SECURITIES
      AND EXCHANGE
      COMMISSION
 Washington,
      D.C.  20549
 FORM
      20-F /A
 Amendment
      No. 1
 (Mark
        One)
 
 REGISTRATION
                  STATEMENT
                  PURSUANT TO SECTION 12(b) OR 12(g) OF THESECURITIES
                  EXCHANGE ACT OF 1934
                  [Fee Required]X
                              ANNUAL REPORT
                  PURSUANT TO
                  SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
                  ACT OF 1934 [Fee
                  Required]For
                  the Fiscal Year Ended December 31, 2006TRANSITION REPORT
                  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
                  ACT OF 1934 [No Fee
                  Required]For
                  the transition period from ______________ to _______________.Commission
                  File No. 0-25108IWI
                  HOLDING LIMITED
                (Exact
                  Name of Registrant as Specified in Its Charter)
                
                British
                  Virgin Islands
                (Jurisdiction
                  of Incorporation or Organization)P.O.
                  Box 3340,
                  Dawson Building, Road Town, Tortola, British Virgin Islands
                Address
                  of Principal Executive OfficesSecurities
                  Registered Pursuant to Section 12(b) of the Act:Title
                  of Each Class
                None
              Name
                  of Each Exchange on Which Registered
                NoneSecurities
                  Registered Pursuant to Section 12(g) of the Act:Common
                  Stock, no par value
                (Title
                  of Class)Securities
                  for which there is a reporting obligation pursuant to Section 15(d)
                  of the
                  Act:None
                (Title
                  of Class)
 As
        of May
        10, 2007 the Registrant had outstanding 2,554,700 shares of Common Stock
        and
        3,644,880 shares of Preferred 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 Exchange Act during the past twelve (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
      ninety (90) days. Yes X  No
 
 Indicate
      by check mark which financial statement item the registrant has elected to
      follow.
 Item
      17    Item 18   X
 
 
 
 
 
 
 TABLE
      OF CONTENTS
 
 
 PART
                I
            PageITEM   1.
                IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
            3ITEM   2.
                OFFER STATISTICS AND EXPECTED TIMETABLE
            3ITEM   3.
                KEY INFORMATION
            3ITEM   4.
                INFORMATION ON THE COMPANY
            4ITEM   5.
                OPERATING AND FINANCIAL REVIEW AND PROSPECTS
            7ITEM   6.
                DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
            10ITEM   7.
                MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
            12ITEM   8.
                SELECTED CONSOLIDATED FINANCIAL DATA
            14ITEM   9.
                THE OFFER AND LISTING
            14ITEM
                10. ADDITIONAL INFORMATION
            15ITEM
                11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT THE MARKET
            15ITEM
                12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
            16PART
                IIITEM
                13.    DEFAULTS DIVIDEND ARREARAGES AND
                DELINQUENCIES
            16ITEM
                14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF
                SECURITY
              HOLDERS
                AND USE OF PROCEEDS
            16ITEM
                15.    CONTROLS AND PROCEDURES
            16ITEM
                16A.  AUDIT COMMITTEE FINANCIAL EXPERT
            17ITEM
                16B.  CODE OF ETHICS
            17ITEM
                16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
            17PART
                IIIITEM
                17.    FINANCIAL STATEMENTS
            17ITEM
                18.    FINANCIAL STATEMENTS
            17ITEM
                19.    EXHIBITS
            18SIGNATURES
            18CERTIFICATION
            19-21
 
 
 
 
 
 
 
 
 
  
  
 PART
      I
 
 ITEM
      1.                      
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
 
 Not
      applicable.
 
 
 ITEM
      2.                      
OFFER STATISTICS AND EXPECTED TIMETABLE
 
 Not
      applicable.
 
 
 ITEM
      3.                      
KEY INFORMATION
 
 
 SELECTED
      CONSOLIDATED FINANCIAL DATA
 (In
      thousands, except share
      data)
 
 Year
                Ended December 31,2002
            
            
            2003
            
            
            2004
            
            
            2005
            
            
            2006Statement
                of Income Data:Net
                sales
            
            $
            25,258
            
            
            $
            21,770
            
            
            $
            27,561
            
            
            $
            25,534
            
            
            $
            27,662Cost
                of sales
            
            
            20,322
            
            
            
            18,772
            
            
            
            22,309
            
            
            
            20,599
            
            
            
            22,244Gross
                profit
            
            
            4,936
            
            
            
            2,998
            
            
            
            5,252
            
            
            
            4,935
            
            
            
            5,418Operating
                expenses
            
            
            4,446
            
            
            
            4,603
            
            
            
            4,672
            
            
            
            4,666
            
            
            
            4,602Income
                (loss) from operations before the
              Restructuring
                Costs
            
            
            490
            
            
            
            (1,605
            )
            
            
            580
            
            
            
            269
            
            
            
            816Restructuring
                Costs
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (378
            )Income
                from operations
            
            
            490
            
            
            
            (1,605
            )
            
            
            580
            
            
            
            269
            
            
            
            438Other
                income (expense) – net
            
            
            (248
            )
            
            
            (299
            )
            
            
            (349
            )
            
            
            (458
            )
            
            
            (562
            )Income
                (loss) before income taxes
            
            
            242
            
            
            
            (1,904
            )
            
            
            231
            
            
            
            (189
            )
            
            
            (124
            )Income
                data:Income
                (tax) benefit
            
            
            36
            
            
            
            -
            
            
            
            -
            
            
            
            (3
            )
            
            
            (3
            )Net
                income (loss)
            
            $
            278
            
            
            $
            (1904
            )
            
            $
            231
            
            
            $
            (192
            )
            
            $
            (127
            )Net
                income (loss) per common share
            
            $
            .11
            
            
            $
            (.75
            )
            
            $
            .09
            
            
            $
            (.08
            )
            
            $
            (.05
            )Cash
                distributions per common share
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Weighted
                average number of common
              shares
                outstanding
            
            
            2,554,700
            
            
            
            2,554,700
            
            
            
            2,554,700
            
            
            
            2,554,700
            
            
            
            2,554,700Year
                Ended December 31,2002
            
            
            2003
            
            
            2004
            
            
            2005
            
            
            2006Balance
                Sheet Data:Working
                capital
            
            $
            3,010
            
            
            $
            1,233
            
            
            $
            1,528
            
            
            $
            1,342
            
            
            $
            1,225Total
                assets
            
            
            14,255
            
            
            
            15,327
            
            
            
            17,466
            
            
            
            18,540
            
            
            
            19,352Long-term
                debt
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Shareholders’
                equity
            
            
            3,335
            
            
            
            1,431
            
            
            
            1,662
            
            
            
            1,470
            
            
            
            1,343
   
 
 Risk
      Factors
 
 The
      nature of the business and industry
      that the Company operates is very seasonal.  This seasonality combined
      with customer sales concentration and the reliance of consumers using their
      discretionary disposable income on fashion related products within current
      economic conditions compounded by the increase in cost of the gold component
      of
      our product presents a potential risk that continued growth may be
      impacted.
 
 The
      majority of the products that the
      Company sells are imported from the Peoples Republic of China (“PRC”) and Hong
      Kong and as such reliance on non restrictive trading agreements between the
      United States of America and these countries is critical.
 
 
 ITEM
      4.                      
INFORMATION ON THE COMPANY
 
 General
 
 IWI
      Holding Limited (“Company”) was
      incorporated in the British Virgin Islands on February 22, 1993. The Company,
      through its wholly-owned subsidiary, Imperial World, Inc. (“Imperial”),
      incorporated in the State of Illinois, is engaged in the design, assembly,
      merchandising and wholesale distribution of jewelry.  The Company
      provides a broad range of fashionable jewelry targeted at consumers who seek
      fine jewelry at moderate prices for every day wear.  These customers
      are likely to purchase jewelry at frequent intervals as fashions and styles
      change.  The majority of the Company’s U.S. sales are under the trade
      name of “World Pacific Jewelry.”  Customers of the Company are
      principally large retail establishments with jewelry departments and mass media
      marketers.
 
 
 Products
      and Pricing
 
 The
      Company’s principal products are
      fine jewelry of rings, earrings, pendants, bracelets and necklaces, made of
      10,
      14 and 18 karat gold, set with diamonds, precious or semi-precious
      stones.  In addition, the Company is also a major supplier of pearl
      products in the industry. The Company’s products are currently sold in over
      7,000 retail outlets.  For the majority of products, the average
      wholesale price is approximately $75 with the prices ranging from approximately
      $20 to $500.
 
 
 Marketing
 
 The
      primary marketing efforts are
      product design and customer support services.  The Company markets its
      proprietary products and product designs through a selling team that includes
      company management, internal account executives and independent sales
      representatives.  Each major account has thorough involvement of
      internal sales management, to insure that quality of sales meet or exceed the
      company requirement.
 
 Customers
 
 The
      Company’s customers consist of
      jewelry retail stores, mass merchandisers, such as Wal-Mart Stores, Inc.,
      department stores, such as J.C. Penney Company, Inc., national jewelry chains,
      catalog showrooms and various specialty markets to include television and
      internet outlets.  The Company derived approximately 32%, 11% and 10%
      of its net sales from three customers during 2006.  The Company has no
      long-term contracts with any customers; however, the core of each of its large
      volume purchasers had been customers for at least five years.  The
      following table sets forth the approximate percentage of net sales for the
      major
      markets for the periods indicated.
 
 
 
 
 
 Year
                Ended December
                31,2004
            
            
            2005
            
            
            2006Jewelry
                retail stores
            
            
            0.3
            %
            
            
            0.3
            %
            
            
            0.2
            %Specialty
                markets
            
            
            12.3
            
            
            
            20.8
            
            
            
            26.1Mass
                merchandisers
            
            
            16.9
            
            
            
            9.2
            
            
            
            11.8Department
                stores
            
            
            50.8
            
            
            
            46.5
            
            
            
            46.5National
                jewelry chains
            
            
            17.5
            
            
            
            22.4
            
            
            
            14.5Catalog
                showrooms
            
            
            2.2
            
            
            
            0.8
            
            
            
            0.9Total
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %
 
 
 Competition
 
 The
      jewelry industry in the United
      States is highly fragmented, with little significant brand name recognition
      or
      consumer loyalty.  Selection is generally a function of design appeal,
      high perceived value and quality in relation to price.
 
 Retail
      jewelry industry generates an
      estimated $44 billion in annual sales in the United States.  Retail
      jewelry sales have historically increased at a rate in excess of the inflation
      rate.  This increase is principally attributable to the growth in the
      number of dual working households which in turn has increased the amount of
      disposable income for women, the largest group of jewelry purchasers.
 
 While
      many competitors may have a wider
      selection of products or greater financial resources, the Company believes
      its
      competitive position is enhanced by its information system, performance and
      its
      close relationship with its customers and vendors.  Therefore,
      although the competition is intense, the Company believes it is well positioned
      in the jewelry industry.
 
 
 Seasonality
 
 The
      jewelry business is highly seasonal,
      with the fourth calendar quarter, which includes the Christmas shopping season,
      historically contributing the highest sales of any quarter during the
      year.    Seasonality cannot be predicted or counted upon,
      and the results of any interim period are not necessarily indicative of the
      results that might be expected during a full fiscal year.
 
 
 The
      following table sets forth the
      Company’s unaudited net sales for the periods indicated (dollar amounts are in
      thousands):
 
 Year
                Ended December
                31,2004
            
            
            2005
            
            
            2006Amount
            
            
            %
            
            
            Amount
            
            
            %
            
            
            Amount
            
            
            %First
                Quarter
            
            $
            4,906
            
            
            
            17.8
            
            
            $
            5,593
            
            
            
            21.9
            
            
            $
            5,066
            
            
            
            18.3Second
                Quarter
            
            
            5,337
            
            
            
            19.4
            
            
            
            4,649
            
            
            
            18.2
            
            
            
            6,475
            
            
            
            23.4Third
                Quarter
            
            
            6,428
            
            
            
            23.3
            
            
            
            4,868
            
            
            
            19.1
            
            
            
            6,213
            
            
            
            22.5Fourth
                Quarter
            
            
            10,890
            
            
            
            39.5
            
            
            
            10,424
            
            
            
            40.8
            
            
            
            9,908
            
            
            
            35.8Total
            
            $
            27,561
            
            
            
            100.0
            
            
            $
            25,534
            
            
            
            100.0
            
            
            $
            27,662
            
            
            
            100.0
 
 
 
 Purchasing
 
 The
      Company imports most of its jewelry
      from the People’s Republic of China (“PRC”) and Hong
      Kong.  Approximately 10% of the Company’s products are sourced in the
      U.S.  Fresh water and cultured pearls are imported from the PRC and
      Hong Kong.  The pearls are assembled by and for the Company primarily
      overseas with limited assembly at the Company’s location into various pearl
      jewelry products.  The Company purchases jewelry from a number of
      suppliers based on quality, pricing and available quantities.
 
 Although
      purchases of material are made
      from a relatively small number of suppliers, the Company believes there are
      numerous alternative sources for all materials, and that the failure of any
      principal supplier would not have a material adverse effect on operations or
      the
      Company’s financial condition.  The Company believes it has good
      relations with its suppliers, most of whom have supplied the Company for many
      years.  The Company has not experienced any difficulty in securing
      product.
 
 Manufacturing
      and Assembly
 
 Since
      the Company imports most of its
      jewelry in an assembled state from suppliers in the PRC and Hong Kong,
      manufacturing and assembly operations conducted by the Company are primarily
      limited to designing jewelry, assembly of pearl products and quality
      control.  Upon completing a design, the Company provides such design
      to its suppliers, who will purchase the raw materials, such as diamonds, other
      precious stones, gold and silver, and manufacture the product or subcontract
      for
      its manufacture.  The use of third party manufacturers enables the
      Company to shift the risk and capital cost of manufacturing.
 
 The
      Company maintains a light assembly
      operation in the United States for the stringing of pearls.  This
      enables the Company to assemble pearls specifically to customer order and to
      provide shipment within two days of the order date.
 
 Property,
      Plants and Equipment
 
 The
      Company maintains its registered
      offices in the BVI; the Company leases approximately 13,000 square feet of
      space
      for operations and pearl assembly in Westmont, Illinois.  The Company
      has been at its current location since November 1993.  In February
      2007, the Company amended its lease reducing its space needs to approximately
      7,500 square feet.  The facility, which provides state of the art
      security, was designed to maximize the efficiency of the Company’s current
      operations and to provide for the Company’s anticipated growth.
 
 Legal
      Proceedings
 
 In
      September 1996, Robert J. Rosen filed
      a class action lawsuit in the Supreme Court in the state of New York alleging
      claims of fraudulent misrepresentations by IWI Holding Limited and some Company
      officers, accountants and lawyers in connection with the Company’s initial
      public offering on December 16, 1994, and in connection with the dissemination
      of financial data thereafter.  The Plaintiff claims damages on behalf
      of the class in excess of $11,000,000, which allegedly resulted from a decline
      of the market value of the Company’s common stock after the initial public
      offering.
 
 The
      parties reached an agreement in
      principle to settle the claim for a significantly lesser amount, which was
      accrued as of December 31, 1999.  The settlement agreement is subject
      to court approval and the Company may decline to proceed with the agreement
      if a
      significant number of class members “opt out” of the settlement.  As
      of April 30, 2007 there has been no response from counsel for the class action
      lawsuit or from the lead counsel.
 
 
 
 
 
 
 ITEM
      5.                      
OPERATING AND FINANCIAL
      REVIEW AND
      PROSPECTS
 
 This
      report contains forward-looking
      statements within the meaning of Section 27A of the Securities Act of 1933
      and
      Section 21E of Securities Exchange Act of 1934.  Actual results could
      differ materially from those projected in the forward-looking statements as
      a
      result of the risks which the Company cannot foresee.  Such risks
      include, but are not limited to an economic turndown, changes in government
      policies, financial difficulty with or loss of a major customer or interruption
      in supplies.
 
 
 Results
      of Operations
 
 The
      following table sets forth, for the
      periods indicated, certain information derived from the Consolidated Statements
      of Income of the Company.  All dollar and share amounts are set forth
      in thousands, except per share data.
 
 2004
            2005
            2006Amount
            %
              Sales
            %
                Change
            Amount
            %
                Sales
            %
                Change
            Amount
            %
                Sales
            %
                ChangeNet
                sales
            $27,561
            100.0
            26.6
            $25,534
            100.0
            (7.4)
            $27,662
            100.0
            8.3Gross
                profit
            5,252
            19.1
            75.2
            4,935
            19.3
            (6.0)
            5,418
            19.6
            9.8Operating
                expenses
            4,672
            16.9
            1.5
            4,666
            18.3
            (0.1)
            4,602
            16.6
            (0.1)Restructuring
                Costs
            -
            -
            -
            -
            -
            -
            -
            378
            1.4Income
                (Loss)
                from  oper.
            580
            2.1
            n/a
            269
            1.1
            (53.6)
            438
            1.6
            62.8Other
                income (expense)
            (349)
            (1.3)
            (16.7)
            (458)
            (1.8)
            (31.2)
            (562)
            (2.0)
            (22.7)(Loss)
                Income before income
                taxes
            231
            0.8
            n/a
            (189)
            (0.7)
            n/a
            (124)
            (0.4)
            n/aIncome
                tax benefit
            -
            -
            n/a
            (3)
            -
            n/a
            (3)
            -
            n/aNet
                (Loss) income
            231
            0.8
            n/a
            (192)
            (0.7)
            n/a
            (127)
            (0.4)
            n/aNet
                (Loss) income
                per  common share
            
            
            $
                0.09
            
            
            $(0.08)
            
            
            $(0.05)Weighted
                average number ofshares
                outstanding
            2,555
            
            
            2,555
            
            
            2,555
 
 
  
  
 The
      Company’s sales are generated
      through the wholesaling of jewelry products to the
      following  groups:
 
 2002
            
            
            2003
            
            
            2004
            
            
            2005
            
            
            2006Jewelry
                retail stores
            
            
            1.1
            %
            
            
            0.6
            %
            
            
            0.3
            %
            
            
            0.3
            %
            
            
            0.2
            %Specialty
                markets
            
            
            28.8
            
            
            
            28.5
            
            
            
            12.3
            
            
            
            20.8
            
            
            
            26.1Mass
                merchandisers
            
            
            27.9
            
            
            
            12.7
            
            
            
            16.9
            
            
            
            9.2
            
            
            
            11.8Department
                stores
            
            
            26.6
            
            
            
            39.5
            
            
            
            50.8
            
            
            
            46.5
            
            
            
            46.5National
                jewelry chains
            
            
            12.5
            
            
            
            16.3
            
            
            
            17.5
            
            
            
            22.4
            
            
            
            14.5Catalog
                showrooms
            
            
            3.1
            
            
            
            2.4
            
            
            
            2.2
            
            
            
            0.8
            
            
            
            0.9Total
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %
 
 
 The
      changes in net sales are primarily
      attributable to changes in volumes of goods delivered to
      customers.  Most of the goods which we sell are produced in
      China.  Until July 21, 2005, the Renminbi (RMB) (Chinese currency) was
      pegged to the U.S. dollar at the exchange rate of 8.28 RMB to
      US$1.  Therefore, we were not impacted by foreign currency
      fluctuations.  Since July 21, 2005 the value of the RMB is pegged to a
      basket of currencies.  As a result, the RMB was immediately revalued
      to 8.11 RMB to US$1.  Since July 21, 2005, the RMB has declined to
      approximately 7.71 to US$1, or approximately 4.5% through April
      2007.  Therefore, foreign currency fluctuation has had a minimal
      impact on the Company.
 
 
 Year
      Ended December 31,2006 Compared to
      Year Ended December 31, 2005
 
 
 Net
      Sales.  Net sales
      increased approximately $2.1 million or 8.3% to $27.7 million in 2006 from
      $25.5
      million in 2005.  This increase in net sales reflects an increase in
      gross sales from the prior year of $3.3 million partially offset by an increase
      in returns compared to 2005 of approximately $1.0 million.  Coop
      advertising charged against sales increased $133,000 in 2006.  This
      increase in 2006 revenues reflect a combination of the expansion of our customer
      base as well as increased sales to other existing customers offset by decreased
      sales from the Company’s largest customer of approximately $2.2 million.
 
 Gross
      Profit.  Gross profit
      increased $483,000 or 9.8% to $5.4 million in 2006 from $4.9 million in
      2005.  Gross margins improved slightly in 2006 to 19.6% vs 19.3% in
      2005; an improvement of .3%.  This improvement in overall gross
      margins was in part due to continued emphasis placed on the profitability of
      each product sold and increased standard profit levels implemented.
 
 Restructuring
      Costs.  The
      Company incurred costs associated with restructuring of approximately
      $378,000.  The Company began restructuring its operations late in the
      2nd quarter and early 3rd quarter.These
      costs comprised severance costs
      associated with the elimination of 14 employees or approximately 25% of total
      employees, start up costs to integrate the operations and systems which were
      outsourced to China with the operations and systems in the U.S. net of labor
      savings generated.  Most of the functions outsourced overseas were
      production related and includes in part boxing, tagging and packaging of the
      product as well as certain other clerical data entry.
   
 
 Income
      from
      Operations.  Income from operations was $438,000 in 2006 compared to
      $269,000 in 2005, representing an increase from the prior year of
      $169,000.  Operating expenses decreased $64,000.
 
 Other
      Income (Expense).  Other
      expenses representing interest costs increased $128,000 to $586,000 from
      $458,000 in 2006 representing a combination of increased borrowings and
      increased interest rates experienced in 2005.  This was partially
      offset by the gain recorded from the sale of an unused trademark of
      approximately $25,000.
 
 Net
      Loss.  The net loss for
      2006 totaled $127,000 a change of $65,000 compared to the net loss reported
      in
      2005 of $192,000.
 
 
 Year
      Ended December 31, 2005 Compared to
      Year Ended December 31, 2004
 
 Net
      Sales.  Net sales
      decreased approximately $2.0 million or 7.4% to $25.5 million in 2005 from
      $27.6
      million in 2004.  This decrease in net sales reflects a decrease in
      gross sales from the prior year of $3.4 million partially offset by a decrease
      in returns compared to 2004 of approximately $1.5 million.  This
      decrease in 2005 revenues reflect a combination of decreased sales from the
      Company’s two largest customers of approximately $5.9 million offset partially
      by the expansion of our customer base as well as increased sales to other
      existing customers.  Coop advertising charged against sales increased
      $156,000.  The change in net sales resulted from a decrease in unit
      volume of approximately 8.1% which was partially offset by a price increase
      of
      approximately 1.5%.
 
 Gross
      Profit.  Gross profit
      decreased $317,000 or 6.0% to $4.9 million in 2005 from $5.2 million in
      2004.  Gross margins improved slightly in 2005 to 19.3% vs 19.1%in
      2004; an improvement of...2%.  This improvement in overall gross
      margins was in part due to continued emphasis placed on the profitability of
      each product sold and increased standard profit levels
      implemented.  This was offset in part due to higher advertising costs,
      an increase of $156,000.
 
 Income
      from
      Operations.  Income from operations was $269,000 in 2005 compared to
      $580,000 in 2004, representing a decrease from the prior year of
      $311,000.  Operating expenses increased $150,000 and primarily
      reflects increased salary and related costs as salaries that had been rolled
      back in 2004 were reinstated in 2005.
 
 Other
      Income (Expense).  Other
      expenses representing interest costs increased $109,000 to $458,000 from
      $349,000 in 2005 representing a combination of increased borrowings and
      increased interest rates experienced in 2005.
 
 Net
      Loss.  The net loss for
      2005 totaled $192,000 a change of $423,000 compared to the net income reported
      in 2004 of $231,000.
 
 
 Analysis
      of Financial Position,
      Liquidity and Capital Resources
 
 The
      Company’s primary liquidity needs
      are to fund accounts receivable and inventories.  The Company has
      historically financed its working capital requirements through a combination
      of
      internally generated cash and short-term borrowings under bank lines of
      credit.  The Company’s working capital at December 31, 2006 was $1.2
      million as compared to $1.3 million at December 31, 2005.
 
 On
      June 14, 2004 the Company entered
      into a credit agreement with a new financial institution, whereby the Company
      can borrow up to $7.5 million, plus the seasonal over-line amount of $1.5
      million, payable on demand.  The total credit facility is governed by
      a formula, as defined in the agreement, based principally on accounts receivable
      and inventory levels.  This agreement provides, among other things,
      that the credit facilities are collateralized by substantially all the assets
      of
      the Company.
   
 
 Under
      this borrowing facility, interest
      is calculated at 0.25% over prime with respect to the revolving
      loan.  In addition, an unused commitment fee is assessed at a rate of
      0.25% representing the difference between the maximum revolving loan and average
      daily outstanding balance.  An officer of the Company has agreed to
      personally guarantee up to $3,500,000 of the borrowing.
 
 The
      agreement contains certain reporting
      and financial covenants, which the Company is required to
      maintain.  The credit agreement matures on June 1, 2007, or may be
      accelerated by the lender upon certain events as specified in the loan
      agreement.
 
 The
      Company did not meet certain
      financial covenants as of September 30, 2006 and continues to be out of
      compliance regarding certain financial covenants primarily the minimum income
      requirement.  As a result the financial institution has placed the
      Company under a forbearance agreement.  Under this forbearance
      agreement, the Company’s borrowing ability as it relates to inventory has been
      decreased by approximately $250,000 as of February 1, 2007 and further
      reductions of approximately $250,000 on each of April 1, 2007 and May 1,
      2007.  Further, the Company’s borrowing is capped as it relates to
      inventory to a maximum of $2,000,000.  In addition, the financial
      institution has increased the interest rate on the borrowing facility to 4%
      over
      the bank’s prime rate with respect to the revolving loan.  The
      currentforbearance
      agreement expires on May 31,
      2007.  The Company is confident that if new financing is not secured
      by this date, that the present financial institution will renew or extend the
      present forbearance agreement.
 
 The
      following table summarizes cash
      provided by (used in) the Company’s business activities for the past three years
      (dollar amounts are in thousands):
  2004
            
            
            2005
            
            
            2006Operating
                activities
            
            $
            (601
            )
            
            $
            (2,385
            )
            
            $
            (92
            )Investing
                activities
            
            
            (2
            )
            
            
            (12
            )
            
            
            (5
            )Financing
                activities
            
            
            604
            
            
            
            2,535
            
            
            
            60Increase
                (decrease) in cash
            
            
            1
            
            
            
            138
            
            
            
            (37
            )
 
 Operating
      Activities.  The
      net cash used in 2006 was principally due to the increase in trade and
      affiliated accounts payable of $1.0 million and increases in inventories of
      $1.1
      million offset partially by lower accounts receivable levels of $0.2 million
      as
      of December 31, 2006.
 Investing
      Activities.Cash uses in 2006 were
      minimal and
      reflect the upgrade of our computer and related systems.
 
 Financing
      Activities.During 2006, the Company
      decreased the
      amounts outstanding under its line of credit by $0.2 million to $7.7 million
      at
      December 31, 2006.  Notes payable others increased by $270,000.
 
 Off
      Balance Sheet Arrangements.
 
 The
      company has no off balance sheet
      arrangements.
 
 During
      the coming twelve months, the
      Company does not anticipate any significant capital
      expenditures.  Expenditures relating to leasehold improvements
      associated with the build out of the new lease is expected to be in the range
      of
      $100,000.  Given the cash flow generated by current operations and the
      existing bank line of credit, the Company has sufficient working capital to
      cover its operations for the next twelve months.  The following are
      its future contractual obligations:
 
 Payments
                due by
                PeriodContractual
                Obligations
            
            Total
            
            
            Less
                than 1
                year
            
            
            1-3
                years
            
            
            4-5
                years
            
            
            More
                than 5
                yearsOperating
                Lease Obligations
            
            $
            822,000
            
            
            $
            111,000
            
            
            $
            303,000
            
            
            $
            217,000
            
            
            $
            191,000Overseas
                Housing Rental
            
            
            45,000
            
            
            
            34,000
            
            
            
            11,000
            
            
            
            -
            
            
            
            -Total
            
            $
            867,000
            
            
            $
            145,000
            
            
            $
            314,000
            
            
            $
            217,000
            
            
            $
            191,000
   
 
 Inflation
 
 Inflation
      has historically not had a
      material effect on the Company’s operations.  When the price of gold
      or precious stones has increased, these costs historically have been passed
      on
      to the customer, quarterly in arrears.  Furthermore, because the
      Company does not have either long-term supply contracts or long-term contracts
      with customers, prices are quoted based on the prevailing prices for
      semi-precious gemstones or metals.  Accordingly, the Company does not
      believe inflation will have a material effect on its future operations.
 
 
 ITEM
      6.                      
DIRECTORS, SENIOR MANAGEMENT
      AND
      EMPLOYEES
 
 Directors
      and Executive Officers
 
 The
      following table sets forth certain
      information as of the date hereof with respect to the directors and executive
      officers of the Company.
 
 Name
            Age
            PositionJoseph
                K. Lau
            59
            Chairman
                of the Board of
                Directors: President of IWI Holding Limited, Principal Financial
                Officer
                and SecretaryRichard
                J. Mick
            66
            Sr.
                Vice President - Sales and
                DirectorConnie
                S. Yui
            56
            Inventory
                Manager and
                DirectorJoseph
                A. Benjamin
            64
            DirectorSamuel
                H. Lou
            53
            Director
 
 
 Each
      director is serving a one-year term
      that expires after the next annual meeting of the Company’s shareholders, or
      until their successors are elected and qualified.  Executive officers
      of the Company are elected by, and serve at the discretion of, the Board of
      Directors.
 
 Joseph
      K. Lau and Connie Yui are brother
      and sister.
 
 Joseph
      K. Lau joined the Company in
      November, 1982 and was elected Senior Vice President, Chief Operating Officer,
      Secretary and Director in February, 1986 and Chairman of the Board, President
      and Chief Executive Officer in August, 1998.  For the 11 years prior
      to joining the Company, he held a management position in the restaurant industry
      and owned a trading company in Hong Kong.
 Richard
      J. Mick joined the Company in
      February, 1996 as Vice President - Sales and Director, in January 2006 he was
      promoted to Senior Vice President - Sales and Director.  For 6 years
      prior to joining the Company he was President of a sales and marketing firm
      selling jewelry and related products.  Prior thereto, Mr. Mick was
      employed by J.C. Penney Company, Inc. for 26 years.
 
 Connie
      S. Yui joined the Company in
      March, 1985 and has served as the Product Development Manager and is responsible
      for inventory control and pearl assembly.
 
 Joseph
      A. Benjamin has served as a
      Director of the Company since December, 1997.  Mr. Benjamin is a CPA
      and is the Managing Partner of Benjamin & Birkenstein, P.C., a business and
      tax consulting firm in Chicago, Illinois.
 
 Samuel
      H. Lou has served as a Director
      of the Company since December, 1997.  Mr. Lou is a business consultant
      with his own firm in Chicago, Illinois.
  
  
 Compensation
      of Directors and
      Officers
 
 The
      aggregate cash compensation paid by
      the Company to all directors and officers as a group during 2006 was
      approximately $637,000.  Due to an extensive travel schedule, one of
      the officers of the Company resides in New York.  Because of this, the
      Company also provides locally an apartment and related costs of approximately
      $13,000 for this individual in lieu of motel accommodations and incurs an
      estimated $9,000 a year in airfare costs.
 
 Certain
      officers of the Company will be
      entitled to bonuses from the Company based on performance criteria to be
      established by the Compensation Committee of the Board of Directors of the
      Company.  Additionally, in December, 1993, the Company adopted a Stock
      Option Plan (the “Option Plan”) to assist the Company and its subsidiaries in
      retaining the service of current employees, motivating selected key management
      personnel, and attracting new management by providing the opportunity for such
      personnel to acquire a proprietary interest in the Company and thereby share
      in
      its growth and success.  Participation in the Option Plan and the
      granting of options under the Option Plan are made by the Compensation Committee
      of the Board of Directors, subject to ratification by the
      Board.  Pursuant to the Option Plan, a total of 150,000 shares of
      Common Stock are reserved for issuance.  The Option Plan requires that
      the exercise price of the option be the fair market value of the Company’s stock
      on the date of the grant of the option but not less than $8.50 per
      share.  The fair market value for purposes of the Option Plan is for
      so long as Common Stock is quoted on the OTCBB, the final closing sales price
      per share on the date of the grant.  The exercise price with respect
      to any option must be paid in cash.  As of the date hereof, there are
      no options to purchase shares of Common Stock outstanding under the Option
      Plan.
 
 The
      Company, during 1995, also adopted a
      Non-Qualified Stock Option Plan (the “Non-Qualified Plan.”)  A total
      of 600,000 shares are reserved for issuance under the Non-Qualified
      Plan.  The Non-Qualified Stock Option Plan provides for the granting
      of options and stock appreciation rights to non-employee directors, key
      management employees and consultants and is administered by the Compensation
      Committee.  The terms of any options and/or stock appreciation rights
      granted under the Non-Qualified Plan shall be determined by the Compensation
      Committee provided that options may not be exercisable for a term longer than
      ten years and may not be exercisable at a price less than the stated value
      of
      the Common Stock.  No options or stock appreciation rights have been
      granted under the Non-Qualified Stock Option Plan.  This plan expired
      in 2005.
 
 In
      addition, the Company maintains a
      defined contribution plan which has both a profit sharing feature and a 401(k)
      savings feature (the “Plan.”)  Under the profit sharing portion of the
      Plan, contributions are an amount determined by the Company’s Board of
      Directors.  Subject to certain limitations required by law, the
      Company’s contribution is allocated to each participant who is employed by the
      Company at the end of the Plan year in the proportion that the total
      compensation paid by the Company to each participant bears to the aggregate
      compensation paid by the Company to all participants during such Plan
      year.  Under the 401(k) savings feature, eligible employees may elect,
      subject to certain limitations required by law, to defer payment of up to 15%
      of
      their compensation.  The Plan provides that if an employee defers
      payment, theCompany
      will contribute 25% of the
      first 6% of compensation deferred, by making a cash payment to the Plan on
      behalf of such participant.  Contributions by the Company to the
      profit sharing feature of the plan, and earnings thereon, vest based on the
      participant’s years of service with the Company, vesting 20% per year after one
      year of service and being fully vested after six years of
      service.  Employee contributions are always 100%
      vested.  Contributions by the Company to the 401(k) savings feature
      vest on the employees first day of employment.  All contributions
      vest, regardless of years of service, upon termination of employment by reason
      of death of disability, attainment of age 62 or the termination of the
      Plan.  After termination of employment, an employee is entitled to
      receive the distribution of his or her entire vested interest in the Plan in
      a
      lump sum, in installments for a specific period of time, or an annuity for
      life.  The amounts held under the Plan are invested according to the
      instructions of the participant in investment funds designated by the plan
      administrator.  The Company made contributions to the Plan during
      2006, 2005 and 2004 of approximately $29,000, $31,000 and $30,000,
      respectively.
   
 
 Employment
      Contracts
 
 The
      Company has an employment contract
      with Joseph K. Lau who is employed by Imperial  was renewed in 2006
      for a five-year period expiring on July 31, 2011.  The agreement calls
      for a base salary of $280,000 per year with an automatic salary increase of
      5
      percent (5%) if the Company reports a minimum of $100,000 pretax
      income.  If the required minimum pretax income is not attained the
      salary level remains the same.  The agreement also provides for a
      bonus of 5 percent (5%) of the Company’s pretax profit.  The agreement
      includes provisions for severance payments for the greater of one half (1/2)
      of
      the compensation earned under this agreement for the remaining term of this
      agreement or severance pay equal to one year’s base salary or any period for
      which the employee is required not to compete.
 
 Committees
      and Attendance of the Board
      of Directors Meetings
 
 During
      the year ended December 31, 2006,
      the Board of Directors held two formal meetings.  The Audit Committee
      held four meetings and the Compensation Committee held two
      meetings.  Each director attended all of the meetings of the Board of
      Directors.  The Audit and Compensation Committees were attended by all
      members.  The members of the Audit Committee are Messrs. Benjamin and
      Lou.  The members of the Compensation Committee are Messrs. Lau,
      Benjamin and Lou.
 
 Employees
 
 As
      of December 31, 2006, the Company had
      33 permanent employees, including 2 executive officers,  8 persons in
      sales and merchandising, 16 persons in operations, and 7 persons in
      administrative and support functions.  None of the employees is
      governed by a collective bargaining agreement and the Company considers its
      relations with its employees to be satisfactory.  As of May 1, 2007,
      the Company had 36 employees, including 2 executive officers,  8
      persons in sales and merchandising, 18 persons in operations, and 8 persons
      in
      administrative and support functions.  The Company supports its
      operations by the use of seasonal or part time employees.  As
      of  December 31, 2006 and May 1, 2007 the Company employed 8 and 3
      seasonal employees, respectively.
 
 Share
      Ownership
 
 Share
      ownership of Directors and
      Officers is illustrated in Item 7.
 
 ITEM
      7.                      
MAJOR SHAREHOLDERS AND
      RELATED
      PARTY TRANSACTIONS
 
 Share
      ownership of major shareholders,
      Directors and Officers
 
 The
      following table is furnished as of
      May 10, 2007, to indicate beneficial ownership of shares of the Company’s Common
      Stock and Preferred Stock by (1) each shareholder of the Company who is known
      by
      the Company to be a beneficial owner of more than 10% of the Company’s Common
      Stock or PreferredStock
      and (2) all officers and directors
      of the Company as a group.  The information in the following table was
      provided by such persons.
 
 Name
                and Addressof Beneficial
                Owner
            Amount
                and Nature ofBeneficial
                Ownership (1)
            Title
                ofClass
            Percent
                ofClass
            Percent
                ofVoting PowerBamberg
                Company Ltd.
            918,750
            Common
            35.96%
            20.99%Bamberg
                Company Ltd
            3,644,880
            Preferred
            100.00%
            41.64%Joseph
                K. Lau
            15,000
            Common
            0.59%
            0.34%Richard
                J. Mick
            117,500
            Common
            4.60%
            2.68%Joseph
                A. Benjamin
            10,000
            Common
            0.39%
            0.23%All
                executive officers and
                directors
              As
                a  group (3 persons)
            142,500
            Common
            5.58%
            3.26%
   
 Compliance
      with Section 16(a) of
      Exchange Act
 
 Under
      the securities laws of the United
      States, the Company’s Directors, its executive officers, and any persons holding
      more than ten percent of the Company’s common stock are required to report their
      initial ownership of the Company’s common stock and any subsequent changes in
      ownership to the Securities and Exchange Commission.  Specific due
      dates for these reports have been established and the Company is required to
      disclose in this Form 20F any failure to file by these dates during
      2006.  All of the filing requirements were satisfied on a timely basis
      in 2006.  In making these disclosures, the Company has relied solely
      on written statements of its directors, executive officers and shareholders
      and
      copies of the reports that were filed with the Commission.
 
 Related
      Party Transactions
 
 All
      transactions between the Company,
      its officers, directors, principal shareholder or affiliates, whether presently
      existing are, or in the future will be, in the belief of management, on terms
      no
      less favorable to the Company than may be obtained from unaffiliated third
      parties.
 
 Since
      1998, some of the Company’s
      products were purchased from a manufacturer in Hong Kong, which is managed
      by a
      relative of an officer of the Company.  For the years ended December
      31, 2006, 2005 and 2004, the Company’s purchases from this manufacturer were
      approximately $232,000, $3,284,000, and $7,887,000 respectively.  The
      Company no longer purchases products from this manufacturer.
 
 Beginning
      in October 2005 the Company
      began purchasing products from another manufacturer in Hong Kong, which is
      owned
      and managed by a relative of an officer of the Company.  Purchases
      from this company in 2006 and 2005 were approximately $3,710,000 and $521,000,
      respectively.
 
 The
      Company uses an outside company to
      provide product quality review at the point of manufacturing in Hong Kong and
      China.  This company is owned and managed by a relative of an officer
      of the Company.  Services and product provided by this company were
      $137,000 and $66,000 in 2006 and 2005, respectively.
 
 The
      Company uses an outside company to
      route gold components from suppliers in the U.S. to manufacturers in Hong Kong
      and China.  This company also provides on a limited basis some product
      to the Company.  This company is owned and managed by a relative of an
      officer of the Company.  Services and product provided by this company
      were approximately $140,000 and $18,000 in 2006 and 2005, respectively.
 
 The
      Company purchases some of its gift
      boxes from a supplier in Hong Kong, which is part owned or controlled by a
      relative of an officer of the Company.  Services and product supplied
      by this company were approximately $192,000, $234,000 and $149,000 in 2006,
      2005, and 2004, respectively.
 
 The
      Company uses outside entities to
      pursue most of its sales, because it has proven to be both effective and
      economical.  The majority stakeholder of the primary outside sales
      entity is a family member of an officer of the Company.  All
      negotiations of pricing, compensation, contracts or any other matters involving
      this entity are conducted by persons other than the related party
      officer.  Commission expense of the Company associated with this
      entity for the years 2006, 2005 and 2004 were $522,000, $619,000 and $688,000,
      respectively. Selling expenses such as salaries, travel, entertainment etc.
      are
      borne directly by the sales entity.
 
 
 ITEM
      8.                      
FINANCIAL  INFORMATION
 
 Reference
      is made to the index to
      Consolidated Financial Statements of the Company, and notes thereto, appearing
      under Item 19 below, together with the report of Spector & Wong, LLP
      thereon.
 
 
 
 ITEM
      9.                      
THE OFFER AND LISTING
 
 There
      is no non-U.S. trading market for
      the Common Stock of the Company.  Within the United States, the
      Company’s Common Stock is traded in the over-the-counter market.  The
      Company’s Common Stock is quoted on the OTCBB under the symbol “IWIHF.”
 
 The
      following table sets forth the high
      and low bid price per share for the Company’s Common Stock for each quarterly
      period for the past two years.
 
 2006
            
            
            2005High
            
            
            Low
            
            
            High
            
            
            LowFirst
                Quarter
            
            $
            .100
            
            
            $
            .070
            
            
            $
            .080
            
            
            $
            .080Second
                Quarter
            
            
            .090
            
            
            
            .060
            
            
            
            .100
            
            
            
            .070Third
                Quarter
            
            
            .070
            
            
            
            .060
            
            
            
            .120
            
            
            
            .070Fourth
                Quarter
            
            
            .115
            
            
            
            .060
            
            
            
            .100
            
            
            
            .070
 
 
 The
      following table sets forth the high
      and low bid price per share for the Company’s Common Stock for each month for
      the past six months.
 
 High
            
            
            Low2006
            November
            
            $
            .060
            
            
            $
            .060December
            
            
            .115
            
            
            
            .0602007
            January
            
            $
            .090
            
            
            $
            .090February
            
            
            .090
            
            
            
            .060March
            
            
            .060
            
            
            
            .060April
            
            
            .060
            
            
            
            .060
 
 
 The
      quotations reflect inter-dealer
      prices without mark-up, mark-down or commission and may not represent actual
      transactions.
 
 At
      May 10, 2007, the bid price of the
      Common Stock was $.06.
 
 As
      of May 10, 2007, there were
      approximately 250 beneficial holders of the Common Stock of the Company, nearly
      all of which are believed to be in the United States.
 
 ITEM
      10.                      
ADDITIONAL INFORMATION
 
 Memorandum
      and
      Articles of Association.
 
 The
      Company has two classes of stock,
      preferred and common.
 
 Preferred
      stock has a par value of $1
      per share, 5 million shares have been authorized 3,644,880 shares are issued
      and
      outstanding.  The preferred shares are entitled to one-half vote per
      share and in the event of liquidation of the Company, the holders of the
      preferred shares will be entitled to $1 per share before any payment to holders
      of common stock.  The preferred shares are subject to redemption, at
      the option of the Company, in whole or in part, at any time after March 21,
      1997, at an amount not to exceed 50% of the net income in excess of $15,000,000
      for the preceding year, together with the accrued dividends, if
      any.  The preferred shares are entitled to a 4% non-cumulative
      dividend, payable on all non-redeemed shares in cash, stock or property as
      the
      Board of Directors shall, in its discretion, declare from time to
      time.  There have been no dividends paid or authorized to preferred
      shareholders.
 
 
 Common
      stock has no par value, 10
      million shares have been authorized 2,554,700 shares are issued and
      outstanding.  Each share of common stock is entitled to one
      vote.  Common stock is entitled to dividends payable in cash stock or
      property as the Board of Directors shall, in its discretion, declare from time
      to time.  There have been no dividends paid or authorized to common
      shareholders.
 
 Exchange
      Controls
 
 The
      Company is not subject to any
      governmental laws, decrees or regulations in the BVI which restrict the export
      or import of capital, including any foreign exchange controls, or which affect
      the remittance of dividends, interest or other payments to non-resident holders
      of the Company’s Common Stock.
 
 Additionally,
      neither the laws of the
      BVI nor the Company’s Charter impose any limitations on the right of
      non-resident foreign owners to hold or vote the Common Stock of the
      Company.
 
 Taxation
 
 The
      BVI imposes no withholding taxes and
      holders of Common Stock who are not resident in the
 BVI
      will not be subject to BVI tax on
      any dividends received from the Company or on gains realized from a sale or
      other disposition of the Common Stock.  The United States does not
      have a tax treaty with the BVI.
 
 Documents
      on Display
 
 Documents
      concerning our Company which
      are referred to in this report may be inspected, upon reasonable notice, at
      our
      principal executive office at Oakmont Centre, 1010 Executive Court, Suite 300,
      Westmont, Illinois 60559.
 
 
 ITEM
      11.                      
QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
 
 The
      economy and its impact on
      discretionary disposable consumer spending could be significant to future
      operating earnings.
 
 The
      Company's sales are highly
      concentrated with several customers.  A significant change in the
      relationship with one or more of these customers could have a material effect
      on
      the operations of the Company.
 
 The
      Company does have some exposure to
      the change in market price of precious metals, pearls and stones, particularly
      gold.  Rapid or steady increase in the price of gold could negatively
      impact the operatingresults
      in future
      periods.  Although the company can pass these costs along to its
      customers, these gold level adjustments occur on a quarterly lag
      basis.  Due to the increase in cost of the gold component of our
      product the impact of which would require consumers to devote more of their
      discretionary disposable income on fashion related products.  The
      impact of this combined with the price increases associated with gasoline could
      potentially have an adverse effect on future earnings of the Company and
      Industry as a whole.
 
 Since
      the Company imports the majority
      of the product it sells from China any significant change or restrictions
      implemented in the exportation or importation laws and procedures between China
      and the U.S. could have a detrimental impact on future operations and
      earnings.
 
 The
      Company does not hold or issue
      financial instruments for trading or speculative purposes.  The
      Company's financial instruments include accounts receivable, accounts payable,
      and notes payable. The
      exposure to the Company for interest
      rate fluctuations is limited to the existing line of credit and is not expected
      to be significant to its overall results of operation.
 
 
 
 ITEM
      12.                      
DESCRIPTION OF SECURITIES
      OTHER
      THAN EQUITY SECURITIES
 
 Not
      applicable.
 
 
 PART
      II
 
 
 ITEM
      13.                      
DEFAULTS, DIVIDENDS ARREARAGES
      AND
      DELINQUENCIES
 
 None
      reportable.
 
 ITEM
                14.
            MATERIAL
                MODIFICATIONS TO THE
                RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
 None
      reportable.
 
 ITEM
                15.
            CONTROLS
                AND PROCEDURES
 
 Disclosure
      Controls and
      Procedures.
 
 We  maintain
      disclosure
      controls and procedures, which are designed to ensure that information required
      to be disclosed in the reports we file or submit under the Securities Exchange
      Act of 1934, as amended, is recorded, processed, summarized and reported within
      time periods specified in the Securities and Exchange Commission’s rules and
      forms and such information is accumulated and communicated to our management,
      including our chief executive officer, or CEO who is also our chief financial
      officer or CFO, as appropriate to allow timely decisions regarding required
      disclosure.
 
 Under
      the supervision and with the
      participation of the Company’s management, including our CEO who is also our
      CFO, an evaluation was performed on the effectiveness of the design and
      operation of our disclosure controls and procedures as of the end of the period
      covered by this annual report.  Based on that evaluation, our
      management, including our CEO who is also our CFO, concluded that our disclosure
      controls and procedures were effective as of December 31, 2006.
 
 An
      evaluation was also performed under
      the supervision and with the participation of our management ,including our
      CEO
      who is also our CFO, of any change in our internal controls over financial
      reporting that occurred during our last fiscal quarter and that has materially
      affected, or is reasonably likely to materially affect, our internal controls
      over financial reporting.  The evaluation did not identify any change
      in our internal controls over financial reporting that occurred during our
      latest fiscal quarter and that has materially affected, or is reasonably likely
      to materially affect, our internal controls over financial reporting.
 
 Management’s
      Report on Internal Control
      Over Financial Reporting
 
 Our
      management is responsible for
      establishing and maintaining adequate internal control over financial reporting,
      as this term is defined in Exchange Act Rule 13a-15(f).  All internal
      control systems, no matter how well designed, have inherent
      limitations.  Therefore, even those systems determined to be effective
      can provide only reasonable assurance with respect to financial statement
      preparation and presentation.
 
 Under
      the supervision and with the
      participation of our management, including our CEO/CFO, we conducted an
      evaluation of the effectiveness of our internal control over financial reporting
      based on the framework in Internal Control Integrated Framework issued by the
      Committee of Sponsoring Organizations of the Treadway
      Commission.  Based on our evaluation under the frame work in Internal
      Control Integrated Framework, our management concluded that our internal control
      over financial reporting was effective as of December 31,
      2006.  However, our annual report does not include an attestation
      report of our independent registered accountant on Management’s Annual Report on
      Internal Control over Financial Reporting.
 
 
 
 ITEM
      16A.                      
AUDIT COMMITTEE FINANCIAL
      EXPERT
 
 The
      Company’s Board of Directors has
      determined that it has at least one financial expert serving on its Audit
      Committee.  This individual is Joseph A. Benjamin who has served as a
      Director of the Company since December, 1997.  Mr. Benjamin is a CPA
      and is the Managing Partner of Benjamin & Birkenstein, P.C., a business and
      tax consulting firm in Chicago, Illinois.
 
 ITEM
      16B.                      
CODE OF ETHICS
 
 The
      Company has adopted a code of ethics
      for the Chief Executive Officer, Chief Financial Officer and Principal
      Accounting Officer.
 
 ITEM
      16C.                      
PRINCIPAL ACCOUNTANT
      FEES AND
      SERVICES
 
 Audit
      Fee
 
 The
      aggregate fees paid relating to the
      audit of the Company's annual financial statements for the years ended December
      31, 2006 and 2005 were $104,847 and $79,837, respectively.
 
 All
      Other Fees
 
 The
      aggregate fees paid for other
      accounting services, primarily audit related, for the years ended December
      31,
      2006 and 2005 were $10,531 and $0, respectively.
 
 
 PART
      III
 
 
 ITEM
      17.                      
FINANCIAL STATEMENTS
 
 Not
      applicable
 
 ITEM
      18.                      
FINANCIAL STATEMENTS
 
 (a)           
Financial
                Statements
            PageReports
                of Independent
                Auditors
            23-24Consolidated
                Balance Sheets as
                of  December 31, 2006 and 2005
            25Consolidated
                Statements of
                Operations for Each of the Years
              in
                the Three-Year Period
                Ended December 31, 2006
            26Consolidated
                Statements of
                Shareholders’ Equity for Each of the Years in the Three-Year Period Ended
                December 31, 2006
            27Consolidated
                Statements of Cash
                Flows for Each of the Years in the Three-Year Period Ended December
                31,
                2006
            28Notes
                to Consolidated Financial
                Statements
            29-40Financial
                Statement Schedules
                (1)I
                - Condensed Financial
                Information of Registrant
            41II
                - Valuation and Qualifying
                Accounts
            42
 
 
 (1)           
All
      other schedules are omitted since
      the required information is not present or
 is
      not present in amounts sufficient to
      require submission of the schedule.
 
 
 ITEM
      19.                      
FINANCIAL STATEMENTS AND EXHIBITS
 
 (a)           
Exhibits
 
 Exhibit
 Number                                     Description
 
 2.1*           
Bill
      of Sale dated February 4, 1995 re:
      acquisition of assets of Ullenberg Corporation (1)
 2.2*           
Stock
      Purchase Agreement relating to
      DACO Manufacturing Ltd. (3)
 3.1*           
Amended
      and Restated Memorandum of
      Association and Articles of Association
 of
      IWI Holding
      Limited (2)
 4.1*           
Specimen
      Form of Common Stock
      certificate (2)
 10.1*           Lease
      Agreement between Imperial World,
      Inc. and American National Bank and Trust
 Company
      of Chicago
      dated October 15, 1993 for the site in Westmont, Illinois (2)
 10.2*           Stock
      Option Plan (2)
 10.3*           Amended
      and Restated Credit Agreement
      dated June, 1996 between Rhode Island
 Hospital
      Trust
      National Bank and Imperial World, Inc. (2)
 10.4*           Indemnity
      Agreement (2)
 10.5*           Profit
      Sharing Plan (2)
 10.6*           Territorial
      Agreement (2)
 10.8*           IWI
      Holding Limited 1995 Non-Qualified
      Stock Option Plan (4)
 10.11*         Financing
      Agreement with Business
      Alliance Capital Corp.
 10.12*         Settlement
      Agreement with Richard W.
      Sigman
 10.13*         Settlement
      Agreement with Bruce W.
      Anderson
 10.14*         Amended
      Lease Agreement
 10.15*         DACO
      Sales Agreement
 10.16*         Employment
      Contract with Joseph K.
      Lau
 10.17*         Code
      of Ethics
 
 *Previously
      Filed
 
 (1)           
Incorporated
      by reference to the
      Company’s Report on Form 6-K for the month of
 February,
      1995.
 (2)           
Incorporated
      by reference to the
      Company’s Registration Statement on Form F-1
 (File
      No. 33-78904) declared effective
      December 13, 1994.
 (3)           
Incorporated
      by reference to the
      Company’s Report on Form 6-K for the month of August,1995.
 (4)           
Incorporated
      by reference to the
      Company’s Form 20-F for the year-ended December 31, 1995.
 
 
 SIGNATURES
 
 Pursuant
      to the requirements of Section
      12 of the Securities Exchange Act of 1934, the registrant certifies that it
      meets all of the requirements for filing on Form 20-F and has duly caused this
      annual report to be signed on its behalf by the undersigned, thereunto duly
      authorized.
 
 IWI
                HOLDING LIMITEDDate:
                  February 29, 2008
              By:
              /s/Joseph
                K. LauJoseph
                K. LauChairman,  President
                and
                Director
    
  
 CERTIFICATIONS
 
 
 
 I,
      Joseph K Lau, certify that:
 
 1.
      I have reviewed this annual report on
      Form 20-F of IWI Holding, Limited:
 
 2.
      Based on my knowledge, this annual
      report does not contain any untrue statement of a material fact or omit to
      state
      a material fact necessary to make the statements made, in light of the
      circumstances under which such statements were made, not misleading with respect
      to the period covered by this annual report:
 
 3.
      Based on my knowledge, the financial
      statements, and other financial information included in this report, fairly
      present in all material respects the financial condition, results of operations
      and cash flows of the registrant as of, and for, the periods presented in this
      annual report;
 
 4.
      I am responsible for establishing and
      maintaining disclosure controls and procedures (as defined in Exchange Act
      Rules
      13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
      defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
      have:
 
 (a)  designed
      such disclosure
      controls and procedures, or caused such disclosure control and procedures to
      be
      designed under my supervision, to ensure that material information relating
      to
      theregistrant,  is
      made known to
      us by others particularly during the period in which this annual report is
      being
      prepared;
 (b)  evaluated
      the
      effectiveness of the registrant’s disclosure controls and procedures as of the
      end of the period covered by this report (the “Evaluation Date”); and
 (c)  evaluated
      the
      effectiveness of the registrant’s disclosure controls and procedures and
      presents in this report our conclusions about the effectiveness of the
      disclosure controls and procedures, as of the end of the period covered by
      this
      report based on such evaluation; and
 (d)  disclosed
      in this report
      any change in the registrant’s internal control over financial reporting that
      occurred during the registrant’s most recent fiscal quarter (the registrant’s
      fourth fiscal quarter in the case of an annual report) that has materially
      affected, or is reasonably likely to materially affect, the registrant’s
      internal control over financial reporting; and
 
 5.
      I have disclosed, based on my most
      recent evaluation of internal control over financial reporting, to the
      registrant’s auditors and the audit committee of registrant’s board of directors
      (or persons performing the equivalent function);
 (a)  all
      significant
      deficiencies and material weaknesses in the design or operation of internal
      controlsover financial
      reporting which  are reasonably likely to adversely affect the
      registrant’s ability to record, process, summarize and report financial data,
      and
 (b)  any
      fraud, whether or not
      material, that involves management or other employees who have a significant
      role in the registrant’s  internal control over financial
      reporting.
 
 
 Date:  February
      29,
      2008
 By:
      /s/ Joseph K. Lau
 
 
 
 Chairman,
      President and Director
 
 
 
 
 
 For
      purposes of 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
      undersigned, Joseph K. Lau, the Chief executive officer of IWI Holding Limited
      (the “Company”), hereby certifies that, to his knowledge:
 (i)  the
      Annual Report on Form
      20-F of the Company for the year ended December 31, 2006, as filed with the
      Securities and Exchange Commission on the date hereof (the “Report”) fully
      complies with the requirements of section 13(a) or 15(d) of the Securities
      Exchange Act of 1934; and
 (ii)  the
      information
      contained in the Report fairly presents, in all material respects, the financial
      condition and results of operations of the Company.
 
 
 Date:  February
      29,
      2008                                                                                     
By: /s/ Joseph K. Lau
 Chairman,
      President and Director
 
 
 
 
 
  
  
 IWI
      HOLDING LIMITED
 
 CONSOLIDATED
      FINANCIAL STATEMENTS AND
 INDEPENDENT
      AUDITOR’S REPORT
 
 Years
      Ended December 31, 2006, 2005 and 2004
 
 
 REPORT
      OF INDEPENDENT REGISTERED PUBLIC
      ACCOUNTING FIRM
 
 The
      Board
      of Directors and
 Stockholders
      of IWI Holding Limited
 Westmont,
      Illinois
 
 
 We
      have
      audited the accompanying consolidated balance sheets of IWI Holding Limited
      as
      of December 31, 2006,  and the related consolidated statements of
      operations, stockholders’ equity and cash flows for the year then
      ended.  These consolidated financial statements are the responsibility
      of the Company’s management. Our responsibility is  to express an
      opinion on these consolidated financial statements based on our audits. The
      consolidated financial  statements of IWI Holdings Limited as of
      December 31, 2005, were audited by other auditors whose report
      dated  April 17, 2006, expressed an unqualified opinion on the
      statements.
 
 We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board  (United States). Those standards require
      that we plan and perform the audit to obtain reasonable assurance
      about  whether the consolidated financial statements are free of
      material misstatement. The Company is not required to  have, nor were
      we engaged to perform, an audit of its internal control over financial
      reporting. Our audit included  consideration of internal control over
      financial reporting as a basis for designing audit procedures that
      are  appropriate in the circumstances, but not for the purpose of
      expressing an opinion on the effectiveness of the  Company’s internal
      control over financial reporting. Accordingly, we express no such opinion.
      An
      audit also  includes examining, on a test basis, evidence supporting
      the amounts and disclosures in the consolidated financial  statements,
      assessing the accounting principles used and significant estimates made by
      management, as well as  evaluating the overall financial statement
      presentation. We believe that our audits provide a reasonable basis for our
      opinion.
 
 In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the  financial position of IWI Holding
      Limited as of December 31, 2006, and the results of its operations and its
      cash  flows for each of the year then ended in conformity with
      accounting principles generally accepted in the United  States of
      America. In addition, the information set forth in schedules listed in the
      index
      at item 19(a) is fairly stated,  in all material respects, in relation
      to the consolidated financial statements from which it has been derived. As
      discussed in Note 3 to the consolidated Financial Statements, the 2006, 2005
      and
      2004 financial information  have been restated to correct a
      misstatement.
 
 
 /s/Spector
      & Wong, LLP
 Pasadena,
      California
 June
      7,
      2007, except for the note 3, correction of an error and note 14 restructuring
      costs, of which the date is February 29, 2008.
 
 
 
 
 
 
 
 
 Report
      of Independent Registered Public Accounting Firm
 
 
 
 The
      Board
      of Directors
 IWI
      Holding Limited
 Westmont,
      Illinois
 
 
 We
      have
      audited the accompanying consolidated balance sheet of IWI Holding Limited
      as of
      December 31, 2005 and the related consolidated statements of operations,
      stockholders’ equity and cash flows for the two years in the period ended
      December 31, 2005.  Our audits also included the financial statement
      schedules listed in the index at item 19(a).  These financial
      statements and schedules are the responsibility of the Company’s
      management.  Our responsibility is to express an opinion on these
      consolidated financial statements and schedules based on our audits.
 
 We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material
      misstatement.  The company has determined that it is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting.  Our audit included consideration of internal
      control over financial reporting as a basis for designing audit procedures
      that
      are appropriate in the circumstances, but not for the purpose of expressing
      an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting.  Accordingly, we express no such opinion.  An
      audit also includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the consolidated financial statements, assessing the
      accounting principles used and significant estimates made by management, as
      well
      as evaluating the overall financial statement presentation.  We
      believe that our audits provide a reasonable basis for our opinion.
 
 In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of IWI Holding Limited as
      of
      December 31, 2005, and the results of its operations and its cash flows for
      the
      two years in the period ended December 31, 2005, in conformity with accounting
      principles generally accepted in the United States of America.  In
      addition, the information set forth in schedules listed in the index at item
      19(a) is fairly stated, in all material respects, in relation to the
      consolidated financial statements from which it has been derived.
 
 As
      discussed in Note 3 to the consolidated financial statements, the 2005 and
      2004
      consolidated financial statements have been restated to correct a
      misstatement.
 
 
 /s/Blackman
      Kallick, LLP
 Chicago,
      Illinois
 April
      17,
      2006, except for Note 3, correction of an error, as to which the date is January
      7, 2008.
 
 
 
 
  
  
 Exhibit
      A
 IWI
      Holding Limited
 Consolidated
      Balance Sheets
 (In
      Thousands,
      Except Share Data)
 
 December
      31, 2006 and 2005
 
 2006
            
            
            2005AssetsCurrent
                AssetsCash
            
            $
            102
            
            
            $
            139Accounts
                receivable, less
                allowance for doubtful accounts of $551 in 2006 and $710 in 2005
            
            
            9,071
            
            
            
            9,336Inventories
            
            
            9,771
            
            
            
            8,676Deferred
                income taxes
            
            
            156
            
            
            
            156Prepaid
                expenses
            
            
            134
            
            
            
            105Total
                Current Assets
            
            
            19,234
            
            
            
            18,412Leasehold
                Improvements, Machinery
                and Equipment
            
            
            2,983
            
            
            
            2,978Less
                accumulated
                depreciation
            
            
            (2,865
            )
            
            
            (2,850
            )Property
                and Equipment, Net
            
            
            118
            
            
            
            128Total
                Assets
            
            $
            19,352
            
            
            $
            18,540Liabilities
                and Stockholders’ Equity
            
            2006
            
            
            2005Current
                LiabilitiesLine
                of credit
            
            $
            7,704
            
            
            $
            7,913Notes
                payableEmployees,
                related parties
            
            
            294
            
            
            
            294Other
            
            
            922
            
            
            
            653Accounts
                payable - Trade
            
            
            6,117
            
            
            
            5,272Accounts
                payable to affiliated
                companies
            
            
            1,573
            
            
            
            1,418Accrued
                liabilities
            
            
            1,399
            
            
            
            1,520Total
                Current Liabilities
            
            
            18,009
            
            
            
            17,070Stockholders’
                Equity (Deficit)Preferred
                stock - $1 par value;
                authorized  5,000,000 shares; issued and
                outstanding  3,644,880 shares
            
            
            3,645
            
            
            
            3,645Common
                stock  No par
                value; authorized  10,000,000 shares; issued and
                outstanding  2,554,700 shares
            
            
            -Additional
                paid-in capital
            
            
            12,446
            
            
            
            12,446Accumulated
                deficit
            
            
            (14,748
            )
            
            
            (14,621
            )Total
                Stockholders’ Equity
            
            
            1,343
            
            
            
            1,470Total
                Liabilities &
                Stockholders’ Equity
            
            $
            19,352
            
            
            $
            18,540
 
 
 
 
 
 See
      notes to consolidated financial
      statements
 
 
  
  
 
 Exhibit
      B
 IWI
      Holding Limited
 Consolidated
      Statements of
      Operations
 (In
      Thousands, Except Share Data)
 
 Years
      Ended December 31, 2006, 2005 and
      2004
 
 2006
            
            
            2005
            
            
            2004Net
                Sales
            
            $
            27,662
            
            
            $
            25,534
            
            
            $
            27,561Cost
                of Sales
            
            
            22,244
            
            
            
            20,599
            
            
            
            22,309Gross
                Profit
            
            
            5,418
            
            
            
            4,935
            
            
            
            5,252Selling,
                General and
                Administrative Expenses
            
            
            4,602
            
            
            
            4,666
            
            
            
            4,672Restructuring
                Cost
            
            
            378
            
            
            ­-
            
            
            ­-Income
                (Loss) from
                Operations
            
            
            438
            
            
            
            269
            
            
            
            580Interest
                Expense
            
            
            (586
            )
            
            
            (458
            )
            
            
            (349
            )Other
                Income
            
            
            24
            
            
            
            -
            
            
            
            -(Loss)
                Income  Before
                Income Taxes
            
            
            (124
            )
            
            
            (189
            )
            
            
            231Income
                Tax Expense
            
            
            (3
            )
            
            
            (3
            )
            
            
            -Net
                (Loss) Income
            
            $
            (127
            )
            
            $
            (192
            )
            
            $
            231Net
                (Loss) Income per Common
                Share
            
            $
            (0.05
            )
            
            $
            (0.08
            )
            
            $
            0.09Weighted-Average
                Number of
                Common
              Shares
                Outstanding
            
            
            2,554,700
            
            
            
            2,554,700
            
            
            
            2,554,700
 
 
 
 
 See
      notes to consolidated financial
      statements
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 Exhibit
      C
 
 IWI
      Holding Limited
 Consolidated
      Statements of Stockholders’
Equity
 (In
      Thousands, Except Share Data)
 
 Years
      Ended December 31, 2006, 2005 and
      2004
 
 Preferred
                Stock
            
            
            Common
                StockNumber
                of shares
            
            
            Amount
            
            
            Number
                of shares
            
            
            Amount
            
            
            Additional
                paid-in capital
            
            
            Accumulated
                Deficit
            
            
            TotalBalance,
                January 1, 2004
            
            
            3,644,880
            
            
            $
            3,645
            
            
            
            2,554,700
            
            
            $
            -
            
            
            $
            12,446
            
            
            $
            (14,660
            )
            
            $
            1,431Net
                Income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            231
            
            
            
            231Balance,
                December 31, 2004
            
            
            3,644,880
            
            
            
            3,645
            
            
            
            2,554,700
            
            
            
            -
            
            
            
            12,446
            
            
            
            (14,429
            )
            
            
            1662Net
                Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (192
            )
            
            
            (192
            )Balance,
                December 31, 2005
            
            
            3,644,880
            
            
            
            3,645
            
            
            
            2,554,700
            
            
            
            -
            
            
            
            12,446
            
            
            
            (14,621
            )
            
            
            1,470Net
                Loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (127
            )
            
            
            (127
            )Balance,
                December 31, 2006
            
            
            3,644,880
            
            
            $
            3,645
            
            
            
            2,554,700
            
            
            $
            -
            
            
            $
            12,446
            
            
            $
            (14,748
            )
            
            $
            1,343
 
 
 
  
 
 
 See
      notes to consolidated financial
      statements
 
 
 
 
  
  
 Exhibit
      D
 IWI
      Holding Limited
 Consolidated
      Statements of Cash
      Flows
 (In
      Thousands)
 
 Years
      Ended
      December 31, 2006, 2005 and 2004
 
 2006
            
            
            2005
            
            
            2004Cash
                Flows from Operating ActivitiesNet
                (loss) income
            
            $
            (127
            )
            
            $
            (192
            )
            
            $
            231Adjustments
                to reconcile net
                (loss) to income
              net
                cash used in
                operating activitiesDepreciation
                and
                amortization
            
            
            15
            
            
            
            18
            
            
            
            66Provision
                for doubtful
                accounts
            
            
            33
            
            
            
            116
            
            
            
            351(Increase)
                decrease in
              Accounts
                receivable
            
            
            232
            
            
            
            (1,738
            )
            
            
            (2,508
            )Inventories
            
            
            (1,095
            )
            
            
            622
            
            
            
            (63
            )Prepaid
                expenses
            
            
            (29
            )
            
            
            58
            
            
            
            18Increase
                (decrease) in Accounts
                payable – Trade
            
            
            845
            
            
            
            (622
            )
            
            
            1,491Accounts
                payable to affiliated
                companies
            
            
            155
            
            
            
            (667
            )
            
            
            (483
            )Accrued
                liabilities
            
            
            (121
            )
            
            
            20
            
            
            
            296Net
                Cash Used
                in  Operating Activities
            
            
            (92
            )
            
            
            (2385
            )
            
            
            (601
            )Net
                Cash Used in Investing ActivitiesPurchases
                of property and
                equipment
            
            
            (5
            )
            
            
            (12
            )
            
            
            (2
            )Net
                Cash Used in Investing
                Activities
            
            
            (5
            )
            
            
            (12
            )
            
            
            (2
            )Cash
                Flows from Financing ActivitiesChecks
                issued in excess of Funds
                on deposit
            
            
            -
            
            
            
            -
            
            
            
            (24
            )(Payments
                on) borrowings from
                notes payable
              Employees
            
            
            -
            
            
            
            (21
            )
            
            
            (20
            )Other
            
            
            269
            
            
            
            226
            
            
            
            315Borrowings
                from  line of
                credit, net
            
            
            (209
            )
            
            
            2,330
            
            
            
            333Net
                Cash Provided by Financing
                Activities
            
            
            60
            
            
            
            2535
            
            
            
            604Net
                Increase (Decrease) in
                Cash
            
            
            (37
            )
            
            
            138
            
            
            
            1Cash,
                Beginning of Year
            
            
            139
            
            
            
            1
            
            
            
            -Cash,
                End of Year
            
            $
            102
            
            
            $
            139
            
            
            $
            1
 
 
 See
      notes to consolidated financial
      statements
 
 
 
  
  
 
 IWI
      Holding Limited
 Notes
      to Consolidated Financial
      Statements
 
 Years
      Ended December 31, 2006, 2005 and 2004
 
 
 Note
      1 - Description of Business and
      Acquisitions
 
 IWI
      Holding Limited (“Holding”) was
      incorporated in the British Virgin Islands on February 22, 1993. Holding and
      its
      wholly owned subsidiary (together, the “Company”) import, assemble, and
      distribute wholesale fine jewelry.  The Company also imports pearls
      for assembly and resale through its wholly owned subsidiary, Imperial World,
      Inc. (“Imperial”).
 
 
 Note
      2 - Status of Operations
 
 The
      Company during 2006 was successful
      in its effort to diversify its customer base thereby reducing its reliance
      on
      two to three major customers.  The diversification effort was
      successful in 2006 as the Company added three customers to its customer base
      accounting for sales in excess of $5 million.  These new customers
      have significant upside potential.  The increase was offset in part by
      lower sales from other customers.   Overall net sales reported in
      2006 increased $ 2,128,000 or 8.3% compared to one year ago.  Coop
      advertising costs charged against revenue increased $133,000 in
      2006.  Moving forward in 2007 the Company expects its core major
      customers to increase its sales from 2006 levels and continue the expansion
      of
      its customer base.
 
 Gross
      margins for the Company increased
      0.3% to 19.6% in 2006 from 19.3% experienced in 2005.  Gross profit
      increased $ 483,000 compared to 2005 levels.  Excluding the effect of
      consignment and liquidation sales for 2006 and 2005 gross profit increased
      $518,000.  Gross margin excluding the effect of consignment and
      liquidation sales increased 0.8% from 21.1% in 2005 to 21.9% in
      2006.  This change in overall gross margins was in part due to a
      change in the mix of sales by customer.  Continued emphasis is placed
      on the profitability of each product sold and standard profit levels
      implemented.
 
 Income
      from operations in 2006 including
      restructuring costs was $438,000 an improvement of $169,000 from 2005 levels
      of
      $ 269,000.  During 2006 the Company incurred costs associated with
      restructuring of approximately $378,000.  The Company began
      restructuring its operations late in the 2ndquarter
      and early 3rdquarter.  These
      costs
      comprised severance costs associated with the elimination of 14 employees or
      approx. 25% of total employees; start up costs to integrate the operations
      and
      systems which were outsourced to China with the operations and systems in the
      U.S. net of labor savings generated.  Most of the functions outsourced
      overseas were production related and includes in part boxing, tagging and
      packaging of the product as well as certain other clerical data
      entry.  These functions have been contracted through a Mainland
      Chinese Company called Best Mark Logistics (BML).  The effect on a go
      forward basis of these changes as well as renegotiating the current lease and
      reducing present square footage of the US office is expected to generate $85,000
      to $100,000 saving in 2007.  Effective April 1, 2007 six upper
      management members have voluntarily reduced their salary 10% to aid the Company
      in attaining it’s profit objective.  Should these objectives be
      exceeded these individuals would be reimbursed for this voluntary salary
      reduction.  Further personnel reductions may be addressed in 2007 as
      the efficiencies and capability of BML improves.
 
 Interest
      expense for 2006 was $586,000
      an increase of  $128,000 or 28.0% from $458,000 in 2005 reflecting
      increased borrowing levels and increases in overall interests
      rates.  Other Income before taxes of 24,000 reflects the sale of one
      of the Company's trademarks.  Tax expense recorded represents
      additional tax liability as a result of conclusion of a tax audit for the year
      2004.
 
 
 
 IWI
      Holding Limited
 Notes
      to Consolidated Financial
      Statements
 
 Years
      Ended December 31, 2006, 2005 and 2004
 
 Note
      2 - Status of Operations
      (Continued)
 
 As
      a result of above the Company is
      reporting a net loss for the year of $127,000 representing an improvement of
      65,000 compared to the net loss reported for 2005.
 
 Moving
      forward into 2007 the Company is
      confident that it will return to profitability on an ongoing
      basis.  The Company continues to explore alternatives to reduce
      production costs and maintain lean overhead support levels.
 
 Note
      3 - Summary of Significant
      Accounting Policies
 
 Basis
      of Presentation
 
 The
      consolidated statements include the
      accounts of the Company and its subsidiary.  All intercompany accounts
      and transactions have been eliminated in consolidation.
 
 Receivables
 
 Receivables
      are carried at the original
      invoice amount less estimates made for doubtful
      receivables.  Management determines the allowances for doubtful
      accounts by reviewing and identifying troubled accounts on a periodic basis
      and
      by using historical experience applied to an aging of accounts.  A
      receivable is considered to be past due if any portion of the receivable balance
      is outstanding for more than thirty days beyond terms.  Receivables
      are written off when deemed uncollectible.  Recoveries of receivables
      previously written off are recorded into earnings when received.
 
 Inventories
 
 Inventories,
      primarily consisting nearly
      entirely of finished goods, (raw materials and work in process for the light
      assembly operation for the stringing of  pearls in the U.S. being the
      balance), are stated at the lower of first-in, first-out - (FIFO) cost or
      market. No costs other than purchase cost freight or duties are capitalized
      in
      inventories.
 
 As
      of December 31, 2006 and 2005, the
      inventory valuation reserve was $1,215,000 and $1,026,000
      respectively.  The Company recorded an expense of $252,000, $131,000
      and $308,000 during 2006, 2005 and 2004, respectively, to adjust the inventory
      value to lower of cost or market and to provide for future liquidations.
 
 Revenue
      Recognition
 
 Revenue
      is recognized in the
      consolidated financial statements when materials are relieved from inventory
      and
      shipped or FOB our facility in Westmont, Illinois.  Nearly all freight
      expense is paid by the customer.    Net sales are arrived at
      by deducting returns, discounts and coop advertising from gross
      sales.  Returns are deducted from allowances when
      received.  In addition, allowances for future returns are provided
      based on historic experiences and accepted customer returns.
 
 Cost
      of Sales
 
 Cost
      of sales consisted of cost of goods
      relieved from our inventory.  Inventory write-downs, purchasing and
      receiving costs, inspection costs as well as warehousing and distribution costs
      are included in sales.
  
 
 Depreciation
 
 Machinery
      and equipment are stated at
      historical cost and depreciated primarily on a straight-line basis over their
      estimated useful lives.  Leasehold improvements are amortized over the
      life of the lease.  Useful lives
 range
      from three to ten years for
      machinery, equipment and leasehold improvements, vaults are amortized over
      40
      years.
 
 Trademarks
 
 Trademarks
      were capitalized and stated
      at historical cost and amortized using the straight-line method over estimated
      useful lives of 10 years.
 
 Commissions
 
 The
      Company accrues for commissions
      based on sales to customers based on specific contractual
      agreements.  These accruals are calculated based upon net sales by
      customer, and the liability account is adjusted monthly to reflect increases
      and
      decreases in each customer’s sales and payments.
 
 Income
      Taxes
 
 Deferred
      tax assets and liabilities are
      determined based on the difference between the financial reporting and tax
      bases
      of assets and liabilities using the enacted tax rates in effect for the year
      in
      which the differences are expected to reverse.
 
 Selling,
      General and Administrative
      Expenses
 
 Selling,
      general and administrative
      expenses consists of all operating expenses other than costs of goods purchased,
      inbound freight and interest.  Such expenses would include salary and
      wages, commission, rent, travel, and all other general and administrative
      expenses.
 
 Fair
      Value of Financial
      Instruments
 
 The
      Company’s financial instruments
      include accounts receivable, accounts payable, and notes payable.  The
      fair values of all financial instruments were not materially different than
      their carrying values.
 
 Accounting
      Estimates
 
 The
      preparation of financial statements
      in conformity with accounting  principles generally accepted in the
      United States of America requires Company management to make estimates and
      assumptions that affect the amounts reported in the financial statements and
      accompanying notes.  Actual results could differ from those
      estimates.
 
 Stock-Based
      Compensation
 
 Prior
      to January 1, 2006, the Company
      accounted for stock option grants in accordance with APB Opinion No. 25,
“Accounting for Stock Issued to Employees” and, accordingly, recognized no
      compensation expense for the stock option grants.  Effective January
      1, 2006, the Company adopted the fair recognition
  
  
 IWI
      Holding Limited
 Notes
      to Consolidated Financial
      Statements
 
 Years
      Ended December 31, 2006, 2005 and 2004
 
 
 Note
      3 - Summary of Significant
      Accounting Policies (Continued)
 
 provisions
      of FASB Statement No. 123
      (R), “Share-Based Payment” (SFAS 123R), using the
      modified-prospective-transition method.  Under that transition method,
      compensation cost recognized in 2006 includes: (a) compensation cost for all
      share-based payments granted prior to, but not yet vested as of January 1,
      2006
      based on the grant date fair value calculated in accordance with the original
      provisions of SFAS 123, and (b) compensation cost for all share-based payments
      granted subsequent to December 31, 2005, based on the grant-date fair value
      estimated in accordance with the provisions of SFAS 123 (R).  As of
      December 31, 2006 and 2005, there were no stock options granted and
      outstanding.
 
 
 Advertising
      Costs
 
 The
      Company expenses all advertising
      costs as incurred.  Advertising costs were approximately $1,282,000,
      $1,149,000 and $993,000 for 2005, 2004 and 2003,
      respectively.  Advertising costs are treated as a reduction in
      Revenue.
 
 Foreign
      Currency
 
 The
      functional currency of the Company
      is the U.S. dollar.  Transactions arising in foreign currencies have
      been translated at rates in effect at the dates of the
      transactions.  The gains or losses during the years presented are not
      significant.
 
 (Loss)
      Income Per Common Share
 
 The
      Company has adopted the provisions
      of FASB No. 128, “Earnings Per Share.”  Income per common share is
      computed by dividing net (loss) income by the weighted-average number of common
      shares outstanding during the period.
 
 Segment
      Information
 
 The
      Company has adopted Statement of
      Financial Accounting Standards No. 131, “Disclosures about Segments of an
      Enterprise and Related Information.”  The internal reporting that is
      used by management for making operating decisions and assessing performance
      is
      used as the source of determining the Company’s reportable
      segments.  This statement requires disclosure of certain information
      by reportable segment, geographic area and major customer.
 
 The
      Company imports, assembles,
      distributes and wholesales fine jewelry.  Substantially all the
      Company’s sales are within the United States.  The Company operates
      this product line as one operating segment, which is deemed to be one reportable
      segment for purposes of this disclosure.
 
 Comprehensive
      Income
 
 Comprehensive
      income is a measure of all
      equity that results from recognized transactions and other economic events
      other
      than owner transactions, such as stock purchases and issuances and
      dividends.  There were no significant differences between the
      Company’s net (loss) income and comprehensive income.
  
 
 Correction
      of an Error
 
 The
      Company has reduced net sales and selling, general and administrative expenses
      by $1,282,000, $1,149,000 and $993,000 in 2006, 2005 and 2004, respectively
      to
      properly classify cooperative advertising costs.  The correction of
      the error had no impact on net (loss) income or accumulated deficit for the
      years restated.
 
 New
      Accounting Pronouncements
 
 In
      May 2005, the FASB issued SFAS No.
      154 “Accounting Changes and Error Corrections - A Replacement of APB Opinion No.
      20 and FASB Statement No. 3”.  This Statement requires that a
      voluntary change in accounting principle be applied retrospectively with all
      prior period financial statements presented on the new accounting principle,
      unless it is impracticable to do so.  Statement 154 also provides that
      (1) a change in method of depreciating or amortizing a long-lived nonfinancial
      asset be accounted for as a change in estimate (prospectively) that was effected
      by a change in accounting principle, and (2) correction of errors in previously
      issued financial statements should be termed a “restatement.”  The new
      standard is effective for accounting changes and correction of errors made
      in
      fiscal years beginning
 after
      December 15, 2005, and are
      required to be adopted by the Company as of January 1, 2006. The adoption of
      SAFS Statement No. 154 is not expected to have an impact on the Company’s
      consolidated financial position or results of operations.
 
 In
      February 2006, the FASB issued SFAS
      Statement No. 155, “Accounting for Certain Hybrid Financial Instruments-an
      amendment of FASB Statements No. 133 and 140”.  This statement permits
      fair value of re-measurement for any hybrid financial instrument that contains
      an embedded derivative that otherwise would require bifurcation; clarifies
      which
      interest-only strips and principal-only strips are not subject to the
      requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging
      Activities”; establishes a requirement to evaluate interests in securitized
      financial assets to identify interests that are freestanding derivatives or
      that
      are hybrid financial instruments that contain an embedded derivative requiring
      bifurcation; clarifies that concentrations of credit risk in the form of
      subordination are not embedded derivatives; and amended SFAS No. 140 “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”, to eliminate the prohibition on a qualifying special-purpose
      entity from holding a derivative financial instrument that pertains to a
      beneficial interest other than another derivative financial instrument, SFAS
      No.
      155 is effective for all financial instruments acquired , issued, or subject
      to
      a re-measurement (new Basis) event occurring after the beginning of an entity’s
      fiscal year that begins after September 15, 2006.  The Company does
      not currently have any hybrid financial instruments.
 
 
 In
      March 2006, the FASB issued SFAS No.
      156 “Accounting for Servicing of Financial Assets”, which amends SFAS No. 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities”.  In a significant change to current guidance, SFAS
      No. 156 permits an entity to choose either of the following subsequent
      measurement methods for each class of separately recognized servicing assets
      and
      servicing liabilities; (1) Amortization Method or (2) Fair Value Measurement
      Method.  SFAS No. 156 is effective as of the beginning of an entity’s
      fiscal year that begins after September 15, 2006.  This pronouncement
      does not currently apply to the Company.
 
 In
      July 2006, the FASB issued
      Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”)
      FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in an
      enterprises’ financial statements in accordance with SFAS No. 109, “Accounting
      for Income Taxes”.  FIN 48 prescribes a recognition threshold and
      measurement attributable for the financial statement recognition and measurement
      of a tax position taken or expected to be taken in a tax return.  FIN
      48 also provides guidance on derecognizing, classification, interest and
      penalties, accounting in interim periods, disclosures and
      transitions.  FIN 48 is effective for fiscal years beginning after
      December 15, 2006.  The Company does not believe that FIN 48 will have
      a significant impact on its financial position and results of operations.
  
  
 
 IWI
      Holding Limited
 Notes
      to Consolidated Financial
      Statements
 
 Years
      Ended December 31, 2006, 2005 and 2004
 
 
 Note
      3 - Summary of Significant
      Accounting Policies (Continued)
 
 New
      Accounting Pronouncements
      (Continued)
 
 In
      September 2006, the FASB issued SFAS
      No. 157 “Fair Value Measures” (“SFAS No. 157”).  SFAS No. 157 defines
      fair value, establishes a framework for measuring fair value in generally
      accepted accounting principles (“GAAP”), expands disclosures about fair value
      measurements, and applies under other accounting pronouncements that require
      or
      permits fair value measurements.  SFAS No. 157 does not require any
      new fair value measurements, however the FASB anticipates that for some
      entities, the application of SFAS No. 157 will change current
      practice.  SFAS No. 157 is effective for financial statements issued
      for fiscal years beginning after November 15, 2007.  The
      implementation of SFAS No. 157 is not expected to have a material impact on
      the
      Company’s results of operations and financial condition.
 
 In
      September 2006, the FASB issued SFAS
      No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
      Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and
      132(R)”.  This statement requires employers to recognize the over
      funded or under funded status of a defined benefit postretirement plan (other
      than a multi-employer plan) as an asset or liability in its statement of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income of a business entity or
      changes in unrestricted net assets of a not-for-profit
      organization.  This statement also requires an employer to measure the
      funded status of a plan as of the date of it year-end statement of financial
      position, with limited exceptions.  The provisions of SFAS No. 158 are
      effective for employers with publicly traded equity securities as of the end
      of
      the fiscal year ending after December 15, 2006.  This pronouncement
      does not currently apply to the Company.
 
 In
      September 2006, the Securities and
      Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108 (Topic 1N),
“Quantifying Misstatements in Current Year Financial Statements” (SAB No.
      108”).  SAB No. 108 addresses how the effect of prior year uncorrected
      misstatements should be considered when quantifying misstatements in current
      year financial statements.  SAB No. 108 requires SEC registrants (i)
      to quantify misstatements using a combined approach which considers both the
      balance sheet and income statement approaches: (ii) to evaluate whether either
      approach results in quantifying and error that is material in light of relevant
      quantitative and qualitative factors; and (iii) to adjust their financial
      statements if the new combined approach results in a conclusion that an error
      is
      material.  SAB No. 108 addresses the mechanics of correcting
      misstatements that include effects from prior years.  It indicates
      that the current year correction of a material error that includes prior year
      effects may result in the need to correct prior year financial statements even
      if the misstatement in the prior year or years is considered
      immaterial.  Any prior year financial statements found to be
      materially misstated in years subsequent to the issuance of SAB No. 108 would
      be
      restated in accordance with SFAS No. 154 “Accounting Changes and Error
      Corrections.”  Because the combined approach represents a change in
      practice, the SEC staff will not require registrants that followed an acceptable
      approach in the past to restate prior years’ historical financial
      statements.  Rather, these registrants can report the cumulative
      effect of adopting the new approach as an adjustment to the current year’s
      beginning balance of retained earnings.  If the new approach is
      adopted in a quarter other than the first quarter, financial statements for
      prior interim periods with the year of adoption may need to be
      restated.  SAB No. 108 is effective for fiscal years ending after
      November 15, 2006.  The adoption of SAB No. 108 is not expected to
      have an impact on the Company’s consolidated financial position or results of
      operations.
 
 
 
 
 IWI
      Holding Limited
 Notes
      to Consolidated Financial
      Statements
 
 Years
      Ended
      December 31, 2006, 2005 and 2004
 
 
 
 Note
      4 - Credit Arrangements
 
 On
      June 14, 2005, the Company entered
      into a credit agreement with a new financial institution whereby the Company
      can
      borrow up to $7.5 million, plus the seasonal over-line amount of $1.5 million,
      payable on demand.    The total credit facility is governed
      by a borrowing base formula, as defined in the agreement, based principally
      on
      accounts receivable and inventory levels. This agreement provides, among other
      things, that the credit agreements are collateralized by substantially all
      the
      assets of the Company with an approximate net book value of $19.4
      million.
 
 Under
      this borrowing facility, interest
      is calculated at 0.25% over the bank’s prime rate with respect to the revolving
      loan.  In addition, an unused commitment fee is assessed at a rate of
      0.25% representing the difference between the maximum revolving loan and the
      average daily outstanding balance.  An officer of the Company
      personally guarantees up to $3.5 million of the borrowings.
 
 The
      agreement contains certain reporting
      and financial covenants, which the Company is required to
      maintain.  The credit agreement matures on June 1, 2007, or may be
      accelerated or called by the lender upon certain events as specified in the
      loan
      agreement.
 
 As
      of December 31, 2006, borrowings
      under this credit agreement were approximately $7.7 million.  As of
      December 31,2006, maximum additional available borrowings under the line of
      credit were approximately $1.3 million, subject to certain borrowing base
      limitations.
 
 The
      Company did not meet certain
      financial covenants as of September 30, 2006 and continues to be out of
      compliance regarding certain financial covenants primarily the minimum income
      requirement.  As a result the financial institution has placed the
      Company under a forbearance agreement.  Under this forbearance
      agreement, the Company’s borrowing ability as it relates to inventory has been
      decreased by approximately $250,000 as of February 1, 2007 and a further
      reduction of approximately $250,000 on each of April 1, 2007 and May 1,
      2007.  Further, the Company’s borrowing is capped as it relates to
      inventory to a maximum of $2,000,000.  In addition, the financial
      institution has increased the interest rate on the borrowing facility to 4%
      over
      the bank’s prime rate with respect to the revolving loan.  The current
      forbearance agreement expires on May 31, 2007.  The Company is
      confident that if new financing is not secured by this date, that the present
      financial institution will renew or extend the present forbearance
      agreement.
 
 
 Note
      5 - Preferred Stock
 
 The
      3,644,880 issued preferred shares
      are redeemable at the Company’s option after March 21, 1997, at an amount not to
      exceed 50% of net income in excess of $15 million for the preceding
      year.  If not redeemed, the preferred shares will begin to accrue a 4%
      non-cumulative dividend as of that date.  The preferred shares have
      voting rights equivalent to one-half vote per share.  In the event of
      a liquidation of the Company, the holders of preferred shares will be entitled
      to $1 per share before any payment is made to common shareholders.
  
  
 IWI
      Holding Limited
 Notes
      to Consolidated Financial
      Statements
 
 Years
      Ended
      December 31, 2006, 2005 and 2004
 
 
 
 Note
      6 - Stock Option Plans
 
 In
      January 1995, the Company adopted a
      nonqualified stock option plan under which 600,000 shares of common stock have
      been reserved for options, which may be granted to key employees and third-party
      consultants at an option price to be determined by the Compensation Committee
      of
      the Board of Directors.  No options have been granted under this
      plan.  This plan expired in 2005.
 
 Note
      7 - Related Party
      Transactions
 
 Since
      1998, some of the Company’s
      products were purchased from a manufacturer in Hong Kong, which is managed
      by a
      relative of an officer of the Company.  For 2006, 2005 and 2004, the
      Company’s purchases from this manufacturer were approximately $232,000,
      $3,284,000 and $7,887,000, respectively.  The Company no longer
      purchases products from this manufacturer.
 
 Beginning
      in October 2005 the Company
      began purchasing products from another manufacturer in Hong Kong, which is
      owned
      and managed by a relative of an officer of the Company.  Purchases
      from this company in 2006 and 2005 were approximately $3,710,000 and $521,000,
      respectively.
 
 The
      Company uses an outside company to
      provide product quality review at the point of manufacturing in Hong Kong and
      China.  This company is owned and managed by a relative of an officer
      of the Company.  Cost for the services provided by this company were
      approximately $137,000 and  $66,000 in 2006 and 2005,
      respectively.
 
 The
      Company also uses an outside company
      to route gold components from suppliers in U.S. to manufacturers in Hong Kong
      and China.  This company also provides on a limited basis some product
      to the Company.  This company is owned and managed by a relative of an
      officer of the Company.  Services and product provided by this company
      were $140,000 and  $18,000 in 2006 and 2005, respectively.
 
 The
      Company purchases some of its gift
      boxes from a supplier in Hong Kong, which is part owned or controlled by a
      relative of an officer of the Company.  Services and product supplied
      by this company were approximately $192,000, $234,000 and $149,000 in 2006,
      2005, and 2004, respectively.
 
 The
      Company uses outside entities to
      pursue most of its sales, because it has proven to be both effective and
      economical.  The majority stakeholder of the primary outside sales
      entity is a family member of an officer of the Company.
 
 Commission
      expense of the Company
      associated with this entity for the years 2006, 2005 and 2004 was approximately
      $522,000, $619,000 and $688,000, respectively.  Selling expenses such
      as salaries, travel, entertainment etc. are borne directly by the sales
      entity.
 
 
  
 
 
 IWI
      Holding Limited
 Notes
      to Consolidated Financial
      Statements
 
 Years
      Ended December 31, 2006, 2005 and 2004
 
 Note
      7 - Related Party Transactions
      (Continue)
 
 
 Notes
      Payable to Employees, Related
      Parties
 
 Notes
      payable to employees and related
      parties reflect loans made to the Company from employees and relatives of
      employees to enhance the cash flow of the Company.  These notes mature
      annually at December 31, but may be renewed if concurred by both the Company
      and
      individual.  These notes may be prepaid without
      penalty.  Interest was accrued and paid on these notes at a beginning
      rate in 2006 of 9.5% and increased during the year reflecting the increase
      in
      the prime rate to 9.75% at year end.  Interest was accrued and paid at
      a rate ranging from 7.5% to 9.5% in 2005 and 7.5% in 2004.
 
 Note
      8 - Income Taxes
 
 The
      following table summarizes income
      taxes (benefits):
 
 Year
                Ended December
                31(In
                Thousands)
            
            
            2006
            
            
            2005
            
            
            2004Current
            U.S.
                federal
            
            $
            (3
            )
            
            $
            (3
            )
            
            $
            -U.S.
                state
            
            
            -
            
            
            
            -
            
            
            
            -Other
            
            
            -
            
            
            
            -
            
            
            
            -(3
            )
            
            
            (3
            )
            
            
            -Deferred
            U.S.
                federal
            
            
            -
            
            
            
            -
            
            
            
            -U.S.
                state
            
            
            -
            
            
            
            -
            
            
            
            -Other
            
            
            -
            
            
            
            -
            
            
            
            --
            
            
            
            -
            
            
            
            -Income
                Tax Expense
            
            
            (3
            )
            
            
            (3
            )
            
            
            -
 
 The
      differences between the U.S. federal
      statutory tax rate and the Company’s effective tax rate are as follows:
 
 Year
                Ended December
                312006
            
            
            2005
            
            
            2004U.S.
                federal statutory tax
                rate
            
            
            34
            %
            
            
            34
            %
            
            
            34
            %Change
                in valuation
                allowance
            
            
            (35
            )
            
            
            (35
            )
            
            
            (35
            )Other
            
            
            1
            
            
            
            1
            
            
            
            1Consolidated
                Effective Tax
                Rate
            
            
            -
            %
            
            
            -
            %
            
            
            -
            %
 
  
  
 
 IWI
      Holding Limited
 Notes
      to Consolidated Financial
      Statements
 
 Years
      Ended December 31, 2006, 2005 and 2004
 
 Note
      8 - Income Taxes (Continued)
 
 The
      components of deferred income taxes
      as of December 31, are as follows:
 
 (In
                Thousands)
            
            2006
            
            
            2005Deferred
                Tax AssetsNet
                operating and capital loss
                carry forward
            
            $
            2,891
            
            
            $
            2,951Accounts
                receivable
            
            
            215
            
            
            
            277Inventories
            
            
            576
            
            
            
            488Property
                and equipment
            
            
            192
            
            
            
            203Accrued
                expenses
            
            
            482
            
            
            
            75Deferred
                Tax Liability Accrued
                expenses
            
            
            -
            
            
            
            -4,356
            
            
            
            3,994Less:  Valuation
                allowance
            
            
            (4,200
            )
            
            
            (3,838
            )Net
                Deferred Tax Asset
            
            $
            156
            
            
            $
            156
 
 
 In
      accordance with the provisions of
      Internal Revenue Code Section 382, utilization of the company’s net operating
      loss carry forward is estimated to be limited to approximately $111,000 per
      year
      because of a change in corporate ownership. However, because some of the net
      operating losses were incurred during part of fiscal year 1998 and all of 1999
      when the Section 382 limitation did not apply, the company has approximately
      $6,100,000 of net operating loss carry forward available for immediate use
      as of
      December 31, 2006.  Because of the Section 382 limitation, the portion
      of the company’s total net operating loss carry forward that may be utilized
      through expiration is estimated to be approximately $7,400,000.  This
      net operating loss carry forward will expire through 2026.
 .
 Note
      9 - Supplemental Cash Flow
      Information
 
 Year
                Ended December
                31(In
                Thousands)
            
            2006
            
            
            2005
            
            
            2004Cash
                paid for interest
            
            $
            583
            
            
            $
            409
            
            
            $
            334
 
 
  
 
 
  
  
 
 IWI
      Holding Limited
 Notes
      to Consolidated Financial
      Statements
 
 Years
      Ended December 31, 2006, 2005 and 2004
 
 Note
      10 - Employee Benefit Plan
 
 The
      company sponsors a
      defined-contribution profit-sharing plan covering substantially all full-time
      employees who have completed one year of service.  Company
      contributions to the plan are discretionary, determined by the Board of
      Directors and fully vest to employees upon completion of six years of
      service.  The Company also has a voluntary 401(k) savings
      plan.  Participants may contribute up to 15% of their compensation to
      this plan.  The Company matching to this plan is discretionary and
      decided annually by the Board of Directors.  Participant and
      employer-matched contributions to the plan are 100% vested.  Company
      contributions to these plans were approximately $29,000, $31,000 and $30,000
      in
      2006, 2005 and 2004, respectively.
 
 
 Note
      11 - Significant Customers
 
 The
      Company derived 32%, 11% and 10% of
      its net sales from three customers during 2006.  The Company derived
      44% and 12% of its net sales from two customers during 2005 and 44%, and 18%
      from two customers in 2004. The receivable balances for significant customers
      were $6,596,000 and $5,817,000 as of December 31, 2006 and 2005,
      respectively.
 
 
 Note
      12 - Commitments and
      Contingencies
 
 Litigation
 
 The
      Company is a codefendant in a class
      action lawsuit brought by a stockholder in 1996 who alleges the Company
      misrepresented its financial position in interim financial
      statements.  The original suit seeks damages in excess of $11
      million.  The Company has repeatedly disputed the stockholder’s
      allegations and believes that they will ultimately prevail in the
      litigation.  The parties reached an agreement in principal to settle
      the claim for a significantly lesser amount, which was accrued for in
      1999.  The settlement agreement is subject to court approval and the
      Company may decline to proceed with the agreement if a significant number of
      class members “opt out” of the settlement.  As of December 31, 2006,
      there has been no response from counsel for the class action lawsuit or from
      the
      lead plaintiff. The Company continues to accrue the settlement amount until
      the
      issue is resolved. The total accrued as of December 31, 2006 was
      $250,000.  This amount has been accrued since 1999.
 
 Operating
      Leases
 
 On
      February 5,2007
      Imperial amended and
      downsized it’s rentable square feet under it’s existing lease.  The
      length of the lease was also extended through August 2014.  Imperial
      is obligated under a lease on its operating facility, located in Westmont,
      Illinois for minimum rentals as well as real estate taxes and other operating
      expenses through August 2014.
 
 The
      future minimum lease payments
      required under this lease as of December 31, 2006 are as follows:
 
 
 Year
                Ending December 31:2007
            
            $
            111,0002008
            
            
            98,0002009
            
            
            101,0002010
            
            
            104,0002011
            
            
            107,0002012
            
            
            110,0002013
            
            
            114,0002014
            
            
            77,000$
            822,000
 
 
 
 Rent
      expense included in the
      accompanying statements of operations amounted to $242,000, $238,000 and
      $221,000 for 2006, 2005 and 2004, respectively.
 
 The
      Company also entered into a lease
      arrangement to secure living arrangements for Company representatives in both
      Hong Kong and Guangzhou, China.  This lease is for a two-year period
      and runs from May 1, 2006 through April 30, 2008.
 
 The
      future minimum lease payments
      required under this lease as of December 31, 2006 are as follows:
 
 Year
      Ending December 31:
 2007          $   34,000
 2008           
11,000
 $   45,000
 
 Rent
      expense included in the
      accompanying statements of operations amounted to $22,000 for 2006.
 
 Employment
      Agreements
 
 The
      Company has an employment agreement
      with an officer, which was renewed for a five-year period expiring on July
      31,
      2011.  The agreement calls for a base salary of $280,000 per year with
      an automatic salary increase of 5 percent (5%) if the Company reports a minimum
      of $100,000 pretax income.  If the required minimum pretax income is
      not attained the salary level remains the same.  The agreement also
      provides for a bonus of 5 percent (5%) of the Company’s pretax
      profit.  The agreement includes provisions for severance payments for
      the greater of one half (1/2) of the compensation earned under this
      agreement
 for
      the remaining term of this agreement
      or severance pay equal to one year’s base salary or any period for which the
      employee is required not to compete.
 
 The
      future minimum annual compensation
      payments as required under the agreement as of December 31, 2006 are as
      follows:
 
 Year
                Ending December 31:2007
            
            $
            280,0002008
            
            
            280,0002009
            
            
            280,0002010
            
            
            280,0002011
            
            
            163,000$
            1,281,000
 
 
 Note
      13.Subsequent Event
 
 In
      June, 2007, the Company reached a
      tentative agreement with a new financial institution subject to due diligence
      and credit committee approval whereby the Company can borrow up to $10
      million.  The new line of credit carries interest at 3% over the LIBOR
      rate or the bank prime rate and matures in June 2010.
 
  
  Note
      14.                      
Restructuring
      Costs
 
 
 The
      company began restructuring its operations late in the 2nd
      quarter
      and early 3rd
      quarter.  These costs comprised severance costs associated with the
      elimination of 14 employees or approx. 25% of total employees, start up costs
      to
      integrate the operations and systems which were outsourced to China with the
      operations and systems in the U.S. net of labor savings
      generated.  Most of the functions outsourced overseas were production
      related and includes in part boxing, tagging and packaging of the product as
      well as certain other clerical data entry.  The Company accounts for
      its restructuring activities in accordance with Statement of Financial
      Accounting Standards No. 146 “Accounting for Costs Associated with Exit or
      Disposal Activities” (“SFAS 146”) and Statement of Financial Accounting No. 112,
“Employees’ Accounting for Post Employment Benefits” (“SFAS 112”).  As
      of December 31, 2006, the Company’s total restructuring accrual was
      $68,000.
 
 During
      fiscal 2006, the Company recorded $378,000 in restructuring charges which
      included $168,000 for severance and benefits, $210,000 for startup costs in
      China.  As of December 31, 2006, 14 employees have been
      terminated.  Payments related to severance and benefits are expected
      to be paid off by the second quarter of fiscal 2007.  Further
      personnel reductions may be addressed in 2007 as the efficiencies and capability
      of the outsourced company improves.  The severance costs on future
      personnel reductions will be recognized when the actions occur.
 
 The
      following table summarizes the various restructuring plan (in thousands):
 
 Workforce
                Reduction
            
            
            Startup
                Costs
            
            
            TotalAccural
                balance as of December 31, 2005
            
            $
            0
            
            
            $
            0
            
            
            $
            0Restructuring
                charges
            
            
            168
            
            
            
            210
            
            
            
            378Cash
                payments
            
            
            (100
            )
            
            
            (210
            )
            
            
            (310
            )Accural
                balance as of December 31, 2006
            
            $
            68
            
            
            $
            0
            
            
            $
            68
 
 
 
 
 
 
 
 
 
 
 Schedule
      l
 IWI
      Holding Limited
 Condensed
      Financial Information of Registrant
 Balance
      Sheets
 December
      31, 2006 and 2005
 
 
 
 Assets
            
            2006
            
            
            2005Cash
            
            $
            1,000
            
            
            $
            1,000Due
                from affiliate
            
            
            500,000
            
            
            
            500,000Investments
                in wholly owned
                subsidiaries
            
            
            842,000
            
            
            
            969,000Total
                Assets
            
            $
            1,343,000
            
            
            $
            1,470,000Stockholders’
                EquityPreferred
                stock - $1 par value;
                authorized – 5,000,000
              shares;
                issued and
                outstanding – 3,644,880 shares
            
            $
            3,644,880
            
            
            $
            3,644,880Common
                stock – No par value;
                authorized – 10,000,000
              shares;
                issued and
                outstanding – 2,544,700 shares
            
            
            -
            
            
            
            -Additional
                paid-in capital
            
            
            12,446,120
            
            
            
            12,446,120Accumulated
                deficit
            
            
            (14,748,000
            )
            
            
            (14,621,000
            )$
            1,343,000
            
            
            $
            1,470,000Statements
                of Income and Accumulated Deficit
            
            2006
            
            
            2005Equity
                in net (loss) income of
                subsidiaries
            
            $
            (127,000
            )
            
            $
            (192,000
            )Accumulated
                deficit, beginning of
                year
            
            
            (14,621,000
            )
            
            
            (14,429,000
            )Accumulated
                deficit, end of
                year
            
            $
            (14,748,000
            )
            
            $
            (14,621,000
            )
 
 
 
 Note
      1 - Basis of Presentation
 
 The
      Company’s share of net (loss) income
      of its unconsolidated subsidiaries, all of which are wholly owned, is included
      in net income using the equity method. Parent-company-only financial statements
      should be read in conjunction with the Company’s consolidated financial
      statements.
  
  
 
 Schedule
      ll
 IWI
      Holding Limited
 Valuation
      and Qualifying Accounts
 Years
      Ended December 31, 2006, 2005 and
      2004
 
 Description
            
            Balance
                at Beginning of
                period
            
            
            Additions
                Charged to Cost and
                Expenses
            
            
            Additions
                Charged to Other
                Accounts
            
            
            Deduction
            
            
            Balance
                at End of
                periodYear
                Ended December 31,
                2004Allowance
                for
              Doubtful
                Accounts
            
            $
            532,000
            
            
            
            351,000
            
            
            
            -
            
            
            
            287,000
            (1)
            
            $
            596,000Inventory
                Valuation
              Allowance
            
            $
            828,000
            
            
            
            308,000
            
            
            
            -
            
            
            
            187,000
            (2)
            
            $
            949,000Deferred
                Income Tax
              Valuation
                Allowance
            
            $
            3,597,000
            
            
            
            -
            
            
            
            -
            
            
            
            318,000
            (3)
            
            $
            3,279,000Year
                Ended December 31,
                2005Allowance
                for
              Doubtful
                Accounts
            
            $
            596,000
            
            
            
            116,000
            
            
            
            -
            
            
            
            2,000
            (1)
            
            $
            710,000Inventory
                Valuation
              Allowance
            
            $
            949,000
            
            
            
            111,000
            
            
            
            -
            
            
            
            34,000
            (2)
            
            $
            1,026,000Deferred
                Income Tax
              Valuation
                Allowance
            
            $
            3,279,000
            
            
            
            559,000
            
            
            
            -
            
            
            
            -
            (3)
            
            $
            3,838,000Year
                Ended December 31,
                2006Allowance
                for
              Doubtful
                Accounts
            
            $
            710,000
            
            
            
            25,000
            
            
            
            -
            
            
            
            184,000
            (1)
            
            $
            551,000Inventory
                Valuation
              Allowance
            
            $
            1,026,000
            
            
            
            268,000
            
            
            
            -
            
            
            
            149,000
            (2)
            
            $
            1,145,000Deferred
                Income
                Tax
              Valuation
                Allowance
            
            $
            3,838,000
            
            
            
            362,000
            
            
            
            -
            
            
            
            -
            
            
            $
            4,200,000
 
 
 (1)           
Write-off
      of uncollectible
      accounts
 (2)           
Inventory
      losses realized
 (3)           
Decreases
      in deferred tax asset