SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F
(Mark One)

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

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

                   For the Fiscal Year Ended December 31, 1998

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 [No Fee Required]

        For the transition period from ______________ to _______________.

                           Commission File No. 0-25108

                               IWI 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 Offices


Securities Registered Pursuant to Section 12(b) of the Act:

      Title of Each Class              Name of Each Exchange on Which Registered
     ---------------------            ------------------------------------------
              None                                       None


Securities 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 June 15, 1997,  the Registrant had  outstanding  2,554,700  shares of
Common Stock and 3,644,880 shares of Preferred Stock.

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Exchange Act during the past
twelve (12) months (or for such shorter  period that the registrant was required
to file such reports);  and (2) has been subject to such filing requirements for
the past  ninety  (90) days.  Yes X  No
                                 ---   ---

     Indicate by check mark which  financial  statement  item the registrant has
elected to follow. Item 17    Item 18  X
                          ----       -----

                                       1
<PAGE>


                                TABLE OF CONTENTS

                                                                          Page
PART I                                                                   ------

         ITEM 1.  DESCRIPTION OF BUSINESS.............................      3
         ITEM 2.  DESCRIPTION OF PROPERTY.............................      5
         ITEM 3.  LEGAL PROCEEDINGS...................................      6
         ITEM 4.  CONTROL OF REGISTRANT...............................      6
         ITEM 5.  NATURE OF TRADING MARKET............................      6
         ITEM 6.  EXCHANGE CONTROLS AND OTHER
                  LIMITATIONS AFFECTING SECURITY HOLDERS..............      7
         ITEM 7.  TAXATION............................................      7
         ITEM 8.  SELECTED CONSOLIDATED FINANCIAL DATA................      8
         ITEM 9.  MANAGEMENT'S DISCUSSION AND ANALYSIS
                  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....      8
         ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT................     10
         ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS..............     13
         ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM
                  REGISTRANT OR SUBSIDIARIES..........................     14
         ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN
                  TRANSACTIONS........................................     14

PART II

         ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED..........     15


         PART III

         ITEM 15. DEFAULTS UPON SENIOR SECURITIES.....................     15
         ITEM 16. CHANGES IN SECURITIES AND CHANGES IN
                  SECURITY FOR REGISTERED SECURITIES..................     15

PART IV

         ITEM 17. FINANCIAL STATEMENTS................................     15
         ITEM 18. FINANCIAL STATEMENTS................................     15
         ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS...................     15

                  SIGNATURES..........................................     17



                                       2
<PAGE>


                                     PART I


ITEM 1.  DESCRIPTION OF BUSINESS

     This  report  contains  forward  looking  statements  within the meaning of
Section  27A of the  Securities  Act of 1933,  as amended and Section 21E of the
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 a
major customer or interruption in supplies..

General

     The Company,  through its  wholly-owned  subsidiary,  Imperial World,  Inc.
("Imperial")  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.  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 made under the trade
name of "World Pacific Jewelry".  Customers of the Company are principally large
retail establishments with jewelry departments and mass media marketers. Despite
the downturn in its U.S.  sales,  the Company  believes  that as a result of its
cost cutting, it is competitively positioned in the jewelry industry.

     In connection with  management's  plan to increase  liquidity,  the Company
sold its Canadian  subsidiary,  DACO Manufacturing Ltd.,  effective as of August
31, 1998.

Products and Pricing

     The Company's principal products are rings, pendants, earrings,  bracelets,
necklaces,  pins and brooches made of diamonds,  other precious or semi-precious
stones,  pearls, silver and gold in addition to the more moderately priced gold,
silver and costume  jewelry.  The Company's  products are currently sold in over
7,000 retail outlets.  The average  wholesale price for the majority of products
is approximately $65 with prices ranging from approximately $20 to $500.

Purchasing

     The Company imports the majority of its jewelry from the People'  Republic
of China ("PRC"),  Hong Kong,  India and Thailand.  Cultured pearls are imported
from Japan,  the PRC and Hong Kong and  freshwater  pearls are imported from the
PRC. The imported pearls are assembled by the Company into various pearl jewelry
products.  The Company  purchases  jewelry from a number of  suppliers  based on
quality, pricing and available quantities.


                                       3
<PAGE>


     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  assembled  state from
suppliers in the PRC, Hong Kong, India, and Thailand, manufacturing and assembly
operations  conducted  by the  Company  are  limited to  designing  jewelry  and
assembly of pearl products.  Upon completing a design, the Company provides such
design to its suppliers, who 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  manufacturing and 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.

Marketing

     The  primary  marketing  efforts are product  design and  customer  support
services.  The products are sold through both independent sales  representatives
on a  commission  basis and by in house sales  personnel.  Although  independent
representatives  may also sell other  products,  they do not sell products which
compete  with  those  of the  Company.  The  Company  supports  the  independent
representatives  with internal  account  executives who have selling and account
management responsibilities.

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.,  catalog  showrooms  and  various  specialty  marketers
including The Home Shopping Network,  Inc. J.C. Penney Company,  Inc.  accounted
for  approximately  33% of net  sales  in 1998.  The  Company  has no  long-term
contracts with any customers,  however, each of its large volume purchasers have
been  customers  for at least five  years.  The  following  table sets forth the
approximate  percentage  of net  sales  for the major  market  segments  for the
periods indicated.


                                       4
<PAGE>

                                       Year Ended
                                      December 31,


                            1996         1997        1998

Jewelry retail stores       15.2%        22.6%       17.8 %
Specialty markets           13.6          7.1         4.6
Mass merchandisers          25.7          6.2        21.3
Department stores           35.9         64.6        55.1
Catalog showrooms            9.6         (0.5)        1.2
                           -----        -----       -----
      Total                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,  perceived  high value and  quality in  relation to
price.

     Jewelry  stores alone  account for an estimated $21 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.  The rise in  number of women in the  workforce  has  increased  the
demand for women's business attire, including jewelry.

     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.

Employees

     As of June 15, 1999,  the Company had 44  employees,  including 3 executive
officers, 3 persons in sales and merchandising,  29 persons in operations, and 9
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.

ITEM 2.  DESCRIPTION OF PROPERTY

     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.  Under the 10 year lease which commenced in November, 1993,
and modified in November 1998, future minimum annual lease payments with respect
to the Company's Westmont, Illinois facilities range from approximately $122,000
to $133,000. At the expiration of the lease, the Company has the option to renew
for an additional five years.


                                       5
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     In  September  1996,  Robert J. Rosan 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's   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 Company has denied all  allegations  and through  counsel is vigorously
defending  all  claims.  A third  party  action has also been filed  against the
underwriter  which is  pending  in this  matter.  Since this cause of action was
filed, discovery has been conducted by the parties to the suit and the matter is
currently  waiting  further  action the state  courts of New York.  The  Company
believes that it has valid defenses against this claim and that such are without
merit.

ITEM 4.  CONTROL OF REGISTRANT

     The  following  table  is  furnished  as of  June  15,  1999,  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.


<TABLE>

Name and Address            Amount and Nature of       Title of     Percent of     Percent of
of Beneficial Owner         Beneficial Ownership        Class        Class         Voting Power
-------------------        ----------------------      -------      -------       -------------
<S>                        <C>                         <C>        <C>            <C>

Bamberg Company Limited           918,750               Common        35.96%        20.99%
Bamberg Company Limited         3,644,880            Preferred          100%        41.64%
Joseph K. Lau                      15,000               Common          .59%          .34%
Richard J. Mick                    27,500               Common         1.08%          .63%
Norman S.W. Chui                        0                                 -             -
Connie S. Yui                           0                                 -             -
Joseph A. Benjamin                      0                                 -             -
Samuel Lau                              0                                 -             -
                                 --------                           -------       --------
All Officers and Directors
  as a group (2) persons           42,500               Common         1.67%          .97%

</TABLE>

ITEM 5. NATURE OF TRADING MARKET

     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.  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 prior two years.


                                   1998                           1997
                                  ------                         ------
                            High            Low             High          Low
                           ------          -----           ------        -----
First Quarter              $.2500        $ .0625           $1.046        $.812
Second Quarter              .3125          .1094             .781         .437
Third Quarter               .1250          .1250             .500         .250
Fourth Quarter              .1250          .0100             .437         .094

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

     At June 29, 1999, the bid price of the Common Stock was $0.5.

     As of June 15, 1999, there were  approximately  1,456 beneficial holders of
the Common Stock of the  Company,  nearly all of which are believed to be in the
United States.

ITEM 6.  EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY-HOLDERS

     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.

ITEM 7.  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.

     On  September  5, 1997,  the  Commissioner  of  Internal  Revenue  issued a
deficiency notice for calendar year 1993 against the Company for $9,659,799 plus
interest and penalties.  On December 10, 1997, the Company filed a petition with
the United States Tax Court challenging this assessment.  On March 12, 1999, the
United  States Tax Court  entered  its  decision  that there were no  additional
income taxes due, nor were any interest or penalty payable.  Accordingly, all of
the issues relative to 1993 have now been resolved.


                                       6
<PAGE>

ITEM. 8  SELECTED CONSOLIDATED FINANCIAL DATA

(In thousands, except share data)
<TABLE>
                                                            Year Ended December 31,
                                               -----------------------------------------------------
                                                1994       1995         1996       1997        1998
                                               ------     -----        ------     ------      ------
<S>                                            <C>         <C>         <C>         <C>        <C>

Statement of Income Data:

Net Sales                                    $41,902    $41,710     $30,840     $25,523    $16,337
Cost of sales                                 37,725     34,024      25,809      24,018     12,650
Gross profit                                   9,177      7,686       5,031       1,505      3,687
Operating expenses                             5,831      8,798      10,221      10,821      6,033
Income (loss) from operations                  3,346     (1,112)     (5,190)     (9,316)    (2,346)
Other income (expense) - net                    (267)      (901)     (1,053)       (832)      (430)
Income (loss) before income taxes              3,079     (2,013)     (6,243)    (10,148)    (2,776)

   Income taxes (benefit)                        788       (629)       (307)       ( 14)      ( 67)
   Net income (loss)                        $  2,291    $(1,384)   $ (5,936)   $(10,134)   $(2,709)
   Net income (loss) per common share (1)   $   2.34    $  (.53)   $  (2.25)   $  (3.96)   $ (1.06)
Cash distributions per common share (1)     $      -    $     -    $      -    $      -    $     -
Weighted average number of common
    shares outstanding (1)                   980,394  2,625,873   2,625,873   2,558,217  2,554,700

                                                             Year Ended December 31,
                                             -----------------------------------------------------
                                             1994       1995         1996       1997         1998
                                             -----     ------       ------     ------       ------
Balance Sheet Data:

Working capital                           $16,064    $ 16,682    $ 12,038    $  2,926     $   470
Total assets                               31,695      44,137      29,768      11,155       6,569
Long-term debt                                  0         556         204           0           0
Shareholders' equity                       20,035      20,288      14,287       4,124       1,415

</TABLE>

(1)  Per share amounts  reflect  retroactively  for the periods  indicated,  the
     March 21, 1994  reorganization  involving  an exchange of  1,225,000  newly
     issued Common Shares for the previously  issued share of $1U.S.  Common and
     the return and retirement of 306,250 of such shares on October 27, 1994.


ITEM 9. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
       OF OPERATIONS

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.


                                       7
<PAGE>


<TABLE>
                              1996                      1997                        1998
                    -----------------------     ----------------------     ---------------------
                    Amount%  Sales%  Change     Amount% Sales%  Change     Amount% Sales% Change
                    -------  ------  ------     ------- ------  ------     ------- ------ ------
<S>                 <C>      <C>     <C>       <C>       <C>     <C>      <C>      <C>    <C>

Net sales           $30,840  100.0   -26.1     $25,523   100.0   -17.2    $16,337   100.0  -36.0
Gross Profit          5,031   16.3   -34.2       1,505     5.9   -70.1      3,687    22.6  144.0
Operating
   expenses          10,221   33.1   +16.2      10,821    42.4     5.9      6,033    37.0  -44.2
Income (loss) from
    operations       (5,190) (16.8) -366.7      (9,316)  (36.5)  -79.5     (2,346)  (31.1)  74.8
Income (loss) before
    income taxes     (6,243) (20.2)  -10.1     (10,148)  (39.8)  -62.6     (2,776)  (34.3)  72.6
Income taxes
    (benefit)          (307)  (1.0)  -51.2         (14)      -   -95.4        (67)    0.3  378.6
Net income (loss)    (5,936) (19.2) -328.9     (10,134)  (39.7)  -70.7     (2,709)  (34.6)  73.3
Net income (loss)
    per common
    share            $(2.25)                    $(3.96)                    $(1.06)
                      ======                     ======                     ======
Weighted
    average number
    of shares
    outstanding       2,626                      2,558                      2,555
                      =====                      =====                      =====
</TABLE>

     The  Company's  sales are  generated  through  the  wholesaling  of jewelry
products to the following distinct groups:

                          1994      1995        1996        1997         1998
                          ----      ----        ----        ----         ----
Jewelry retail stores     17.5%     16.1%       15.2%       22.6%        17.8%
Specialty markets         13.0      10.0        13.6         7.1          4.6
Mass merchandisers        37.9      36.4        25.7         6.2         21.3
Department stores         25.5      28.1        35.9        64.6         55.1
Catalog showrooms          6.1       9.4         9.6        (0.5)         1.2
                         ------    ------      ------      ------       ------
Total                    100.0%    100.0%      100.0%      100.0%       100.0%

      Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Net Sales. Net sales decreased by $9.2 million,  or 36% to $16.3 million in
1998,  this  decrease  was caused by lower sales in the  domestic  market  ($3.6
million) and the  Company's  sale of the  Company's  Canadian  subsidiary,  DACO
Manufacturing  Ltd.,  ($5.6 million).  The sale this subsidiary was completed on
August 31,  1998.  The  domestic  sales  decline of $3.6  million was  primarily
attributable  to lower sales to the retail jewelry stores and department  stores
target market.

     Gross  Profit.  Gross  profit  increased by $2.2 million to $3.7 million in
1998. The domestic or ongoing  operations gross profit increased by $3.5 million
which was partially offset by the decreased gross profit level from the Canadian
Subsidiary of $1.3 million, primarily resulting from its divestiture.

     Loss from Operations. The loss from operations decreased by $7.0 million to
a loss of $2.7 million in 1998.  This  reduction in operating loss was reflected
both domestically and in the Canadian  operation,  $5.2 million and $1.8 million
respectively.  The domestic  operating  loss included a gain on the sale of DACO
Manufacturing  LTD of $110,000.  Total operating costs decreased $2.4 million of
which  $1.6  million  was  from  ongoing  or  domestic  operations,   reflecting
additional efficiencies and cost reductions implemented in 1998, and $.8 million
from Canadian operations.


                                       8
<PAGE>

     Net Loss.  The net loss for 1998 of $2.7 million  compared to $10.1 million
in 1997 reflects an improvement  of $7.4 million.  This decrease in the 1998 net
loss was  primarily  attributable  to the  increase in gross  profit  levels and
decrease in operating costs as described  above. In addition,  interest  expense
decreased  $.4  million,  of  which  $.3  million  is  from  ongoing  operations
reflecting reduced financing requirements.

      Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

     Net Sales.  Net sales decreased by $5.3 million,  or 17.2% to $25.5 million
in 1997. Of this decrease,  all but $.1 million represents lower sales levels in
the domestic market. This decrease of $5.2 million relates to a general decrease
in sales at all targeted  markets with the  exception of jewelry  retail  stores
which increased slightly during 1997.

     Gross  Profit.  Gross  profit  decreased by $3.5 million to $1.5 million in
1997.  The  1997  level  reflects  a  combination  of  lower  sales  volume  and
approximately  $3.6 million in losses from the inventory  reduction plan.  Gross
profit attributable to DACO increased in 1997 $.3 million.

     Loss from Operations. The loss from operations increased by $2.8 million to
a loss of $9.3  million in 1997.  This amount  includes  $0.9  million  from the
provision  for bad  debts  (principally  Montgomery  Ward and  Company)  and the
recording  of a loss on assets  held for  disposal of $2.3  million  against the
assets of it's Canadian  operations.  (See Note 4 of the Consolidated  Financial
Statements)  Total  operating  costs,  excluding  the  loss of  assets  held for
disposal,  decreased $1.7 million as management implemented cuts to more closely
match the Company's current operating level.

     Net Loss. The net loss for 1997 was $10.1 million  compared to $5.9 million
in 1996.  The increase in the 1997 net loss was  primarily  attributable  to the
decrease in gross profit levels and increased loss from  operations as described
above.  The  interest  expense  for 1997  decreased  $.4  million to $.8 million
reflecting  reduced  financing  requirements.  This  however,  was  offset  by a
reduction in tax benefit from $.3 million in 1996 to $14 Thousand in 1997.

         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,  short-term
borrowings  under bank lines of credit,  loans from  affiliates  and in 1994 and
1995,  the proceeds from an IPO. The Company's  working  capital at December 31,
1998 was $.5 million as compared to $2.9 million at December 31, 1997.

     On May 19, 1999, the Company executed a financing agreement effective as of
May 24, 1999, with Business Alliance Capital Corp., an asset based lender. Under
the terms of this  agreement,  the Company is  authorized to borrow a maximum of
$2,500,000 against certain assets, including eligible inventory and receivables.
The  Company  used  certain of these loan  proceeds  to pay off the bank so that
Business  Alliance  Capital Corp. is now the Company's sole lender.  The Company
believes  that  this  line of credit  will be  sufficient  for at least the next
twelve months.


                                       9
<PAGE>

     The  following  table  summarizes  cash provided by (used in) the Company's
business activities for the past three years:

                                      1996          1997           1998
                                   -----------  ------------   ------------
(Dollars in thousands)
Operating activities                $6,773         $4,137          $ 928
Investing activities                     -           (605)           494
Financing activities                (6,763)        (3,700)        (1,378)
Increase (decrease) in cash             10           (168)            48

     Operating Activities. The net cash generated in 1998 was principally due to
the  decrease in accounts  receivable  of $1.4 million and  inventories  of $2.3
million, of which approximately $2.1 million funded the net loss for the year.

     Investing  Activities.  Cash generated in 1998 primarily reflects primarily
the cash proceeds from the sale of DACO Manufacturing Limited of $610,000..

     Financing Activities.  During 1998, the Company reduced amounts outstanding
under its lines of credit by $1.5  million to $1.2 million at December 31, 1998.
Notes payable to employees increased $125,000.

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. Net sales in the third quarter of
1998 include the results from DACO through  August 31, 1998.  The fourth quarter
1998 does not reflect any results from DACO.  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,
                    ------------------------------------------------------------
                           1996                   1997                 1998
                         -------                --------             ---------
                    Amount       %         Amount        %     Amount        %
                    ------     -----       ------     -----    ------      -----
First Quarter      $ 8,415       27.3     $ 6,051     23.7     $ 4,687      28.7
Second Quarter       7,286       23.6       5,329     20.9       5,242      32.1
Third Quarter        4,085       13.3       5,955     23.3       3,234      19.8
Fourth Quarter      11,054       35.8       8,188     32.1       3,174      19.4
                    ------      -----      ------    -----      ------     -----
Total              $30,840      100.0     $25,523    100.0     $16,337     100.0
                    ======      =====      ======    =====      ======     =====

                                       10
<PAGE>

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.  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 10. DIRECTORS AND OFFICERS OF REGISTRANT

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               Position

Joseph K. Lau           51      Chairman of the Board of Directors; President of
                                IWI Holding Limited, Principal Financial Officer
Richard J. Mick         57      Vice President - Sales and Director
Norman S.W. Chui        27      Senior Manager/Secretary and Director
Connie S. Yui           48      Inventory Manager and Director
Joseph A. Benjamin      56      Director
Samuel Lou              45      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.  Norman S. W. Chui is
the nephew of Joseph K. Lau.

     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. 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.

     Norman  S.W.   Chui   joined  the  Company  in  December   1997  as  Senior
Manager/Secretary  and  Director.  Prior to joining the Company,  Mr. Chui was a
consultant with Eclipse  Information Systems of Darien, IL and prior thereto was
a consultant for Arthur Andersen & Co. which he joined following graduation from
the University of Illinois in 1994.


                                       11
<PAGE>

     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 with his own accounting firm in Chicago, Illinois.

     Samuel Lou was elected to the Board of Directors in December  1997. Mr. Lou
is a business consultant with his own firm in Chicago, Illinois.

Employment Contracts

     Joseph K. Lau is employed by The  Company  pursuant to a contract  expiring
July 31, 2001. The contract provides for a base salary of $200,000 per year, and
bonuses as determined by the Compensation Committee of the Board of Directors.

ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS

     The aggregate  cash  compensation  paid by the Company to all directors and
officers as a group during 1998 was approximately $615,000.

     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.

     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 NASDAQ Stock Exchange,  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, options to purchase 20,000 shares of Common
Stock had been granted under the Option Plan.

     During 1995,  the Company  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  had been  granted  under the
Non-Qualified Stock Option Plan as of December 31, 1998.


                                       12
<PAGE>

     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% of the first 2% of compensation  deferred,  by making a cash
payment  to the Plan on  behalf of such  participant.  As of July 1,  1998,  the
matching  portion was  increased to 50% of the first 6% of  compensation  that a
particpant contributes.  The matching is discretionary,  and is decided annually
by the Board of Directors.  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  1998  and  1997  of  $31,000  and  $15,000,
respectively.

ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

     The Company  presently has outstanding  incentive stock options to purchase
20,000 shares of the Company's Common Stock, at $8.50 per share.  Theses options
expire in January of 2000.  No options are held by any  officers or directors of
the Company.

ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN 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.

     Rhine  Jewellery  Limited  (Rhine),  located in Hong Kong and the Company's
principal  supplier for 1997 and 1996, is a subsidiary of Rhine Holding Limited,
a former  major  stockholder  of the company.  For the years ended  December 31,
1998,  1997 and 1996,  the  Company's  purchases  from Rhine were  approximately
$900,000, $4,200,000 and $4,600,000,  respectively.  During 1998, Rhine Holdings
Limited filed for bankruptcy in Hong Kong and purchases from Rhine ceased.


                                       13
<PAGE>

     During  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 year ended December 31, 1998, the Company's purchases from this
manufacturer were approxiately $700,000.

                                     PART II

ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED

          Not applicable.


                                    PART III

ITEM 15. DEFAULTS UPON SENIOR SECURITIES

          None reportable.


ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES

          None reportable.

                                     PART IV

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                                            Page
        --------------------                                            ----

        Report of Independent Auditors..................................  F-1
        Consolidated Balance Sheets as of  December 31, 1998 and 1997...  F-2
        Consolidated Statements of Operations For Each of the Years
            in the Three-Year Period Ended December 31, 1998............  F-3
        Consolidated Statements of Shareholders' Equity for Each of the
            Years in the Three-Year Period Ended December 31, 1998......  F-4
        Consolidated Statements of Cash Flows for Each of the Years in
            the Three-Year Period Ended December 31, 1998...............  F-5

                                       14
<PAGE>

        Notes to Consolidated Financial Statements......................  F-7

                     Financial Statement Schedules (1)..................

            I - Condensed Financial Information of Registrant........... F-25
            II - Valuation and Qualifying Accounts...................... F-28


(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.

     (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)
10.9 *   Lease Agreement relating to facilities of DACO Manufacturing (4)
10.10    Employment Contract with Joseph K. Lau
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
27.1     Financial Data Schedule
*        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.


                                       15
<PAGE>
                                   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 LIMITED


                                         By: /s/ Joseph K. Lau
                                            -----------------------------
                                              Joseph K. Lau
                                              Chairman, Chief Executive Officer
                                              and Principal Accounting Officer




Dated: July 1, 1999


                                       16
<PAGE>


                          INDEPENDENT AUDITOR'S REPORT



 The Board of Directors
 IWI Holding Limited
 Westmont, Illinois


We have  audited  the  accompanying  consolidated  balance  sheet of IWI HOLDING
LIMITED as of December  31, 1998,  and the related  consolidated  statements  of
operations,  stockholders'  equity and cash flows for the year then  ended.  Our
audit 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
financial statements based on our audit. The financial statements of the Company
for the years ended  December 31, 1997 and 1996,  were audited by other auditors
whose report, dated February 20, 1998, except for Note 4 and paragraph 1 of Note
6 as to which the date was June 26,  1998,  expressed  an  unqualified  opinion,
assuming the Company continued as a going concern.

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

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

The accompanying  financial  statements have been prepared  assuming IWI HOLDING
LIMITED will continue as a going concern. As more fully described in Note 2, the
Company has incurred operating losses in 1998, 1997 and 1996. These losses raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The financial  statements do not include any adjustments to reflect the possible
future  effects  on the  recoverability  and  classification  of assets  and the
amounts and  classification  of liabilities  that may result from the outcome of
this uncertainty.




                                          /s/Blackman Kallick Bartelstein, LLP

Chicago, Illinois
February 12, 1999

Except for the first and third paragraphs of Note 5, as to which the date is May
24, 1999

                                      F-1
<PAGE>

                               IWI HOLDING LIMITED

                           Consolidated Balance Sheets
                        (In Thousands, Except Share Data)

                           December 31, 1998 and 1997


                                     ASSETS


                                                           1998         1997

Current Assets
    Cash                                                 $   82       $     38
    Accounts receivable, less allowance for doubtful
     accounts of $280 in 1998 and $642 in 1997            1,749          3,358
    Inventories                                           3,686          6,053
    Prepaid expenses                                        107            145
    Assets held for disposal                                  -            363
                                                         ------         ------
                  Total Current Assets                    5,624          9,957
                                                         ------         ------



Property and Equipment                                    2,623          2,637
    Less accumulated depreciation                        (1,678)        (1,439)
                                                         ------         ------
                  Property and Equipment, Net               945          1,198
                                                         ------         ------
                                                        $ 6,569       $ 11,155
                                                         ======         ======


         The accompanying notes are an integral part of the consolidated
                             financial statements.
                                      F-2
<PAGE>

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                              1998         1997
Current Liabilities

   Lines of credit                                          $ 1,217    $  2,720


    Notes payable                                               125           -
    Accounts payable - Trade                                  1,655       2,167
    Accounts payable to affiliated companies                  1,423       1,236
    Accrued liabilities                                         734         908
                                                             ------      ------
                  Total Current Liabilities                   5,154       7,031
                                                             ------      ------
Stockholders' Equity (Deficit)
    Preferred stock - $1 par value; authorized - 5,000,000
     shares; issued and outstanding - 3,644,880 shares        3,645       3,645
    Common stock - No par value;  authorized - 10,000,000
     shares; issued and outstanding - 2,554,700 shares            -           -
    Additional paid-in capital                               12,446      12,446
    Accumulated deficit                                     (14,676)    (11,967)
                                                             ------      ------
                  Total Stockholders' Equity                  1,415       4,124
                                                             ------      ------
                                                            $ 6,569    $ 11,155
                                                             ======      =====

                                      F-3
<PAGE>

                                                                       EXHIBIT B

                               IWI HOLDING LIMITED

                      Consolidated Statements of Operations
                        (In Thousands, Except Share Data)

                  Years Ended December 31, 1998, 1997 and 1996


                                                   1998       1997       1996
                                                  ------     ------     ------

Net Sales                                       $ 16,337   $ 25,523    $ 30,840

Cost of Sales                                     12,650     24,018      25,809
                                                 -------    -------     -------
Gross Profit                                       3,687      1,505       5,031

Selling, General and Administrative Expenses       6,143      8,521      10,221

(Gain) Loss on Assets Held for Disposal             (110)     2,300           -
                                                  -------    -------     -------
Loss from Operations                              (2,346)    (9,316)     (5,190)
                                                  -------    -------     -------
Other (Expense) Income
    Interest expense                                (430)      (832)     (1,225)
    Equity in joint venture                            -          -         172
                                                  -------    -------     -------
                 Total Other Expense, Net           (430)      (832)     (1,053)
                                                  -------    -------     -------
Loss Before Income Taxes                          (2,776)   (10,148)     (6,243)

Income Tax Benefit                                   (67)       (14)       (307)
                                                  -------    -------     -------
Net Loss                                        $ (2,709)  $ (10,134)   $(5,936)
                                                  =======    =======     =======
Net Loss Per Common Share                       $  (1.06)  $   (3.96)   $ (2.25)
                                                  =======    =======     =======
Weighted-Average Number of Common
 Shares Outstanding                          $ 2,554,700  $2,558,217 $2,635,830
                                               =========   =========  =========



         The accompanying notes are an integral part of the consolidated
                              financial statements.

                                      F-4
<PAGE>


                               IWI HOLDING LIMITED

                 Consolidated Statements of Stockholders' Equity
                        (In Thousands, Except Share Data)

                  Years Ended December 31, 1998, 1997 and 1996


<TABLE>

                                      Preferred Stock               Common Stock
                                 ------------------------    ------------------------
                                  Number of                   Number of
                                   Shares         Amount        Shares        Amount
                                 ----------      --------    -----------     --------
<S>                              <C>             <C>          <C>            <C>

Balance, January 1, 1996         3,644,880      $  3,645        2,643,750    $    -

Repurchase of Common Stock               -             -          (60,850)        -

Net Loss                                 -             -                -         -
                                 ---------       --------       ----------    ------
Balance, December 31, 1996       3,644,880         3,645        2,582,900         -

Repurchase of Common Stock               -             -          (28,200)        -

Net Loss                                 -             -                -         -
                                 ---------       --------       ----------    ------
Balance, December 31, 1997       3,644,880         3,645        2,554,700         -

Net Loss                                 -             -                -         -
                                 ---------       --------       ----------    ------
Balance, December 31, 1998       3,644,880     $   3,645        2,554,700    $    -
                                 =========       ========       ==========    ======

</TABLE>





         The accompanying notes are an integral part of the consolidated
                              financial statements.
                                      F-5
<PAGE>
                                                                      EXHIBIT C




     Additional
      Paid-in         Accumulated
      Capital           Deficit            Total

     $  12,540         $  4,103        $  20,288

           (65)               -              (65)

             -           (5,936)          (5,936)
       --------         --------         --------
        12,475           (1,833)          14,287

           (29)               -              (29)

             -          (10,134)         (10,134)
       --------         --------         --------
        12,446          (11,967)           4,124

             -           (2,709)          (2,709)
       --------         --------         --------
     $  12,446        $ (14,676)        $  1,415
       ========         ========         ========

                                      F-6
<PAGE>
                                                                      EXHIBIT D
                                                                      (Page 1)

                               IWI HOLDING LIMITED

                      Consolidated Statements of Cash Flows
                                 (In Thousands)

                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>

                                                               1998        1997        1996
                                                              ------      ------      ------
<S>                                                          <C>        <C>          <C>

Cash Flows from Operating Activities
    Net loss     $                                           (2,709)   $ (10,134)    $ (5,936)
    Adjustments to reconcile net loss to
     net cash provided by operating activities
        Depreciation and amortization                           252           955         479
        Loss on sale of assets                                    7             -           -
        Equity in joint venture                                   -             -        (172)
        Provision for doubtful accounts                         177           865         736
        Deferred income taxes                                     -            46         404
        (Gain) loss on assets held for disposal                (110)        2,300           -
        (Increase) decrease in
             Accounts receivable                              1,432         3,335       8,071
             Accounts receivable from affiliated company          -             -         899
             Inventories                                      2,340         4,837       3,938
             Refundable income taxes                              -           432          41
             Prepaid expenses                                    38           (58)        (17)
        Increase (decrease) in
             Straight acceptances payable                         -             -        (216)
             Accounts payable - Trade                          (512)         (100)       (580)
             Accounts payable to affiliated company             187           760        (408)
             Accrued liabilities                               (174)         (101)       (243)
             Income taxes payable                                 -             -        (223)
                                                            --------       -------     --------
                 Net Cash Provided by
                  Operating Activities                          928         4,137       6,773
                                                            --------       -------     --------
Cash Flows from Investing Activities
    Purchases of property and equipment                         (11)         (605)       (212)
    Proceeds from sale of equipment                               5             -         212
    Proceeds from sale of assets held for disposal              500             -           -
                                                            --------      --------     --------
                 Net Cash Provided by (Used in)
                  Investing Activities                          494          (605)          -
                                                            --------      --------     --------

</TABLE>

         The accompanying notes are an integral part of the consolidated
                              financial statements.

                                      F-7
<PAGE>

                                                                      EXHIBIT D
                                                                      (Page 2)

                               IWI HOLDING LIMITED

                      Consolidated Statements of Cash Flows
                                 (In Thousands)

                  Years Ended December 31, 1998, 1997 and 1996


<TABLE>

                                                          1998         1997        1996
                                                         ------       ------      ------
<S>                                                      <C>          <C>         <C>

Cash Flows from Financing Activities
    Borrowings from notes payable to employees          $  125       $    -     $     -
    Payments on lines of credit, net                    (1,503)      (2,964)     (6,156)
    Payments on notes payable to stockholders and
     payable to affiliate                                    -         (707)       (542)
    Repurchase of common stock                               -          (29)        (65)
                                                        -------      -------     -------
                 Net Cash Used in Financing Activities  (1,378)      (3,700)     (6,763)

Net Increase (Decrease) in Cash                             44         (168)         10

Cash, Beginning of Year                                     38          206         196
                                                        -------      -------     -------
Cash, End of Year                                       $   82       $   38     $   206
                                                        =======      =======     =======
</TABLE>



         The accompanying notes are an integral part of the consolidated
                             financial statements.

                                      F-8
<PAGE>


                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996



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  subsidiaries  (together,  the
Company)  import,  manufacture,  and wholesale  fine  jewelry.  The Company also
imports  pearls for  assembly and resale  through its wholly  owned  subsidiary,
Imperial World,  Inc.  (Imperial).  Substantially all of the Company's sales are
made in the United States.

NOTE 2 - GOING CONCERN

The accompanying  consolidated  financial  statements are prepared in accordance
with generally  accepted  accounting  principles on a going-concern  basis which
contemplates  that the Company will be able to realize its assets and  discharge
its liabilities in the normal course of business for the foreseeable future.

The Company has  incurred  significant  operating  losses since 1995 and, in the
opinion of management,  has inventory in excess of desired levels as of December
31, 1998.

The Company has reduced monthly  operating  expenses and continues an aggressive
inventory  reduction plan to maintain  liquidity and reduce inventory to desired
levels  (Note  3).  Management   expects  that  these  efforts  will  result  in
maintaining the liquidity  necessary for the  foreseeable  future.  However,  no
assurances  can be given that the Company will be  successful  in  accomplishing
these  objectives.  Further,  there can be no  assurance  that the Company  will
achieve  profitability.  The  Company's  continuation  as  a  going  concern  is
dependent upon attaining  future  profitable  operations and upon its ability to
maintain adequate financing or capital.  The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets and the amounts and classifications of liabilities that
may result from the outcome of this uncertainty.

                                      F-9
<PAGE>


                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

All significant intercompany transactions have been eliminated.

Inventories

Inventories,  primarily consisting of finished goods, are stated at the lower of
first-in, first-out (FIFO) cost or market.

As of December 31, 1997,  management determined that the Company's inventory was
in excess of its requirements  measured by its existing and anticipated level of
sales. Accordingly, based on the existing market conditions, inventory valuation
reserves  of  $1,800,000,  were  recorded  as of  December  31,  1997,  for  the
anticipated  losses  from the  completion  of the plans  initiated  to  maintain
liquidity and reduce  inventory to desired  levels.  These  inventory  reduction
plans were substantially completed as anticipated.

Net sales  during 1998  continued  at a level much lower than  anticipated,  and
management  initiated another inventory  reduction plan. An inventory  valuation
reserve of $1,778,000 was recorded as of December 31, 1998, for the  anticipated
losses from the completion of the plan during 1999,  which  management  believes
will be sufficient to provide for such losses.  However, it is possible that the
inventory  reduction  plan will not be  successful  or that  losses in excess of
those  recorded in the  financial  statements  will be  incurred.  Approximately
$673,000  of losses  were  recorded  during  1998 for the  future  reduction  of
inventory under these plans.

Depreciation

Property and equipment are stated at historical cost and  depreciated  primarily
on a straight-line  basis over their estimated useful lives.  Useful lives range
from five to ten years for  machinery  and equipment and ten years for leasehold
improvements.

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.

                                      F-10
<PAGE>



                              IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

The  Company's  financial  instruments  include  accounts  receivable,  accounts
payable,  accrued  liabilities,  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 generally  accepted
accounting   principles  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 has granted  stock options for a fixed number of shares to employees
with an  exercise  price  equal to the fair  value of the  shares at the date of
grant.  The Company  accounts for stock  option  grants in  accordance  with APB
Opinion No. 25,  "Accounting  for Stock Issued to Employees"  and,  accordingly,
recognizes no compensation expense for the stock option grants.

Advertising Costs

The Company expenses all advertising  costs as incurred.  Advertising costs were
approximately   $436,000,   $658,000  and  $814,000  in  1998,  1997  and  1996,
respectively.

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.  Gains or losses  during the year have been  included  in net
income (loss).

                                      F-11
<PAGE>


                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss Per Common Share

Effective in 1997, the Company adopted the provisions of FASB No. 128, "Earnings
Per  Share."  Loss per common  share is  computed  by  dividing  net loss by the
weighted-average  number of common shares  outstanding  during the period.  When
dilutive, stock options and warrants are included as share equivalents using the
treasury stock method in the  calculation of diluted  earnings per share.  Basic
and diluted net loss per common  share are the same for all years  presented  as
the common stock equivalents of the Company would be antidilutive.

Segment Information

In the fourth  quarter of 1998,  the  Company  adopted  Statement  of  Financial
Accounting  Standards No. 131,  "Disclosures about Segments of an Enterprise and
Related   Information."  This  statement   supercedes   Statement  of  Financial
Accounting  Standards  No. 14,  "Financial  Reporting for Segments of a Business
Enterprise,"  replacing the "industry  segment"  approach with the  "management"
approach.  The management approach designates the internal  organization that is
used by management for making operating  decisions and assessing  performance as
the  source  of the  Company's  reportable  segments.  This  statement  requires
disclosure of certain  information by reportable  segment,  geographic  area and
major customer.

The Company imports, manufactures 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 one reportable  segment
for purposes of this disclosure.


NOTE 4 - LOSS ON ASSETS HELD FOR DISPOSAL

In connection with management's plan to increase liquidity (Note 2), the Company
completed  the sale of its Daco  subsidiary  in August 1998.  As of December 31,
1997,  the  carrying  value of the net assets of Daco were reduced to fair value
(approximately $363,000) based on an estimate of the selling value less costs to
sell.  The selling value had been  determined  based on a written offer received
and accepted in principle by the Company on June 26, 1998.

                                      F-12
<PAGE>

                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 4 - LOSS ON ASSETS HELD FOR DISPOSAL (Continued)

The  following  details  the net  assets  of Daco as of  December  31,  1997 (in
thousands):

          Accounts receivable                           $      2,678
          Inventory                                            3,232
          Prepaid expenses                                        39
          Property and equipment                               1,111
          Deferred charges                                        82
          Notes payable                                         (186)
          Line of credit                                      (2,365)
          Accounts payable - Trade                            (1,174)
          Accrued liabilities                                   (708)
          Deferred income taxes                                  (46)
                                                               2,663

          Loss on assets held for disposal                    (2,300)

          Assets Held for Disposal                      $        363

A gain of $110,000 was recognized during 1998 based upon the final selling value
less costs to sell.  Daco had net sales of  approximately  $4.8  million,  $10.4
million, and $8.9 million in 1998, 1997 and 1996,  respectively,  and a net loss
of $299,000, $26,000 and $607,000 in 1998, 1997 and 1996, respectively.


NOTE 5 - CREDIT ARRANGEMENTS

Imperial has an agreement with a bank through various credit facilities, whereby
Imperial can borrow up to $10 million,  payable on demand.  The agreement can be
terminated  without  cause  by the  Company  or the bank  with 90 days'  written
notice.  The total credit  facility is governed by a formula,  as defined in the
agreement,  based principally on accounts  receivable and inventory levels.  The
agreement  provides,   among  other  things,  that  the  credit  facilities  are
collateralized by substantially all assets of Imperial.  The agreement  contains
certain  reporting  and  financial  covenants  which the  Company is required to
maintain. Under current covenants, Imperial may not declare or pay dividends, or
make loans or advances to Holding. As of May 24, 1999, the

                                      F-13
<PAGE>



                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 5 - CREDIT ARRANGEMENTS (Continued)

Company is not in compliance with certain reporting  covenants of this agreement
and has been operating under a forbearance agreement with the bank which expired
December 31, 1998,  and limited  borrowings to $1.3 million.  As of December 31,
1998 and 1997, the amount of restricted net assets of Imperial was approximately
$1.7 and $5.7 million, respectively.

Under the  demand  facility,  interest  is  calculated  at 5.00% over the bank's
reference  rate.  The line of credit  bore  interest  at 12.75% and 11.25% as of
December 31, 1998 and 1997, respectively, and borrowings as of December 31, 1998
were $1,217,124.

On May 24, 1999,  the Company  entered into an  agreement  with a new  financial
institution,  whereby  Imperial can borrow up to $2.5 million payable on demand.
As with the prior lender 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 assets of  Imperial.  Under this new
demand facility, interest is calculated at 3% over prime. The agreement contains
certain  reporting  and  financial  covenants  which the  Company is required to
maintain.  The  agreement can be terminated by the Company with 30 days' written
notice, or by the lender upon certain events as specified in the loan agreement.


NOTE 6 - STOCKHOLDERS' EQUITY

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 at that date. The preferred shares
have voting rights  equivalent  to one-half  vote per share,  and a $1 per share
liquidation preference.

On December 16, 1994, the Company issued 1,500,000 shares of its common stock at
$8.50 per share in an initial public offering (IPO). The proceeds received,  net
of commissions and other related expenses, were approximately $9.9 million.

                                      F-14
<PAGE>


                              IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996

NOTE 6 - STOCKHOLDERS' EQUITY (Continued)

The Company  granted an option to purchase  225,000 shares of common stock at an
exercise  price of $8.50 to the  underwriters.  This  option  was  exercised  on
January 30, 1995, with the Company receiving net proceeds of approximately  $1.6
million.  In  conjunction  with the IPO,  warrants to purchase an  aggregate  of
150,000  shares of common  stock at an exercise  price of $14.025 were issued to
the  representative of the underwriters of the IPO. The warrants are exercisable
for a period of four years beginning December 16, 1995.

In February 1996, the Company's Board of Directors  authorized the repurchase of
up to 350,000 shares of its common stock. As of December 31, 1998, 89,050 common
shares had been repurchased and retired.


NOTE 7 - STOCK OPTION PLANS

The Company has 150,000 shares of common stock reserved for options which may be
granted to  directors,  officers,  and key  employees  under a stock option plan
adopted in 1994.  The exercise  price of the options  shall not be less than the
greater of $8.50 per share or the fair market value of the stock on the date the
option is granted. The only options outstanding as of December 31, 1998 and 1997
were 20,000 and 80,000 shares,  respectively,  at an exercise price of $8.50 per
share granted in 1995. During 1998, 60,000 shares were canceled.

During 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.

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related interpretations
in accounting for its employee stock options  because,  as discussed  below, the
alternative  fair  value  accounting  provided  for under  Financial  Accounting
Standards  Board Statement No. 123,  "Accounting  for Stock-Based  Compensation"
(FASB 123),  requires use of option valuation models that were not developed for
use in valuing employee stock options.

                                      F-15
<PAGE>


                              IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996

NOTE 7 - STOCK OPTION PLANS (Continued)

Under APB 25, since the exercise  price of the Company's  employee  stock option
grants has equaled the estimated fair value of the underlying  stock on the date
of grant, no compensation expense is recognized. Pro forma information regarding
net  income  and  earnings  per share is  required  under  FASB 123 and has been
determined  as if the  Company  had  accounted  for its  stock  options  granted
subsequent to December 31, 1994,  under the fair value method of that Statement.
The fair value for these  options  was  estimated  at the date of grant  using a
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions:  risk-free interest rate of 7.8%; a dividend yield of zero percent;
and a weighted-average  expected life of the options of five to seven years. The
volatility  factor of the expected market price of the Company's common stock is
1.2.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  input  assumptions  including the expected  stock price  volatility.
Because the Company's employee stock options have characteristics  significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the vesting  period of the respective  option.  The
Company's pro forma net loss and pro forma net loss per share, respectively, for
the years ended December 31, 1998,  1997 and 1996 would be $2,752,000 and $1.07;
$8,985,000 and $3.42; and $6,028,000 and $2.29,  respectively.  Because FASB 123
is applicable only to options  granted  subsequent to December 31, 1994, its pro
forma impact will not be fully reflected until 1999.

The  weighted-average  exercise price of options  outstanding as of December 31,
1998 and 1997 is  $8.50.  The  weighted-average  remaining  contractual  life of
options outstanding as of December 31, 1998 is one year.

                                      F-16
<PAGE>


                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 8 - RELATED PARTY TRANSACTIONS

Rhine  Jewellery  Limited  (Rhine),  located  in Hong  Kong  and  the  Company's
principal  supplier for 1997 and 1996, is a subsidiary of Rhine Holding Limited,
a former  major  stockholder  of the company.  For the years ended  December 31,
1998,  1997 and 1996,  the  Company's  purchases  from Rhine were  approximately
$900,000, $4,200,000 and $4,600,000, respectively.

During 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 year ended December 31, 1998, the Company's purchases from this manufacturer
were approximately $700,000.


NOTE 9 - INCOME TAXES

The following table summarizes income taxes (benefits):

                                                Year Ended December 31
                                        1998              1997           1996
                                                     (In Thousands)
         Current
               U.S. federal         $      -          $     -           $ (48)
               U.S. state                  -              (90)              -
               Other                     (67)              30            (259)
                                       ------           ------          ------
                                         (67)             (60)           (307)
         Deferred                      ------           ------          ------
               U.S. federal                -                -               -
               U.S. state                  -                -               -
               Other                       -               46               -
                                       ------           ------          ------
                                           -               46               -
                                       ------           ------          ------
         Income Taxes               $    (67)        $    (14)        $  (307)
         Loss before income taxes      ======           ======          ======
               United States          (2,410)        $ (7,898)        $(5,818)
               Other                    (366)          (2,250)           (425)
                                       ------           ------          ------
                                    $ (2,776)        $(10,148)        $(6,243)
                                       ======          =======          ======

                                      F-17
<PAGE>

                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 9 - INCOME TAXES (Continued)

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

                                                     Year Ended  December 31
                                                  -----------------------------
                                                   1998        1997      1996
                                                  ------     --------   -------

U.S. federal statutory tax rate                   (34.0)%     (34.0)%   (34.0)%
Excess foreign income taxes (benefit)              (2.1)        1.0      (1.8)
State income taxes (net of U.S. federal income
 tax benefit)                                         -           -      (1.0)
Change in valuation allowance                      34.6        31.0      30.0
Other                                               (.9)        2.0       1.9

Consolidated Effective Tax Rate                    (2.4)%         -%     (4.9)%

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

                                                         1998         1997
                                                        ------       ------
                                                          (In Thousands)
             Deferred Tax Assets (Liabilities)
                  Loss carryforwards             $     5,390     $    4,385
                  Accounts receivable                    109            251
                  Inventories                            743            672
                  Property and equipment                 (72)          (128)
                  Other                                   12             (5)

                                                       6,182          5,175
                  Less: Valuation allowance           (6,182)        (5,221)

                  Net Deferred Tax Liability     $         -     $      (46)

The valuation  allowance  increased in 1998 primarily due to the increase in the
net operating loss carryforward.  For income tax purposes, the Company has a net
operating  loss  carryforward  of  approximately  $12.6  million,  which expires
through 2013, and a capital loss  carryforward  of  approximately  $2.3 million,
which expires in 2003.  Utilization  of the net operating loss  carryforward  to
offset  future  taxable  income  may  be  limited  in any  given  year  and  the
carryforwards  may expire prior to utilization,  due to a significant  change in
ownership during 1998.

                                      F-18
<PAGE>

                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996

NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION

                                                        Year Ended December 31
                                                     1998      1997        1996
                                                         (In Thousands)

Cash paid for income taxes                          $  -      $  11      $    -
Cash paid for interest                               477        867       1,302

Noncash investing and financing activities
  Receivable from affiliate for sale of investment
  in joint venture                                     -           -      1,402


NOTE 11 - EMPLOYEE BENEFIT PLAN

Imperial sponsors a  defined-contribution,  profit-sharing  plan (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 Plan has a voluntary 401(k) savings feature.  Participants may contribute up
to 15% of their  compensation to the Plan.  Imperial matches 50% of the first 2%
of compensation that a participant contributes. As of July 1, 1998, the matching
portion was increased to 50% of the first 6% of compensation  that a participant
contributes. The matching is discretionary, and is decided annually by the board
of directors.  Participant and  employer-matched  contributions  to the Plan are
100% vested.  Company  contributions  were  approximately  $31,000,  $15,000 and
$10,000 in 1998, 1997 and 1996, respectively.


NOTE 12 - SIGNIFICANT CUSTOMERS

The Company  derived 33%, 21% and 19% of its net sales from one customer  during
1998, 1997 and 1996, respectively.

                                      F-19
<PAGE>


                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996

NOTE 13 - COMMITMENTS AND CONTINGENCY

Litigation

The Company is a codefendant in a lawsuit  brought by a stockholder  who alleges
the  Company   misrepresented   its  financial  position  in  interim  financial
statements.  The  stockholder  has filed for class action  status and is seeking
damages of $11 million. The Company believes the allegation is without merit and
intends to vigorously defend the claim.

Operating Leases

Imperial  is  obligated  under a lease on its  operating  facility  for  minimum
rentals  as well as real  estate  taxes and  other  operating  expenses  through
October 2003, with an option for an additional five years.

The future minimum lease payments required under these leases as of December 31,
1998, approximated the following (in thousands):

           Year Ending December 31:
                                      1999            $         122
                                      2000                      125
                                      2001                      129
                                      2002                      133
                               Later years                      125
                                                             -------
           Total Minimum Lease Payments               $         634
                                                             =======

Rent expense included in the accompanying  statements of operations  amounted to
$414,340, $463,000 and $470,000 for 1998, 1997 and 1996, respectively.

Employment Agreements

The Company has an  employment  agreement  with an officer  expiring on July 31,
2001. The agreement includes provisions for severance payments for the longer of
one  additional  year or any period for which the  employee is  required  not to
compete.

                                      F-20
<PAGE>


                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 13 - COMMITMENTS AND CONTINGENCY

Employment Agreements (Continued)

The future minimum annual compensation  payments as required under the agreement
as of December 31, 1998, approximated the following (in thousands):

                                           1999                $     210
                                           2000                      235
                                           2001                      146
                                                                   ------
                                                               $     591
                                                                   ======
                                      F-21
<PAGE>



                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 14 - GEOGRAPHIC SEGMENT INFORMATION

Financial  information as of and for the years ended December 31, 1998, 1997 and
1996, summarized by geographic area, is as follows:

<TABLE>

                                          United
                                          States
                                       --------------------
                                                              Canada Eliminations  Consolidated
                                                              ----------------------------------
<S>                                    <C>         <C>          <C>            <C>

1998
     Total Revenues - Unaffiliated
      customers                        $  11,507   $ 4,830      $     -        $   16,337
                                         =======    ======        ======          =======
     Loss from operations              $  (2,170)  $  (176)     $     -        $   (2,346)
                                         =======    ======        ======          =======
     Assets - Identifiable assets      $   6,569   $     -      $     -        $    6,569
                                         =======    ======        ======          =======
1997
     Total Revenues - Unaffiliated
      customers                        $  15,540   $ 10,395     $  (412)       $   25,523
                                         =======    ======        ======          =======
     Loss from operations              $  (7,314)  $ (2,002)    $     -        $   (9,316)
                                         =======    ======        ======          =======
     Assets - Identifiable assets      $  13,550   $  7,572     $(9,967)       $   11,155
                                         =======    ======        ======          =======
1996
     Total Revenues - Unaffiliated
      customers                        $  21,945   $  8,895     $     -        $   30,840
                                         =======    ======        ======          =======
     Loss from operations              $  (4,828)  $   (488)    $   126        $   (5,190)
                                         =======    ======        ======          =======
     Assets - Identifiable assets      $  24,376   $  8,360     $(2,968)       $   29,768
                                         =======    ======        ======          =======
</TABLE>

                                      F-22
<PAGE>


                               IWI HOLDING LIMITED

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1998, 1997 and 1996


NOTE 15 - YEAR 2000 ISSUE (Unaudited)

The year 2000 (Y2K) issue is the result of computer  programs  using a two-digit
format,  as opposed to four digits to indicate the year.  Such computer  systems
will be unable to  interpret  dates  beyond  1999,  which  could  cause a system
failure or application errors, leading to disruptions in operations.

The Company is in the process of updating its software,  hardware and production
equipment  to remedy all major  areas of  exposure  to Y2K issues and intends to
have all noncompliant equipment upgraded by September 1999.

The Company has done an external  review of vendors and  customers  to determine
the major areas of  exposure  to Y2K issues.  No  disruption  to  operations  is
expected due to Y2K.  The Company has been  working with all major  customers to
comply with Y2K standards  since 1998 and it is the expectation of the Company's
management  that all major  upgrades  will be  completed by the end of the third
quarter 1999.

                                      F-23
<PAGE>

                              IWI HOLDING LIMITED

           Schedule I - Condensed Financial Information of Registrant

                                 Balance Sheets

                           December 31, 1998 and 1997

                                     ASSETS
                                    --------

                                                              1998         1997
                                                             ------       ------
Cash                                                 $       1,000  $     1,000
Due from Affiliate                                         500,000      500,000
Investments in Wholly Owned Subsidiaries                   914,000    3,623,000
                                                         ---------    ---------
                 Total Assets                        $   1,415,000  $ 4,124,000
                                                         =========    =========

                              STOCKHOLDERS' EQUITY

Preferred Stock - $1 par value; authorized -
5,000,000 shares; issued and outstanding -
3,644,880 shares                                     $   3,644,880  $ 3,644,880

Common Stock - No par value; authorized - 10,000,000
 shares; issued and outstanding - 2,554,700 shares               -           -

Additional Paid-in Capital                              12,446,222   12,446,222

Accumulated Deficit                                    (14,676,102) (11,967,102)
                                                        ----------   ----------
                 Total Stockholders' Equity          $   1,415,000  $ 4,124,000
                                                        ==========   ==========

                   See note to condensed financial statements.

                                      F-24
<PAGE>

                               IWI HOLDING LIMITED

           Schedule I - Condensed Financial Information of Registrant

                   Statements of Loss and Accumulated Deficit

                     Years Ended December 31, 1998 and 1997



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

Equity in net loss of subsidiaries        $    (2,709,000)     $   (10,134,000)

Accumulated deficit, beginning of year        (11,967,102)          (1,833,102)
                                              ------------         ------------
Accumulated deficit, end of year          $   (14,676,102)     $   (11,967,102)
                                              ============         ============




                   See note to condensed financial statements.

<PAGE>

                               IWI HOLDING LIMITED

           Schedule I - Condensed Financial Information of Registrant

                     Note to Condensed Financial Statements

                     Years Ended December 31, 1998 and 1997


NOTE 1 - BASIS OF PRESENTATION

The Company's share of net income (loss) of its unconsolidated subsidiaries, all
of which are wholly  owned,  is included in net income  (loss)  using the equity
method.  Parent-company-only  financial statements should be read in conjunction
with the Company's consolidated financial statements.

                                      F-25
<PAGE>


                               IWI HOLDING LIMITED

                 Schedule II - Valuation and Qualifying Accounts

                     Years Ended December 31, 1998 and 1997
<TABLE>


                                         Additions     Additions
                           Balance at    Charged to    Charged to                         Balance
                           Beginning     Costs and       Other                            at End
Description                of Period     Expenses       Accounts      Deductions         of Period
-----------               ------------  ------------  ------------   -------------      -----------
<S>                       <C>           <C>           <C>            <C>                <C>

Year Ended
 December 31, 1996

   Allowance for
    Doubtful Accounts       $ 454,000   $  736,000       $  -        $ 496,000(1)        $ 694,000

   Inventory Valuation
    Allowance               1,500,000    2,953,000          -        2,853,000(2)        1,600,000

   Deferred Income
    Tax Valuation
    Allowance                 495,000    2,239,000          -                -           2,734,000

Year Ended
 December 31, 1997

   Allowance for
    Doubtful Accounts       $ 694,000   $  865,000       $  -        $ 917,000(1)        $ 642,000

   Inventory Valuation
    Allowance               1,600,000   3,642,000           -        3,442,000(2)        1,800,000

   Deferred Income
    Tax Valuation
    Allowance               2,734,000  2,487,000            -               -            5,221,000

</TABLE>

                                      F-26
<PAGE>


                               IWI HOLDING LIMITED

                 Schedule II - Valuation and Qualifying Accounts

                     Years Ended December 31, 1998 and 1997

<TABLE>
                                                     Additions          Additions
                                Balance at           Charged to         Charged to                             Balance
                                Beginning            Costs and            Other                                at End
Description                     of Period            Expenses           Accounts          Deductions          of Period
------------                   -----------          ------------       ------------      ------------         ---------
<S>                           <C>                  <C>                <C>                <C>                  <C>
Year Ended
 December 31, 1998

   Allowance for
    Doubtful Accounts       $   642,000            $  177,000           $    -           $ 539,000(1)       $   280,000

   Inventory Valuation
    Allowance                 1,800,000               673,000                -             695,000(2)         1,778,000

   Deferred Income
    Tax Valuation
    Allowance                 5,221,000               961,000                -                   -            6,182,000

(1) Writeoff of uncollectible accounts
(2) Inventory losses realized

</TABLE>
                                      F-27