation,  and the
     Company  was the  acquired  corporation.  The  Company  accounted  for this
     transaction  as a  recapitalization  of CPI, with the issuance of 2,625,000
     shares of common  stock for the net assets of the  Company.  Following  the
     1993  acquisition,   the  Company  was  engaged  in  the  business  of  (i)
     installation  and  servicing  of cellular  credit-card  pay  telephones  in
     taxicabs, radio-cabs, limousines, rental cars, trains, ferries, hotels, and
     business conference  centers,  and (ii) the data processing and development
     of streamline software specializing in credit card authorization processing
     with real-time  billing  functions.  The Company ceased such  operations in
     October  1994 due to  substantial  losses.  Effective  April 3,  1995,  the
     Company acquired C.B.  Marketing and Investment  Limited,  a privately-held
     English  corporation engaged in the business of medical market research and
     the  manufacture  of  pharmaceuticals  and  contraceptives  in the Peoples'
     Republic  of  China.  On  April  22,  1996,  the  Company  entered  into  a
     divestiture  agreement  with  respect  to  C.B.  Marketing  and  Investment
     Limited. During 1996, the Company was reorganized to invest in internet and
     ISDN ("International Standard Digital Network") related technologies.

     On May 22,  1997,  the Company  acquired  Chiron  Systems Ltd.  ("CSL"),  a
     privately-held English Corporation engaged in the business of designing and
     developing  ISDN related  products.  During 1997, the Company,  through CSL
     provided  hardware and software products and services for internet and ISDN
     applications.  CSL had expected to confirm several  substantial orders from
     the Far East  during  the last  quarter  of 1997  based upon a new range of
     products.   However,   these  orders  never  materialized  due  to  alleged
     specification  failure,  resulting in a need for  additional  funding.  The
     Company  decided not to make any further  investment in CSL and,  effective
     December 19, 1997, exercised its right to divest CSL under the terms of the
     acquisition agreement.  CSL was subsequently placed into liquidation by its
     creditors.  During its  ownership  of CSL,  the  Company  invested in joint
     ventures  in Asia and West  Africa  in  connection  with  the  delivery  of
     products and services being developed by CSL. As a result of the failure of
     CSL to develop the requisite products and technology, and the corresponding
     divestiture of CSL, the Company became engaged in various legal proceedings
     with its joint venture partners which was finally settled in October 1999.


                                       F-6
<PAGE>


     The Company presently has no revenue producing operations or activities and
     has suffered recurring operating losses from operations. Management's plans
     include  seeking an  acquisition  candidate  in the  internet  and  related
     technology fields. In connection with such a transaction, which, similar to
     the Company's previous mergers will actually be a reverse acquisition,  the
     Company  may seek to raise  proceeds  from the sale of its  securities.  On
     October  27, 1999 the  Company  filed a Form 8-K  setting out a  contingent
     acquisition   which,  if  consummated,   would  provide  the  Company  with
     $2,160,000 in cash and liquid securities.  This agreement is conditional on
     the  settlement of all  outstanding  litigation,  the filing of outstanding
     reports  and  the  maintenance  of the  Company's  quotation  on the  OTC -
     Bulletin Board.

(2)  Summary of significant accounting policies:

     Foreign currency translation -

     Gains and losses  from  foreign  currency  transactions  are  reflected  in
     current operating results.

     Revenue and cost recognition -

     Revenues are  generally  recognized  as earned and expenses are  recognized
     when incurred under the accrual basis of accounting.

     Net loss per share -

     Net loss per  share  was  computed  by  dividing  net loss by the  weighted
     average number of common shares issued and outstanding during the period.

     Income taxes -

     The Company has adopted  Statement of Financial  Accounting  Standards  No.
     109,  "Accounting for Income Taxes",  to account for deferred income taxes.
     Deferred taxes are computed based on the tax liability or benefit in future
     years of the reversal of temporary differences in the recognition of income
     or deduction of expenses between financial and tax reporting purposes.  The
     net difference, if any, between the provision for taxes and taxes currently
     payable is reflected in the balance sheet as deferred  taxes.  Deferred tax
     assets and/or liabilities, if any, are classified as current and noncurrent
     based on the classification of the related asset or liability for financial
     reporting  purposes,  or based on the expected  reversal  date for deferred
     taxes that are not related to an asset or liability.

     Comprehensive income -

     Other than net income, the Company has no items of comprehensive  income as
     defined by generally accepted accounting principles.


                                       F-7
<PAGE>


(3)  Discontinued operations

     On  December  19,  1997,  the  Company's  Board  of  Directors  approved  a
     divestiture agreement whereby the Company delivered to certain shareholders
     who had previously  owned Chiron Systems Ltd.,  ("CSL") all the outstanding
     shares in this  corporation,  which had been acquired by the Company on May
     22,  1997.  In return,  the CSL  shareholders  transferred  to the  Company
     1,320,157  shares  (2,640,313  shares  pre-reverse  split) of the Company's
     common stock. In connection  therewith,  the Company recognized $361,641 of
     losses  relating  primarily to  unrecoverable  loans  receivable  from this
     divested corporation.

     In  conjunction  with its ownership of CSL, the Company  entered into joint
     ventures in Asia and West Africa for the  delivery of products and services
     being  developed  by CSL.  During the year ended  December  31,  1997,  the
     Company invested  $2,250,000 in certain assets purchased from joint venture
     partners.  As a result  of the  failure  of CSL to  develop  the  requisite
     products and  technology,  and the  corresponding  divestiture  of CSL, the
     Company became engaged in various legal  proceedings with its joint venture
     partners. In October 1999, a comprehensive settlement agreement was reached
     by the Company with its joint  venture  partners.  By this  agreement,  the
     Company agreed not to pursue claims against  certain assets  purchased from
     the joint venture partners, the joint venture partners agreed not to pursue
     claims  against the Company  relating to negligence  and breach of contract
     and the Company was released from debts totaling $252,029. This resulted in
     a net write-off to the Company of $1,997,971,  which is reflected as a loss
     from discontinued operations for the year ended December 31, 1997.

(4)  Accounts payable and accrued liabilities

     As of December 31, 1998,  accounts payable and accrued  liabilities consist
     primarily of obligations for legal and professional fees.

(5)  Stockholders' equity

     On March 11, 1997, the Board of Directors  approved a 1-for-8 reverse stock
     split of the issued and outstanding shares of the Company's common stock.

     On May 22, 1997, the Company acquired Chiron Systems Ltd., a privately-held
     English  Corporation  in a  stock-for-stock  exchange.  As a result of such
     transaction,  the Company  issued  2,640,313  shares of its  authorized but
     unissued  common  stock to the  shareholders  of  Chiron  Systems  Ltd.  On
     December 19, 1997 the Company  exercised its right to divest Chiron Systems
     Ltd., under the terms of the acquisition agreement. Accordingly,  1,320,157
     (post 1-for-2  reverse stock split) shares were returned to the Company and
     immediately cancelled.

     On May 22, 1997,  the Board of  Directors  approved the issuance of 150,000
     shares of the Company's  common stock in satisfaction of obligations in the
     amount of $37,500.

     On June 9, 1997,  the Board of Directors  approved a 1-for-2  reverse stock
     split of the issued and outstanding shares of the Company's common stock.


                                       F-8
<PAGE>


     On June 20, 1997,  the Company sold pursuant to a private  placement  under
     Regulation S, 1,483,935  shares of common stock for proceeds of $2,375,000.
     The proceeds are net of $147,689 of placement costs.

     On August 12,  1997,  250,000  shares of the  Company's  common  stock were
     issued pursuant to the conversion of a loan note in the amount of $125,000.

     On December  19,  1997,  the Board of  Directors  approved  the issuance of
     203,304 shares of the Company's common stock in satisfaction of obligations
     in the amount of $35,000.

(6)  Income taxes

     The income tax  provision  is  summarized  as follows  for the years  ended
     December 31, 1998 and 1997:


                                          Year Ended               Year Ended
                                       December 31, 1998       December 31, 1997
                                       -----------------       -----------------

Federal                                      $--                      $--
State and local                               --                       --
                                             ----                     ----
      Total                                  $--                      $--
                                             ====                     ====

Statutory rates of income tax                  40%                      43%
Income tax effect related to the
  following items:

Net operating losses                          (40)                     (43)
                                             ----                     ----
      Total                                   --                       --
                                             ====                     ====

Effective rate of income tax                    0%                       0%
                                             ====                     ====

     The Company has net operating loss  carryforwards  to offset future taxable
     income of approximately $5 million expiring in the years 2009 through 2013.
     As it is not more likely than not that the resulting  deferred tax benefits
     will be  realized,  a  valuation  allowance  has been  recognized  for such
     deferred tax assets.

(7)  Commitments and contingencies

     The Company has not filed federal nor state income tax returns for the past
     several years,  and is currently  working with the Internal Revenue Service
     and state taxing authorities to ensure filings of all requisite returns are
     made as soon as possible.  In management's  opinion,  there are no material
     liabilities as a result of the delay in filing these returns.

(8)  Legal proceedings and subsequent events

     During  the  period   subsequent  to  December  31,  1998,   various  legal
     proceedings  were  settled.  Reference  is made to Note 3 for details as to
     such resolution.


                                       F-9