SECURITIES
      AND EXCHANGE
      COMMISSION


Washington,
      D.C.  20549


FORM
      20-F


Amendment
      No. 2/A


(Mark
      One)





£           
      REGISTRATION STATEMENT PURSUANT
      TO SECTION 12(b) OR 12(g) OF THESECURITIES EXCHANGE
      ACT OF 1934 [Fee
      Required]





R           
      ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
      [Fee
      Required]





For
      the
      Fiscal Year Ended December 31, 2005





£           
      TRANSITION 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
            Name
                of Each Exchange on Which
                RegisteredNone
            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, 2006 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 R  No £





Indicate
      by check mark which financial statement item the registrant has elected to
      follow.


Item
      17 £ Item 18R







1








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
            13ITEM   9.
                THE OFFER AND LISTING
            13ITEM
                10. ADDITIONAL INFORMATION
            14ITEM
                11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT THE
                MARKET
            15ITEM
                12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
            15PART
                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
            16ITEM
                16B.  CODE OF ETHICS
            17ITEM
                16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
            17PART
                IIIITEM
                17.    FINANCIAL STATEMENTS
            17ITEM
                18.    FINANCIAL STATEMENTS
            17ITEM
                19.    FINANCIAL STATEMENTS AND
                EXHIBITS
            17SIGNATURES
            18CERTIFICATION
            19-20














2





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 31,2001
            
            
            2002
            
            
            2003
            
            
            2004
            
            
            2005Statement
                of Income Data:Net
                sales
            
            $
            22,610
            
            
            $
            25,258
            
            
            $
            21,770
            
            
            $
            27,561
            
            
            $
            25,534Cost
                of sales
            
            
            17,751
            
            
            
            20,322
            
            
            
            18,772
            
            
            
            22,309
            
            
            
            20,599Gross
                profit
            
            
            4,859
            
            
            
            4,936
            
            
            
            2,998
            
            
            
            5,252
            
            
            
            4,935Operating
                expenses
            
            
            4,341
            
            
            
            4,446
            
            
            
            4,603
            
            
            
            4,672
            
            
            
            4,666Income
                (loss) from operations before the  Gain on Trade
                Settlement
            
            
            518
            
            
            
            490
            
            
            
            (1,605
            )
            
            
            580
            
            
            
            269Gain
                on Trade Settlement
            
            
            1,141
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Other
                income (expense) – net
            
            
            (306
            )
            
            
            (248
            )
            
            
            (299
            )
            
            
            (349
            )
            
            
            (458
            )Income
                (loss) before income taxes
            
            
            1,353
            
            
            
            242
            
            
            
            (1,904
            )
            
            
            231
            
            
            
            (189
            )Income
                data:Income
                (tax) benefit
            
            
            120
            
            
            
            36
            
            
            
            -
            
            
            
            -
            
            
            
            (3
            )Net
                income (loss)
            
            $
            1,473
            
            
            $
            278
            
            
            $
            (1,904
            )
            
            $
            231
            
            
            $
            (192
            )Net
                income (loss) per common share
            
            $
            .58
            
            
            $
            .11
            
            
            $
            (.75
            )
            
            $
            .09
            
            
            $
            (.08
            )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 31,2001
            
            
            2002
            
            
            2003
            
            
            2004
            
            
            2005Balance
                Sheet Data:Working
                capital
            
            $
            2,569
            
            
            $
            3,010
            
            
            $
            1,233
            
            
            $
            1,528
            
            
            $
            1,342Total
                assets
            
            
            11,625
            
            
            
            14,255
            
            
            
            15,327
            
            
            
            17,466
            
            
            
            18,540Long-term
                debt
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Shareholders’
                equity
            
            
            3,057
            
            
            
            3,335
            
            
            
            1,431
            
            
            
            1,662
            
            
            
            1,470








3








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 componet 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 44% and 12% of its net sales from two customers during
      2005.  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.








4





Year
                Ended December 31,2003
            2004
            2005Jewelry
                retail stores
            0.6
                %
            0.3
                %
            0.3
                %Specialty
                markets
            28.5
            12.3
            20.8Mass
                merchandisers
            12.7
            16.9
            9.2Department
                stores
            39.5
            50.8
            46.5National
                jewelry chains
            16.3
            17.5
            22.4Catalog
                showrooms
            2.4
            2.2
            0.8Total
            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 31,2003
            2004
            2005Amount
            %
            Amount
            %
            Amount
            %First
                Quarter
            $  4,447
            20.4
            $  4,906
            17.8
            $  5,593
            21.9Second
                Quarter
            5,038
            23.1
            5,337
            19.4
            4649
            18.2Third
                Quarter
            5,716
            26.3
            6,428
            23.3
            4,868
            19.1Fourth
                Quarter
            6,569
            30.2
            10,890
            39.5
            10,424
            40.8Total
            $21,770
            100.0
            $27,561
            100.0
            $25,534
            100.0













5













Purchasing





The
      Company imports most of its jewelry from the People’s Republic of China (“PRC”)
      and Hong Kong.  Approximately 20% 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 imported pearls are assembled by and for
      the Company both overseas and 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 December 2003 the Company extended its
      present lease through January 2007, future minimum annual lease payments are
      approximately $200,000.  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 principal 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, 2006 there
      has been no response from counsel for the class action lawsuit or from the
      lead
      counsel.








6








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.





2003
            2004
            2005%
                Amount
            %
                Sales
            Change
            %
                Amount
            %
                Sales
            Change
            %
                Amount
            %
                Sales
            ChangeNet
                sales
            $21,770
            100.0
            (13.8)
            $27,561
            100.0
            26.6
            $25,534
            100.0
            (7.4)Gross
                profit
            2,998
            13.8
            (60.7)
            5,252
            19.1
            75.2
            4935
            19.3
            (6.0)Operating
                expenses
            4,603
            21.1
            (3.5)
            4,672
            16.9
            1.5
            4,666
            18.3
            (0.1)Income
                (Loss) from oper
            (1,605)
            (7.4)
            (427.5)
            580
            2.1
            n/a
            269
            1.1
            n/aOther
                income (expense)
            (299)
            (1.4)
            n/a
            (349)
            (1.3)
            (16.7)
            (458)
            (1.8)
            (31.2)(Loss)
                Income before
              income
                taxes
            (1,904)
            (8.8)
            (886.8)
            231
            0.8
            n/a
            (189)
            (0.7)
            n/aIncome
                tax benefit
            -
            -
            n/a
            -
            -
            n/a
            (3)
            -
            n/aNet
                (Loss) income
            (1,904)
            (8.8)
            (784.9)
            231
            231
            231n/a
            (192)
            0.8
            n/aNet
                (Loss) income per  common share
            $
                (0.75)
            
            
            $
                0.09
            
            
            $(0.08)Weighted
                average number of
              shares
                outstanding
            2,555
            
            
            2,555
            
            
            2,555





The
      Company's sales are generated
      through the wholesaling of jewelry products to


the
      following
      groups:






7





2001
            2002
            2003
            2004
            2005Jewelry
                retail stores
            3.2%
            1.1%
            0.6%
            0.3%
            0.3%Specialty
                markets
            22.1
            28.8
            28.5
            12.3
            20.8Mass
                merchandisers
            22.3
            27.9
            12.7
            16.9
            9.2Department
                stores
            41.7
            26.6
            39.5
            50.8
            46.5National
                jewelry chains
            9.9
            12.5
            16.3
            17.5
            22.4Catalog
                showrooms
            0.8
            3.1
            2.4
            2.2
            0.8Total
            100.0%
            100.0%
            100.0%
            100.0%
            100.0%




The
      change in net sales is primarily attributable to changes in volumes of goods
      delivered to our customers.  While most of the goods which we sell are
      produced in China until July 21, 2005, the Renminbi (RMB) (the 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 to 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 8.00 RMB to US$1, or
      approximately 1.3% over the past year.  Therefore, foreign currency
      fluctuation has had a minimal impact on the Company.




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 price increases
      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 cost, 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 experianced 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.











8




Year
      Ended December 31, 2004 Compared to Year Ended December 31, 2003





Net
      Sales.  Net Sales
      increased $5.8 million or 26.6% to $27.6 million in 2004 from $21.8 million
      in
      2003.  This increase in Net Sales reflects both an increase in gross
      sales from the prior year of $5.4 million combined with a decrease in returns
      compared to 2003 of nearly $1.0 million.  This increase in 2004
      revenues reflects a combination of increase in net sales to the Company’s two
      largest customers of $7.9 million and modest increases in the balance of its
      customer base.  This increase in net sales overcame the loss of a
      major customer during 2004, which had represented approximately 20% of the
      Company’s net sales in 2003 and represents a decrease in sales from this
      customer in 2004 of $3.8 million compared to 2003 levels.  Advertising
      costs applied against sales increased $544,000 in 2004 to $993,000 from $449,000
      in 2003.





Gross
      Profit.  Gross profit
      increased $2.2 million or 75.2% to $5.2 million in 2004 from $3.0 million in
      2003.  Excluding the effect of consignment, liquidation sales and
      advertising for 2004 and 2003, gross profit increased $2.5
      million.  Gross margin excluding the effect of consignment and
      liquidation sales increased 6.1% from 18.5% in 2003 to 24.6% in
      2004.  This improvement in overall gross margin was, in part, due to
      renewed emphasis placed on the profitability of each product sold and increased
      standard profit levels implemented.  In addition, due to the relative
      consistency of overall gold pricing throughout 2004 the impact of the change
      in
      gold prices throughout 2004 had minimal impact on profitability.





Income
      from
      Operations.  Income from Operations were $508,000 in 2004 compared to
      a loss from operations in 2003 of $1.6 million, representing an increase over
      the prior year of $2.2 million.  This primarily reflects the increased
      sales and margins experianced in 2004.  Operating expenses increased
      $613,000 or 12.1% and primarily reflect increased sales related costs such
      as
      advertising and commissions.





Other
      Income
      (Expense).  Other Expenses representing interest costs increased
      $50,000 to $349,000 from $299,000 in 2003 representing a combination of
      increased borrowings and increased interest rates experianced in
      2004.


Net
      Income.  The net income
      for 2004 totaled $231,000 a change of $2,136,000 compared to the net loss
      reported in 2003 of $1,904,000.








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, 2005 was $1.3 million as compared to $1.5
      million at December 31, 2004.





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 .25% over prime with respect
      to the revolving loan.  In addition, an unused commitment fee is
      assessed at a rate of .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
      following table summarizes cash provided by (used in) the Company’s business
      activities for the past three years (dollar amounts are in
      thousands):





2003
            2004
            2005Operating
                activities
            $
                (2,286)
            $(601)
            $  (2,385)Investing
                activities
            (32)
            (2)
            (12)Financing
                activities
            2,302
            604
            2,535Increase
                (decrease) in cash
            (16)
            1
            138











9








Operating
      Activities.  The net cash used in 2005 was principally due to
      the increase in accounts receivable of $1.6 million and decreases in accounts
      payables of $1.3 million offset partially by lower inventory levels of .6
      million December 31, 2005.





Investing
      Activities.  Cash uses in 2005 were minimal and reflect the
      upgrade of our computer and related systems.





Financing
      Activities.  During 2005, the Company increased the amounts
      outstanding under its line of credit by $2.3 million to $7.9 million at December
      31, 2005.  Notes payable to employees and others increased by
      $205,000.





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.  As a result, 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
              3-5
                  years
              More
                  than 5 yearsOperating
                  Lease Obligations
              200,000
              184,000
              16,000
 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
            58
            Chairman
                of the Board of Directors: President of IWI Holding Limited, Principal
                Financial Officer and SecretaryRichard
                J. Mick
            65
            Sr.
                Vice President - Sales and DirectorConnie
                S. Yui
            55
            Inventory
                Manager and DirectorJoseph
                A. Benjamin
            63
            DirectorSamuel
                H. Lou
            52
            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.








10





Compensation
      of Directors and Officers





The
      aggregate cash compensation paid by the Company to all directors and officers
      as
      a group during 2005 was approximately $584,000.  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 $12,000 for this individual in lieu of motel
      accommodations and incurs an estimated $7,900 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, the Company will contribute 50% in 2003,
      effective January 1, 2004, 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 2005, 2004 and 2003 of approximately
      $31,000, $30,000 and $61,000, respectively.








11


Employment
      Contracts





The
      Company has an employment contract with Joseph K. Lau who is employed by
      Imperial pursuant to a contract expiring July 2006.  Mr. Lau has
      waived salary increases as provided for in the contract since 2003 and has
      waived any bonus earned since that time.  The contract provides for at
      a base salary of $163,000 in 2006, and bonuses as determined by the Compensation
      Committee of the Board of Directors.





Committees
      and Attendance of the Board of Directors Meetings





During
      the year ended December 31, 2005, the Board of Directors held two formal
      meetings.  The Audit Committee held four meetings and the Compensation
      Committee held one meeting.  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, 2005, the Company had 55 employees, including
      2  executive officers,  9 persons in sales and
      merchandising, 34 persons in operations, and 10 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, 2006, the Company had 52 employees,
      including 2 executive officers,  9 persons in sales and merchandising,
      31 persons in operations, and 10 persons in administrative and support
      functions.





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, 2006, 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 Preferred Stock and (2)
      all officers and directors of the Company as a group.  The information
      in the following table was provided by such persons.








12


Name
                and Address
              of
                Beneficial Owner
            Amount
                and Nature of
              Beneficial
                Ownership (1)
            Title
                of
              Class
            Percent
                of
              Class
            Percent
                of
              Voting
                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 2005.  All of the filing requirements
      were satisfied on a timely basis in 2005.  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, 2005, 2004 and 2003, the
      Company’s purchases from this manufacturer were approximately $3,284,000,
      $7,887,000, and $7,394,000 respectively.  Beginning in October 2005
      the Company began purchasing products from another manufacturer in Hong Kong,
      which is owned and managed by another relative of an officer of the
      Company.  Purchases from this company in 2005 were approximately
      $521,000.





The
      Company uses outside entities to pursue most of its sales, because it has proven
      to be both effective and economical.  The stakeholders of a primary
      outside sales entity are an officer of the Company and a family member of such
      officer.  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 2005, 2004 and 2003 were $619,000, $688,000
      and
      $569,000, 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
      Blackman Kallick Bartelstein, LLP thereon.







13





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 “JEWLF.”





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.





2005
            
            
            2004High
            
            
            Low
            
            
            High
            
            
            LowFirst
                Quarter
            
            $
            .080
            
            
            $
            .080
            
            
            $
            .200
            
            
            $
            .120Second
                Quarter
            
            
            .100
            
            
            
            .070
            
            
            
            120
            
            
            
            .100Third
                Quarter
            
            
            .120
            
            
            
            .070
            
            
            
            .100
            
            
            
            .100Fourth
                Quarter
            
            
            .100
            
            
            
            .070
            
            
            
            110
            
            
            
            .080








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
            Low2005           
                November
            $.080
            $
                .080December
            .080
            .0702006           
                January
            $.070
            $
                .070February
            .070
            .070March
            .100
            .070April
            .090
            .060







The
      quotations reflect inter-dealer prices without mark-up, mark-down or commission
      and may not represent actual transactions.





At
      May
      10, 2006, the bid price of the Common Stock was $.06.





As
      of May
      10, 2006, 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.








14


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 operating results
      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.





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.  The economy and its impact on discretionary
      disposable consumer spending could be significant to future operating
      earnings.





15





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 ANDUSE 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 that 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, 2005.
 
 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 financing
        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 evalution 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 framework in Internal
        Control-Integrated Framework, our management concluded that our internal
        control
        over financial reporting was effective as of December 31, 2005.








16





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, 2005 and 2004 were $79,837 and
      $64,404, respectively.





All
      Other Fees





The
      aggregate fees paid for other accounting services, primarily audit related,
      for
      the years ended December 31, 2005 and 2004 were $0 and $6,349,
      respectively.








PART
      III








ITEM
      17.                      
FINANCIAL STATEMENTS





Not
      applicable





ITEM
      18.                      
FINANCIAL STATEMENTS





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
      Blackman Kallick Bartelstein, LLP thereon.








ITEM
      19.                      
FINANCIAL STATEMENTS AND EXHIBITS





(a)           
                Financial Statements
            PageReport
                of Independent Auditors
            22Consolidated
                Balance Sheets as of  December 31, 2005 and 2004
            23Consolidated
                Statements of Operations for Each of the Years
              in
                the Three-Year Period Ended December 31, 2005
            24Consolidated
                Statements of Shareholders’ Equity for Each of the
              Years
                in the Three-Year Period Ended December 31, 2005
            25Consolidated
                Statements of Cash Flows for Each of the Years in
              the
                Three-Year Period Ended December 31, 2005
            26Notes
                to Consolidated Financial Statements
            27-36Financial
                Statement Schedules (1)I
                -
                Condensed Financial Information of Registrant
            37II
                - Valuation and Qualifying Accounts
            38(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.








17





(b)           
      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: 
                  January 23, 2008
              By:
              /s/ 
                Joseph K. LauJoseph
                K. LauChairman,  President
                and Director




18


Exhibit
        31
 
 CERTIFICATIONS
 
 I,
        Joseph
        K. Lau, certify that:
 
 1.
        I have
        reviewed this annual report on Form 20-F of IWI Holding Limited for
 the
        year
        ended December 31, 2005:
 
 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
        quarterly
 report;
 
 3.
        Based
        on my knowledge, the financial statements, and other financial
 information
        included in this annual 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 quarterly 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
 controls
        and procedures to be designed under my supervision, to ensure that
 material
        information relating to the registrant, is made known to me 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 converted 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 weakness in the design or operation
 of
        internal controls over financial reporting which are reasonably likely to
        adversely affect the registrant's
 ability
        to record, process, summarize and report financial data,
 
 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
 
 
 Dated:
        January 23 2008
 
 By:
        /s/
        Joseph K. Lau
 Joseph
        K.
        Lau
 Chief
        Executive Officer and Chief Financial Officer






19





CERTIFICATION
        OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT
 TO
        18
        U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
 SECTION
        906 OF THE SARBANES-OXLEY ACT OF 2002
 
 I,
        Joseph
        K. Lau, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
        to
        Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of
        Form
        20-F of IWI Holding Limited for the annual period ended December 31, 2005
        fully
        complies with the requirements of Section 13(a) or 15(d) of the Securities
        Exchange Act of 1934 and that information contained in such Form 20-F fairly
        presents in all material respects the financial condition and results of
        operations of IWI Holding Limited.
 
 By:
        /s/
        Joseph K. Lau
 ----------------------------
 Name:
        Joseph K. Lau
 Title:
        Chief Executive Officer
 &
        Chief Financial Officer
 
 January 23,
        2008








20





















IWI
      HOLDING LIMITED


CONSOLIDATED
      FINANCIAL STATEMENTS AND


INDEPENDENT
      AUDITOR’S REPORT




Years
      Ended December 31, 2005, 2004 and 2003











21







Independent
      Auditor’s Report











The
      Board
      of Directors


IWI
      Holding Limited


Westmont,
      Illinois





We
      have
      audited the accompanying consolidated balance sheets of IWI Holding Limited
      as
      of December 31, 2005 and 2004, and the related consolidated statements of
      operations, stockholders’ equity and cash flows for each of the three 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 2004, and the results of its operations
      and
      its cash flows for each of the three 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, 2004 and 2003 have been re-stated to correct a
      misstatement.














s/Blackman
      Kallick Bartelstein, LLP


Chicago,
      Illinois


April
      17,
      2006, except for Note 3, correction of an error, of which the date is January
      7,
      2008.










22





Exhibit
      A


IWI
      Holding Limited


Consolidated
      Balance Sheets


(In
      Thousands, Except Share Data)





December
      31, 2005 and 2004





Assets
            
            2005
            
            
            2004Current
                AssetsCash
            
            $
            139
            
            
            $
            1Accounts
                receivable, less allowance for doubtful
              accounts
                of $710 in
                2005 and $596 in 2004
            
            
            9,336
            
            
            
            7,714Inventories
            
            
            8,676
            
            
            
            9,298Deferred
                income taxes
            
            
            156
            
            
            
            156Prepaid
                expenses
            
            
            105
            
            
            
            163Total
                Current Assets
            
            
            18,412
            
            
            
            17,332Leasehold
                Improvements, Machinery and Equipment
            
            
            2,978
            
            
            
            2,966Less
                accumulated depreciation
            
            
            (2,850
            )
            
            
            (2,832
            )Property
                and Equipment, Net
            
            
            128
            
            
            
            134Total
                Assets
            
            $
            18,540
            
            
            $
            17,466Liabilities
                and Stockholders’
                EquityCurrent
                LiabilitiesLine
                of credit
            
            $
            7,913
            
            
            $
            5,583Notes
                payable
              Employees,
                related
                parties
            
            
            294
            
            
            
            315Other
            
            
            653
            
            
            
            427Accounts
                payable - Trade
            
            
            5,272
            
            
            
            5,894Accounts
                payable to affiliated companies
            
            
            1,418
            
            
            
            2,085Accrued
                liabilities
            
            
            1,520
            
            
            
            1,500Total
                Current Liabilities
            
            
            17,070
            
            
            
            15,804Stockholders’
                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
            
            
            12,446
            
            
            
            12,446Additional
                paid-in capitalAccumulated
                deficit
            
            
            (14,621
            )
            
            
            (14,429
            )Total
                Stockholders’ Equity
            
            
            1,470
            
            
            
            1,662Total
                Liabilities & Stockholders’ Equity
            
            $
            18,540
            
            
            $
            17,466














23














Exhibit
      B


IWI
      Holding Limited


Consolidated
      Statements of Operations


(In
      Thousands, Except Share Data)





Years
      Ended December 31, 2005, 2004 and 2003





2005
            
            
            2004
            
            
            2003Net
                Sales
            
            $
            25,534
            
            
            $
            27,561
            
            
            $
            21,770Cost
                of Sales
            
            
            20,599
            
            
            
            22,309
            
            
            
            18,772Gross
                Profit
            
            
            4,935
            
            
            
            5,252
            
            
            
            2,998Selling,
                General and Administrative Expenses
            
            
            4,666
            
            
            
            4,672
            
            
            
            4,603Income
                (Loss) from Operations
            
            
            269
            
            
            
            580
            
            
            
            (1,605
            )Interest
                Expense
            
            
            (458
            )
            
            
            (349
            )
            
            
            (299
            )(Loss)
                Income  Before Income Taxes
            
            
            (189
            )
            
            
            231
            
            
            
            (1,904
            )Income
                Tax Expense
            
            
            (3
            )
            
            
            -
            
            
            
            -Net
                (Loss) Income
            
            $
            (192
            )
            
            $
            231
            
            
            $
            (1,904
            )Net
                (Loss) Income per Common Share
            
            $
            (0.08
            )
            
            $
            0.09
            
            
            $
            (0.75
            )Weighted-Average
                Number of Common
              Shares
                Outstanding
            
            
            2,554,700
            
            
            
            2,554,700
            
            
            
            2,554,700














24



















Exhibit
      C





IWI
      Holding Limited


Consolidated
      Statements of Stockholders’ Equity


(In
      Thousands, Except Share Data)





Years
      Ended December 31, 2005, 2004 and 2003





Preferred
                Stock
            
            
            Common
                StockNumber
                of Shares
            
            
            Amount
            
            
            Number
                of Shares
            
            
            Amount
            
            
            Additional
                Paid-in Capital
            
            
            Accumulated
                Paid-in Capital
            
            
            TotalBalance,
                January 1, 2003
            
            
            3,644,880
            
            
            $
            3,645
            
            
            
            2,554,700
            
            
            $
            -
            
            
            $
            12,446
            
            
            $
            (12,756
            )
            
            $
            3,335Net
                Income
            
            
            
            
            
            
            
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,904
            )Balance,
                December 31, 2003
            
            
            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
            )
            
            
            1,662Net
                Income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (192
            )
            
            
            (192
            )Balance,
                December 31, 2005
            
            
            3,644,880
            
            
            $
            3,645
            
            
            
            2,554,700
            
            
            $
            -
            
            
            $
            12,446
            
            
            $
            (14,621
            )
            
            $
            1,470













25










Exhibit
      D


IWI
      Holding Limited


Consolidated
      Statements of Cash Flows


(In
      Thousands)





Years
      Ended December 31, 2005, 2004
      and 2003





2005
            
            
            2004
            
            
            2003Cash
                Flows from Operating ActivitiesNet
                (loss) income
            
            $
            (192
            )
            
            $
            231
            
            
            $
            (1,904
            )Adjustments
                to reconcile net (loss) to income net cash used in operating
                activities
              Depreciation
                and amortization
            
            
            18
            
            
            
            66
            
            
            
            159Provision
                for doubtful accounts
            
            
            116
            
            
            
            351
            
            
            
            (32
            )(Increase)
                decrease in
              Accounts
                receivable
            
            
            (1,738
            )
            
            
            (2,508
            )
            
            
            (1,674
            )Inventories
            
            
            622
            
            
            
            (63
            )
            
            
            370Prepaid
                expenses
            
            
            58
            
            
            
            18
            
            
            
            121Increase
                (decrease) in
              Accounts
                payable – Trade
            
            
            (622
            )
            
            
            1,491
            
            
            
            (171
            )Accounts
                payable to affiliated companies
            
            
            (667
            )
            
            
            (483
            )
            
            
            810Accrued
                liabilities
            
            
            20
            
            
            
            296
            
            
            
            35Net
                Cash Used in Operating Activities
            
            
            (2,385
            )
            
            
            (601
            )
            
            
            (2,286
            )Net
                Cash Used in Investing Activities
              Purchases
                of property and
                equipment
            
            
            (12
            )
            
            
            (2
            )
            
            
            (32
            )Cash
                Flows from Financing Activities
              Checks
                issued in excess of Funds
                on deposit
            
            
            -
            
            
            
            (24
            )
            
            
            24(Payments
                on) borrowings from notes payable Employees
            
            
            (21
            )
            
            
            (20
            )
            
            
            132Other
            
            
            226
            
            
            
            315
            
            
            
            -Borrowings
                from  line of credit, net
            
            
            2,330
            
            
            
            333
            
            
            
            2,146Net
                Cash Provided by  Financing Activities
            
            
            2,535
            
            
            
            604
            
            
            
            2,302Net
                Increase (Decrease) in Cash
            
            
            138
            
            
            
            1
            
            
            
            (16
            )Cash,
                Beginning of Year
            
            
            1
            
            
            
            -
            
            
            
            16Cash,
                End of Year
            
            $
            139
            
            
            $
            1
            
            
            $
            -














26













IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003








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 continues in its effort to diversify its customer base thereby reducing
      its reliance on two to three major customers.  The diversification
      effort was successful in 2005 but was offset by lower sales from two major
      customers.  These two customers’ combined sales decreased in 2005 by
      approximately $5.9 million.  This decrease in sales was partially
      offset by the expansion of our customer base as well as increased sales to
      other
      existing customers.  Sales were further effected by an increase in
      coop advertising of $156,000 which is charged against sales.  This
      resulted in overall net sales reported in 2005 decreasing $2.0 million or 7.4%
      compared to 2004.  Moving forward in 2006, the Company expects to not
      only increase its sales to core major customers but also to increase it sales
      to
      new customers from 2005 levels, thus continuing the expansion of its customer
      base.





Gross
      margins for the Company continued to improve during 2005 from levels experienced
      in 2004.  Gross margins improved slightly in 2005 to 19.3% vs. 19.1%
      in 2004 an increase of .2%.  Gross profit as a result of lower sales
      levels and increased advertising costs in 2005 decreased by $317,000 as compared
      to 2004 levels.  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.





Moving
      forward into 2006 the Company is confident that it will return to profitability
      on an ongoing basis.  The Company continues to explore alternatives to
      reduce production costs such as moving certain production functions where
      feasible overseas and maintain lean overhead support levels.





The
      Company’s goal is to continue to diversify its customer base thereby reducing
      its reliance on two to three major customers.  This diversification
      effort is expected to increase sales in 2006 from our non-major
      customers.  Within the first three months of 2006 the Company has
      either shipped or received orders from two new customers.  These new
      customers have significant volume potential.  Response to new styles
      and products presented to our customers has been well received toward the end
      of
      2005 and beginning of 2006.  Where a concerted effort to diverse our
      customer base continues, at the same time we are attempting to expand
      opportunities with our major customers.











27



















IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003








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 costs, freight or duties are
      capitalized in inventories.





As
      of
      December 31, 2005 and 2004, the inventory valuation reserve was $1,026,000
      and
      $949,000 respectively.  The Company recorded an expense of $131,000,
      $308,000 and $388,000 during 2005, 2004 and 2003, 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 sales
      when received.  In addition, allowances for future returns are provided
      based on historic experiences and accepted customer returns.




Cost
      of Sales




Cost
      of sales consists of the 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
      cost of 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 shorter of useful life or the life of the lease. 
Useful lives range from three to ten years for machinery, equipment and
      leasehold improvements.





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 consist of
      all operating expenses other than costs of goods purchased, inbound freight
      and
      interest.  Such expenses would include salary and wages, commission,
      rent, travel, cooperative advertising and all other general operating
      expenses.





28





IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003








Note
      3 - Summary of Significant Accounting Policies (Continued)





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





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.  As of December 31,
      2005 and 2004, there were no stock options outstanding.





Advertising
      Costs





The
      Company recognizes  all advertising costs as
      incurred.  Advertising costs were approximately $1,149,000, $993,000
      and $449,000 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.











29
















IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003








Note
      3 - Summary of Significant Accounting Policies (Continued)





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 $1,149,000, $993,000 and $449,000 in 2005,
      2004 and 2003, 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
      November 2004, the FASB issued SFAS Statement No. 151 “Inventory Costs - An
      amendment of ARB No. 43, Chapter 4.”  This new standard is the result
      of a broader effort by the FASB to improve financial reporting by eliminating
      differences between GAAP in the United States and GAAP developed by the
      International Accounting Standards Board (IASB).  As part of this
      effort, the FASB and the IASB identified opportunities to improve financial
      reporting by eliminating certain narrow differences between their existing
      accounting standards.  Statement No. 151 clarifies that abnormal
      amounts of idle facility expense, freight, handling costs and spoilage should
      be
      expensed as incurred and not included in overhead.  Further, Statement
      No. 151 requires that allocation of fixed production overheads to conversion
      costs should be based on normal capacity of the production
      facilities.  The provisions in Statement 151 are effective for
      inventory costs incurred during fiscal years beginning after June 15,
      2005.  The adoption of SFAS Statement No. 151 is not expected to have
      an impact on the Company’s consolidated financial position or results of
      operations.





In
      December 2004, the FASB issued SFAS Statement No. 123 (Revised 2004),
“Share-Based Payments”.  The new FASB rule requires that the
      compensation cost relating to share-based payment transactions be recognized
      in
      the financial statements.  That cost will be measured based on the
      fair value of the equity or liability instruments issued.  Public
      entities (other than those filing as small business issuers) will be required
      to
      apply Statement No. 123R beginning with the first interim or annual reporting
      period of the company’s first fiscal year  beginning after June 15,
      2005.  The adoption of SFAS Statement No. 123 (Revised) is not
      expected to have an impact on the Company’s consolidated financial position or
      results of operations.














30








IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003








Note
      3 - Summary of Significant Accounting Policies (Continued)





New
      Accounting Pronouncements (Continued)





In
      December 2004, the FASB issued SFAS No. 153 “Exchanges of Nonmonetary Assets -
      An Amendment of APB Opinion No. 29”.  This new standard is the result
      of a broader effort by the FASB to improve financial reporting by eliminating
      differences between GAAP in the United States and GAAP developed by the
      International Accounting Standards Board (IASB).  As part of this
      effort, the FASB and the IASB identified opportunities to improve financial
      reporting by eliminating certain narrow differences between their existing
      accounting standards.  Statement 153 amends APB Opinion No. 29,
“Accounting for Nonmonetary Transactions”, that was issued in
      1973.  The amendments made by Statement 153 are based on the principle
      that exchanges of nonmonetary assets should be measured based on the fair value
      of the assets exchanged.  Further, the amendments eliminate the narrow
      exception for nonmonetary exchanges of similar productive assets and replace
      it
      with a broader exception for exchanges of nonmonetary assets that do not have
      “commercial substance.”  Previously, Opinion 29 required that the
      accounting for an exchange of a productive asset for a similar productive asset
      or an equivalent interest in the same or similar productive asset should be
      based on the recorded amount of the asset relinquished.  The
      provisions in Statement 153 are effective for nonmonetary asset exchanges
      occurring in the fiscal periods beginning after June 15, 2005.  The
      adoption of SAFS Statement No. 153 is not expected to have an impact on the
      Company’s consolidated financial position or results of operation.





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.  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.





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 $18.4 million.





Under
      this borrowing facility, interest  is calculated at .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 .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.







31


IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003





Note
      4 - Credit Arrangements (Continued)





As
      of
      December 31, 2005, borrowings under this credit agreement were approximately
      $7.9 million.  As of December 31,2005, maximum additional available
      borrowings under the line of credit were approximately $1.1 million, subject
      to
      certain borrowing base limitations.  The Company was in compliance with all
      the financial covenants during the year-ended December 31, 2005 except the
      debt
      service coverage ratio.  This covenant was waived by the bank for the
      year-ended December 31, 2005.





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% noncumulative 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.








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 2005, 2004 and 2003, the Company’s purchases from this
      manufacturer were approximately $3,284,000, $7,887,000 and $7,394,000,
      respectively.  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
      2005  were approximately $521,000.





The
      Company uses outside entities to pursue most of its sales, because it has proven
      to be both effective and economical.  The stakeholders of a primary
      outside sales entity are an officer of the Company and a family member of such
      officer.





Commission
      expense of the Company associated with this entity for the years 2005, 2004
      and
      2003 was approximately $619,000, $688,000 and $569,000,
      respectively.  Selling expenses such as salaries, travel,
      entertainment etc. are borne directly by the sales entity.











32























IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003





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 2005 of 7.5% and increased periodically
      through the year reflecting increases in the prime rate to 9.5% at year
      end.  Interest was accrued and paid at a rate of 7.5% and 10.0%
      in  2004 and 2003 respectively.








Note
      8 - Income Taxes





The
      following table summarizes income taxes (benefits):





(In
      Thousands)





Year
                Ended December 312005
            2004
            2003Current
            U.S.
                federal
            $           
                (3)
            $           
                -
            $           
                -U.S.
                state
            -
            -
            -Other
            -
            -
            -(3)
            -
            -DefferedU.S.
                federal
            -
            -
            -U.S.
                state
            -
            -
            -Other
            -
            -
            --
            -
            -Income
                Tax Expense
            (3)
            -
            -





The
      differences between the U.S. federal statutory tax rate and the Company’s
      effective tax rate are as follows:





Year
                Ended December 312005
            2004
            2003U.S.
                federal statutory tax rate
            34%
            34%
            34%Change
                in valuation allowance
            (35)
            (35)
            (35)Other
            1
            1
            1Consolidated
                Effective Tax Rate
            -
                %
            -
                %
            -
                %











33








IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003





Note
      8 - Income Taxes (Continued)





The
      components of deferred income taxes as of December 31, are as
      follows:





(In
      Thousands)





2005
              
              
              2004Deferred
                  Tax AssetsNet
                  operating and capital loss  carry forward
              
              $
              2,951
              
              
              $
              2,682Accounts
                  receivable
              
              
              277
              
              
              
              232Inventories
              
              
              488
              
              
              
              464Property
                  and equipment
              
              
              203
              
              
              
              212Accrued
                  expenses
              
              
              75
              
              
              
              -Deferred
                  Tax LiabilityAccrued
                  expenses
              
              
              -
              
              
              
              (155
              )3,994
              
              
              
              3,435Less:  Valuation
                  allowance
              
              
              (3,838
              )
              
              
              (3,279
              )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 $6,200,000 of net operating loss carry forward
      available for immediate use as of December 31, 2005.  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 $7,600,000.  This net operating loss carryforward will
      expire through 2023.


.





Note
      9 - Supplemental Cash Flow Information





(In
                  Thousands)
              Year
                  Ended December 312005
              2004
              2003Cash
                  paid for interest
              $           
                  409
              $           
                  334
              $           
                  297





34











IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003





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 $31,000, $30,000 and $61,000 in 2005, 2004 and 2003,
      respectively.








Note
      11 - Significant Customers





The
      Company derived 44% and 12% of its net sales from two customers during
      2005.  The Company derived 44% and 18% of its net sales from two
      customers during 2004 and 36%, 20% and 12% from three customers in 2003. The
      receivable balances for significant customers were $5,817,000 and $7,439,000
      as
      of December 31, 2005 and 2004, 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, 2005,
      there has been no response from counsel for the class action lawsuit or from
      the
      lead plaintiff.














35






















IWI
      Holding Limited


Notes
      to Consolidated Financial Statements





Years
      Ended December 31, 2005, 2004 and 2003





Note
      12 - Commitments and Contingencies  (Continued)





Operating
      Leases





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 January 2007.





The
      future minimum lease payments required under this lease as of December 31,
      2005
      are as follows:








Year
      Ending December
      31:


2006           
      $ 184,000


2007           
      16,000


$  200,000





Rent
      expense included in the accompanying statements of operations amounted to
      $238,000, $221,000 and $187,000 for 2005, 2004 and 2003,
      respectively.





Employment
      Agreements





The
      Company has an employment agreement with an officer expiring on July 31,
      2006.  The agreement includes provisions for severance payments for
      the longer of one year 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, 2005  approximates $163,000.










36






















Schedule
      l


IWI
      Holding Limited


Condensed Financial Information of
      Registrant


Balance
      Sheets


December
      31, 2005 and 2004








Assets
              
              2005
              
              
              2004Cash
              
              $
              1,000
              
              
              $
              1,000Due
                  from affiliate
              
              
              500,000
              
              
              
              500,000Investments
                  in wholly owned subsidiaries
              
              
              969,000
              
              
              
              1,161,000Total
                  Assets
              
              $
              1,470,000
              
              
              $
              1,662,000Stockholders’
                  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
              
              
              (14,621,000
              )
              
              
              (14,429,000
              )$
              1,470,000
              
              
              $
              1,662,000Statements
                  of Income and Accumulated Deficit2005
              
              
              2004Equity
                  in net (loss) income of subsidiaries
              
              $
              (192,000
              )
              
              $
              231,000Accumulated
                  deficit, beginning of year
              
              
              (14,429,000
              )
              
              
              (14,660,000
              )Accumulated
                  deficit, end of year
              
              $
              (14,621,000
              )
              
              $
              (14,429,000
              )
 
  37





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.











38




Schedule
      ll


IWI
      Holding Limited


Valuation
      and Qualifying Accounts


Years
      Ended December 31, 2005, 2004 and 2003





Description
              
              Balance
                  at Beginning of Period
              
              
              Additions
                  Charged to Cost and Expenses
              
              
              Additions
                  Charged to Other Accounts
              
              
              Deductions
              
              
              Balance
                  at End of PeriodYear
                  Ended December 31,
                  2003Allowance
                  for
                Doubtful
                  Accounts
              
              $
              568,000
              
              
              
              (32,000
              )
              
              
              -
              
              
              
              4,000
              (1)
              
              $
              532,000Inventory
                  Valuation
                Allowance
              
              $
              1,073,000
              
              
              
              388,000
              
              
              
              -
              
              
              
              633,000
              (2)
              
              $
              828,000Deferred
                  Income Tax
                Valuation
                  Allowance
              
              $
              3,612,000
              
              
              
              -
              
              
              
              -
              
              
              
              15,000
              (3)
              
              $
              3,597,000Year
                  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
              
              
              
              -
              
              
              
              -
              
              
              $
              3,838,000





(1)           
      Write-off of uncollectible accounts


(2)           
      Inventory losses realized


(3)           
      Decreases in deferred tax assets