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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934


For the Year Ended: October 31, 2003

Commission File Number: 0-27002

INTERNATIONAL DISPLAYWORKS, INC.

(Exact name of Registrant as specified in its charter)


|                                                |  |                                     
|----------------------------------------------- |  | ------------------------------------
|Delaware                                        |  | 94-3333649                          
|                                                |  |                                     
|(State or Incorporation)                        |  | (I.R.S. Employer Identification No.)
|                                                |  |                                     
|599 Menlo Drive, Suite 200, Rocklin, California |  | 95765                               
|                                                |  |                                     
|(Address of principal executive offices)        |  | (Zip Code)                          

(916) 415-0864




(Registrants telephone number, including area code)


Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [  ] No

Indicate by a checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K, (§229,405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of the
Form 10-K or any amendment of this Form 10-K. [  ]

Indicate by a check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). [  ] Yes [X] No

Aggregate Market Value of the voting stock held by non-affiliates of the
registrant based on the closing sale price as reported by the OTCBB on January
21, 2004 was $41,942,711.30.

The number of shares of the registrants common stock, no par value,
outstanding on January 21, 2004 was 24,610,508.

Documents incorporated by reference: Certain portions of Registrants
definitive proxy statement to be filed pursuant to Regulation 14A in connection
with the annual meeting of stockholders:

Part III: Items 10, 11, 12, 13 and 14 of this report





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TABLE OF CONTENTS



|              |                                                                                              |  |  |  |  |  |  | 
|------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | ITEM 1. BUSINESS                                                                            
|              | ITEM 2. PROPERTIES                                                                          
|              | ITEM 3. LEGAL PROCEEDINGS                                                                   
|              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                 
|PART II      
|              | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS               
|              | ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA                                                
|              | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
|RISK FACTORS 
|              | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                         
|              | ITEM 8. FINANCIAL STATES AND SUPPLEMENTARY DATA                                             
|PART III     
|              | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE              
|              | ITEM 9A. CONTROLS AND PROCEDURES                                                            
|              | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                 
|              | ITEM 11. EXECUTIVE COMPENSATION                                                             
|              | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                     
|              | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                     
|              | ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES                                             
|PART IV      
|              | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                    
|SIGNATURES   
|EXHIBIT INDEX
|EXHIBIT 23.1 
|EXHIBIT 23.2 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32   



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PART I




ITEM 1. BUSINESS

With the exception of historical facts stated herein, the matters
discussed in this report on Form 10-K are forward looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from projected results. Such forward looking statements include,
but are not necessarily limited to statements regarding anticipated levels of
future revenues and earnings from the operations of International DisplayWorks,
Inc. and its subsidiaries, (the Company, we, or us), projected costs and
expenses related to our operations, liquidity, capital resources, and
availability of future equity capital on commercially reasonable terms.
Factors that could cause actual results to differ materially are discussed
under Item 7  Managements Discussion and Analysis of Financial Condition and
Results of Operations  Risk Factors. Readers of this report are cautioned
not to put undue reliance on forward looking statements, which, by their
nature, are not reliable indicators of future performance. We disclaim any
intent or obligation to publicly update these forward looking statements,
whether as a result of new information, future events or otherwise.

Overview

We design and manufacture liquid crystal display, or LCD, products and are
a supplier to several Fortune 500 companies, major Japanese and other Asian and
European corporations and smaller companies operating in a variety of discrete
markets. We work as an outsourced manufacturer or provider of design,
manufacturing and assembly services. Our target OEM customers operate in the
telecommunications, automotive, medical, computing, office equipment, home
appliance and consumer electronics industries. Our components and modules are
used in various electronic products, including cellular phones and other
wireless communication devices. We are also targeting areas for new
applications, including audio, point-of-sale systems, irrigation controls and
personal digital assistants.

We assist OEM customers in the design and development of their products
and furnish full turnkey manufacturing services. Our services include design,
component purchasing, assembly into finished products or electronic
subassemblies and post-assembly testing. We provide custom design
manufacturing services, for which we design and develop proprietary products
that are sold by our OEM customers to their end customers using their brand
names.

Our corporate headquarters are located in Rocklin, California. The design
and manufacture of our products is located at our facility in China, where we
employ approximately 1,800 people. We were originally a private company that
was acquired by Morrow Snowboards, Inc., a public company incorporated in
Oregon in October 1989 that was engaged in manufacturing snowboard equipment
and apparel. Through a series of transactions, we assumed the reporting
obligations of Morrow Snowboards and its successor, Granite Bay Technologies,
Inc. Our operations are concentrated primarily in our subsidiaries, MULCD
Microelectronics (Shenzhen) Co., Ltd. and IDW Technology (Shenzhen) Co., Ltd.,
both of which are organized under the laws of China. We refer to International
Display Works, Inc., a Delaware corporation, and these subsidiaries
collectively as we or us throughout this report. Our operating structure
is described graphically below:

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(INTERNATIONAL DISPLAY WORKS, INC. FLOW CHART)

Our website is located at www.idwlcd.com. Through our website, we make
available free of charge our annual report on Form 10-K, our proxy statement,
our quarterly reports on Form 10-Q, our current reports on Form 8-K, amendments
to reports filed under the Securities Exchange Act and earnings press releases.

Industry Overview

Displays

Display Technology

Prior to the 1970s, most commonly used displays and indicators had
substantial limitations as to their use, especially in terms of size, life and
power consumption. LCDs were developed in the 1970s in response to these
limitations, especially the demand for greater information content and less
power consumption than was possible using light emitting diode, or LED,
technology. LCDs provide high-information content displays at competitive
prices. LCDs now appear in products throughout the communications, office
automation, industrial, medical and consumer electronics industries. LCDs are
one of the fastest growing of the established display industry segments.

An LCD modifies light that passes through or is reflected by it, rather
than emitting light like an LED. An LCD consists of a layer of liquid
crystalline material suspended between two glass plates. The liquid crystals
align themselves in a predictable manner when an electrical charge is applied
in accordance with the graphical design and instructions from the associated
integrated circuit chip (driver). LCDs display these images or characters in
black and white or in a wide range of color combinations. The graphical image
of an LCD is produced in rows and columns that can be selectively energized to
form letters or pictures. A principal advantage of LCDs over other display
technologies, such as LEDs, is the ability to include thousands or even
millions of pixels in a single display, which allows for greater information
content.

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There
are two types of LCDs: passive matrix and active matrix. We manufacture passive matrix LCD displays, which are less complex and less
expensive to manufacture. Currently, passive matrix LCDs are used in
applications such as mobile handsets and PDAs, as well as in office equipment,
data collection terminals, point-of-sale equipment, medical devices,
transportation instrumentation and industrial instruments and controls and
consumer electronics. Active
matrix LCD, otherwise known as thin film transistor, or TFT, displays are relatively complex devices which we do not manufacture
that require manufacturing operations involving very large capital
investments. Other display technologies such as organic light-emitting
diodes, or OLEDs, liquid-crystal-on-silicon, or LCOS, and plasma, along with other promising display technologies are
also available or in
development.

Display Markets

Displays are becoming a ubiquitous feature in many consumer, commercial
and industrial products. OEMs increasingly believe that a display interface is
important because it makes products more useful and easier to operate. In
addition, the increasing complexity and functionality of handheld products,
such as wireless computing and communication devices, require OEMs to increase
the visual performance and information content of the displays incorporated
into their products. At the same time, the market continues to demand that
OEMs incorporate displays with reduced power requirements and lower costs.
Custom LCDs address these requirements for high performance, increased
information content, low power and low cost.

OEMs often include in their products unique display modules and features
as a means of differentiating their products from those of competitors. OEMs
then make decisions about whether to use standard or custom display devices and
whether to design and produce these devices in-house versus outsourcing design
and/or production. OEMs often recognize that their greatest strengths are
market recognition of their brand names, market research and product
development expertise, as well as effective sales and distribution channels.
OEMs also recognize that the time constraints and limitations of available
resources often preclude them from maintaining the specialized in-house
expertise and equipment necessary to design and manufacture custom devices. As
a result, many OEMs outsource to us the design and production of display
devices and components to focus their own resources on the areas where they
have the greatest expertise and leverage of resources. Outsourcing allows them
to gain access to specialized design and manufacturing technology and
expertise, accelerate the design process, and reduce their own investment in
equipment, facilities, and the personnel necessary for specialized design and
production. These advantages allow OEM customers to maximize profitability and
reduce risk and time to market, while capitalizing on economies of scale. In
some cases, the outsourced functions include the original design of products.

According to a November 2003 report by J.M. Dutton & Associates, the
passive LCD market, where we currently focus our business, is estimated to be
between $2 billion and $3 billion. The size of the LCD module market may be
upwards of $100 billion annually and addresses growth areas such as cellular
telephones, medical instruments and hand-held data collection devices, as well
as benefits from the increased digitalization of data displays across many
applications.

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Our Strategy

We are focused on expanding our position as a provider of LCD
manufacturing services to major OEMs in two ways. We are dedicating
significantly greater efforts to develop custom design and manufacture of LCD
displays and display modules for our customers, areas in which profit margins
are greater than standard LCDs and where we can exhibit our greatest strengths.
We are also improving the range of technologies that we offer, such as the
recent addition and subsequent expansion of Chip-on-Glass technologies. To
achieve these objectives, we intend to continue to pursue the following
strategies:



| |  | Target and establish close relationships with strong customers who
have high-volume and multiple product needs.We target strong
companies that we believe would benefit from our design and
manufacturing services and seek to develop multiple programs for
different product groups for those customers. Our sales and
engineering staffs integrate their knowledge and expertise to
demonstrate the benefits from working with us. We emphasize global
account management to establish long-lasting customer relationships
that emphasize complete product life-cycle solutions and to anticipate
customer needs. To these ends, we have recently restructured our
sales organization for greater efficiency and resource utilization.             
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Introduce new technologies that leverage our core competencies and
result in near-term realizable revenue.We identify and utilize new
technologies with near-term application by our customers. Our
investments in new technologies are therefore customer-driven. We
leverage our library of design, manufacturing and assembly processes.
Our LCD capabilities include: twisted nematic, or TN, high performance
twisted nematic, or HTN, supertwisted nematic, or STN, film
compensated supertwisted nematic, or FSTN, and black mask color, in
conjunction with assembly capabilities that include Surface Mount
Technology, or SMT, Chip-on-Board, Chip-on-Flex and Chip-on-Glass,
each of which assists in the production of complex components.
| 
| |  | Maximize utilization of manufacturing capacity. We have been
following a strategy of soliciting customers who respond to
competitive pricing by placing large volume repeat orders with us,
thus reducing our overhead absorption rates as we recover fixed
capacity costs over a larger revenue base and incur fewer order setup
costs. We are promoting shortened lead times and competitive pricing
to win new business thereby optimizing our manufacturing capacity.
Our larger and recurring orders lower our engineering, administrative
and sales expenses.                                                                                                                                                                                   
| 
| |  | Maintain low-cost manufacturing in China.All of our manufacturing
facilities are located in China. China provides us with one of the
lowest cost engineering and production work forces in the world, which
in turn, allows us to pass on significant cost advantages to our
customers and provides us the platform to compete with others
manufacturing in China and other low-cost locations.                                                                                                                                                                                                                                                                                                                                                     
| 
| |  | Produce high value-added electronic components and modules.We
produce not only LCDs, but also LCD modules that are incorporated into
different types of electronic products. As a result of our focus on
high value-added subassemblies or modules that are integrated into
complex products, we are able to achieve higher gross margins.                                                                                                                                                                                                                                                                                                                                                                                                            

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| |  | Produce high quality products at competitive prices.Given the
intensely price sensitive nature of our industry, our goal is to
manufacture high quality products at low cost for our customers. We
believe that the quality of our manufacturing services is central to
maintaining customer trust and loyalty, and we therefore strive to
ensure that our design and production processes are of world-class
standards. We have consistently met the stringent quality demands of
our OEM customers. Our factories are certified under ISO 9001, the
International Organization for Standardizations highest quality
standards. We are also QS9000 certified, which is the established
standard for the automotive industry. Our principal manufacturing
facilities located in Shenzhen are also certified under ISO 14001, the
latest recognized quality standard, which provides a structured basis
for environmental management and control.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Develop improved production techniques in collaboration with
customers.We focus on collaborating with our customers to refine and
improve the production methods employed for complex, yet proven
production technologies rather than on the initial development of
components or assemblies for which there is no established market. By
doing this, we help our OEM customers enhance their product design,
lower costs and improve yields. This strategy allows us to strengthen
our relationships with our OEM customers. As a result, our customers
allow us to use their proprietary production technologies in our
assembly operations. These relationships allow us to focus our
research and development efforts on process improvement and help limit
our risks associated with new product introductions.                                                                                                                             

Our Customers

OEM customers continue to adopt outsourcing strategies. We believe the
main causes for this are:



| |  | Reduction of total production cost.OEMs continually need to reduce
costs to remain competitive. Providers of components and modules
manufacture products at reduced total costs to OEMs because higher
volumes of manufacturing capacity lead to economies of scale, access
to leading-edge procurement and inventory management capabilities,
proficiency in purchasing materials and an emphasis on improvements to
the entire supply chain. Contract manufacturing also enables OEMs to
take advantage of producing in low-cost geographical regions.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Access to leading technologies.OEMs continually seek access to
engineering expertise and manufacturing technologies necessary to
build their increasingly complex products. OEMs are motivated to work
with component manufacturers to gain access to their expertise in
product design, assembly, manufacturing and testing technologies.                                                                                                                                                                                                              
| 
| |  | Acceleration of time-to-market.OEMs face the demands of increasingly
shorter product life-cycles. OEMs can significantly improve product
development cycles and shorten time-to-market by utilizing the
expertise and manufacturing infrastructure of outsourced
manufacturers, including capabilities relating to design and
development.                                                                                                                                                                                                              
| 
| |  | Reduction of capital investment and shifting of fixed costs to
variable costs.As electronics products have become more
technologically advanced, the manufacturing process is requiring
greater levels of investment in capital equipment. Outsourcing allows
OEMs to lower their investment in inventory and manufacturing assets
and shift more of                                                                                                                                                                                                    

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|their fixed costs to variable costs, thereby
increasing their return on assets. As a result, OEMs can react more
quickly to changing market conditions and allocate capital to other
core activities such as sales and marketing and research and
development.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We derive approximately 92% of our business from 19 customers.
Historically, we have had substantial recurring sales from one customer. Sales
to that customer for the year ended October 31, 2003, year ended October 31,
2002 and the ten-months ended October 31, 2001, accounted for approximately
29%, 30%, and 35%, respectively, of total sales. Sales to our five largest
customers accounted for 48%, 51%, and 57% of our net sales during the periods
ended October 31, 2003, 2002 and 2001, respectively.

Sales to our OEM customers are primarily based on purchase orders we
receive from time to time rather than firm, long-term purchase commitments.
Although it is our general practice to purchase raw materials only upon
receiving a purchase order, for certain customers, we will occasionally
purchase raw materials based on such customers rolling forecasts or
anticipated orders. Uncertain economic conditions and our general lack of
long-term purchase commitments from our customers make it difficult for us to
accurately predict revenue over the longer term. Even in those cases where
customers are contractually obligated to purchase products from us or
repurchase unused inventory from us, we may elect not to enforce our
contractual rights because of the long-term nature of our customer
relationships and for other business reasons, and instead may negotiate with
customers regarding particular situations.

Our Products and Services

Our customers seek product differentiation. Custom-designed display
modules provide them with the opportunity to differentiate their products on a
cost-effective basis. We apply our design, manufacturing and assembly
capabilities to develop custom displays and display modules, and together with
our customers, create and implement engineering and product solutions with
quick design turnaround and rapid prototyping. We are involved early with our
customers product development cycles and continue with them through
manufacturing, testing, logistics and distribution. We add value for our
customers through our ability to integrate the design and production processes.

Our products consist of TN, STN and FSTN LCDs and subassemblies, ranging
from basic LCDs for calculators, watches and electronic games, to more complex
products. These more complex devices are used in cellular telephones,
electronic appliances, office equipment, hand held computers, automotive
equipment and medical electronics and may be used in applications that require
high multiplex rates and wide viewing angles. We are currently developing wide
temperature LCD displays for automotive, appliance and outdoor utility meters;
high density graphic displays for handheld computers, cellular phones and
personal digital assistants; cold cathode and white LED backlighting for black
and white, half tone and color displays; and custom Chip-on-Glass displays for
consumer electronics and appliances. We design and manufacture value-added
display modules with electronics, keypads, interface circuitry, back lighting
and mounting hardware.

Our Design and Manufacturing Capabilities

The typical cycle for a LCD product to be designed, manufactured and sold
to an OEM customer varies substantially, ranging from a few days to several
months, including the

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design, proof and production period. Initially, an OEM
customer gathers data from its sales personnel for products in which there is
market interest, including features and anticipated unit costs. The OEM
customer then contacts us and possibly other prospective manufacturers, with
forecasted total production quantities and design specifications or renderings.
From that information, we then determine estimated component and materials
costs. We then advise our OEM customer of the development costs, manufacturing
charges (including molds and tooling, if applicable) and unit cost based on the
forecasted production quantities desired during the expected production cycle.

After we agree with the OEM customer on the quotation for the development
and unit cost, we begin the LCD product development. The costs of LCD product
development are either paid by the customer prior to development or built into
the costs of manufacturing the product. Upon completion of the tooling, we
produce samples of the product for the customers quality testing, and, once
approved, commence mass production of the product. We expect to recover the
development costs by the forging of a long-term customer relationship and
through mass production, which allows us to amortize them over a period of time
and over production quantity.

We manufacture LCDs using glass, liquid crystal solution and polarizer. A
TN type LCD is the most conventional and economical and is suitable for most
common devices such as calculators and watches. TN type LCDs allow for clearer
visibility and wider viewing angles than STN type LCDs. STN LCDs are suitable
for use in devices such as pocket games and personal digital assistants. Our
fully automated front-end processing line is capable of producing a monthly
quantity of 35,000 panels measuring 14 by 16 each. Unit output varies
depending on the size of the LCD and the quantity per panel. This usually is
between 10 and 120 displays per panel. We also utilize the following
production techniques:



| |  | Chip on Glass, or COG.COG is a process that connects integrated
circuits directly to LCD panels without the need for wire bonding. We
apply this technology to produce advanced LCD modules for high-end
electronic products, such as cellular phones and PDAs. At October 31,
2003, we had three COG lines. These machines provide a total
production capacity of up to 300,000 chip bonds per month.                                                                 
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Chip on Board, or COB.COB is a technology that utilizes wire bonding
to connect large-scale integrated circuits directly to printed circuit
boards. We use COB in the assembly of consumer products such as
calculators, personal organizers and electronic appliances. At
October 31, 2003, we had nine COB machines. These machines are fully
automatic and use ultrasonic mounting technology and have a total
production capacity of up to 400,000 chips per month.
| 
| |  | Tape Automated Bonding with Anisotropic Conductive Film, or TAB with
ACF.TAB with ACF is an advanced heat sealing technology that
connects a liquid crystal display component with an integrated circuit
in very small LCD modules, such as those used in cellular phones and
pagers. At October 31, 2003, we had six systems of TAB with ACF
machines. The machines provide a total production capacity of up to
500,000 seals per month.                             
| 
| |  | Fine Pitch Heat Seal Technology, or FPHS.FPHS technology allows us
to connect LCD displays to printed circuit boards produced by COB that
enables very thin                                                                                                                                                                                                                                                                                                            

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|  |  | connections. This method is highly specialized and
is used in the production of finished products such as PDAs. At
October 31, 2003, we had 12 machines utilizing FPHS technology. The
machines provide a total production capacity of up to 500,000 seals
per month.                                                                                                                                                                         
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Surface Mount Technology, or SMT.SMT is a process by which
electronic components are mounted directly on both sides of a printed
circuit board, increasing board capacity, facilitating product
miniaturization and enabling advanced automation of production. We
use SMT for products such as electronic appliances. At October 31,
2003, we had three SMT production lines. Our total mounting capacity
is 20,000,000 components per month.

Suppliers

A substantial portion of our product costs stem from the purchase of
components and raw materials. Raw materials are principally comprised of
glass, liquid crystal solution and polarizer. Components include integrated
circuits, printed circuit boards, resistors, capacitors, molded plastic parts
and packaging materials. These are purchased from a variety of suppliers. We
are dependent on certain key suppliers for sole source supplies of customer
specified items. We generally base component orders on received purchase
orders in an effort to minimize our inventory risk by ordering components and
products only to the extent necessary. However, for certain customers and
because of lead times, we may occasionally purchase components and/or raw
materials based on such customers rolling forecasts or anticipated orders
following a risk assessment.

Certain components may be subject to limited allocation by certain of our
suppliers. In our industry, supply shortages and delays in deliveries of
particular components have resulted in curtailed production, or delays in
production of assemblies using scarce components. These supply shortages may
contribute to an increase in our inventory levels and reduction in our margins.
We expect that shortages and delays in deliveries of some components will
continue to impact our industry, and we are striving to develop multiple
sources of supply where possible.

Competition

General competition in the outsourced manufacturing industry is intense
and characterized by price erosion, rapid technological change and global
competition from numerous companies. This highly competitive environment has
resulted in pricing pressures that have reduced margins. We believe that the
principal competitive factors in our targeted markets are product quality,
pricing, flexibility and timeliness in responding to design and schedule
changes, reliability in meeting product delivery schedules, technological
sophistication and geographic location. The services we provide are available
from many independent sources as well as from current and potential customers
with in-house manufacturing capabilities or the resources to design and
manufacture similar products themselves.

We consider our primary competitors to be Three-Five Systems, Inc., Optrex
America, Inc., Varitronix Ltd., Wintek Corporation, Truly Semiconductors
Limited and other
similar companies.

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Quality Control

We maintain strict quality control programs for our products, including
the use of total quality management systems, or TQM, and advanced testing and
calibration equipment. We audit our suppliers for quality and control, and our
quality control personnel test incoming raw materials and components. During
the production stage, our quality control personnel also test the quality of
work-in-progress at several points in the production process. Finally, after
the assembly stage, we conduct testing of finished products. We provide office
space at our principal manufacturing facilities for representatives of some of
our major customers to permit them to monitor production of their products, as
well as to provide them access to our manufacturing personnel.

All of our manufacturing facilities are certified under ISO 9001 quality
standards, the International Organization for Standardizations, or ISOs,
highest standards. The ISO is a Geneva-based organization dedicated to the
development of worldwide standards for quality management guidelines and
quality assurance. ISO 9001, which was the first quality system standard to
gain worldwide recognition, requires an entity to gather, analyze, document and
monitor its quality systems and make improvements where needed. Our
certification under an ISO 9001 quality standard demonstrates that our
manufacturing operations meet the most demanding of the established world
standards. We are also certified with QS 9000 for automotive products, which
qualify us to work with North American automakers. Our principal manufacturing
facilities are also certified under ISO 14001 quality standards, which provide
a structured basis for environmental management control. In addition, we
sustain numerous customer qualification audits each year, many of which make
additional recommendations and suggestions based on third-party experiences,
which we evaluate and often subsequently adopt.

Sales and Marketing

We focus on developing close relationships with our customers at the
development and design phases and continuing throughout all stages of
production. Sales and marketing operations are integrated processes involving
a network of representatives, direct salespersons, sales engineers and senior
executives covering North America, Asia and Europe. We direct our sales
resources and activities at several management and staff levels within our
customers and prospective customers. We receive inquiries resulting from our
representatives, word of mouth, from public relations activities, our website
and through referrals from current customers. We evaluate these opportunities
against our customer selection criteria and assign either a representative or a
direct salesperson.

Backlog

As of December 31, 2003, we had a backlog of orders of approximately $13.3
million, as compared with a backlog of $3.5 million as of December 31, 2002.
Our backlog consists of product orders for which confirmed purchase orders have
been received and that are scheduled for shipment within 12 months. Orders are
given with an average of twelve weeks lead time though there is considerable
variation. Most orders are subject to rescheduling or
cancellation by the customer with limited penalties. Because of the
possibility of customer changes in delivery schedules or cancellations and
potential delays in product shipments, our backlog as of a particular date may
not be indicative of net sales for any succeeding period.

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Research and Development

We currently invest in research and development for design, development,
manufacturing and assembly technology when we can identify near-term market
applications that stem directly from such investments. New, customer-driven
technologies provide us with the potential to offer better and more
technologically advanced services to our OEM customers while providing returns
on the investments. We plan to continue acquiring advanced design equipment
and to enhance our technological expertise through continued training of our
engineers and further hiring of qualified system engineers. These improvements
are intended to enhance the speed, efficiency and quality of our assembly
processes.

Intellectual Property

We rely upon a combination of trade secrets, industry expertise,
confidential procedures and contractual provisions to protect our intellectual
property. Our core business is not dependent on any material patents, licenses
or trademarks.

Geographic Markets

The approximate percentages of our net sales to customers by geographic
area are based upon shipping destination of product and are set forth below for
the periods indicated:

|                                     |  |                                |        |      |  |      |        |  |  |   |        | 
|------------------------------------ |  | ------------------------------ | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|Revenues                             |  | Fiscal Period Ended October 31
|                                     |  |                               
|                                     |  | 2003                           |        | 2002 |  | 2001
|                                     |  |                                |        |      |  |     
|United States                        |  | $                              | 10,824 |      |  | $    | 11,266 |  |  | $ | 7,642  | 
|Hong Kong (including China)          |  |                                | 4,916  |      |  |      | 6,753  |  |  |   | 5,634  | 
|Asia (excluding Hong Kong
and China) |  |                                | 4,538  |      |  |      | 2,183  |  |  |   | 490    | 
|Europe                               |  |                                | 1,690  |      |  |      | 566    |  |  |   | 407    | 
|Other                                |  |                                | 878    |      |  |      | 160    |  |  |   | 485    | 
|                                     |  |                                |        |      |  |      |        |  |  |   |        | 
|                                     |  | $                              | 22,846 |      |  | $    | 20,928 |  |  | $ | 14,658 | 
|                                     |  |                                |        |      |  |      |        |  |  |   |        | 

Employees

As of October 31, 2003, we employed approximately 1,800 persons, 10 of
whom are based in the U.S., one in the U.K. and the remainder in China and Hong
Kong. We consider our relationships with employees to be good and believe that
the compensation provided to our employees is comparable to similar employers
in the same geographic market and industry. We are not a party to any material
labor contracts. We have experienced no significant labor stoppages. This
situation may not continue in the future and any labor
difficulties could lead to increased costs and/or interruptions in our
production. We are subject to labor laws in each location and have to expend
certain resources in order to comply with local legislation and regulations.
In China in particular, these laws may change or the interpretation may change
over time and could have a material impact on our profitability.

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ITEM 2. PROPERTIES.

Our manufacturing facilities consist of three buildings totaling
approximately 270,000 square feet situated on four acres of leased land in an
industrial suburb of Shenzhen, Southern China known as Heng Gang. These
facilities are located 30 minutes from the center of the city of Shenzhen and
about one hour from Hong Kong. The buildings are approximately twelve years
old, and the LCD production line is approximately five years old. Only the
state may own land in China. Therefore, we lease the land under our
facilities, and our lease agreement gives us the right to use the land for 50
years at an annual rent of $2,200, subject to certain periodic rent increases,
and will expire in 2049. At the end of the lease term, all improvements we
have made will revert to the lessor. We also lease dormitory facilities for
our production employees on an adjacent property and ancillary accommodations
in the area for senior staff at a current cost of $256,800 per year from the
Heng Gang Village Commune.

We also operate our own diesel power plant for generation of the power
requirements of the manufacturing facilities and have environmental obligations
with regard to the plant. Our operations generate small amounts of hazardous
and/or toxic waste as manufacturing by-products, including various gases,
epoxies, inks, solvents and other wastes. As our operations expand, the amount
of such waste produced is likely to increase. We must expend resources to
comply with all applicable environmental regulations. We believe that all
hazardous and/or toxic waste is being stored, used and disposed of in
accordance with applicable current laws.

Our corporate headquarters are located in an industrial park in Rocklin,
California in a space of 4,700 square feet. The lease expires in April 2005,
and the rent is currently $73,000 per year for the remainder of the lease. We
pay a proportionate share of operating expenses for the facilities of
approximately $12,400 per year. We lease an office in Hong Kong. The rent and
management fee is $22,000 per year and the lease expires in February 2005. We
also lease office space on short term leases for our sales offices in Ann
Arbor, Michigan and Woking, Surrey, United Kingdom.




ITEM 3. LEGAL PROCEEDINGS.

We are not a party to any legal proceedings except as described below, and
there are no material legal proceedings pending with respect to our property,
though from time to time, we may be involved in routine litigation incidental
to our business. The following matter pertains to our predecessor entities,
Morrow Snowboards, Inc. and Granite Bay Technologies, Inc., with regard to our
predecessors discontinued snowboard business:

Nicolas Steenolsen vs. Squaw Valley Ski Corporation, Granite Bay
Technologies, Inc., Morrow Snowboards, Inc., International DisplayWorks, Inc.,
et al., Superior Court of California, Los Angeles County, Case No. BC243817.
The case is a complaint for personal injuries, which arose from plaintiffs use
of a snowboard allegedly manufactured by Morrow Snowboards, Inc. The complaint
seeks unspecified general damages and unspecified past and future medical
expenses. We are defending the action. The Court ordered the parties to
mediation, with costs to be split by all parties. The Court set a trial
date of April 6, 2004. On January 22, 2004, Squaw Valley Ski Corporation filed
a cross-complaint against us for equitable contribution. There is no basis for
determining the amount of damages or probability of outcome at this time.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no matters submitted to a vote of our security holders during
the fourth quarter ended October 31, 2003.




PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common stock is traded on the OTC Bulletin Board under the symbol
IDWK. As of October 31, 2003, there were approximately 2,500 registered
holders of our common stock. As many of the shares of common stock are held in
street name, there may be additional beneficial holders of our common stock.
As of January 27, 2004, a total of 3,543,702 shares of our common stock
underlie outstanding options and warrants.

The following table shows the range of high and low bid as reported by the
OTC Bulletin Board for the time periods indicated:

|                               |  |     |      |      |  |   |      | 
|------------------------------ |  | --- | ---- | ---- |  | - | ---- | 
|                               |  | Low |      | High
|                               |  |     |      |     
|Fiscal 2003:                   |  |     |      |      |  |   |      | 
|Fourth Quarter (to October 31) |  | $   | 0.26 |      |  | $ | 0.51 | 
|Third Quarter (to July 31)     |  | $   | 0.24 |      |  | $ | 0.40 | 
|Second Quarter (to April 30)   |  | $   | 0.16 |      |  | $ | 0.51 | 
|First Quarter (to January 31)  |  | $   | 0.14 |      |  | $ | 0.35 | 
|Fiscal 2002:                   |  |     |      |      |  |   |      | 
|Fourth Quarter (to October 31) |  | $   | 0.17 |      |  | $ | 0.32 | 
|Third Quarter (to July 31)     |  | $   | 0.19 |      |  | $ | 0.48 | 
|Second Quarter (to April 30)   |  | $   | 0.30 |      |  | $ | 0.46 | 
|First Quarter (to January 31)  |  | $   | 0.21 |      |  | $ | 0.51 | 

Dividends

We have paid no dividends on our common stock since our inception and may
not do so in the future. For the foreseeable future, we expect any earnings
will be retained to finance the growth of the Company.

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Recent Sales of Unregistered Securities

During the fourth quarter ended October 31, 2003, we have sold and issued
the following securities:

1.     Between July 2003 and August 2003, the Company sold additional units
with net proceeds totaling $1,000,000. Each unit offering consisting of debt
instruments and warrants to purchase shares of common stock of the Company
equal to 20% of the investment amount. Under the debt instruments, the Company
will pay interest only payments each month at a rate of 12% per year and the
total amount borrowed is due on December 31, 2004. The warrants are
exercisable for $0.35 per share for a period of 3 years. There was no broker
or placement agent in this transaction.

2.     In September 2003, the Company closed a private placement of 1,666,667
shares of common stock at $0.30 per share. The Companys net proceeds from the
offering were $500,000.10. There was no broker or placement agent in this
transaction.

3.     In December 2003, the Company completed a private financing of
3,333,335 shares of common stock at $1.50 per share. The Companys net
proceeds from the offering were $5,000,002.50. Roth Capital Partners, LLC
acted as the placement agent for the financing and received an eight percent
(8%) fee based on gross proceeds and a five (5) year warrant to purchase
166,666 shares of common stock at $1.75 per share.

The sales and issuances of common stock, debt instruments and warrants to
purchase common stock in private placements listed above were made by us in
reliance upon the exemptions from registration provided under Section 4(2) and
4(6) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D,
promulgated by the SEC under federal securities laws and comparable exemptions
for sales to accredited investors under state securities laws. The offers
and sales were made to accredited investors as defined in Rule 501(a) under the
Securities Act, no general solicitation was made by us or any person acting on
our behalf; the securities sold were subject to transfer restrictions, and the
certificates for those shares contained an appropriate legend stating that they
had not been registered under the Securities Act and may not be offered or sold
absent registration or pursuant to an exemption therefrom.




ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.

We derived the consolidated statements of income and balance sheet data
presented below as of and for the years ended October 31, 2003 and 2002, the
ten months ended October 31, 2001 and the eleven months ended December 31,
2000, from our audited consolidated financial statements. We derived the
consolidated statements of income and balance sheet data presented below as of
January 1, 2000 from the audited consolidated financial statements of our
predecessor, whose operations were discontinued in 1999. We began our current
operations on February 1, 2000. You should read this summary of consolidated
financial information with the section entitled Managements Discussion and
Analysis of Financial Condition and Results of Operation

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and our Consolidated
Financial Statements and Notes thereto appearing elsewhere in this report.

(in thousands, except per share data)

|                                                                      |         |   |          |            |          |   |          |            |          |               |        |            |   |   |        |            |   |   |        |           |  
|--------------------------------------------------------------------- | ------- | - | -------- | ---------- | -------- | - | -------- | ---------- | -------- | ------------- | ------ | ---------- | - | - | ------ | ---------- | - | - | ------ | --------- | -
|                                                                      |         |   | October  |            | October  |   | October  |            | December | January 1,   
|                                                                      |         |   | 31, 2003 |            | 31, 2002 |   | 31, 2001 |            | 30, 2000 |               | 2000  
|                                                                      |         |   | (twelve  |            | (twelve  |   | (ten     |            | (eleven  | (discontinued
|                                                                      |         |   | months)  |            | months)  |   | months)  |            | months)  | operations)  
|                                                                      |         |   |          |            |          |   |          |            |          |              
|Net sales                                                             |         | $ | 22,846   |            |          | $ | 20,928   |            |          | $             | 14,658 |            |   | $ | 17,804 |            |   | $ |       |          
|Gross profit                                                          |         |   | 5,246    |            |          |   | 5,198    |            |          |               | 3,190  |            |   |   | 5,211  |            |   |   |       |          
|                                                                      |         |   |          |            |          |   |          |            |          |               |        |            |   |   |        |            |   |   |        |          
|Loss from continuing operations                                       |         |   | (808     | )          |          |   | (6,942   | )          |          |               | (2,571 | )          |   |   | (3,499 | )          |   |   | (374   | )        
|Loss from discontinued
operations, net of income taxes                |         |   |         |            |          |   |         |            |          |               |       |            |   |   | (581   | )          |   |   | (3,276 | )        
|Net loss                                                              |         | $ | (808     | )          |          | $ | (6,942   | )          |          | $             | (2,571 | )          |   | $ | (4,080 | )          |   | $ | (3,650 | )        
|                                                                      |         |   |          |            |          |   |          |            |          |               |        |            |   |   |        |            |   |   |        |          
|Net loss per share                                                    |         |   |          |            |          |   |          |            |          |               |        |            |   |   |        |            |   |   |        |          
|                                                                      | Basic   |   | $        | (0.04      | )        |   | $        | (0.36      | )        |               | $      | (0.14      | ) |   |        | (0.23      | ) |   | $      | (0.57     | )
|                                                                      |         |   |          |            |          |   |          |            |          |               |        |            |   |   |        |            |   |   |        |          
|                                                                      | Diluted |   | $        | (0.04      | )        |   | $        | (0.36      | )        |               | $      | (0.14      | ) |   | $      | (0.23      | ) |   | $      | (0.57     | )
|                                                                      |         |   |          |            |          |   |          |            |          |               |        |            |   |   |        |            |   |   |        |          
|Weighted average number of shares
used in computing per share
amounts |         |   |          |            |          |   |          |            |          |               |        |            |   |   |        |            |   |   |        |          
|                                                                      | Basic   |   |          | 19,448,718 |          |   |          | 19,207,246 |          |               |        | 19,192,611 |   |   |        | 17,482,583 |   |   |        | 6,377,556 |  
|                                                                      |         |   |          |            |          |   |          |            |          |               |        |            |   |   |        |            |   |   |        |          
|                                                                      | Diluted |   |          | 19,448,718 |          |   |          | 19,207,246 |          |               |        | 19,192,611 |   |   |        | 17,482,583 |   |   |        | 6,377,556 |  
|                                                                      |         |   |          |            |          |   |          |            |          |               |        |            |   |   |        |            |   |   |        |          

|                                                                     |  |          |        |          |  |          |        |          |  |            |        |  |  |   |        |  |  |   |       | 
|-------------------------------------------------------------------- |  | -------- | ------ | -------- |  | -------- | ------ | -------- |  | ---------- | ------ |  |  | - | ------ |  |  | - | ----- | 
|                                                                     |  | October  |        | October  |  | October  |        | December |  | January 1,
|                                                                     |  | 31, 2003 |        | 31, 2002 |  | 31, 2001 |        | 30, 2000 |  | 2000      
|                                                                     |  |          |        |          |  |          |        |          |  |           
|Consolidated Balance Sheet Data                                      |  |          |        |          |  |          |        |          |  |            |        |  |  |   |        |  |  |   |       | 
|Cash and cash equivalents                                            |  | $        | 1,178  |          |  | $        | 1,556  |          |  | $          | 982    |  |  | $ | 885    |  |  | $ | 1,930 | 
|Net current assets from
continuing operations                        |  |          | 9,264  |          |  |          | 6,618  |          |  |            | 5,950  |  |  |   | 6,151  |  |  |   | 2,111 | 
|Property, plant and equipment, net                                   |  |          | 4,796  |          |  |          | 5,197  |          |  |            | 6,389  |  |  |   | 7,297  |  |  |   | 2,332 | 
|`Total assets from continuing
operations                             |  |          | 14,060 |          |  |          | 11,815 |          |  |            | 18,058 |  |  |   | 19,543 |  |  |   | 3,061 | 
|Current liabilities                                                  |  |          | 7,959  |          |  |          | 6,093  |          |  |            | 5,861  |  |  |   | 5,631  |  |  |   | 6,172 | 
|Long-term debt and capital lease
obligations, net of current
portion |  |          | 1,876  |          |  |          | 1,280  |          |  |            | 807    |  |  |   | 201    |  |  |   | 2,404 | 
|Stockholders equity                                                 |  |          | 4,224  |          |  |          | 4,442  |          |  |            | 11,390 |  |  |   | 13,735 |  |  |   | 4,603 | 

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QUARTERLY FINANCIAL DATA
(In thousands)

|                      |                  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |   | 
|--------------------- | ---------------- | - | ------ |  | ------------ | - | ------ |  | ----- | - | -------- | - | ---------- | - | ---------- | - | ----- | - | ----- | - | 
|                      |                  |   |        |  |              |   |        |  |       |   |          |   |            |   | Diluted    |   | Basic
|                      |                  |   |        |  |              |   |        |  |       |   | Net      |   | Earnings   |   | Earnings  
|                      |                  |   |        |  |              |   |        |  |       |   | Earnings |   | (Loss) Per |   | (Loss) Per
|                      |                  |   | Sales  |  | Gross Profit |   | (Loss) |  | Share |   | Share   
|                      |                  |   |        |  |              |   |        |  |       |   |         
|                      | October 31, 2003 |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |   | 
|First Quarter         |                  | $ | 5,121  |  |              | $ | 1,492  |  |       | $ | 24       |   |            | $ | 0.00       |   |       | $ | 0.00  |  
|Second Quarter        |                  |   | 4,688  |  |              |   | 931    |  |       |   | (628     | ) |            |   | (0.03      | ) |       |   | (0.03 | )
|Third Quarter         |                  |   | 5,889  |  |              |   | 1,305  |  |       |   | (314     | ) |            |   | (0.02      | ) |       |   | (0.02 | )
|Fourth Quarter        |                  |   | 7,148  |  |              |   | 1,518  |  |       |   | 110      |   |            |   | 0.01       |   |       |   | 0.01  |  
|                      |                  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|Total (twelve months) |                  | $ | 22,846 |  |              | $ | 5,246  |  |       | $ | (808     | ) |            | $ | (0.04      | ) |       | $ | (0.04 | )
|                      |                  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|                      | October 31, 2002 |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |   | 
|First Quarter         |                  | $ | 4,611  |  |              | $ | 1,155  |  |       | $ | (299     | ) |            | $ | (0.02      | ) |       | $ | (0.02 | )
|Second Quarter        |                  |   | 5,584  |  |              |   | 1,383  |  |       |   | (178     | ) |            |   | (0.01      | ) |       |   | (0.01 | )
|Third Quarter         |                  |   | 5,316  |  |              |   | 1,321  |  |       |   | (347     | ) |            |   | (0.02      | ) |       |   | (0.02 | )
|Fourth Quarter        |                  |   | 5,417  |  |              |   | 1,339  |  |       |   | (6,118   | ) |            |   | (0.32      | ) |       |   | (0.32 | )
|                      |                  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|Total (twelve months) |                  | $ | 20,928 |  |              | $ | 5,198  |  |       | $ | (6,942   | ) |            | $ | (0.36      | ) |       | $ | (0.36 | )
|                      |                  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|                      | October 31, 2001 |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |   | 
|First Quarter         |                  |   | 4,109  |  |              |   | 960    |  |       |   | (710     | ) |            |   | (0.04      | ) |       |   | (0.04 | )
|Second Quarter        |                  |   | 4,843  |  |              |   | 1,223  |  |       |   | (540     | ) |            |   | (0.03      | ) |       |   | (0.03 | )
|Third Quarter         |                  |   | 4,579  |  |              |   | 975    |  |       |   | (861     | ) |            |   | (0.04      | ) |       |   | (0.04 | )
|Fourth Period         |                  |   | 1,127  |  |              |   | 32     |  |       |   | (460     | ) |            |   | (0.02      | ) |       |   | (0.02 | )
|                      |                  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|Total (ten months)    |                  | $ | 14,658 |  |              | $ | 3,190  |  |       | $ | (2,571   | ) |            | $ | (0.14      | ) |       | $ | (0.14 | )
|                      |                  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  




ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

Except for statements of historical facts, this section contains
forward-looking statements involving risks and uncertainties. You can identify
these statements by forward-looking words including believes, considers,
intends, expects, may, will, should, forecast, or anticipates, or
the negative equivalents of those words or comparable terminology, and by
discussions of strategies that involve risks and uncertainties.
Forward-looking statements are not guarantees of our future performance or
results, and our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth under Risk Factors. This section should be read in
conjunction with our consolidated financial statements.

The following discussion is presented on a consolidated basis, and
analyzes our financial condition and results of operations for the year ended
October 31, 2003, the year ended October 31, 2002, and the ten-months ended
October 31, 2001.

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Overview

We manufacture LCDs and LCD modules and assemblies for major OEMs, and
offer design and engineering services related to those products. Our target
OEM customers operate in the telecommunications, automotive, medical,
computing, office equipment, home appliance and consumer electronics
industries. Our components and modules are used in various electronic
products, including cellular phones and other wireless communication devices.
Developments in our industry over the past years has resulted in lower costs
for displays. As a result of the decreased costs and thus prices for LCDs, new
display designs and applications are being incorporated into products in new
market segments.

During the past several years, we have focused our efforts on decreasing
costs and streamlining our corporate structure, while focusing on development
of new key customers with high volume, multi-product needs for displays and
display modules. We also strengthened our core engineering competencies and
manufacturing processes, enabling us to improve our margins, predominantly
through higher yields in the manufacturing process. We also began to engage
our customers at the design phase and emphasized our engineering design
capability and product quality to facilitate product changes and the effective
rollout of new products for our customers. More recently, with our expanded
base of strong customers, our focus has begun to shift to servicing those
customers through continual product changes and development of new products.
We believe that our emphasis on engineering and process manufacturing will
allow us to continue to maintain high yields that will translate into
competitive pricing and maximization of margins in our industry.

Our production is typically based on purchase orders received from
customers. However, for certain customers we may purchase raw materials based
on non-binding forecasts or in anticipation of orders for products, consistent
with our involvement with the customer. We generally do not obtain long-term
commitments from our customers and economic changes in a customers industry
could impact our revenue in any given period. One of our risks in
manufacturing results from inventory that may become obsolete due to customer
product changes and discontinuation of old products for next generation
products. We manage this risk through customer forecasts and our involvement
in product changes and engineering. Our design and engineering services also
allow us to better understand and meet our customers needs and anticipate
industry changes that might impact our inventory and purchasing decisions.
Although increases in labor costs and other charges may impact cost of sales,
our yield rate is one of the most significant factors affecting our
manufacturing operations and results.

We are ISO certified and emphasize our quality and manufacturing
processes, and we are generally pre-qualified through quality inspections by
our significant customers. We emphasize incoming quality inspection and
in-process inspection to improve yield and reduce warranty claims and product
returns. We believe that our quality and manufacturing processes are our core
strengths. We do not anticipate any change in our practices and consider our
investment in our engineering and quality departments as a continuing cost of
doing business. We believe our current facilities and resources are adequate
to sustain higher sales volume and growth.

With the increase in key customers that we anticipate will result in high
volume sales, we intend to emphasize our design engineering, process
engineering and quality efforts to

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drive increased sales in conjunction with our sales and marketing efforts,
often working with our customers in teams that will include engineering input
and support at early phases.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition presented in this
section are based upon our financial statements, which have been prepared in
accordance with generally accepted accounting principles, or GAAP, in the U.S.
During the preparation of our financial statements we are required to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates and judgments,
including those related to sales returns, pricing concessions, bad debts,
inventories, investments, fixed assets, intangible assets, income taxes,
pensions and other contingencies. We base our estimates on historical
experience and on various other assumptions that we believe are reasonable
under current conditions. Actual results may differ from these estimates under
different assumptions or conditions.

Revenue Recognition

We recognize revenue from product sales in accordance with Staff
Accounting Bulletin (SAB) No. 101 Revenue Recognition in Financial
Statements. SAB No. 101 requires that revenue be recognized when all of the
following conditions are met:



| |  | Persuasive evidence of an arrangement exists;        
|- |  | -----------------------------------------------------
| 
| |  | Delivery has occurred or services have been rendered;
| 
| |  | Price to the customer is fixed or determinable; and  
| 
| |  | Collectability is reasonably assured.                

We recognize revenue from the sale of our products when the products are
shipped from our factories in China, provided collectability is reasonably
assured from the customer. Sales revenue is recorded net of discounts and
rebates except for prompt payment discounts, which are accounted for as an
operating expense. Returns and adjustments are booked as soon as they have
been assessed for validity.

Accounts Receivable

We maintain an allowance for doubtful accounts for estimated losses
resulting from the inability or unwillingness of our customers to make required
payments. We determine the adequacy of this allowance by regularly evaluating
individual customer receivables and considering a customers financial
condition, credit history and current economic conditions.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
on the weighted average-cost basis. Costs included in the valuation of
inventory are labor, materials (including freight and duty) and manufacturing
overhead. Provisions are made for obsolete or slow moving inventory based on
management estimates.

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Income Taxes

Pursuant to Financial Accounting Standards Board (FASB) Statement of
Financial Standards (SFAS) No. 109, Accounting for Income Taxes, income
taxes are recorded based on current year amounts payable or refundable, as well
as the consequences of events that give rise to deferred tax assets and
liabilities. We base our estimate of current and deferred taxes on the tax
laws and rates that are currently in effect in the appropriate jurisdiction.
Changes in laws or rates may affect the current amounts payable or refundable
as well as the amount of deferred tax assets or liabilities. At October 31,
2003, we had approximately $9,373,000 of net operating loss carry forward
available for use resulting in approximately $3,700,000 of deferred tax assets.
We have provided a valuation allowance of 100% of the $3,700,000 based
primarily on our history of losses.

Results of Operations

Comparison of the year ended October 31, 2003 to the year ended October 31,
2002

Net sales Net sales for the fiscal year ended October 31, 2003 increased
9.2% to $22,846,000 from $20,928,000. Our new European customer accounted for
the majority of the increase. We have restructured our sales operation to
focus on specific multinational customers in expanded geographic markets. Our
new European customer was derived as a direct result of our new focus.

Cost of sales Cost of sales increased 1.8% to 77.0% of net sales for the
fiscal year ended October 31, 2003 from 75.2% of net sales for the fiscal year
ended October 31, 2002. 1.5% of the increase can be attributed to increased
material costs resulting from a change in product mix related to production for
our new European customer, 1.2% of the increase to direct labor costs caused by
the use of overtime to meet delivery schedules required in part due
to a recruitment ban imposed by
the Chinese government during the SARS crisis and 0.8% of the increase to
transportation costs, offset by a 1.5% decrease in depreciation charges.

General and administrative expenses General and administrative expenses
were $3,637,000 for the fiscal year ended October 31, 2003, and $4,036,000 for
the fiscal year ended October 31, 2002, a decrease of 9.9%. The decrease is
primarily attributed to a decrease in amortization expense related to our
goodwill which was written off at the end of fiscal 2002. Significant elements
of this expense include employee related expenses of $1,753,000, professional
fees of $360,000, rent, telephone and utilities of $183,000, insurance of
$222,000, and local Chinese government fees of $197,000.

Selling, marketing, and customer service Selling, marketing, and
customer service expenses were $1,655,000 for the fiscal year ended October 31,
2003, and $1,562,000 for the fiscal year ended October 31, 2002, an increase of
6.0%. These increases can be attributed to the opening of the Ann Arbor,
Michigan and Woking, Surrey, United Kingdom sales offices in June and July
2003, respectively. Significant elements of this expense consist of employee
related expenses of $659,000, commission expense of $498,000 and rent of
$71,000. We believe the increase in sales and marketing expense is consistent
with the anticipated revenue growth through new customers; however, we will
continue to monitor sales and marketing expenses as a percentage of revenue.

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Engineering, advanced design and project management expenses
Engineering, advanced design and project management expenses were $593,000 for
the fiscal year ended October 31, 2003, and $691,000 for the fiscal year ended
October 31, 2002, a decrease of 14.2%. The decrease is attributable to lower
salary costs realized by replacement of expatriate engineering staff with
Chinese based staff. We anticipate increases in engineering related costs
associated with design and process engineering services to our clients, as well
as our efforts to team engineers with our sales and marketing efforts to
service our new and existing client base.

Impairment of goodwill In October 2001, we merged into our predecessor
and were the surviving corporation. In accordance with the provisions of SFAS
No. 121, we were required to periodically review the operating environment and
our performance to determine if there are any grounds for reviewing the
carrying value of goodwill and whether impairment may exist.

In October 2002, we applied the provisions of SFAS No. 121 to goodwill and
recorded an impairment charge of $5,287,000, which eliminated all of our
remaining goodwill and included this charge as a component of operating
expenses in fiscal 2002.

Goodwill was being amortized on a straight-line basis over 15 years.
Amortization expense charged to operations was $432,000 for the period ended
October 31, 2002.

Impairment of machinery Pursuant to the provisions of SFAS No. 121, a
review of the carrying value of long lived assets in the fourth quarter of
fiscal 2002 concluded that we could not be certain to recommence the use of
certain equipment that was decommissioned when it became more economical to
outsource rather than manufacture in house, nor did we foresee significant
proceeds from the sale of such equipment. Therefore, an impairment charge of
$270,000 was recorded in fiscal 2002. Reviews in the fiscal 2003 did not
reveal the need for further reductions in the carrying value of fixed assets,
thus there was no fixed asset impairment charge recorded in the fiscal year
ended October 31, 2003, pursuant to SFAS No. 144, which superseded SFAS No.
121.

Interest expense Interest expense decreased to $389,000 for the fiscal
year ended October 31, 2003, from $464,000 for the year ended October 31, 2002
a decrease of 16.2%. Although there was an increase in debt in fiscal 2003
over 2002, the overall decrease in interest expense is primarily due to a
reduction in the average outstanding debt during the year as new debt was added
in the fourth quarter of 2003.

Other income Other income for the fiscal year ended October 31, 2003 was
$220,000. The significant components included a write-back of $150,000 of
accrued expenses related to previous operations and $63,000 received from a
sublet of leased property. Other income for the fiscal year ended October 31,
2002 was $170,000.

Net loss The net loss for the year was $808,000. This was a 41.7%
decrease compared to the net loss from the fiscal period ended October 31, 2002
of $1,385,000 before the write off of goodwill of $5,287,000 and the impairment
of machinery of $270,000. The net loss for the year ended October 31, 2002 was
$6,942,000, including impairment charges for the write off of all goodwill at
the year end and the charge for the impairment of

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machinery. The 9.2% increase in sales and the 6.4% decrease in operating
expenses were significant contributors to the reduction in the net loss.

Comparison of the Periods Ended October 31, 2002 and October 31, 2001

Net sales- Net sales for the fiscal year ended October 31, 2002 were
$20,928,000 and for the ten months ended October 31, 2001 were $14,658,000, an
annualized increase of 19%. This increase can be attributed to our overall
sales effort in all market areas.

Cost of sales- Cost of sales decreased to 75.2% of net sales for the
fiscal year ended October 31, 2002 from 78.2% for the ten months ended October
31, 2001. This decrease can be attributed to our overall cost containment
programs implemented at the end of fiscal year 2001 and absorption of fixed
overhead over increased production.

General and administrative General and administrative expenses were
$4,036,000 for the fiscal year ended October 31, 2002 and $4,071,000 for the
ten months ended October 31, 2001, an annualized decrease of 17.4%. The
decrease can be attributed to the downsizing of the Rocklin and Hong Kong
administrative offices at the end of fiscal 2001. Significant elements of this
expense include employee related expenses of $1,600,000, professional fees of
$406,000, amortization of goodwill of $432,000, rent and utilities of $172,000,
insurance of $191,000, local Chinese government fees of $197,000 and bad debt
expense of $77,000.

Selling, marketing and customer service Selling, marketing and customer
service expenses were $1,562,000 for the fiscal year ended October 31, 2002 and
$1,231,000 for the ten month fiscal period ended October 31, 2001, an
annualized increase of 5.7%. Significant elements of this expense consist of
employee related expenses of $580,000, commission expense of $575,000 and rent
of $71,000. The increase is largely attributable to higher commission from the
increased sales volume.

Engineering, advanced design and project management Engineering,
advanced design and project management expenses were $691,000 for the fiscal
year ended October 31, 2002 and $901,000 for the ten month fiscal period ended
October 31, 2001, an annualized decrease of 36.1%. The significant decrease
was due to the relocation of design and project management to China resulting
in lower engineering salary costs. Significant elements of this expense
include employee related expenses of $645,000 and travel and lodging of
$40,000.

Impairment of goodwill In October 2001, we merged into our predecessor
and were the surviving corporation. In accordance with the provisions of SFAS
No. 121, we were required to periodically review the operating
environment and our performance to determine if there are any grounds for
reviewing the carrying value of goodwill to determine whether impairment may
exist.

In October 2002, we applied the provisions of SFAS No. 121 to goodwill and
recorded an impairment charge of $5,287,000, which eliminated all of our
remaining goodwill and included this charge as a component of operating
expenses in fiscal 2002.

Goodwill was being amortized on a straight-line basis over 15 years.
Amortization expense charged to operations was $432,000 for the period ended
October 31, 2002.

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Impairment of machinery Pursuant to the provisions of SFAS No. 121 a
review of the carrying value of long lived assets in the fourth quarter of
fiscal 2002 concluded that we could not be certain to recommence the use of
certain equipment that was decommissioned when it became more economical to
outsource rather than manufacture in house, nor did we foresee significant
proceeds from the sale of such equipment. Therefore, an impairment charge of
$270,000 was recorded in fiscal 2002.

Interest expense Interest expense reduced to $464,000 for the fiscal
year ended October 31, 2002, from $530,000 for the ten months ended October 31,
2001, a reduction of 27% on an annualized basis. The overall decrease in
interest expense is primarily due to a reduction in outstanding loan notes in
the year and a reduction in the fixed commitment fee on a factoring line.

Other income Other income for the fiscal year ended October 31, 2002 was
$170,000. The significant element included in other income was rental received
from a sublet of leased property of $63,000, duty drawback and bad debt
recovery of $52,000. In the ten months ended October 31, 2001, other income
was $972,000, which included a gain on the issue of common stock from the
settlement of a put option, rental income from subleased property, duty draw
back and insurance refunds.

Net loss The net loss for the year was $6,942,000, including impairment
charges for the write off of all goodwill at the year end and the charge for
the impairment of machinery. Without the write off of goodwill and impairment
charge, the net operating loss would have been $1,385,000 compared to
$2,571,000 for the ten months to October 31, 2001. This improvement is
primarily due to a 3% increase in margin and a volume increase in sales of 17%
on an annualized basis.

Liquidity and Capital Resources

Since we acquired our Chinese manufacturing operations in 2000 and thereby
entered the LCD business, our cash flow from operations has, taken as a whole,
been negative. With the acquisition we were short of liquidity, had low
utilization of our capacity and large fixed overhead expenses, a poor quality
customer base and disaffected suppliers. We also faced a significant downturn
in our industry subsequently compounded by the events of September 11, 2001,
the Iraqi war and the impact of SARS. Our share price was negatively impacted
rendering equity financing unattractive.

In the
year ended December 30, 2000, we sustained a loss of $4,080,000. In the ten months ended October 31, 2001, we sustained a loss of
$2,571,000. In the fiscal year 2002, we considered it necessary, after
evaluation, to write down our goodwill stemming from the acquisition and to
write down certain assets incurring a total charge of $5,989,000, which
contributed to a total loss of $6,942,000, including a loss of $953,000 from
other activities. In the fiscal year ended October 31, 2003, we sustained a
loss of $808,000. Our total loss since entering the LCD business has been
$13,820,000, which when

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combined with losses from the snowboard and apparel businesses of our
predecessor resulted in an accumulated deficit of $37,653,000.

Adjusted
for non-cash items, the above losses resulted in a cash outflows in
the year ended December 31, 2000 of $1,742,000 and
in the ten months ending October 31, 2001 of $1,252,000 and cash inflows in the
year ended October 31, 2002 of $135,000 and in the year ended October 31, 2003 of
$106,000. Thus, the net cash outflow from the total loss of
$13,820,000 discussed above was $2,753,000. This was financed by the
issue of promissory notes, the majority of which were to executives and related
parties, and financing of our receivables
from an asset based line for U.S. domestic customers and a factoring
line for Hong
Kong customers.

At
October 31, 2002, we had $602,000 of debt due within a year and a
further $1,280,000 due thereafter. We met our repayment obligations as they
fell due, and in the summer we successfully raised $1,000,000 in debt and
$500,000 in equity. This has resulted in repayment obligations at October 31,
2003 of $502,000 within one year and $1,877,000 thereafter in addition to
$1,051,000 on our credit line.

Subsequent to the fiscal year ended October 31, 2003, on December 23,
2003, we successfully completed a $5,000,000 private placement through the sale
of 3,333,335 shares of our common stock.

We believe that we will achieve positive operating cash flows in the
upcoming fiscal years based on current market conditions and our performance.
We have commenced investment in Chip-on-Glass, a relatively new LCD technology
for which we believe there is considerable customer demand and which commands a
higher margin than our existing technologies. We are analyzing our market and
our position with in it and considering what investments may be appropriate
given the risks disclosed in the document and the opportunities that may be
available. We have not commenced negotiations to extend or replace our
obligations, and there can be no certainty that we would be successful should
we seek to do so. However, we believe that, in the absence of new projects our
resources as outlined above will be sufficient to meet our obligations as they
fall due. We may conclude that opportunities exist such that we will wish to
make investments in excess of existing resources and will do so if, taking into
account the risk, these have the probability of providing positive returns.

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RISK FACTORS

Investment in our common stock involves risk. You should carefully consider
the risks we describe below before deciding to invest. The market price of our
common stock could decline due to any of these risks, in which case you could
lose all or part of your investment. In assessing these risks, you should also
refer to the other information included in this report, including our
consolidated financial statements and the accompanying notes. You should pay
particular attention to the fact that we are a holding company with substantial
operations in China and are subject to legal and regulatory environments that
in many respects differ from that of the U.S. Our business, financial
condition or results of operations could be affected materially and adversely
by any of the risks discussed below and any others not foreseen. This
discussion contains forward-looking statements.

Risks Related to Our Business

Adverse trends in the electronics industry may adversely affect our operating
results.

Our business depends on the electronics industry, which is subject to
rapid technological change, short product life cycles and margin pressures. In
addition, the electronics industry historically has been cyclical and subject
to significant downturns characterized by diminished product demand,
accelerated erosion of average selling prices and production over-capacity.
Economic conditions affecting the electronics industry in general or our major
customers may adversely affect our operating results. If our customers
products fail to gain widespread commercial acceptance, become obsolete, or
otherwise suffer from low sales volume, our business and operating results
would be negatively impacted.

A few customers and applications account for a significant portion of our
sales.

In fiscal 2003, five customers contributed 48% of total sales revenue,
including one customer which contributed 29% of our revenue. This compares with
fiscal 2002 when five customers contributed 51% of our total sales revenue and
one customer contributed 30% of our revenue. Under present conditions, the
loss of any one of these customers could have a material effect on our
performance, liquidity and prospects. To reduce this risk, we continue to emphasize custom
devices for which customer relationships are generally longer term with lower
probability of cancellation.

We do not have long-term purchase commitments from our customers and may have
to rely on customer forecasts.

Custom manufacturers for OEMs must provide increasingly rapid product
turnaround and respond to increasingly shorter lead times. A variety of
conditions, both specific to individual customers and generally affecting the
demand for their products, may cause customers to cancel, reduce or delay
orders. Cancellations, reductions or delays by a significant customer or by a
group of customers would result in reduced revenue and could result in excess and
obsolete inventory and/or unabsorbed manufacturing capacity, which could
adversely affect our business. On occasion, customers require rapid increases
in production, which can strain our resources and reduce our margins. Although
we have increased our manufacturing capacity, we may lack sufficient capacity
at a given time to meet our customers demands if they exceed anticipated
levels. We strive for rapid response to

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customer demand, which can lead to reduced purchasing efficiency and increased
material costs.

Our customers generally do not provide us with firm, long-term volume
purchase commitments. In addition, the worldwide economic slowdown commencing
in 2001 led to radically shortened lead times on purchase orders as rapid
product cycles became the norm. Although we sometimes enter into manufacturing
contracts with our customers, these contracts clarify order lead times,
inventory risk allocation and similar matters rather than provide firm,
long-term commitments. As a result, customers can generally cancel purchase
commitments or reduce or delay orders at any time. The large percentage of our
sales to customers in the electronics industry, which is subject to severe
competitive pressures, rapid technological change and product obsolescence,
increases our inventory and overhead risks.

In addition, we make significant decisions, including determining the
levels of business that we will seek and accept, production schedules,
component procurement commitments, facility requirements, personnel needs, and
other resource requirements, based on our estimates of customer requirements.
The short-term nature of our customers commitments and the possibility of
rapid changes in demand for their products reduce our ability to estimate
accurately the future requirements of those customers. Because many of our
costs and operating expenses are fixed, a reduction in customer demand can harm
our gross margins and operating results. In order to transact business, we
assess the integrity and creditworthiness of our customer and may, based on
this assessment, agree to amortize design, development and set up costs over
time and enter into commitments with suppliers. Such assessments are not
always accurate and expose us to potential costs, including the write off of
costs incurred and inventory obsolescence. We may also occasionally place
orders with suppliers based on a customers forecast or in anticipation of an
order. Additionally, from time to time, we may purchase quantities greater
than customer orders to secure more favorable pricing, delivery or credit
terms. These purchases can expose us to losses from cancellation costs,
inventory carrying costs or inventory obsolescence.

Failure to optimize our manufacturing potential and cost structure could
materially and adversely affect our business and operating results.

We strive to fully utilize the manufacturing capacity of our facilities
but may not do so on a consistent basis. Our factory utilization is dependent
on our success in accurately forecasting demand, predicting volatility, timing
volume sales to our customers, balancing our productive resources with product
mix, and planning manufacturing services for new or other products that we
intend to produce. Demand for contract manufacturing of these products may not
be as high as we expect, and we may fail to realize the expected benefit from
our investment in our manufacturing facilities. Our profitability and
operating results are also dependent upon a variety of other factors,
including: utilization rates of our manufacturing lines, downtime due to
product changeover, impurities in raw materials causing shutdowns, and
maintenance of contaminant-free operations.

Moreover, our cost structure is subject to fluctuations from inflationary
pressures in China and other geographic regions where we conduct business.
China is currently experiencing dramatic growth in its economy. This growth
may lead to continued pressure on wages and salaries that may exceed increases
in productivity. In addition, these may not be compensated for and may be
exacerbated by currency movements. We are also exposed

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to movement in commodity prices, particularly diesel fuel, which is used
to power our manufacturing facilities.

We face intense competition, and many of our competitors have substantially
greater resources than we do.

We operate in a competitive environment that is characterized by price
deflation and technological change. We compete with major international and
domestic companies. Our major competitors include Three-Five Systems, Inc.,
Optrex America, Inc., Varitronix, Ltd., Wintek Corporation, Truly
Semiconductors Limited,
and other similar companies primarily located in Japan, Taiwan, Korea, Hong
Kong and China. Our competitors may have greater market recognition and
substantially greater financial, technical, marketing, distribution,
purchasing, manufacturing, personnel and other resources than we do.
Furthermore, some of our competitors have manufacturing and sales forces that
are geographically diversified, allowing them to reduce transportation
expenses, tariff costs and currency fluctuations for certain customers in
markets where their facilities are located. Many competitors have production
lines that allow them to produce more sophisticated and complex devices than we
do and to offer a broader range of display devices to our target customers.
Other emerging companies or companies in related industries may also increase
their participation in the display and display module markets, which would
intensify competition in our markets.

We depend on the market acceptance of the products of our customers.

Currently, we do not sell products to end users. Instead, we design and
manufacture various display product solutions that our customers incorporate
into their products. As a result, our success depends almost entirely upon the
widespread market acceptance of our customers products. Any significant
slowdown in the demand for their products would adversely affect our business.
Therefore, we must identify industries that have significant growth potential
and establish strong, long-term relationships with OEMs in those industries.
Our failure to identify potential growth opportunities or establish these
relationships would adversely affect our business.

We extend credit to our customers and may not be able to collect all
receivables due to us.

We extend credit to our customers based on assessments of their financial
circumstances, generally without requiring collateral. Our overseas customers
may be subject to economic cycles and conditions different from those
of our U.S.
customers. We may also be unable to obtain satisfactory credit information or
adequately secure our credit risk for some of these overseas customers. The
extension of credit presents an exposure to risk of uncollected receivables.
Additionally, the collectable amounts may not realize the amounts
anticipated in U.S. dollar terms when denominated in a foreign currency. Our
inability to collect on these accounts may also have an effect on our immediate
and long term liquidity as we borrow under an asset based credit line, under
which uncollected receivables are a major asset and indicator of performance to
our lender and our profitability.

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We may need to produce higher-end products to remain competitive.

Our future success may be partly dependent upon our ability to effectively
offer higher-end products that we do not currently supply, including color
super twisted neumatic, or CSTN, thin film transistor, or TFT, and organic
liquid emissive displays, or OLED, as we believe the high volume markets are
moving in these directions. If we fail to offer more complex higher-end
products that are desired by the marketplace, our competitive position could
decline.

The growth of our business depends on our ability to finance new products and
services.

We operate in a rapidly changing industry. Technological advances, the
introduction of new products and new design and manufacturing techniques could
adversely affect our business unless we are able to adapt to the changing
conditions. To remain competitive, we must continue to incur significant costs
in product development, equipment, facilities and invest in working capital.
These costs may increase,
resulting in greater fixed costs and operating expenses. As a result, we could be required to expend substantial funds for and commit
significant resources to the following:



| |  |  | research and development activities on existing and potential product solutions;
| | - |  | --------------------------------------------------------------------------------
|
| |  |  | additional engineering and other technical personnel;                           
|
| |  |  | advanced design, production and test equipment;                                 
|
| |  |  | manufacturing services that meet changing customer needs;                       
|
| |  |  | technological changes in manufacturing processes; and                           
|
| |  |  | manufacturing capacity.                                                         

Our future operating results will depend to a significant extent on our ability
to continue to provide new product solutions and electronic manufacturing
services that compare favorably on the basis of time to market, cost and
performance with the design and manufacturing capabilities of OEMs and
competitive third-party suppliers and technologies. Our failure to
increase sufficiently our net sales to offset these increased costs would
adversely affect our operating results.

We are subject to lengthy development periods and product acceptance cycles.

We sell our products and services to OEMs, who then incorporate them into
the products they sell. OEMs make the determination during their product
development programs whether to incorporate our products and services or pursue
other alternatives. This requires us to make significant investments of time
and resources well before our customers introduce their products and before we
can be sure that our efforts will generate any significant sales or that we
will even recover our initial investment of time and resources.

During a customers entire product development process, we face the risk
that our products will fail to meet technical, performance or cost requirements
or that they could be

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replaced by competing products. Even if we complete our design or
production processes in a manner satisfactory to our customer, the customer may
delay or terminate its product development efforts. The occurrence of any of
these events could adversely affect our operating results. The lengthy
development period also means that it is difficult to immediately replace
unexpected losses of existing or expected business.

We are subject to lengthy sales cycles.

Our
focus on developing a customer base that requires custom displays and
devices means that it may take longer to develop strong customer relationships or
partnerships. Moreover, factors specific to certain industries also have an
impact on our sales cycles. In particular, those customers who operate in or
supply to the medical and automotive industries require longer sales cycles as
qualification processes are longer and more rigorous, often
requiring extensive field audits. These lengthy and challenging sales
cycles may mean that it could take longer before our sales and marketing efforts result in
revenue to us, if at all.

Products we manufacture may contain design or manufacturing defects, which
could result in reduced demand for our services and customer claims.

We manufacture products to our customers requirements, which can be
highly complex and may at times contain design or manufacturing errors or
failures. Any defects in the products we manufacture, whether caused by a
design, manufacturing or component failure or error, may result in returns,
claims, delayed shipments to customers or reduced or cancelled customer orders.
If these defects occur, we will incur additional costs, and if in large
quantity or too frequent, we may sustain additional costs, loss of business
reputation and may incur liability.

We could become involved in intellectual property disputes.

We do not have any patents, licenses or trademarks material to our
business. Instead, we rely on trade secrets, industry expertise and our
customers sharing of intellectual property with us. We do not knowingly
infringe patents, copyrights or other intellectual property rights owned by
other parties; however, in the event of an infringement claim, we may be
required to spend a significant amount of money to defend a claim, develop a
non-infringing alternative or to obtain licenses. We may not be successful in
developing such an alternative or obtaining licenses on reasonable terms, if at
all. Any litigation, even without merit, could result in substantial costs and
diversion of our resources and could materially and adversely affect our
business and operating results.

Our customers may decide to design and/or manufacture the products that they
currently purchase from us.

Our competitive position could also be adversely affected if one or more
of our customers decide to design and/or manufacture their own displays and
display modules. We may not be able to compete successfully with these
in-house developments by our customers.

We may develop new products that may not gain market acceptance.

We operate in an industry characterized by frequent and rapid
technological advances, the introduction of new products and new design and
manufacturing technologies. As a result,

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we may be required to expend
funds and to commit resources to research and
development activities, possibly requiring additional engineering and other
technical personnel; new design, production, and test equipment; and
continually enhancing design and manufacturing processes and techniques. We may invest in equipment
employing new production techniques for existing products and new equipment in
support of new technologies that fail to generate adequate returns
on the investment due to insufficient productivity, functionality or market
acceptance of the products for which the equipment may be used. We could
therefore incur significant sums in design and manufacturing services for new
product solutions that do not result in sufficient revenue, which would
adversely affect our future operating results. Furthermore, customers may
change or delay product introductions or terminate existing products without
notice for any number of reasons unrelated to us, including lack of market
acceptance for a product. Our future operating results will depend
significantly on our ability to provide timely design and manufacturing
services for new products that compete favorably with design and manufacturing
capabilities of OEMs and third party suppliers.

Our component and materials suppliers may fail to meet our needs.

We do not have long term supply contracts with the majority of our
suppliers or for specific components. This generally serves to reduce our
commitment risk but does expose us to supply risk and to price increases that
we may not be able to pass on to our customers. In our industry, at times,
there are shortages of some of the materials and components that we use. In
some cases, supply shortages and delays in delivery have resulted in curtailed
production or delays in production, which contribute to an increase in
inventory levels and loss of profit. We expect that shortages and delays in
deliveries of some components will continue to occur from time to time. If we
are unable to obtain sufficient components on a timely basis, we may experience
manufacturing delays, which could harm our relationships with current or
prospective customers and reduce our sales. We also depend on a small number
of suppliers for certain supplies that we use in our business. If we are
unable to continue to purchase components from these limited source suppliers
or identify alternative suppliers, our business and operating results would be
materially and adversely affected. We may also not be able to obtain as
competitive pricing for some of our supplies as our competitors. Moreover,
some suppliers, for example, those who sell integrated circuits, could be
preferential in their sales to our competitors, who may have greater buying
power or leverage in negotiations.

Future outbreaks of severe acute respiratory syndrome or other communicable
diseases may have a negative impact on our business and operating results.

In 2003, several economies in Asia, including Hong Kong and southern
China, where our operations are located, were affected by the outbreak of
severe acute respiratory syndrome, or SARS. If there is a recurrence of an
outbreak of SARS, or similar infectious or contagious diseases such as avian
flu, it could adversely affect our business and operating results. For
example, a future SARS outbreak could result in quarantines or closures to some
of our factories, and our operations could be seriously disrupted as the
majority of our work force is housed in a single dormitory. In addition,
ongoing concerns regarding SARS, particularly its effect on travel, could
negatively impact our customers and suppliers, in particular their willingness
to travel to do business.

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Our results could be harmed if compliance with new environmental regulations
becomes too burdensome.

Our manufacturing processes result in the creation of small amounts of
hazardous and/or toxic wastes, including various gases, epoxies, inks, solvents
and other organic wastes. We are subject to Chinese governmental regulations
related to the use, storage and disposal of such hazardous wastes. We also
have our own electrical power generation plant that operates on diesel fuel.
The amounts of our hazardous waste are expected to increase in the future as
our manufacturing operations increase, and therefore, our cost of compliance is
likely to increase. Although we believe we are operating in compliance with
applicable environmental laws, there is no assurance that we will be in
compliance consistently as such laws and regulations or their interpretation
and implementation change. Failure to comply with environmental regulation
could result in the imposition of fines, suspension or halting of production or
closure of manufacturing operations.

Our existing loans mature in 2004 and 2005, and we may not be able to secure
alternative financing on acceptable terms.

Our financing is currently comprised of loan notes, a mortgage on our
properties in China and an asset based line of credit. We have no arrangements
to extend the maturity of the loan notes beyond the due dates presented in our
accounts, nor have we commenced negotiations to extend or replace the mortgage.
Moreover, the asset based line of credit can be withdrawn by the lender.

From time to time, we may seek additional equity or debt financing to
provide for the capital expenditures required to maintain or expand our design
and production facilities and equipment and/or working capital, as well as to
repay loans if our cash flow from operations is insufficient. We cannot
predict with certainty the timing or amount of any such capital requirements.
If such financing is not available on satisfactory terms, we may be unable to
expand our business or to develop new business at the rate desired, and our
operating results may suffer.

We must effectively manage our growth.

Failure to manage our growth effectively could adversely affect our
operations. We have increased the number of our manufacturing and design
programs and plan to expand further the number and diversity of our programs in
the future and may increase the number of locations from which we manufacture
and sell. Our ability to manage our planned growth effectively will require us
to:



| |  |  | enhance our operational, financial and management systems;                                                                                   
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | expand our facilities and equipment; and                                                                                                     
|
| |  |  | successfully hire, train and motivate additional employees, including
the technical personnel necessary to operate our production
facilities.

An expansion and diversification of our product range, manufacturing and
sales locations and customer base would result in increases in our overhead and
selling expenses.

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We may also be required to increase staffing and other expenses as well as
our expenditures on plant, equipment and property in order to meet the
anticipated demand of our customers. Customers, however, generally do not
commit to firm production schedules for more than a short time in advance. Any
increase in expenditures in anticipation of future orders that do not
materialize would adversely affect our profitability. Customers also may
require rapid increases in design and production services that place an
excessive short-term burden on our resources.

Potential strategic alliances may not achieve their objectives.

We are currently exploring strategic alliances designed to enhance or
complement our technology or to work in conjunction with our technology,
increase our manufacturing capacity, provide additional know-how, components or
supplies and develop, introduce and distribute products and services utilizing
our technology and know-how. Any strategic alliances entered into may not
achieve their strategic objectives, and parties to our strategic alliances may
not perform as contemplated.

We may not be able to retain, recruit and train adequate management and
production personnel.

Our continued operations are dependent upon our ability to identify,
recruit and retain adequate management and production personnel in China. We
require trained graduates of varying levels and experience and a flexible work
force of semi-skilled operators. Many of our current employees come from the
more remote regions of China as they are attracted by the wage differential and
prospects afforded by Shenzhen and our operations. With the growth currently
being experienced in China and competing opportunities for our personnel, there
can be no guarantee that a favorable employment climate will continue and that
wage rates in China will continue to be internationally competitive.

We are at risk of double taxation due to transfer pricing.

None of the asset based finance or factoring lines we have established
will accept receivables from our Chinese subsidiaries as collateral for
advances; we therefore invoice our non-Chinese customers through our companies
in Hong Kong and the U.S. As a result, we have intercompany invoicing whereby
our Chinese subsidiaries invoice the Hong Kong and U.S. entities who then
invoice our customers for sales rendered. As required by the tax authorities
in each jurisdiction, we seek to apply arms length pricing to this process.
Should a tax authority in any jurisdiction consider the pricing not to be arms
length, it may deem the prices charged to be different from those we have
applied. If this decision were to be applied unilaterally, it could lead to an
increase in our overall tax expenses. In addition, we may have to expend
resources in defending our positions, irrespective of the outcome determined.

Risks Related to International Operations

We are dependent on our Chinese manufacturing operations.

Our current manufacturing operations are located in China, our sales
offices are in the U.S., Europe, Hong Kong, Singapore and China, and our
administrative offices are in the U.S. The geographical distances between
these facilities create a number of logistical and communications challenges.
In addition, because of the location of the manufacturing

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facilities in China, we could be affected by economic and political
instability there, including problems related to labor unrest, lack of
developed infrastructure, variances in payment cycles, currency fluctuations,
overlapping taxes and multiple taxation issues, employment and severance taxes,
compliance with local laws and regulatory requirements, greater difficulty in
collecting accounts receivable, and the burdens of cost and compliance with a
variety of foreign laws. Moreover, inadequate development or maintenance of
infrastructure in China, including adequate power and water supplies,
transportation, raw materials availability or the deterioration in the general
political, economic or social environment could make it difficult, more
expensive and possibly prohibitive to continue to operate our manufacturing
facilities in China.

The Chinese government could change its policies toward, or even nationalize,
private enterprise, which could harm our operations.

Over the past several years, the Chinese government has pursued economic
reform policies, including the encouragement of private economic activities and
decentralization of economic regulation. The Chinese government may not
continue to pursue these policies or may significantly alter them to our
detriment from time to time without notice. Changes in policies by the Chinese
government resulting in changes in laws, regulations, their interpretation, or
the imposition of confiscatory taxation, restrictions on currency
conversion or
imports and sources of supply could materially and adversely affect our
business and operating results. The nationalization or other expropriation of
private enterprises by the Chinese government could result in the total loss of
our investment in China.

The Chinese legal system has inherent uncertainties that could materially and
adversely impact our ability to enforce the agreements governing our
operations.

We lease the land on which our factories in China are located. The
performance of the agreements and the operations of our factories are dependent
on our relationship with the local government. Our operations and prospects
would be materially and adversely affected by the failure of the local
government to honor our agreements or an adverse change in the laws governing them.
In the event of a dispute, enforcement of these agreements could be difficult
in China. China tends to issue legislation which is subsequently followed by
implementing regulations, interpretations and guidelines that can render
immediate compliance difficult. Similarly, on occasion, conflicts are
introduced between national legislation and implementation by the provinces
that take time to reconcile. These factors can present difficulties in our
compliance. Unlike the U.S., China has a civil law system based on written
statutes in which judicial decisions have limited precedential value. The
Chinese government has enacted laws and regulations to deal with economic
matters such as corporate organization and governance, foreign investment,
commerce, taxation and trade. However, its experience in implementing,
interpreting and enforcing these laws and regulations is limited, and our
ability to enforce commercial claims or to resolve commercial disputes in China
is therefore unpredictable. These matters may be subject to the exercise of
considerable discretion by agencies of the Chinese government, and forces and
factors unrelated to the legal merits of a particular matter or dispute may
influence their determination.

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Because our operations are international, we are subject to significant
worldwide political, economic, legal and other uncertainties.

We are incorporated in the U.S. and have subsidiaries in China, Hong Kong,
Singapore and the British Virgin Islands. Because we manufacture all of our
products in China, substantially all of the net book value of our total fixed
assets is located there. However, we sell our products to customers worldwide
with concentrations in Hong Kong, North America, Europe, Japan, China and
Southeast Asia and may thus have receivables in, and goods in transit to those
locations. Protectionist trade legislation in the U.S. or foreign countries,
such as a change in export or import legislation, tariff or duty structures, or
other trade policies, could adversely affect our ability to sell products in
these markets, or even to purchase raw materials or equipment from foreign
suppliers. Moreover, we are subject to a variety of U.S. laws and regulations,
changes to which may affect our ability to transact business with customers or
in certain product categories.

We are also subject to numerous national, state and local governmental
regulations, including environmental, labor, waste management, health and
safety matters and product specifications. We are subject to laws and
regulations governing our relationship with our employees, including: wage and
hour requirements, working and safety conditions, citizenship requirements,
work permits and travel restrictions. These include local labor laws and
regulations, which may require substantial resources for compliance. We are
subject to significant government regulation with regard to property ownership
and use in connection with our leased facilities in China, import restrictions,
currency restrictions and restrictions on the volume of domestic
sales and other areas of regulation, all of
which impact our profits and operating results.

We face risks associated with international trade and currency exchange.

We transact business in a variety of currencies including Hong Kong
dollars, Japanese Yen, Singapore dollars, U.S. dollars and the Chinese Yuan
Renminbi, or RMB. Increased sales to Europe may result in receivables by us in
other currencies, such as the Euro. Although we transact business
predominantly in U.S. and Hong Kong dollars, we collect a portion of our
revenue and incur approximately 30% of our operating expenses, such as payroll,
land rent and other costs associated with running our facilities in China, in
RMB. Adverse movements between the selling currency and the RMB would have a
material impact on our profitability. Changes in exchange rates would affect
the value of deposits of currencies we hold. The RMB has been broadly stable
against U.S. dollar in the past three years, but is not fully convertible and
fully traded. It is not currently possible to hedge against movement in the
RMB exchange rate through conventional means; we are thus not hedged and
remain exposed to movement in the exchange rate. The exchange rate of the Hong
Kong dollar has been pegged to the U.S. dollar and has not in the past
presented a currency exchange risk, though this could change in the future. We
also do not currently hedge against exposure to other currencies. We cannot
predict with certainty future exchange rates and thus their impact on our
operating results.

We also
had long term debt, denominated in RMB, repayable in equal installments over three
years, of RMB 10 million (U.S. $1.2 million at current exchange rates). As of
October 31, 2003, two installments of RMB 3.3 million each were outstanding and
due for repayment in June 2004 and June 2005. An increase in the value of the
RMB against the U.S. dollar would result in a translation loss in U.S. dollar
terms that would be realized as U.S. dollars from sales revenues are utilized
to meet the repayment obligation.

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Changes to Chinese tax laws and heightened efforts by the Chinese tax
authorities to increase revenues could subject us to greater taxes.

Under applicable Chinese law, we have been afforded a number of profits
tax concessions by, and tax refunds from, Chinese tax authorities on a
substantial portion of our operations in China. However, the Chinese tax
system is subject to substantial uncertainties with respect to interpretation
and enforcement. Following the Chinese governments program of privatizing
many state owned enterprises, the Chinese government has attempted to augment
its revenues through heightened tax collection efforts. Continued efforts by
the Chinese government to increase tax revenues could result in
revisions to tax
laws or their interpretation, which could increase our future tax
liabilities or deny us expected concessions or refunds.

In October 2003, changes to the Chinese Value Added Tax system were
announced affecting the recoverability of input VAT beginning January 1, 2004.
The exact implementation is still being determined and disseminated. The
expense to us will depend not only on the legislation, but also on the reaction
of both our suppliers and customers. We estimate that, had the change been
effective throughout fiscal 2003, the cost to us prior to certain
mitigating actions we may have been able to take, would have been approximately
$350,000.

Risks Related to Our Shares

The market price of our shares is subject to price and volume fluctuations.

The markets for equity securities have been volatile. The price of our common
shares has been and could continue to be subject to wide fluctuations in
response to variations in operating results, news announcements, trading
volume, general market trends both domestically and internationally, currency
movements and interest rate fluctuations, or sales of common shares by our
officers, directors and our principal shareholders, customers, suppliers or
other publicly traded companies. Certain events, such as the issuance of
common shares upon the exercise of our outstanding stock options could also
materially and adversely affect the prevailing market price of our common
shares. Further, the stock markets in general have recently experienced
extreme price and volume fluctuations that have affected the market prices of
equity securities of many companies and that have been unrelated or
disproportionate to the operating performance of such companies. These fluctuations may materially and adversely affect the market price of our
common shares and your ability to resell your shares at or above the price you
paid, or at any price.

The concentration of share ownership by our officers and directors allows them
to control or substantially influence the outcome of matters requiring
shareholder approval.

As of January 27, 2004, our officers and directors as a group beneficially
owned approximately 22% of our common shares. As a result, acting together,
they may be able to control or substantially influence the outcome of matters
requiring approval by our shareholders, including the election of directors and
approval of significant corporate transactions.

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We do not pay cash dividends.

We have never paid any cash dividends on our common stock and may not pay
cash dividends in the future. Instead, we intend to apply earnings to the
expansion and development of our business. Thus, the liquidity of your
investment is dependent upon your ability to sell stock at an acceptable
price. The price can go down as well as up and may limit your ability to
realize any value from your investment, including the initial purchase price.




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Currency Fluctuations

We sell a majority of our products in U.S. dollars and pay for our
material components in U.S. dollars, Hong Kong dollars, Chinese RMB and
Japanese yen. We pay labor costs and overhead expenses in U.S. dollars, RMB
and Hong Kong dollars.

The exchange rate of the Hong Kong dollar to the U.S. dollar has been
fixed by the Hong Kong government since 1983 at approximately HK$7.80 to
US$1.00 through the currency issuing banks in Hong Kong and accordingly has not
in the past presented a currency exchange risk. This could change in the
future as there is discussion in some circles concerning the advantages of the
fixed rate.

Effective January 1, 1994, China adopted a floating currency system
whereby the official exchange rate equaled the market rate. Since the market
and official RMB rates were unified, the value of the RMB against the U.S.
dollar has been stable. There is currently pressure being exerted by the U.S.
for the RMB to be permitted to float more freely but it is unclear whether this
would lead to an upward movement in the exchange rate between the RMB and the
U.S. dollar. It is not currently possible to hedge against movement in the RMB
exchange rate through conventional means. We are thus not hedged
and remain exposed to movement in the exchange rate. We incur approximately
30% of our expenses in RMB and have negligible RMB revenue, an increase in the
value of the RMB would thus have an adverse affect on our operating margins.

In addition, we had long term debt, repayable in installments over three
years, of RMB 10 million (U.S. $1.2 million at current exchange rates), of
which two installments were outstanding at the fiscal year ended October 31,
2003. An increase in the value of the RMB against the U.S. dollar would result
in a translation loss in U.S. dollar terms which would be realized as U.S.
dollars from sales revenues were utilized to meet the repayment obligation.

We hold comparatively small amounts of cash in RMB, largely that required
for approximately two weeks of disbursements. An increase in the value of the
RMB would thus result in small translation gain; however, this would be more
than offset by our accounts payable balances in RMB as these tend to be larger
than the cash holding.

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We also incur liabilities in Japanese Yen from the purchase of raw
materials. We do not currently hedge against this exposure and thus exposed to
exchange rate movement at present.

Interest Rate Risk

Our principal exposure to interest rate changes is on the asset based
lending line which is based on prime rates in the U.S.

Inflation Risk

Although inflation has remained low in recent years in the markets in
which we currently sell and expect to do so for the foreseeable future, the
general inflation rate in China is higher with wage expectation running at
5-10% annually. Such inflation represents a risk to our profitability if
sustained and not compensated for by a movement in exchange rates or
productivity improvements.

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ITEM 8. FINANCIAL STATES AND SUPPLEMENTARY DATA.

TABLE OF CONTENTS

|                                                                 |                                                                                                                                                                |  |      |     | 
|---------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                 |                                                                                                                                                                |  | Page
|                                                                 |                                                                                                                                                                |  |     
|Reports of Independent Auditors and Certified Public Accountants |                                                                                                                                                                |  | F-2  |    
|                                                                 |                                                                                                                                                                |  |      |    
|Consolidated Financial Statements                                |                                                                                                                                                                |  |      |    
|                                                                 |                                                                                                                                                                |  |      |    
|                                                                 | Consolidated Balance Sheets as of October 31, 2003 and 2002                                                                                                    |  |      | F-4 | 
|                                                                 |                                                                                                                                                                |  |      |     | 
|                                                                 | Consolidated Statements of Operations for the year
ended October 31, 2003, the year ended October 31, 2002
and the ten-months ended October 31, 2001           |  |      | F-5 | 
|                                                                 |                                                                                                                                                                |  |      |     | 
|                                                                 | Consolidated Statements of Stockholders Equity for the year
ended October 31, 2003, the year ended October 31, 2002
and the ten-months ended October 31, 2001 |  |      | F-6 | 
|                                                                 |                                                                                                                                                                |  |      |     | 
|                                                                 | Consolidated Statements of Cash Flows for the year
ended October 31, 2003, the year ended October 31, 2002
and the ten-months ended October 31, 2001           |  |      | F-7 | 
|                                                                 |                                                                                                                                                                |  |      |     | 
|                                                                 | Notes to Consolidated Financial Statements                                                                                                                     |  |      | F-8 | 
|                                                                 |                                                                                                                                                                |  |      |     | 
|Supplementary Information                                        |                                                                                                                                                                |  | F-30 |    
|                                                                 |                                                                                                                                                                |  |      |    

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
International DisplayWorks, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of International
DisplayWorks, Inc. and subsidiaries (the Company), as of October 31, 2003 and
2002 and the related consolidated statements of operations, stockholders
equity and cash flows, for each of the two years in the period ended October
31, 2003. These consolidated financial statements 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 as of and for the ten-months ended October 31, 2001 were audited by
other auditors whose report, dated January 23, 2002 expressed an unqualified
opinion on those statements.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International DisplayWorks,
Inc. and subsidiaries as of October 31, 2003 and 2002, and the results of its
operations and its cash flows for each of the two years in the period ended
October 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.

In connection with our audit of the consolidated financial statements referred
to above, we have audited Schedule II - Valuation and Qualifying Accounts, for
each of the two years in the period ended October 31, 2003. In our opinion this
schedule presents fairly, in all material respects, the information required to
be set forth therein.

/S/ GRANT THORNTON

Hong Kong
December 5, 2003 (except for note 2,
          as to
which the date is December 23, 2003)

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
International DisplayWorks, Inc. and Subsidiaries

We have audited the accompanying consolidated statements of operations,
shareholders equity and cash flows of International DisplayWorks, Inc. and
subsidiaries (the Company) for the ten months ended October 31, 2001. These
consolidated financial statements and the schedules referred to on the
following pages are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements and supplemental schedules based on our audits.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of International DisplayWorks, Inc. and subsidiaries for the ten
months ended October 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The Supplemental Schedule
of Valuation and Qualifying Accounts is presented for purpose of complying with
the Securities and Exchange Commissions rules and is not a part of the basic
consolidated financial statements. This information has been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.

/S/ PERRY-SMITH LLP

Sacramento, California
January 23, 2002

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INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
October 31

|                                                         |                                                                                                                                                             |                                            |       |         |        |  |       |         |        |  | 
|-------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----- | ------- | ------ |  | ----- | ------- | ------ |  | 
|                                                         |                                                                                                                                                             | 2003                                       |       | 2002   
|                                                         |                                                                                                                                                             |                                            |       |        
|ASSETS                                                   |                                                                                                                                                             |                                            |       |         |        |  |       |        
|Current assets:                                          |                                                                                                                                                             |                                            |       |         |        |  |       |        
|                                                         | Cash and cash equivalents                                                                                                                                   |                                            | $     | 1,178   |        |  | $     | 1,556   |       
|                                                         | Accounts receivable, net of allowance for doubtful accounts of $40 and $341,
respectively                                                                   |                                            |       | 4,260   |        |  |       | 3,064   |       
|                                                         | Inventories                                                                                                                                                 |                                            |       | 2,465   |        |  |       | 1,460   |       
|                                                         | Prepaid expense and other current assets                                                                                                                    |                                            |       | 1,361   |        |  |       | 538     |       
|                                                         |                                                                                                                                                             |                                            |       |         |        |  |       |        
|                                                         |                                                                                                                                                             | Total current assets                       |       |         | 9,264  |  |       |         | 6,618  | 
|Property, plant and equipment                            |                                                                                                                                                             |                                            | 4,796 |         |        |  | 5,197 |        
|                                                         |                                                                                                                                                             |                                            |       |         |        |  |       |        
|                                                         |                                                                                                                                                             | Total assets                               |       | $       | 14,060 |  |       | $       | 11,815 | 
|                                                         |                                                                                                                                                             |                                            |       |         |        |  |       |        
|LIABILITIES AND STOCKHOLDERS EQUITY                     |                                                                                                                                                             |                                            |       |         |        |  |       |        
|Current liabilities:                                     |                                                                                                                                                             |                                            |       |         |        |  |       |        
|                                                         | Accounts payable                                                                                                                                            |                                            | $     | 4,770   |        |  | $     | 3,070   |       
|                                                         | Accrued liabilities                                                                                                                                         |                                            |       | 1,636   |        |  |       | 1,365   |       
|                                                         | Line of credit                                                                                                                                              |                                            |       | 1,051   |        |  |       | 1,004   |       
|                                                         | Current portion of long term debt - related parties                                                                                                         |                                            |       | 50      |        |  |       | 150     |       
|                                                         | Current portion of long term debt                                                                                                                           |                                            |       | 452     |        |  |       | 504     |       
|                                                         |                                                                                                                                                             |                                            |       |         |        |  |       |        
|                                                         |                                                                                                                                                             | Total current liabilities                  |       |         | 7,959  |  |       |         | 6,093  | 
|Long-term debt, net of current portion - related parties |                                                                                                                                                             |                                            | 624   |         |        |  | 424   |        
|Long-term debt, net of current portion                   |                                                                                                                                                             |                                            | 1,253 |         |        |  | 856   |        
|                                                         |                                                                                                                                                             |                                            |       |         |        |  |       |        
|                                                         |                                                                                                                                                             | Total liabilities                          |       |         | 9,836  |  |       |         | 7,373  | 
|Commitments and contingencies                            |                                                                                                                                                             |                                            |      |         |        |  |      |        
|Stockholders equity                                     |                                                                                                                                                             |                                            |       |         |        |  |       |        
|                                                         | Preferred stock, no par value, 10,000,000 shares authorized,
no shares issued or outstanding                                                                |                                            |       |        |        |  |       |        |       
|                                                         | Common stock, no par value, 40,000,000 shares authorized
20,984,913 and 19,217,246 shares issued and
outstanding at October 31, 2003 and 2002,
respectively |                                            |       | 41,806  |        |  |       | 41,216  |       
|                                                         | Accumulated deficit                                                                                                                                         |                                            |       | (37,653 | )      |  |       | (36,845 | )     
|                                                         | Cumulative translation adjustment                                                                                                                           |                                            |       | 71      |        |  |       | 71      |       
|                                                         |                                                                                                                                                             |                                            |       |         |        |  |       |        
|                                                         |                                                                                                                                                             | Total stockholders equity                 |       |         | 4,224  |  |       |         | 4,442  | 
|                                                         |                                                                                                                                                             |                                            |       |         |        |  |       |        
|                                                         |                                                                                                                                                             | Total liabilities and stockholders equity |       | $       | 14,060 |  |       | $       | 11,815 | 
|                                                         |                                                                                                                                                             |                                            |       |         |        |  |       |        

The accompanying footnotes are an integral part of these financial statements.

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INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)

For the Year Ended October 31, 2003, the Year Ended October 31, 2002
and the Ten-Months Ended October 31, 2001

|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |       |            | 
|------------------------------------------------------------------ | --------------------------------------------------- | ---------------------------- | ------ | ---------------- | ---------- | ---------------- | ------ | ---------------- | ---------- | - | ------ | ----- | ---------- | 
|                                                                   |                                                     |                              |        | October 31, 2003 |            | October 31, 2002 |        | October 31, 2001
|                                                                   |                                                     |                              |        | (twelve months)  |            | (twelve months)  |        | (ten months)    
|Net sales                                                          |                                                     | $                            | 22,846 |                  |            | $                | 20,928 |                  |            | $ | 14,658 |      
|Cost of goods sold                                                 |                                                     |                              | 17,600 |                  |            |                  | 15,730 |                  |            |   | 11,468 |      
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|                                                                   | Gross profit                                        |                              |        | 5,246            |            |                  |        | 5,198            |            |   |        | 3,190 |           
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|Operating expenses:                                                |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|                                                                   | General and administrative                          |                              |        | 3,637            |            |                  |        | 4,036            |            |   |        | 4,071 |           
|                                                                   | Sales, marketing and customer service               |                              |        | 1,655            |            |                  |        | 1,562            |            |   |        | 1,231 |           
|                                                                   | Engineering, advanced design and
product management |                              |        | 593              |            |                  |        | 691              |            |   |        | 901   |           
|                                                                   | Impairment of machinery                             |                              |        |                 |            |                  |        | 270              |            |   |        |      |           
|                                                                   | Impairment of goodwill                              |                              |        |                 |            |                  |        | 5,287            |            |   |        |      |           
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|                                                                   |                                                     | Total operating expenses     |        |                  | 5,885      |                  |        |                  | 11,846     |   |        |       | 6,203      | 
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|Loss from operations                                               |                                                     |                              | (639   | )                |            |                  | (6,648 | )                |            |   | (3,013 | )    
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|Other income (expense):                                            |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|                                                                   | Interest expense                                    |                              |        | (389             | )          |                  |        | (464             | )          |   |        | (530  | )         
|                                                                   | Other income                                        |                              |        | 220              |            |                  |        | 170              |            |   |        | 972   |           
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|                                                                   |                                                     | Total other income (expense) |        |                  | (169       | )                |        |                  | (294       | ) |        |       | 442        | 
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|Loss before income taxes                                           |                                                     |                              | (808   | )                |            |                  | (6,942 | )                |            |   | (2,571 | )    
|                                                                   | Provision for income taxes                          |                              |        |                 |            |                  |        |                 |            |   |        |      |           
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|Net loss                                                           |                                                     |                              | (808   | )                |            |                  | (6,942 | )                |            |   | (2,571 | )    
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|Net loss per common share:                                         |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|                                                                   | Net loss - basic                                    |                              | $      | (0.04            | )          |                  | $      | (0.36            | )          |   | $      | (0.14 | )         
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|                                                                   | Net loss - diluted                                  |                              | $      | (0.04            | )          |                  | $      | (0.36            | )          |   | $      | (0.14 | )         
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|Weighted average number of shares used in
computing share amounts: |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|                                                                   |                                                     | Basic                        |        |                  | 19,448,718 |                  |        |                  | 19,207,246 |   |        |       | 19,192,611 | 
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      
|                                                                   |                                                     | Diluted                      |        |                  | 19,448,718 |                  |        |                  | 19,207,246 |   |        |       | 19,192,611 | 
|                                                                   |                                                     |                              |        |                  |            |                  |        |                  |            |   |        |      

The accompanying footnotes are an integral part of these financial statements.

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INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(In Thousands, Except Share and Per Share Data)

For the Year Ended October 31, 2003, the Year Ended October 31, 2002
and the Ten-Months Ended October 31, 2001

|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |        |        |  
|-------------------------- | --------------------------------- | ---------------------- | ---------- | ------------ | - | ----------- | ------ | ----------- |  | ---------- | ------- | ----- | ------ | - | -- |  | --- | - | ------ | ------ | ------ | -
|                           |                                   |                        |            | Common Stock |   |             |        |             |  | Cumulative |         |       |        |  
|                           |                                   |                        |            |              |   | Accumulated |        | Translation |  |            |         |      
|                           |                                   |                        |            | Shares       |   | Amount      |        | Deficit     |  | Adjustment |         | Total
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |      
|Balance, December 31, 2000 |                                   |                        | 19,150,540 |              |   | $           | 40,997 |             |  | $          | (27,332 | )     |        | $ | 70 |  |     | $ | 13,735 |       
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       
|                           | Comprehensive Income (Loss)       |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |        |       
|                           |                                   | Net loss               |            |              |   |             |        |             |  |            |         |       | (2,571 | ) |    |  |     |   |        |        | (2,571 | )
|                           |                                   | Translation adjustment |            |              |   |             |        |             |  |            |         |       |        |   |    |  | 18  |   |        |        | 18     |  
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       
|                           | Total comprehensive loss          |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        | (2,553 | )     
|                           | Stock issued in private placement |                        |            | 170,706      |   |             |        | 59          |  |            |         |       |        |   |    |  |     |   |        | 59     |       
|                           | Warrants issued                   |                        |            |             |   |             |        | 149         |  |            |         |       |        |   |    |  |     |   |        | 149    |       
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       
|Balance, October 31, 2001  |                                   |                        | 19,321,246 |              |   |             | 41,205 |             |  |            | (29,903 | )     |        |   | 88 |  |     |   | 11,390 |       
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       
|                           | Comprehensive loss                |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |        |       
|                           |                                   | Net loss               |            |              |   |             |        |             |  |            |         |       | (6,942 | ) |    |  |     |   |        |        | (6,942 | )
|                           |                                   | Translation adjustment |            |              |   |             |        |             |  |            |         |       |        |   |    |  | (17 | ) |        |        | (17    | )
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       
|                           | Total comprehensive loss          |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        | (6,959 | )     
|                           | Stock retired                     |                        |            | (134,000     | ) |             |        |             |  |            |         |       |        |   |    |  |     |   |        |        |       
|                           | Common stock options exercised    |                        |            | 30,000       |   |             |        | 7           |  |            |         |       |        |   |    |  |     |   |        | 7      |       
|                           | Warrants issued                   |                        |            |             |   |             |        | 4           |  |            |         |       |        |   |    |  |     |   |        | 4      |       
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       
|Balance, October 31, 2002  |                                   |                        | 19,217,246 |              |   |             | 41,216 |             |  |            | (36,845 | )     |        |   | 71 |  |     |   | 4,442  |       
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       
|                           | Comprehensive income (loss)       |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |        |       
|                           |                                   | Net loss               |            |              |   |             |        |             |  |            |         |       | (808   | ) |    |  |     |   |        |        | (808   | )
|                           |                                   | Translation adjustment |            |              |   |             |        |             |  |            |         |       |        |   |    |  |    |   |        |        |       |  
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       
|                           | Total comprehensive loss          |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        | (808   | )     
|                           | Warrants issued                   |                        |            |             |   |             |        | 74          |  |            |         |       |        |   |    |  |     |   |        | 74     |       
|                           | Stock issued                      |                        |            | 1,767,667    |   |             |        | 516         |  |            |         |       |        |   |    |  |     |   |        | 516    |       
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       
|Balance, October 31, 2003  |                                   |                        | 20,984,913 |              |   | $           | 41,806 |             |  | $          | (37,653 | )     |        | $ | 71 |  |     | $ | 4,224  |       
|                           |                                   |                        |            |              |   |             |        |             |  |            |         |       |        |   |    |  |     |   |        |       

The accompanying footnotes are an integral part of these financial statements.

F-6



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##### Table of Contents



INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


For the Year Ended October 31, 2003, the Year Ended October 31, 2002
and the Ten-Months Ended October 31, 2001

|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |       |      |        |  
|------------------------------------------------ | ----------------------------------------------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------------------------- | ------ | ----------- | ----- | ----------- | ----- | ----------- | ------ | ------ | ----- | ---- | ------ | -
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        | October 31, |       | October 31, |       | October 31,
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        | 2003        |       | 2002        |       | 2001       
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |            
|Cash flows from operating activities:            |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |       
|                                                 | Net loss                                                                                  |                                                     | $                                                                | (808                                                | )      |             | $     | (6,942      | )     |             | $      | (2,571 | )    
|                                                 | Adjustments to reconcile net loss to net cash provided
by (used in) operating activities: |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|                                                 |                                                                                           | Depreciation                                        |                                                                  |                                                     | 811    |             |       |             | 1,096 |             |        |        | 941   |     
|                                                 |                                                                                           | Impairment of goodwill                              |                                                                  |                                                     |       |             |       |             | 5,287 |             |        |        |      |     
|                                                 |                                                                                           | Amortization of goodwill                            |                                                                  |                                                     |       |             |       |             | 432   |             |        |        | 360   |     
|                                                 |                                                                                           | Stock issued for services                           |                                                                  |                                                     | 16     |             |       |             |      |             |        |        |      |     
|                                                 |                                                                                           | Warrants
issued for extension of debt terms         |                                                                  |                                                     | 29     |             |       |             |      |             |        |        |      |     
|                                                 |                                                                                           | Impairment of machinery                             |                                                                  |                                                     |       |             |       |             | 270   |             |        |        |      |     
|                                                 |                                                                                           | Loss on disposal of fixed assets                    |                                                                  |                                                     | 58     |             |       |             | 9     |             |        |        |      |     
|                                                 |                                                                                           | Loss (income) on foreign currency translation       |                                                                  |                                                     |       |             |       |             | (17   | )           |        |        | 18    |     
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|                                                 |                                                                                           |                                                     | 106                                                              |                                                     |        |             | 135   |             |       |             | (1,252 | )     
|                                                 |                                                                                           | Changes in operating assets and liabilities         |                                                                  |                                                     |        |             |       |             |       |             |        |        |       |     
|                                                 |                                                                                           |                                                     | (Increase) decrease in accounts receivable                       |                                                     | (1,196 | )           |       |             | 167   |             |        |        | (292  | )   
|                                                 |                                                                                           |                                                     | (Increase) decrease in inventories                               |                                                     |        | (1,005      | )     |             |       | (138        | )      |        |       | 747  |       
|                                                 |                                                                                           |                                                     | (Increase) decrease in prepaid expenses and other current assets |                                                     |        | (823        | )     |             |       | (123        | )      |        |       | (129 | )     
|                                                 |                                                                                           |                                                     | Increase (decrease) in accounts payable                          |                                                     |        | 1,700       |       |             |       | 1,120       |        |        |       | (910 | )     
|                                                 |                                                                                           |                                                     | Increase (decrease) in accrued liabilities                       |                                                     |        | 271         |       |             |       | 107         |        |        |       | (382 | )     
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|                                                 |                                                                                           |                                                     |                                                                  | Net cash provided by (used in)
operating activities |        |             | 947   |             |       |             | 1,268  |        |       |      | (2,218 | )
|Cash flows from investing activities:            |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |       
|                                                 | Acquisitions
of property, plant & equipment                                               |                                                     |                                                                  | (491                                                | )      |             |       | (183        | )     |             |        | (33    | )    
|                                                 | Proceeds from disposal of property, plant & equipment                                     |                                                     |                                                                  | 23                                                  |        |             |       |            |       |             |        |       |      
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|                                                 | Net cash provided by (used in) investing activities                                       |                                                     |                                                                  | (468                                                | )      |             |       | (183        | )     |             |        | (33    | )    
|Cash flows from financing activities:            |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |       
|                                                 | Proceeds from issuance of common stock                                                    |                                                     |                                                                  | 500                                                 |        |             |       | 7           |       |             |        | 59     |      
|                                                 | Issuance
of warrants                                                                      |                                                     |                                                                  | 45                                                  |        |             |       | 4           |       |             |        | 149    |      
|                                                 | Proceeds (payment) on lines of credit, net                                                |                                                     |                                                                  | 46                                                  |        |             |       | (447        | )     |             |        |       |      
|                                                 | Proceeds from debt  related parties                                                      |                                                     |                                                                  | 100                                                 |        |             |       |            |       |             |        | 325    |      
|                                                 | Proceeds from debt                                                                        |                                                     |                                                                  | 848                                                 |        |             |       |            |       |             |        | 2,636  |      
|                                                 | Payment on debt  related parties                                                         |                                                     |                                                                  | (100                                                | )      |             |       | (75         | )     |             |        |       |      
|                                                 | Payment on debt                                                                           |                                                     |                                                                  | (402                                                | )      |             |       |            |       |             |        | (821   | )    
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|                                                 |                                                                                           | Net cash provided by (used in) financing activities |                                                                  |                                                     | 1,037  |             |       |             | (511  | )           |        |        | 2,348 |     
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|Increase (decrease) in cash and cash equivalents |                                                                                           |                                                     | (378                                                             | )                                                   |        |             | 574   |             |       |             | 97     |       
|Cash and cash equivalents at beginning of period |                                                                                           |                                                     | 1,556                                                            |                                                     |        |             | 982   |             |       |             | 885    |       
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|Cash and cash equivalents at end of period       |                                                                                           | $                                                   | 1,178                                                            |                                                     |        | $           | 1,556 |             |       | $           | 982    |       
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|Supplemental disclosure:                         |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |       
|                                                 | Cash paid for interest                                                                    |                                                     | $                                                                | 389                                                 |        |             | $     | 464         |       |             | $      | 530    |      
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|                                                 | Cash paid for income taxes                                                                |                                                     | $                                                                |                                                    |        |             | $     |            |       |             | $      |       |      
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|Non-cash financing Activities:                   |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |       
|                                                 | Stock issued for services                                                                 |                                                     | $                                                                | 16                                                  |        |             | $     |            |       |             | $      |       |      
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      
|                                                 | Warrants
issued for extension of debt terms                                               |                                                     | $                                                                | 29                                                  |        |             | $     |            |       |             | $      |       |      
|                                                 |                                                                                           |                                                     |                                                                  |                                                     |        |             |       |             |       |             |        |        |      

The accompanying footnotes are an integral part of these financial statements.

F-7



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##### Table of Contents



INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|1. |  | THE BUSINESS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Description of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | International DisplayWorks, Inc. (the Company), headquartered in
Rocklin, California, was incorporated in the state of Delaware in July of
1999. On October 31, 2001, the Company merged with its parent, Granite
Bay Technologies, Inc., a California corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | The Company, together with its subsidiaries, all of which are wholly
owned, is engaged in the design, manufacture and worldwide distribution
of liquid crystal displays (LCDs), modules, and assemblies for major
original equipment manufacturers (OEMs) with applications in
telecommunications, automotive, industrial, medical, and consumer
products.                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | The Companys manufacturing operations are in Shenzhen, Peoples Republic
of China (PRC). The display company MULCD Microelectronics (Shenzhen)
Co., Ltd. (MULCD) and the module company IDW Technologies (Shenzhen)
Co., Ltd. (IDWT) manufacture Liquid Crystal Displays (LCDs) and LCD
modules using various display technologies such as chip-on-glass (COG),
chip-on-board (COB), chip-on-flex (COF), surface mount technology
(SMT), and tape automated bonding (TAB). IDWT also provides
additional module enhanced services by adding other components such as
back lighting, and keypads to module assemblies as well as having the
capabilities to produce complete turn-key products.
|  
|2. |  | LIQUIDITY & SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | The Company and its subsidiaries generated net losses from continuing
operations of $808,000, $6,942,000 ($953,000 before charges for
amortization and write-off of goodwill of $5,719,000 and equipment
impairment charges of $270,000) and $2,571,000 during the periods ended
October 31, 2003, 2002, and 2001, respectively. The Company and its
subsidiaries also have an accumulated deficit of $37,653,000, of which
$23,833,000 is from discontinued operations and $13,820,000 is from
continued operations.                                                                                                                                                                                        
|  
|   |  | The Company requires capital to repay certain existing fixed obligations,
and to provide for additional working capital and investment in capital
equipment if it is to grow in accordance with its business plan. To this
end the Company has completed the following transactions:                                                                                                                                                                                                                                                                                                                                                                                                                         

F-8



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| |  |  | A $1,500,000 private placement during the
fiscal year ended October 31, 2003 consisting of $1,000,000
of debt instruments (which included the issuance of 200,000
warrants to purchase 200,000 shares at $0.35 a share for a
period of 3 years) and $500,000 through the sale of
1,666,667 shares of the Companys common stock (see notes 9
and 12(a)).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On December 23, 2003, the Company
successfully completed a $5,000,000 private placement
through the sale of 3,333,335 shares of the Companys
common stock at $1.50 a share. Proceeds, net of expenses
of $426,000 were $4,574,002. The placement agent received
a five-year warrant to purchase 166,666 shares at $1.75 a
share.                       



|   |  | Management believes that the aforementioned debt and equity transactions,
the asset based lines of credit, and cash flows from operations will
provide the Company sufficient working capital to fund operations for the
foreseeable future.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|3. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                  



| | a. |  | Principles of Consolidation                                                                                                                                    
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The consolidated financial statements include the financial statements
of International DisplayWorks, Inc., and all of the following
wholly-owned subsidiaries:



| |  |  | International DisplayWorks (Hong Kong) Limited,
(a Hong Kong company)
| | - |  | ---------------------------------------------------------------------
|
| |  |  | MULCD Microelectronics (Shenzhen) Co., Ltd., (a PRC company)         
|
| |  |  | IDW Technology (Shenzhen) Co., Ltd. (a PRC company)                  
|
| |  |  | International DisplayWorks Ltd., (a BVI company)                     
|
| |  |  | International DisplayWorks Pte., Ltd., (a Singapore company)         



| |    |  | All significant intercompany accounts and transactions have been
eliminated on consolidation.                                                                                                         
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Fiscal Year                                                                                                                                                                                           
|
| |    |  | The Company changed its fiscal year end to October 31 for fiscal
period 2001. Accordingly, the financial information presented for the
fiscal year ended October 31, 2001 is a short ten-month period.

F-9



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| | c. |  | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The Company considers all highly liquid investments with maturity, at
date of purchase, of three months or less to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                      
|
| | d. |  | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |    |  | The carrying amounts of cash and cash equivalents, accounts
receivable, notes payable, lines of credit, accounts payable, and
amounts due to related parties approximate fair value due to the
short-term maturity of these instruments. The carrying amount of the
mortgage debt also approximates fair value as the exchange rate of
the RMB to the U.S. dollar that has been applied has remained relatively stable. Because of
the length of the mortgage contract movements in the RMB could affect
this carrying value.
|
| | e. |  | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |    |  | Inventories are stated at the lower of cost or market. Cost is
determined on the weighted average-cost basis. Costs included in the
valuation of inventory are labor, materials (including freight and
duty) and manufacturing overhead. Provisions are made for obsolete or
slow moving inventory based on management estimates.                                                                                                                                                                                            
|
| | f. |  | Property, Plant and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |    |  | Property, plant and equipment are recorded at cost less accumulated
depreciation and any provision for impairment. The cost of major
improvements is capitalized whereas the cost of maintenance and
repairs is expensed in the period incurred. Gains and losses from the
disposal of property, plant and equipment are included in income/loss
from operations.                                                                                                                                                            
|
| |    |  | All land in the PRC is owned by the PRC government. According to PRC
law the government may sell the right to use the land for a specified
period of time. Thus all of the Companys land holdings in the PRC are
considered to be leasehold land and are amortized on the straight-line
basis over the respective term of the right to use the land. The
buildings on the land are also depreciated over the same period.                                                                                                   
|
| |    |  | Amortization of leasehold improvements is provided using the
straight-line method over the shorter of the expected useful life of
the asset or the remaining lease term.                                                                                                                                                                                                                                                                                                                                                     
|
| |    |  | Depreciation rates computed using the straight-line method are as
follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                   |  |         
|---------------------------------- |  | --------
|Land and Buildings                 |  | 30 years
|Machinery                          |  | 10 years
|Furniture, fixtures, and equipment |  | 5 years 

F-10



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| | g. |  | Impairment or Disposal of Long-Lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, that was
applicable to financial statements issued for fiscal years beginning
after December 15, 2001. The FASBs new rules on asset impairment
supersede SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and portions of
Accounting Principles Board (APB) Opinion No. 30, Reporting the
Results for Operations. The statement requires a single accounting
model for long-lived assets to be disposed of and significantly
changes the criteria that would have to be met to classify an asset as
held-for-sale. Classification as held-for-sale is an important
distinction since such assets are not depreciated and are stated at
the lower of fair value or carrying amount. The statement also
requires expected future operating losses from discontinued operations
to be recorded in the period(s) in which the losses are incurred,
rather than as of the measurement date as previously required. On
November 1, 2002, the Company adopted SFAS No. 144. The adoption of
SFAS No. 144 did not have any significant impact on the financial
position and results of operations of the Company.
|
| | h. |  | Warranty Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |    |  | The Company warrants its products against defects for fifteen days
after delivery to customers. As the Company manufactures custom
products to customer specifications and has not experienced
significant returns, the Company does not anticipate it will incur a
material amount of warranty expense and therefore no provision has
been made.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | i. |  | Advertising and Promotion Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |    |  | Advertising and promotion costs are expensed as incurred and are
included in selling, marketing and customer service expenses.
Advertising expenses were approximately $44,000, $2,200 and $17,000
for the periods ending October 31, 2003, 2002, and 2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | j. |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |    |  | The Company recognizes revenue from product sales in accordance with
Staff Accounting Bulletin (SAB) No. 101 Revenue Recognition in
Financial Statements. SAB No. 101 requires that revenue be recognized
when all of the following conditions are met:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



| |  |  | Persuasive evidence of an arrangement exists,        
| | - |  | -----------------------------------------------------
|
| |  |  | Delivery has occurred or services have been rendered,
|
| |  |  | Price to the customer is fixed or determinable, and  
|
| |  |  | Collectability is reasonably assured.                



| |  |  | The Company recognizes revenue from the sale of its products when the
products are shipped from its factory in the PRC, provided
collectability is reasonably assured
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |    |  | from the customer. Sales revenue is recorded net of discounts and
rebates except for prompt payment discounts, which are accounted for
as an operating expense. Returns and adjustments are booked as soon
as they have been assessed for validity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | k. |  | Shipping and Handling Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |    |  | Shipping and handling costs are expensed to cost of sales for material
purchases; and cost of sales or selling expenses for delivery for
finished products. During the periods ended October 31, 2003, 2002,
and 2001, shipping and handling costs expensed to cost of sales were
$535,000, $356,000, and $301,000, respectively. During the periods
ended October 31, 2003, 2002, and 2001 shipping and handling costs
expensed to selling expenses were nil, $50,337 and $17,061,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | l. |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |    |  | Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets, including tax loss
and credit carry forwards, and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date. Deferred income tax expense represents the change
during the period in the deferred tax assets and deferred tax
liabilities. The components of the deferred tax assets and
liabilities are individually classified as current and non-current
based on their characteristics. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized in the foreseeable future.
|
| | m. |  | Stock Options and Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |    |  | SFAS No. 123, Accounting for Stock-Based Compensation, allows
companies which have stock-based compensation arrangements with
employees to adopt a new fair value basis of accounting for stock
options and other equity instruments or to continue to apply the
existing accounting rules under APB Opinion No. 25, Accounting for
Stock Issued to Employees, but with additional financial statement
disclosure. The Company continues to account for stock-based
compensation arrangements under APB Opinion No. 25. See also the
adoption of SFAS No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosureat note 3(r).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | n. |  | Product Development Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |    |  | Expenditures associated with the development of new products and
improvements to existing products are expensed as incurred. Product
development costs were approximately $13,000, $28,000 and $636,000 for
the periods ended October 31, 2003, 2002 and 2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-12



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| | o. |  | Net Loss per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | Basic net loss per common share is computed by dividing net loss
applicable to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted net loss per
common share is determined using the weighted-average number of common
shares outstanding during the period, adjusted for the dilutive effect
of common stock equivalents, consisting of shares that might be issued
upon exercise of common stock options. In periods where losses are
reported, the weighted-average number of common shares outstanding
excludes common stock equivalents, because their inclusion would be
anti-dilutive. For the periods ended October 31, 2003, 2002, and 2001
the weighted-average number of common shares outstanding excludes
common stock equivalents of 3,936,481, 2,889,709, and 2,457,709
shares, respectively.
|
| | p. |  | Foreign Currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |    |  | All transactions in currencies other than functional currencies during
the year are translated at the exchange rates prevailing on the
respective transaction dates. Monetary assets and liabilities
existing at the balance sheet date denominated in currencies other
than functional currencies are translated at the exchange rates
existing on that date. Exchange differences are recorded in the
consolidated statement of operations. For the periods ended October
31, 2003, 2002, and 2001, the exchange differences resulted in expense
of $67,000, $48,900 and $14,000, respectively.                                                                                                                                                                                                                                                                  
|
| |    |  | The Company and its subsidiaries have adopted the U.S. dollar, Hong
Kong dollar and the PRC Renminbi as their functional currencies. The
financial statements of all subsidiaries with functional currencies
other than the U.S. dollar are translated in accordance with SFAS No.
52, Foreign Currency Translation. All assets and liabilities are
translated at the rates of exchange ruling at the balance sheet date
and all income and expense items are translated at the average rates
of exchange over the year. All exchange differences arising from the
translation of subsidiaries financial statements are recorded as a
component of comprehensive income.                                                                                                                                                                                        
|
| |    |  | The exchange rate between the Hong Kong dollar and the U.S. dollar has
been pegged (HK$7.80 to US$1.00) since October 1983. The exchange rate
between the Renminbi and the U.S. dollar is based on the prevailing
market rate, which was approximately Renminbi 8.3 to US$1.00 at
October 31, 2003, 2002, and 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | q. |  | Segment Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |    |  | The Company accounts for its segments pursuant to SFAS No. 131
Disclosures about Segments of an Enterprise and Related Information.
Operating segments, as defined in SFAS No. 131, are components of an
enterprise for which separate financial information is available and
is evaluated regularly by the Company in deciding how to allocate
resources and in assessing performance. The financial information is
required to be reported on the basis that it is used internally for                                                                                                                                                                                                                                                                                                                                                                         

F-13



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| |    |  | evaluating the segment performance. The Company believes it operates
in only one segment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | r. |  | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |    |  | In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS No. 148
amends SFAS No. 123 Accounting for Stock-Based Compensation,to
provide alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 is effective for fiscal years
beginning after December 15, 2002 (November 1, 2003 for the Company).
The expanded annual disclosure requirements and the transition
provisions are effective for fiscal years ending after December 15,
2002 (October 31, 2003 for the Company). Management does not expect
the adoption of SFAS No. 148 to have a material effect on the
Companys financial position, results of operations, or cash flows.
|
| |    |  | At October 31, 2003, the Company has three stock-based employee
compensation plans, as more fully described in note 10(b). The Company
accounts for these plans under the recognition and measurement
principles of APB No. 25, Accounting for Stock Issued to Employees,
and related interpretations. Stock-based employee compensation costs
are not reflected in net income when options granted under the plan
had an exercise price equal to the market value of the underlying
common stock on the date of grant. During the periods ending October
31, 2003, 2002 and 2001, the Company recorded no compensation expense
related to its stock-based employee compensation plans.                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |    |  | The following table illustrates the effect on net loss and loss per
share as if the Company had applied the fair value recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation,
to stock-based employee compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                                  |  |             |  |   |       |      |      |      |       |      |        |   |       |   |        |  
|--------------------------------------------------------------------------------- |  | ----------- |  | - | ----- | ---- | ---- | ---- | ----- | ---- | ------ | - | ----- | - | ------ | -
|Period ended October 31,                                                          |  |             |  |   |       | 2003 |      | 2002 |       | 2001
|                                                                                  |  |             |  |   |       |      |      |      |       |     
|Net loss, as reported                                                             |  |             |  |   |       | $    | (808 | )    |       | $    | (6,942 | ) |       | $ | (2,571 | )
|Less: Stock based compensation
costs under fair value based
Method for all awards |  |             |  |   |       |      | (65  | )    |       |      | (130   | ) |       |   | (65    | )
|                                                                                  |  |             |  |   |       |      |      |      |       |      |        |   |       |   |        |  
|Net loss, pro forma                                                               |  |             |  |   |       | $    | (873 | )    |       | $    | (7,072 | ) |       | $ | (2,636 | )
|                                                                                  |  |             |  |   |       |      |      |      |       |      |        |   |       |   |        |  
|Basic loss per share                                                              |  | As reported |  | $ | (0.04 | )    |      | $    | (0.36 | )    |        | $ | (0.14 | )
|                                                                                  |  | Pro forma   |  | $ | (0.04 | )    |      | $    | (0.37 | )    |        | $ | (0.14 | )
|                                                                                  |  |             |  |   |       |      |      |      |       |      |        |   |       |   |        |  
|Diluted loss per share                                                            |  | As reported |  | $ | (0.04 | )    |      | $    | (0.36 | )    |        | $ | (0.14 | )
|                                                                                  |  | Pro forma   |  | $ | (0.04 | )    |      | $    | (0.37 | )    |        | $ | (0.14 | )
|                                                                                  |  |             |  |   |       |      |      |      |       |      |        |   |       |   |        |  

F-14



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##### Table of Contents





| |  |  | The Company has computed the value of all options granted during the
periods ending October 31, 2003, 2002 and 2001 using the Black-Scholes
option-pricing model, and the following weighted average assumptions
for grants for the periods ended:
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |             |      |             |  |             |       |   |  |  |      |  
|----------------------- |  | ----------- | ---- | ----------- |  | ----------- | ----- | - |  |  | ---- | -
|                        |  | October 31, |      | October 31, |  | October 31,
|                        |  | 2003        |      | 2002        |  | 2001       
|                        |  |             |      |             |  |            
|Risk-free interest
rate |  |             | 3.7  | %           |  |             | 3.7   | % |  |  | 6.0  | %
|Expected dividend
yield |  |             | 0.0  | %           |  |             | 0.0   | % |  |  | 0.0  | %
|Expected life (years)   |  |             | 5    |             |  |             | 5     |   |  |  | 5    |  
|Expected volatility     |  |             | 92.4 | %           |  |             | 100.1 | % |  |  | 82.8 | %



| |  |  | Using the Black-Scholes methodology, the total value of options
granted during the periods ending October 31, 2003, 2002, and 2001 was
$90,955, $94,025, and $76,826, respectively, which would be amortized
on a pro forma basis over the vesting period of the options (typically
four years). The weighted average fair value per share of options
granted during the periods ending October 31, 2003, 2002, and 2001 was
$0.29, $0.42, and $0.49 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others(FIN 45). FIN 45
requires that upon issuance of a guarantee, a guarantor must recognize
a liability for the fair value of an obligation assumed under a
guarantee. FIN 45 also requires additional disclosures by a guarantor
in its annual financial statements about the obligations associated
with guarantees issued. The recognition provisions of FIN 45 are
effective for any guarantees issued or modified after December 31,
2002. The disclosure requirements are effective for financial
statements of interim or annual periods ending after December 15, 2002
(January 31, 2003 for the Company). The adoption of FIN No. 45 did not
have a material effect on the Companys financial position, results of
operations, or cash flows.
|
| |  |  | In January 2003, the FASB issued FIN No. 46, Consolidation of
Variable Interest Entities (FIN 46) which is an interpretation of
Accounting Research Bulletin No. 51, Consolidated Financial
Statements. FIN 46 requires a variable interest entity (VIE) to be
consolidated by a company that is considered to be the primary
beneficiary of that VIE. In December 2003, the FASB issued FIN No. 46
(revised December 2003), Consolidation of Variable Interest Entities
(FIN 46-R) to address certain FIN 46 implementation issues. The
effective dates and impact of FIN 46 and FIN 46-R for the Companys
consolidated financial statements are as follows:                                                                                                                                                                                                                                                                



| | 1. |  | Special purpose entities (SPEs) created
prior to February 1, 2003. The Company must apply either
the provisions of FIN 46 or early adopt the provisions of
FIN 46-R at the end of the first interim or annual
reporting period ending after December 15, 2003. The
Company has determined that it has no SPEs.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-15



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##### Table of Contents





| | 2. |  | Non-SPEs created prior to February 1, 2003.
The Company is required to adopt FIN 46-R at the end of the
first interim or annual reporting period ending after March
15, 2004. While not required, the Company could elect to
adopt FIN 46 or FIN 46-R for these non-SPEs as of the end
of the first interim or annual reporting period ending
after December 15, 2003. Management does not believe that
the adoption of this provision will have a material effect
on the Companys financial position, results of operations
or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. |  | All entities, regardless of whether a SPE,
that were created subsequent to January 31, 2003. The
Company is required to apply the provisions of FIN 46
unless management elects to early adopt the provisions of
FIN 46-R as of the first interim or annual reporting period
ending after December 15, 2003. If the Company does not
elect to early adopt FIN 46-R, then the Company is required
to apply FIN 46-R to these entities as of the end of the
first interim or annual reporting period ending after March
15, 2004. The Company has not entered into any material
joint venture or partnership agreements subsequent to
January 31, 2003 and the Company does not expect to enter
into any such material agreements during the first interim
period ended January 31, 2004. If the Company enters into
any significant joint venture and partnership agreements in
the future that would require consolidation under FIN 46 or
FIN 46-R, it could have a material impact on the Companys
future consolidated financial statements.



| |  |  | In April 2003, FASB issued SFAS No. 149, Amendments of Statement
133 on Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative
instruments, including derivatives embedded in other contracts and
hedging activities. SFAS No. 149 amends SFAS No. 133 for decisions
made by the FASB as part of its Derivatives Implementation Group
process. SFAS No. 149 also amends SFAS No. 133 to incorporate
clarifications of the definition of a derivative. SFAS No. 149 is
effective for contracts entered into or modified and hedging
relationships designated after June 30, 2003. The provisions of
SFAS No. 149 are not expected to have a material impact on the
Companys financial position, results of operations, or cash flows.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In May 2003, the FASB issued Statement No. 150, Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity. SFAS No. 150 establishes standards for how
an issuer classifies and measures certain financial instruments
with characteristics of both liabilities and equity. SFAS No. 150
requires that an issuer classifies a financial instrument that is
within its scope as a liability (or an asset in some
circumstances). SFAS No. 150 was effective for financial
instruments entered into or modified after May 31, 2003, and
otherwise was effective for the Companys fourth quarter of 2003.
The adoption of SFAS No. 150 is not expected to have a material
impact on the Companys financial position, results of operations,
or cash flows.  

F-16



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##### Table of Contents





| | s. |  | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | Certain amounts in the prior periods financial statements have
been reclassified to conform to the current year presentation.                                                                                                                                                                                                                                                                                                                                                
|
| | t. |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |    |  | The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.



|4. |  | INVENTORIES                                                         
|-- |  | --------------------------------------------------------------------
|  
|   |  | Inventories consisted of the following at October 31 (in thousands):

|                                     |  |      |       |      |  |   |       |  
|------------------------------------ |  | ---- | ----- | ---- |  | - | ----- | -
|                                     |  | 2003 |       | 2002
|                                     |  |      |       |     
|Finished goods                       |  | $    | 687   |      |  | $ | 165   |  
|Work-in-progress                     |  |      | 752   |      |  |   | 250   |  
|Raw materials                        |  |      | 1,537 |      |  |   | 1,414 |  
|Less: reserve for obsolete inventory |  |      | (511  | )    |  |   | (369  | )
|                                     |  |      |       |      |  |   |       |  
|                                     |  | $    | 2,465 |      |  | $ | 1,460 |  
|                                     |  |      |       |      |  |   |       |  



|5. |  | PREPAID EXPENSES AND OTHER CURRENT ASSETS                                                         
|-- |  | --------------------------------------------------------------------------------------------------
|  
|   |  | Prepaid expenses and other current assets consisted of the following at
October 31 (in thousands):

|                      |  |      |       |      |  |   |     | 
|--------------------- |  | ---- | ----- | ---- |  | - | --- | 
|                      |  | 2003 |       | 2002
|                      |  |      |       |     
|Prepaid expenses      |  | $    | 377   |      |  | $ | 206 | 
|Advances to suppliers |  |      | 303   |      |  |   | 172 | 
|PRC - VAT tax refund  |  |      | 354   |      |  |   | 135 | 
|Other                 |  |      | 327   |      |  |   | 25  | 
|                      |  |      |       |      |  |   |     | 
|                      |  | $    | 1,361 |      |  | $ | 538 | 
|                      |  |      |       |      |  |   |     | 



|6. |  | PROPERTY, PLANT AND EQUIPMENT                                                         
|-- |  | --------------------------------------------------------------------------------------
|  
|   |  | Property, plant and equipment consisted of the following at October 31
(in thousands):

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##### Table of Contents



|                                  |  |      |        |      |  |   |        |  
|--------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                  |  | 2003 |        | 2002
|                                  |  |      |        |     
|Land and buildings                |  | $    | 1,185  |      |  | $ | 1,185  |  
|Furniture, fixtures and equipment |  |      | 1,798  |      |  |   | 1,837  |  
|Machinery                         |  |      | 4,865  |      |  |   | 4,720  |  
|Leasehold improvements            |  |      | 83     |      |  |   | 83     |  
|                                  |  |      |        |      |  |   |        |  
|                                  |  |      | 7,931  |      |  |   | 7,825  |  
|Less accumulated depreciation     |  |      | (3,135 | )    |  |   | (2,628 | )
|                                  |  |      |        |      |  |   |        |  
|                                  |  | $    | 4,796  |      |  | $ | 5,197  |  
|                                  |  |      |        |      |  |   |        |  



|   |  | Depreciation expense totaled $811,000, $1,096,000 and $941,000 for the
periods ended October 31, 2003, 2002, and 2001, respectively.                                                                                                                                                                                                                                                                                                   
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In October 2002, the Company assessed the recoverability of the carrying
value of a certain machine. The assessment resulted in an impairment
loss of the machines entire net book value of $270,000. This loss
reflects the amount by which the carrying value of the machine exceeded
its estimated fair value. The impairment loss is recorded as a component
of operating expenses in the statement of operations for fiscal 2002.
|  
|   |  | As of October 31, 2003 the Company had, issued and outstanding, purchase
commitments for $166,000 of capital equipment.                                                                                                                                                                                                                                                                                                                
|  
|7. |  | GOODWILL                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | Goodwill represents the unamortized excess of the cost of acquiring a
business over the fair values of the net assets received at the date of
acquisition. The Company had no goodwill on its balance sheet during the
fiscal period ended October 31, 2003.                                                                                                                                                                           
|  
|   |  | In accordance with the provisions of SFAS No. 121, management was
required to periodically review the operating environment and performance
of the Company to determine if there are any grounds for reviewing the
carrying value of goodwill to determine whether impairment may exist.                                                                                                                                               
|  
|   |  | In October 2002, the Company applied the provisions of SFAS No. 121 to
its goodwill and recorded an impairment charge of $5,287,000, which
eliminated all remaining goodwill of the Company and included this charge
as a component of operating expenses in fiscal 2002.                                                                                                                                                              
|  
|   |  | Goodwill was being amortized on a straight-line basis over 15 years.
Amortization expense charged to operations was $432,000 and $360,000 for
the periods ended October 31, 2002, and 2001, respectively.                                                                                                                                                                                                                              

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##### Table of Contents





|8. |  | ACCRUED LIABILITIES                                                         
|-- |  | ----------------------------------------------------------------------------
|  
|   |  | Accrued liabilities consisted of the following at October 31 (in
thousands):

|                                        |                           |   |      |       |      |   |     |       | 
|--------------------------------------- | ------------------------- | - | ---- | ----- | ---- | - | --- | ----- | 
|                                        |                           |   | 2003 |       | 2002
|                                        |                           |   |      |       |     
|Accrued payroll and related liabilities |                           | $ | 747  |       |      | $ | 523 |      
|Accrued staff hostel expenses           |                           |   | 219  |       |      |   | 247 |      
|Accrued inventory purchases             |                           |   | 68   |       |      |   | 165 |      
|Accrued royalties                       |                           |   | 129  |       |      |   | 19  |      
|Accrued PRC government management fees  |                           |   | 102  |       |      |   | 115 |      
|Other accrued liabilities               |                           |   | 371  |       |      |   | 296 |      
|                                        |                           |   |      |       |      |   |     |      
|                                        | Total accrued liabilities |   | $    | 1,636 |      |   | $   | 1,365 | 
|                                        |                           |   |      |       |      |   |     |      



|9. |  | LONG-TERM DEBT                                                                                            
|-- |  | ----------------------------------------------------------------------------------------------------------
|  
|   |  | Loans and notes payable consisted of the following at October 31 (in
thousands, except interest payments):

|                                                                                                                                                                                                                                                                                                                                                                                                                |  |             |     |             |  |   |     | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | --- | ----------- |  | - | --- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                |  | October 31, |     | October 31,
|                                                                                                                                                                                                                                                                                                                                                                                                                |  | 2003        |     | 2002       
|                                                                                                                                                                                                                                                                                                                                                                                                                |  |             |     |            
|Notes payable to directors, stockholders and
immediate family members thereof , interest
only payments due in monthly installments
ranging from approximately $2,400 to $3,700
at a yearly interest rates ranging from
12.00% to 12.68%; principal balance due and
payable in full December 31, 2004,
collateralized by the accounts receivable,
inventory, equipment and other tangible
assets of the Company. |  | $           | 624 |             |  | $ | 424 | 
|Note payable to a director of the Company,
interest and principal payments due in
monthly installments of $10,000 at a yearly
interest rate of 12.68%; principal balance
due in full March 1, 2004, collateralized by
the accounts receivable, inventory, equipment
and other tangible assets of the Company.                                                                                                   |  |             | 50  |             |  |   | 150 | 

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|                                                                                                                                                                                                                                                                                                                                               |  |             |       |             |  |   |       |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- | ----------- |  | - | ----- | -
|                                                                                                                                                                                                                                                                                                                                               |  | October 31, |       | October 31,
|                                                                                                                                                                                                                                                                                                                                               |  | 2003        |       | 2002       
|                                                                                                                                                                                                                                                                                                                                               |  |             |       |            
|Notes payable to third-parties, interest only
payments due in monthly installments ranging
from $500 to $3,850 at a yearly interest rate
of 12.00%; principal balance due and payable
in full on June 30, 2004 or December 31,
2004, collateralized by the accounts
receivable, inventory, equipment and other
tangible assets of the Company. |  |             | 900   |             |  |   | 100   |  
|Mortgage loan, at a variable yearly interest
rate that ranged from 7.9% to 8.3%, to be
repaid in three annual installments,
collateralized by the three factory buildings
in Shenzhen, PRC. There are two equal
additional installments due in June 2004 and
June 2005.                                                                        |  |             | 805   |             |  |   | 1,208 |  
|                                                                                                                                                                                                                                                                                                                                               |  |             |       |             |  |   |       |  
|                                                                                                                                                                                                                                                                                                                                               |  |             | 2,379 |             |  |   | 1,882 |  
|Less: current portion                                                                                                                                                                                                                                                                                                                          |  |             | (502  | )           |  |   | (602  | )
|                                                                                                                                                                                                                                                                                                                                               |  |             |       |             |  |   |       |  
|                                                                                                                                                                                                                                                                                                                                               |  | $           | 1,877 |             |  | $ | 1,280 |  
|                                                                                                                                                                                                                                                                                                                                               |  |             |       |             |  |   |       |  



| |  | Maturities of long-term debt are as follows:
| |  | --------------------------------------------

|            |  |                 |     |               |  |       |       |  |  |   |       | 
|----------- |  | --------------- | --- | ------------- |  | ----- | ----- |  |  | - | ----- | 
|Year Ending |  |                 |     |               |  |       |       |  |  |   |       | 
|October 31, |  | Related parties |     | Third parties |  | Total
|            |  |                 |     |               |  |      
|2004        |  | $               | 50  |               |  | $     | 452   |  |  | $ | 502   | 
|2005        |  |                 | 624 |               |  |       | 1,253 |  |  |   | 1,877 | 
|            |  |                 |     |               |  |       |       |  |  |   |       | 
|            |  | $               | 674 |               |  | $     | 1,705 |  |  | $ | 2,379 | 
|            |  |                 |     |               |  |       |       |  |  |   |       | 



| |  | In the quarter ended December 30, 2000, the Company issued approximately
$349,000 of collateralized notes payable due December 15, 2001 to a key
employee, board members and other individual investors. In February and
June of 2003 the due dates were extended to December 31, 2004. In
exchange for the extension of the due dates the note holders received
warrants to purchase 228,437 shares of the Companys common stock at
between $0.16 and $0.21 per share.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | During the year ended October 31, 2003, the Company extended the due
dates on $524,000 of the unpaid notes payable due to related parties and
others to March 1, 2004 or December 31, 2004.                                                                                                                                                                                                                                                                             
|
| |  | From July 2003 through September 2003, the Company, in conjunction with a
private placement of stock (see note 12(a)), issued $1,000,000 of
collateralized notes payable due December 31, 2004 to individual
investors. The notes carry an interest rate of 12% and warrants to
purchase common shares of the Companys stock equal to 20% of the face                                                                                                                  

F-20



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##### Table of Contents





|    |  | value of the notes. The Company issued 200,000 warrants to purchase
200,000 shares of the Companys common stock at $0.35 per share for a
period of three years. The notes are collateralized by the accounts
receivable, inventory, equipment and intangible assets of the Company.
These notes do not contain any covenants. The notes were issued to third
parties and a related party. The related party subscribed to $100,000 of
the debt and received 20,000 warrants to purchase 20,000 shares of the
Companys common stock. The related party is an immediate family member
of a director of the Company. Interest is payable monthly with principal
due December 31, 2004. The proceeds were used for general working
capital of the Company.                                                                                                                                                          
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | In June of 2001 and as amended in June 2002 the Company, through its
wholly owned subsidiary, IDWT, entered into a mortgage on the three
buildings located at its manufacturing facility in Shenzhen, PRC. The
amount borrowed was RMB 10,000,000, approximately $1,200,000 at
prevailing exchange rates, for three years at a variable interest rate
that ranged from 7.9% to 8.3% during the year, scheduled to be repaid in
three annual installments, the first was due in June 2003. As of October
31, 2003 approximately $805,000 remains outstanding. If the exchange
rate between the RMB and the USD should change the remaining outstanding
amount will vary in USD terms.                                                                                                                                                                                                                              
|   
|10. |  | LINES OF CREDIT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | On March 23, 2001, as subsequently amended and renewed, the Company
entered into an asset based lending program for a $2,000,000 line of
credit secured by the IDWs accounts receivable, inventory, equipment,
and intangibles. The agreement was for twelve months at an interest rate
of 3% above the prime rate (7.75% at October 31, 2003) with a minimum
monthly charge of $7,800. In March 2003 the agreement was once again
extended for twelve months to March 2004. As of October 31, 2003 the
Company has approximately $492,000 currently due on the facility and has
available approximately $137,000 for use under this facility, based on
eligible receivables. In June 2003 a separate note in the amount of
$50,000 was executed to secure a letter of credit in the amount of
$90,000 to a supplier of the Company. The remaining $40,000 was secured
against the availability under the line.
|   
|    |  | In August of 2001 and as amended in July 2002, the Company, through its
wholly owned subsidiary, IDWHK, entered into a factoring agreement
collateralized by accounts receivable and inventory of IDWHK. The
agreement is guaranteed by the Company. The facility provides for a
maximum borrowing of $1,282,000 with an interest rate of 2.25% above the
prime-lending rate (7.5% at October 31, 2003). As of October 31, 2003
the Company has approximately US$559,000 currently due on the facility
and has no availability under this facility based on eligible
receivables.                                                                                                                                                                                                                                                                                                                                 
|   
|11. |  | COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



| | a. |  | Lease Obligations                                                                                                                               
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The Company leases premises under various operating leases. The
Company is currently obligated under the following significant
operating leases:

F-21



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| |  | i.                                                                                                                                        | In March 2000, and as amended, the Company
entered into a 5-year lease for office space in Rocklin,
California. The payment terms are $73,000 per year.                                                                                                                                                                                                                                                                                             
| |  | ----------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | ii.                                                                                                                                       | In February 2003 the Company entered into a 2-year
lease for office space in Hong Kong. The payment terms are
$15,000 per year.                                                                                                                                                                                                                                                                                                                     
|
| |  | iii.                                                                                                                                      | The Company has entered into a lease agreement for a
workers dormitory in Shenzhen, PRC. The lease on the workers
dormitory expires on August 3, 2020 and costs $233,700 per year.
The expense recorded in fiscal years ended October 31, 2003 and
October 31, 2002 was offset by rental income of $43,000 and
$67,000, respectively.                                                                                                             
|
| |  | iv.                                                                                                                                       | The Company has entered into various lease agreements
for individual employee quarters in Shenzhen, PRC. The lease
terms of these quarters range from six to sixty months. The
yearly lease payments range from $1,800 to $23,100. During the
fiscal year ended October 31, 2003, the Company entered into
fourteen of the aforementioned leases with terms of between six
and sixty months and yearly lease payments of between $1,800 and
$13,000.
|
| |  | v.                                                                                                                                        | In November 2002 the Company entered into a one-year
lease at an annual cost of $40,600 for housing accommodation for
an officer of the Company. In November 2003 the lease term was
extended to expire in July 2004.                                                                                                                                                                                                                               
|
| |  | The following is a schedule of future minimum lease payments under
non-cancelable operating leases as of October 31, 2003 (in thousands):

|           |  |               |       |                 |  |             |     |           |  |   |       | 
|---------- |  | ------------- | ----- | --------------- |  | ----------- | --- | --------- |  | - | ----- | 
|           |  | Minimum Lease |       |                 |  |             |     | Net Lease
|           |  | Commitments   |       | Sublease Income |  | Commitments
|           |  |               |       |                 |  |            
|2004       |  | $             | 375   |                 |  | $           | (43 | )         |  | $ | 332   | 
|2005       |  |               | 338   |                 |  |             |    |           |  |   | 338   | 
|2006       |  |               | 300   |                 |  |             |    |           |  |   | 300   | 
|2007       |  |               | 264   |                 |  |             |    |           |  |   | 264   | 
|2008       |  |               | 241   |                 |  |             |    |           |  |   | 241   | 
|Thereafter |  |               | 2,688 |                 |  |             |    |           |  |   | 2,688 | 
|           |  |               |       |                 |  |             |     |           |  |   |       | 
|           |  | $             | 4,206 |                 |  | $           | (43 | )         |  | $ | 4,163 | 
|           |  |               |       |                 |  |             |     |           |  |   |       | 



|   |  | For the periods ended October 31, 2003, 2002, 2001 rental expense was
$365,000, $117,000 and $241,000, respectively.                                                                                                                                             
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|b. |  | Legal Matters                                                                                                                                                                                                                                                    
|  
|   |  | From time to time, the
Company is involved in routine litigation in the normal course of
business. Management believes that none of the outstanding litigation
will have a material adverse effect on the Companys financial
condition or results of operations.

F-22



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##### Table of Contents





| | c. |  | Purchase Commitment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The Company enters into forward purchase commitments in the normal
course of business in anticipation of orders from customers not all of
which are matched by contracts from customers. The Company believes
that such commitments will be required for future production or could
be cancelled without material cost. In July 2002, the Company entered
into a commitment to purchase certain inventory from a vendor for
$261,000. The Company is under no certain deadline to purchase the
inventory.



|12. |  | STOCKHOLDERS EQUITY
|--- |  | --------------------



| | a. |  | Issuance of Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | In September 2003, the Company issued 1,666,667 shares of the
Companys common stock at $0.30 per share in a private placement. The
proceeds of $500,000 were used for working capital and operating
expenses. The securities issued in this private placement were not
registered under the Securities Act of 1933, as amended, and therefore
fall under the restrictions of Rule 144 of the Securities Act of 1933,
as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | b. |  | Stock Option Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |    |  | The Company maintains the 1990 Employee Equity Incentive Plan for
selected executives, employees and directors for which 1,102,500
shares of common stock have been reserved for issuance under the plan.
The plan permits the granting of options for terms not to exceed ten
years from the date of grant. The options generally vest ratably over
a four-year period and are exercisable subject to terms established in
the plan document. The exercise price of the options granted under
the plan must be equal to or greater than the fair market value of the
shares on the date of grant for incentive stock options and not less
than 85 percent of the fair market value for nonqualified stock
options. The exercise price of the options granted by the Company has
generally been equal to or greater than fair market value at the date
of grant. There were 25,000 options cancelled in the plan in the year
ended October 31, 2003, there was no activity in the plan in the year
ended October 31, 2002 and there

F-23



---



##### Table of Contents





| |  |  | were 240,000 options cancelled in the ten months ended October 31,
2001. This Plan has now expired and no new options are available for
grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In September 2000, the Company established the 2000 Employee Equity
Incentive Plan for certain key employees of the Company. The plan
also permits the granting of stock options, restricted stock awards,
stock appreciation rights, stock units and other stock grants to
certain persons with a relationship with the Company, including
agents, consultants, advisors, independent contractors, sales
representatives, distributors, principals and retail distribution
outlets for the Companys products. The plan provides for up to
1,632,800 shares of stock that are authorized for issuance. The price
of each share of stock covered by an option shall not be less than
100% of the fair value of the Companys common stock on the date of
grant. Each option certificate shall have an exercise period of six
months to ten years. There were 536,006 options granted and 205,000
options cancelled during the year ended October 31, 2003; 515,000
options granted and 68,000 options cancelled during the year ended
October 31, 2002; and there were 255,000 options granted and 62,500
cancelled during the ten months ended October 31, 2001. At October 31,
2003 approximately 531,294 options are available for grant under the
plan.
|
| |  |  | In October 1999, the Company established the 1999 Stock Option Plan
for Non-Employee Directors. This plan provides for the issuance of up
to 300,000 shares of the Companys common stock to existing directors
and, in the case of extra services or duties, past directors. Unless
otherwise provided in the option grant, the options vest over the year
following the date of grant and expire after the later of five years
after the date of grant or five years after termination as a director.
During the year ended October 31, 2003 there were 6,000
options granted under the plan and 12,250 options were cancelled;
during the year ended October 30, 2002 there were 30,000 options
exercised under the plan; and there was no activity in this plan for
the ten months ended October 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | From fiscal 1999 to 2001 the board
had granted 235,000 options to various
current and former directors at exercise prices ranging from $0.50 to
$0.78 that are not part of compensation plans that are not part of
compensation plans. No compensation expense was recorded for these
options for the periods ended October 31, 2003, 2002, and 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | The following is a summary of the status of all of the Companys stock
option plans as of October 31, 2003, 2002 and 2001 and changes during
the periods ended on those dates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                                         |           |  |           |         |                |   |          |      | 
|---------------------------------------- | --------- |  | --------- | ------- | -------------- | - | -------- | ---- | 
|                                         |           |  |           |         |                |   | Weighted
|                                         |           |  | Number    |         | Average       
|                                         |           |  | Of Shares |         | Exercise Price
|                                         |           |  |           |         |               
|Options outstanding at
December 31, 2000 |           |  | 1,135,348 |         |                | $ | 1.36     |     
|                                         | Granted   |  |           | 405,000 |                |   |          | 0.58 | 
|                                         | Exercised |  |           |        |                |   |          |     | 

F-24



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##### Table of Contents



|                                        |                  |  |           |           |                |   |          |      | 
|--------------------------------------- | ---------------- |  | --------- | --------- | -------------- | - | -------- | ---- | 
|                                        |                  |  |           |           |                |   | Weighted
|                                        |                  |  | Number    |           | Average       
|                                        |                  |  | Of Shares |           | Exercise Price
|                                        |                  |  |           |           |               
|                                        | Cancelled        |  |           | (302,500  | )              |   |          | 0.95 | 
|                                        |                  |  |           |           |                |   |          |     
|Options outstanding at
October 31, 2001 |                  |  | 1,237,848 |           |                | $ | 1.21     |     
|                                        | Granted          |  |           | 515,000   |                |   |          | 0.42 | 
|                                        | Exercised        |  |           | (30,000   | )              |   |          | 0.25 | 
|                                        | Cancelled        |  |           | (68,000   | )              |   |          | 0.76 | 
|                                        |                  |  |           |           |                |   |          |     
|Options outstanding at
October 31, 2002 |                  |  | 1,654,848 |           |                | $ | 1.00     |     
|                                        | Granted          |  |           | 542,006   |                |   |          | 0.26 | 
|                                        | Exercised        |  |           |          |                |   |          |     | 
|                                        | Cancelled        |  |           | (242,250  | )              |   |          | 0.70 | 
|                                        |                  |  |           |           |                |   |          |     
|Options outstanding at
October 31, 2003 |                  |  | 1,954,604 |           |                | $ | 0.78     |     
|                                        |                  |  |           |           |                |   |          |     
|Options exercisable at :                |                  |  |           |           |                |   |          |     
|                                        | October 31, 2003 |  |           | 1,157,098 |                |   | $        | 1.18 | 
|                                        |                  |  |           |           |                |   |          |     
|                                        | October 31, 2002 |  |           | 1,038,332 |                |   | $        | 0.93 | 
|                                        |                  |  |           |           |                |   |          |     
|                                        | October 31, 2001 |  |           | 806,852   |                |   | $        | 0.87 | 
|                                        |                  |  |           |           |                |   |          |     



| |  |  | The following table summarizes information about stock options
outstanding and exercisable at October 31, 2003:
| |  |  | ---------------------------------------------------------------------------------------------------------------

|                 |  |                |           |              |  |                |      |                |  |                |      |  |  |  |           |  |  |   |      | 
|---------------- |  | -------------- | --------- | ------------ |  | -------------- | ---- | -------------- |  | -------------- | ---- |  |  |  | --------- |  |  | - | ---- | 
|                 |  | Number of      |           | Weighted     |  |                |      |                |  | Number of      |      |  |  | 
|                 |  | Shares         |           | Average      |  | Weighted       |      | Shares         |  | Weighted      
|                 |  | Outstanding at |           | Remaining    |  | Average        |      | Exercisable at |  | Average       
|Range of         |  | October 31,    |           | Contractual  |  | Exercise price |      | October 31,    |  | Exercise Price
|Exercise price   |  | 2003           |           | Life (Years) |  | per Share      |      | 2003           |  | per Share     
|$  .01 - $  5.00 |  |                | 1,899,604 |              |  |                | 2.96 |                |  | $              | 0.62 |  |  |  | 1,157,098 |  |  | $ | 1.18 | 
|$5.01 - $10.00   |  |                | 55,000    |              |  |                | 1.82 |                |  |                | 6.25 |  |  |  |          |  |  |   |     | 
|                 |  |                |           |              |  |                |      |                |  |                |      |  |  |  |           |  |  |   |      | 
|                 |  |                | 1,954,604 |              |  |                | 2.92 |                |  | $              | 0.78 |  |  |  | 1,157,098 |  |  | $ | 1.18 | 
|                 |  |                |           |              |  |                |      |                |  |                |      |  |  |  |           |  |  |   |      | 



| | c. |  | Stock Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The Company, from time to time has issued stock warrants as payment
for fees, interest, and services rendered. For the periods ended
October 31, 2003, 2002, and 2001, the Company had outstanding warrants
to purchase 2,066,887, 1,234,861, and 1,291,861 shares of common
stock, respectively. All warrants are exercisable at a weighted
average price per share of $1.18, have a term of five years and are
exercisable immediately or over the term of the related note if any.
For the periods ended October 31, 2003, 2002 and 2001, no warrants to
purchase common stock were

F-25



---



##### Table of Contents





| |  |  | exercised and none lapsed. For the periods ended October 31, 2003,
2002, and 2001, 458,437, 15,000, and 460,000 warrants were granted,
respectively.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



|13. |  | INCOME TAXES                                                                                                                                                                                                                                                                                                   
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company has not recorded an income tax expense or benefit for the
periods ended October 31, 2003 and 2002.                                                                                                                                                                                                 
|   
|    |  | The reconciliation between the actual income tax expense and income tax
computed by applying the statutory U.S. Federal and State, PRC and Hong
Kong income tax rates to earnings before provision for income taxes for
the periods ended October 31, 2003, 2002 and 2001 is as follows (amounts
in thousands):

|                                                                                              |  |             |      |             |  |             |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------- |  | ----------- | ---- | ----------- |  | ----------- | ------ | - |  | - | ------ | -
|                                                                                              |  | October 31, |      | October 31, |  | October 31,
|                                                                                              |  | 2003        |      | 2002        |  | 2001       
|Pre-tax loss                                                                                  |  | $           | (808 | )           |  | $           | (6,942 | ) |  | $ | (2,571 | )
|                                                                                              |  |             |      |             |  |             |        |   |  |   |        |  
|Computed Federal income tax
benefit at 34.0%                                                  |  |             | (275 | )           |  |             | (2,360 | ) |  |   | (874   | )
|Computed state income tax
benefit at 8.4%, net of
federal income benefit                      |  |             | (47  | )           |  |             | (202   | ) |  |   | (75    | )
|Effect of difference between
Hong Kong and PRC tax rates
and U.S. Federal and state
tax rates |  |             | 161  |             |  |             | 207    |   |  |   | 267    |  
|Impairment of goodwill                                                                        |  |             |     |             |  |             | 1,937  |   |  |   |       |  
|Other permanent differences                                                                   |  |             | (234 | )           |  |             | 561    |   |  |   | (393   | )
|Elimination of net operating
Loss carry forwards due to
Section 382 limitation                |  |             |     |             |  |             |       |   |  |   | 8,692  |  
|Change in valuation allowance                                                                 |  |             | 395  |             |  |             | (143   | ) |  |   | (7,617 | )
|                                                                                              |  |             |      |             |  |             |        |   |  |   |        |  
|                                                                                              |  | $           |     |             |  | $           |       |   |  | $ |       |  
|                                                                                              |  |             |      |             |  |             |        |   |  |   |        |  



| |  | The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at October
31, 2003 and 2002 are presented below (amounts in thousands):
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-26



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|                     |                                            |                                 |                        |       |        |   |      |       |        |   | 
|-------------------- | ------------------------------------------ | ------------------------------- | ---------------------- | ----- | ------ | - | ---- | ----- | ------ | - | 
|                     |                                            |                                 |                        |       | 2003   |   | 2002
|                     |                                            |                                 |                        |       |        |   |     
|Deferred tax assets: |                                            |                                 |                        |       |        |   |      |      
|                     | Net operating loss (NOL) carry forwards    |                                 | $                      | 3,564 |        |   | $    | 3,255 |       
|                     | Depreciation and amortization              |                                 |                        | (4    | )      |   |      | (4    | )     
|                     | Allowance for doubtful accounts receivable |                                 |                        | 7     |        |   |      | 38    |       
|                     | Inventory obsolescence                     |                                 |                        | 77    |        |   |      |      |       
|                     | Write-off of machinery                     |                                 |                        | 41    |        |   |      | 41    |       
|                     | Accrued expenses                           |                                 |                        | 19    |        |   |      | (23   | )     
|                     |                                            |                                 |                        |       |        |   |      |      
|                     |                                            | Total gross deferred tax assets |                        |       | 3,704  |   |      |       | 3,307  |  
|                     |                                            | Less valuation allowance        |                        |       | (3,704 | ) |      |       | (3,307 | )
|                     |                                            |                                 |                        |       |        |   |      |      
|                     |                                            |                                 | Net deferred tax asset |       | $      |  |      |       | $      |  | 
|                     |                                            |                                 |                        |       |        |   |      |      



|    |  | The Company has provided a valuation allowance for 100% of its deferred
tax assets at October 31, 2003, 2002 and 2001 as the Company could not
conclude that it was more likely than not that it would realize these
assets due principally to the Companys history of losses.                                                                                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | At October 31, 2003 and 2002 the Company had an estimated federal net
operating loss carry forward of approximately $9,373,000 and $8,598,000
respectively, expiring through 2020.                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | PRC Taxation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | The fiscal year end of the PRC subsidiaries is December 31. The tax rate
for both companies is 15%. At December 31, 2002 IDWT and MULCD had a tax
loss carry forward of $522,000 and $761,000, respectively. Management
expects both companies to have incurred tax losses in the year ended
December 31, 2003. A 100% valuation allowance for the deferred tax assets
has been provided as it could not be concluded that it was more likely
than not that these assets would be realized given the history of trading
losses.
|   
|    |  | Hong Kong Taxation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | The rate of taxation in Hong Kong is 17.5%. The Company has incurred
losses since its inception. A 100% valuation allowance for the deferred
tax assets has been provided as it could not be concluded that it was
more likely than not that these assets would be realized given the
history of trading losses.                                                                                                                                                                                                               
|   
|14. |  | RETIREMENT PLANS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | The Company maintains the IDW 401(k) Plan (the Plan) under the
provisions of Section 401(k) of the Internal Revenue Code. The Plan
covers substantially all full-time U.S. employees. At its option, the
Company can make discretionary matching contributions. To date the
Company has not made such a contribution.                                                                                                                                                                                                      

F-27



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##### Table of Contents





|    |  | For its Hong Kong employees, the Company currently contributes
approximately $9,000 per year to a Mandatory Provident Fund (MPF) under
the laws of the Hong Kong Special Administrative Region of the PRC.                                                                                                                                                                                                                                                             
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|15. |  | SEGMENT AND GEOGRAPHIC INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | The Company produces displays or display modules for end products of OEMs
manufacturers and hence operates in one segment. However, the Company
has four major geographic territories where it sells and distributes
essentially the same products. The geographic territories are the United
States, Hong Kong (including China), Asia (excluding Hong Kong and
China), and Europe. The following represents geographical data for
continuing operations (in thousands).

|                                     |  |                                |        |      |  |      |        |  |  |   |        | 
|------------------------------------ |  | ------------------------------ | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|Revenues                             |  | Fiscal Period Ended October 31
|                                     |  |                               
|                                     |  | 2003                           |        | 2002 |  | 2001
|                                     |  |                                |        |      |  |     
|United States                        |  | $                              | 10,824 |      |  | $    | 11,266 |  |  | $ | 7,642  | 
|Hong Kong (including China)          |  |                                | 4,916  |      |  |      | 6,753  |  |  |   | 5,634  | 
|Asia (excluding Hong Kong
and China) |  |                                | 4,538  |      |  |      | 2,183  |  |  |   | 490    | 
|Europe                               |  |                                | 1,690  |      |  |      | 566    |  |  |   | 407    | 
|Other                                |  |                                | 878    |      |  |      | 160    |  |  |   | 485    | 
|                                     |  |                                |        |      |  |      |        |  |  |   |        | 
|                                     |  | $                              | 22,846 |      |  | $    | 20,928 |  |  | $ | 14,658 | 
|                                     |  |                                |        |      |  |      |        |  |  |   |        | 

|                                     |  |      |       |      |  |   |       | 
|------------------------------------ |  | ---- | ----- | ---- |  | - | ----- | 
|Long-lived Assets                  |  |      |       |      |  |   |       | 
|                                     |  |      |       |      |  |   |       | 
|                                     |  | 2003 |       | 2002
|                                     |  |      |       |     
|United States                        |  | $    | 109   |      |  | $ | 162   | 
|Hong Kong (including China)          |  |      | 4,687 |      |  |   | 5,035 | 
|Asia (excluding Hong Kong
and China) |  |      |      |      |  |   |      | 
|Europe                               |  |      |      |      |  |   |      | 
|Other                                |  |      |      |      |  |   |      | 
|                                     |  |      |       |      |  |   |       | 
|                                     |  | $    | 4,796 |      |  | $ | 5,197 | 
|                                     |  |      |       |      |  |   |       | 



| |  | Major Customer                                                                                                                                       
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Sales to one customer for the periods ended October 31, 2003, 2002, 2001,
accounted for approximately 29%, 30%, and 35%, respectively of total
sales.

F-28



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|16. |  | QUARTERLY FINANCIAL DATA (UN-AUDITED)
|--- |  | -------------------------------------

The following financial information reflects all normal recurring
adjustments that are, in opinion of management, necessary for a fair statement
of the results of the interim periods. The quarterly results for the periods
ending October 31, 2003, 2002, and 2001 are set forth in the following table:

|                   |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |   | 
|------------------ |  | - | ------ |  | ------------ | - | ------ |  | ----- | - | -------- | - | ---------- | - | ---------- | - | ----- | - | ----- | - | 
|                   |  |   |        |  |              |   |        |  |       |   |          |   |            |   | Diluted    |   | Basic
|                   |  |   |        |  |              |   |        |  |       |   | Net      |   | Earnings   |   | Earnings  
|                   |  |   |        |  |              |   |        |  |       |   | Earnings |   | (Loss) Per |   | (Loss) Per
|                   |  |   | Sales  |  | Gross Profit |   | (Loss) |  | Share |   | Share   
|                   |  |   |        |  |              |   |        |  |       |   |         
|2003               |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|First Quarter      |  | $ | 5,121  |  |              | $ | 1,492  |  |       | $ | 24       |   |            | $ | 0.00       |   |       | $ | 0.00  |  
|Second Quarter     |  |   | 4,688  |  |              |   | 931    |  |       |   | (628     | ) |            |   | (0.03      | ) |       |   | (0.03 | )
|Third Quarter      |  |   | 5,889  |  |              |   | 1,305  |  |       |   | (314     | ) |            |   | (0.02      | ) |       |   | (0.02 | )
|Fourth Quarter     |  |   | 7,148  |  |              |   | 1,518  |  |       |   | 110      |   |            |   | 0.01       |   |       |   | 0.01  |  
|                   |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|Total              |  | $ | 22,846 |  |              | $ | 5,246  |  |       | $ | (808     | ) |            | $ | (0.04      | ) |       | $ | (0.04 | )
|                   |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|2002               |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|First Quarter      |  | $ | 4,611  |  |              | $ | 1,155  |  |       | $ | (299     | ) |            | $ | (0.02      | ) |       | $ | (0.02 | )
|Second Quarter     |  |   | 5,584  |  |              |   | 1,383  |  |       |   | (178     | ) |            |   | (0.01      | ) |       |   | (0.01 | )
|Third Quarter      |  |   | 5,316  |  |              |   | 1,321  |  |       |   | (347     | ) |            |   | (0.02      | ) |       |   | (0.02 | )
|Fourth Quarter     |  |   | 5,417  |  |              |   | 1,339  |  |       |   | (6,118   | ) |            |   | (0.32      | ) |       |   | (0.32 | )
|                   |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|Total              |  | $ | 20,928 |  |              | $ | 5,198  |  |       | $ | (6,942   | ) |            | $ | (0.36      | ) |       | $ | (0.36 | )
|                   |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|2001               |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|First Quarter      |  |   | 4,109  |  |              |   | 960    |  |       |   | (710     | ) |            |   | (0.04      | ) |       |   | (0.04 | )
|Second Quarter     |  |   | 4,843  |  |              |   | 1,223  |  |       |   | (540     | ) |            |   | (0.03      | ) |       |   | (0.03 | )
|Third Quarter      |  |   | 4,579  |  |              |   | 975    |  |       |   | (861     | ) |            |   | (0.04      | ) |       |   | (0.04 | )
|Fourth Period      |  |   | 1,127  |  |              |   | 32     |  |       |   | (460     | ) |            |   | (0.02      | ) |       |   | (0.02 | )
|                   |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  
|Total
(ten months) |  | $ | 14,658 |  |              | $ | 3,190  |  |       | $ | (2,571   | ) |            | $ | (0.14      | ) |       | $ | (0.14 | )
|                   |  |   |        |  |              |   |        |  |       |   |          |   |            |   |            |   |       |   |       |  

*     The
Company changed its fiscal year end to October 31st in October 2001.
Previously the fiscal year end was a manufacturing calendar year ending on the
last Saturday in December. Therefore, the fourth period of fiscal 2001 is only
one month.

F-29



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SUPPLEMENTARY INFORMATION

F-30



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##### Table of Contents



INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)

For the year Ended October 31, 2003, the year Ended October 31, 2002
and the ten-months Ended October 31, 2001

|                 |                                  |           |            |          |            |              |            |           |        |  |         |      |   |  |   |     | 
|---------------- | -------------------------------- | --------- | ---------- | -------- | ---------- | ------------ | ---------- | --------- | ------ |  | ------- | ---- | - |  | - | --- | 
|                 |                                  |           | Balance at |          | Charged to |              |            |           |        |  | Balance
|                 |                                  |           | beginning  |          | costs and  |              | Deductions |           | at End
|Description      |                                  | of Period |            | Expenses |            | (write-offs) |            | of Period
|                 |                                  |           |            |          |            |              |            |          
|October 31, 2001 |                                  |           |            |          |            |              |            |           |        |  |         |      |   |  |   |    
|                 | Allowance for
doubtful accounts  |           | $          | 127      |            |              | $          | 69        |        |  | $       |     |   |  | $ | 196 | 
|                 | Allowance for
obsolete inventory |           | $          | 482      |            |              | $          | 103       |        |  | $       |     |   |  | $ | 585 | 
|                 |                                  |           |            |          |            |              |            |           |        |  |         |      |   |  |   |    
|October 31, 2002 |                                  |           |            |          |            |              |            |           |        |  |         |      |   |  |   |    
|                 | Allowance for
doubtful accounts  |           | $          | 196      |            |              | $          | 237       |        |  | $       | (92  | ) |  | $ | 341 | 
|                 | Allowance for
obsolete inventory |           | $          | 585      |            |              | $          | (216      | )      |  | $       |     |   |  | $ | 369 | 
|                 |                                  |           |            |          |            |              |            |           |        |  |         |      |   |  |   |    
|October 31, 2003 |                                  |           |            |          |            |              |            |           |        |  |         |      |   |  |   |    
|                 | Allowance for
doubtful accounts  |           | $          | 341      |            |              | $          | 6         |        |  | $       | (307 | ) |  | $ | 40  | 
|                 | Allowance for obsolete
inventory |           | $          | 369      |            |              | $          | 142       |        |  |         |     |   |  | $ | 511 | 

F-31



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##### Table of Contents






PART III






| |  | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE.
| |  | -------------------------------------------------------------------------------
|
| |  | None.                                                                          






| |  | ITEM 9A. CONTROLS AND PROCEDURES.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | We carried out an evaluation, under the supervision and with the
participation of the our management, including our Chief Executive Officer and
Chief Financial Officer, about the effectiveness of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures as of the end of the period covered by this
Form 10-K are effective in timely alerting them to material information
required to be included in this Form 10-K.






| |  | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                                                                                                                                                                   
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The information called for in Item 10 of Part III is incorporated by
reference from the definitive proxy statement of the Company to be filed
with the Securities and Exchange Commission within 180 days from fiscal
year end.






| |  | ITEM 11. EXECUTIVE COMPENSATION.                                                                                                                                                                                               
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The information called for in Item 11 of Part III is incorporated by
reference from the definitive proxy statement of the Company to be filed
with the Securities and Exchange Commission within 180 days from fiscal
year end.






| |  | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.                                                                                                                                                       
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The information called for in Item 12 of Part III is incorporated by
reference from the definitive proxy statement of the Company to be filed
with the Securities and Exchange Commission within 180 days from fiscal
year end.






| |  | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                                                                                                                                                                       
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The information called for in Item 13 of Part III is incorporated by
reference from the definitive proxy statement of the Company to be filed
with the Securities and Exchange Commission within 180 days from fiscal
year end.






| |  | ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.                              
| |  | ------------------------------------------------------------------------------
|
| |  | The information called for in Item 14 of Part III is incorporated by
reference

36



---



##### Table of Contents





| |  | from the definitive proxy statement of the Company to be filed with
the Securities and Exchange Commission within 180 days from fiscal year
end.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------




PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.



|(a) |  | The following documents are filed as part of this report:
|--- |  | ---------------------------------------------------------



| | (1) |  | Financial Statements (see Item 8.)
| | --- |  | ----------------------------------



| |  |  | Report of Independent Auditors (Grant Thornton)                                                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Report of Independent Certified Public
Accountants (Perry-Smith, LLP)                                                                 
|
| |  |  | Consolidated Balance Sheets - October 31, 2003
and October 31, 2002                                                                   
|
| |  |  | Consolidated Statements of Operations - Years
Ended October 31, 2003, October 31, 2002 and ten months ended
October 31, 2001          
|
| |  |  | Consolidated Statements of Stockholders Equity
- Years Ended October 31, 2003, October 31, 2002 and ten
months ended October 31, 2001
|
| |  |  | Consolidated Statements of Cash Flows - Years
Ended October 31, 2003, October 31, 2002 and ten months ended
October 31, 2001          
|
| |  |  | Notes to Consolidated Financial Statements                                                                                            



| | (2) |  | Financial Statement Schedules
| | --- |  | -----------------------------



| |  |  | Schedule II - Valuation and Qualifying Accounts
(accounts not required or not material have been omitted)
| | - |  | ---------------------------------------------------------------------------------------------------------



| | (3) |  | Exhibits
| | --- |  | --------

|            |  |                                                                                                                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                              
|2.1         |  | Agreement and Plan of Merger merging Morrow Snowboards, Inc. into Granite Bay
Technologies, Inc. (1)                                                                                                                         
|            |  |                                                                                                                                                                                                                              
|2.2         |  | Agreement and Plan of Merger merging Granite Bay Technologies, Inc. into International
DisplayWorks, Inc.(2)                                                                                                                 
|            |  |                                                                                                                                                                                                                              
|3.1         |  | Certificate of Incorporation (2)                                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                              
|3.2         |  | Bylaws(22)                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                              
|4.2         |  | Securities Purchase Agreement dated October 31, 1997 among the Registrant, Morrow, LLC,
Morrow Snowboards ULC, Westbeach Snowboard Canada Ltd. and the security holders of
Westbeach Snowboard Canada Ltd. listed therein (6)

37



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##### Table of Contents



|            |  |                                                                                                                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                              
|4.3         |  | Forms of Warrant (26)                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                              
|4.4         |  | Forms of Placement Agent Warrant (27)                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                              
|10.1        |  | Forms of Warrant (3)                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                              
|10.2        |  | Morrow Snowboards, Inc. Employee Equity Incentive Plan as amended and restated February
13, 1997 (4)                                                                                                                         
|            |  |                                                                                                                                                                                                                              
|10.3        |  | Form of Nonqualified Stock Option Agreement (3-4)                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                              
|10.4        |  | Form of Incentive Stock Option Agreement (3-4)                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                              
|10.5        |  | Form of Indemnification Agreement (3-4)                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                              
|10.6        |  | Stock Option Plan for Non-Employee Directors (3-4)                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                              
|10.7        |  | Securities Purchase Agreement dated October 31, 1997 among the Registrant, Morrow, LLC,
Morrow Snowboards ULC, Westbeach Snowboard Canada Ltd. and the Security holders of
Westbeach Snowboard Canada Ltd. listed therein (6)
|            |  |                                                                                                                                                                                                                              
|10.8        |  | Guarantee and Postponement of Claim by Morrow Westbeach Canada ULC in favor of Foothill
Capital Corporation dated as of May 7, 1998 (as assigned to Capitol Bay Management, Inc.)
(19)                                       
|            |  |                                                                                                                                                                                                                              
|10.9        |  | Intellectual Property and Security Agreement dated as of May 7, 1998, between Morrow
Snowboards, Inc. and Foothill Capital Corporation (as assigned to Capitol Bay Management,
Inc.)(19)                                     
|            |  |                                                                                                                                                                                                                              
|10.10       |  | General Security Agreement dated as of May 7, 1998, between Morrow Westbeach Canada ULC
and Foothill Capital Corporation (as assigned to Capitol Bay Management, Inc.)(19)                                                   
|            |  |                                                                                                                                                                                                                              
|10.11       |  | Security Agreement-Stock Pledge dated as of May 7, 1998, between Morrow Snowboards, Inc.
and Foothill Capital Corporation (as assigned to Capitol Management, Inc.)(19)                                                      
|            |  |                                                                                                                                                                                                                              
|10.12       |  | Assignment and Acknowledgment Agreement dated May 7, 1999, between Capitol Bay
Management, Inc. and Foothill Capital Corporation, the Registrant and Westbeach Snowboard
U.S.A. Inc.(19)                                     
|            |  |                                                                                                                                                                                                                              
|10.13       |  | Acquisition Agreement dated as of March 26, 1999, by and between K2 Acquisitions, Inc.
and the Registrant (10)                                                                                                               
|            |  |                                                                                                                                                                                                                              
|10.14       |  | Memorandum of Understanding between Capitol Bay Management, Inc. and the Company (11)                                                                                                                                        
|            |  |                                                                                                                                                                                                                              
|10.15       |  | Payment Agreement effective June 17, 1999 among Morrow Snowboards, Inc., certain
Petitioning Creditors named therein and Robert K. Morrow, Inc., a Disbursing Agent for
the Petitioning Creditors (12)                       
|            |  |                                                                                                                                                                                                                              
|10.16       |  | Promissory Note dated August 25, 1999, given by Morrow Snowboards, Inc. to Dennis and
Carol Pekkola (12)                                                                                                                     
|            |  |                                                                                                                                                                                                                              
|10.17       |  | Trust Deed dated August 25, 1999, given by Morrow Snowboards, Inc. to Robert Smejkel, as
Trustee, with Dennis and Carol Pekkola as beneficiaries(13)                                                                         
|            |  |                                                                                                                                                                                                                              
|10.18       |  | Subordination Agreement dated August 25, 1999, among Morrow Snowboards, Inc., Robert K.
Morrow, as Escrow Agent for certain creditors of the Company and the Pekkolas (13)                                                   
|            |  |                                                                                                                                                                                                                              
|10.19       |  | Morrow Snowboards, Inc. 1999 Stock Option Plan for Non-Employee Directors (14)                                                                                                                                               
|            |  |                                                                                                                                                                                                                              
|10.20       |  | Asset Purchase Agreement dated as of November 12, 1999, among Westbeach Canada ULC and
Westbeach Sports Inc.(15)                                                                                                             
|            |  |                                                                                                                                                                                                                              
|10.21       |  | General Assignment dated as of November 12, 1999, among Westbeach Canada ULC                                                                                                                                                 

38



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##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                      
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                      
|            |  | and
Westbeach Sports Inc.(15)                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                      
|10.22       |  | Assignment of Lease and Consent among Westbeach Canada ULC, Westbeach Sports Inc. and
Western Immo Holdings, Inc. dated as of November 12, 1999 (15)                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                      
|10.23       |  | Assignment of Lease and Consent among Westbeach Canada ULC, Westbeach Sports Inc. and
Welf Arne Von Dehn dated as of November 12, 1999 (15)                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                      
|10.24       |  | Bill of Sale between Westbeach Canada ULC and Westbeach Sports Inc. dated as of November
12, 1999 (15)                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                      
|10.25       |  | Letter from Arthur Andersen, LLP dated January 24, 2000 (16)                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.26       |  | Placement Agent Agreement dated January 13, 2000, between Morrow Snowboards, Inc. and
Capitol Bay Securities, Inc (17)                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                      
|10.27       |  | Securities Purchase Agreement effective as of January 31, 2000, among Morrow Snowboards,
Inc. and the Sellers (18)                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                      
|10.28       |  | Sale and Purchase Agreement February 1, 2000 among Vikay Industrial (Hong Kong) Ltd. and
International DisplayWorks, Inc. (19)                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                      
|10.29       |  | Supplemental Deed and Charge dated February 1, 2000, between International DisplayWorks
(Hong Kong) Ltd. and International DisplayWorks, Inc., as Chargors, and Vikay Industrial
Ltd. (in Judicial Management) and Vikay Industrial (Hong Kong) Ltd. as Chargees (18)
|            |  |                                                                                                                                                                                                                                                                      
|10.30       |  | 2000 Equity Incentive Plan for Non-Employee Directors (21)                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|10.31       |  | Stock Option Agreements [Form of] (23)                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                      
|10.32       |  | Equity Incentive Plan (21)                                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|10.33       |  | Employment Contract with Ian Bebbington (24)                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.34       |  | Manufacturing Agreement (25)                                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.35       |  | Form of Common Stock Purchase Agreement (26)                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.36       |  | Form of Promissory Note (26)                                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.37       |  | Form of Securities Purchase Agreement (27)                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|10.38       |  | Form of Registration Rights Agreement (27)                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|23.1        |  | Consent of Grant Thornton                                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                      
|23.2        |  | Consent of Perry Smith                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                      
|31.1        |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|31.2        |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|32          |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                      
|(1)         |  | Incorporated herein by reference from the Companys Current Report on
Form 8-K dated November 6, 2000 (File No. 0-753683).                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|(2)         |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated October 31, 2001 (File No. 0-27002).                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                      
|(3)         |  | Incorporated herein by reference from the Companys registration
statement on Form S-1 (File No. 33-97800).                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                      
|(4)         |  | Incorporated by reference from the Companys Proxy Statement for
the meeting held on May 22, 1997 (File No. 000-27002).                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                      
|(5)         |  | Incorporated herein by reference from the Companys 1995 Annual Report on
Form 10-K (File No. 0-27002).                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                      
|(6)         |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated October 31, 1997 (File No. 0-27002).                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                      
|(7)         |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated November 11, 1997 (File No. 0-27002).                                                                                                                                                  

39



---



##### Table of Contents



|     |  |                                                                                                                                 
|---- |  | --------------------------------------------------------------------------------------------------------------------------------
|(8)  |  | Incorporated by reference from the Companys 1997 Annual Report on Form
10-K (File No. 0-27002).                                
|     |  |                                                                                                                                 
|(9)  |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated May 8, 1998 (File No. 0-27002).                   
|     |  |                                                                                                                                 
|(10) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated March 26, 1999 (File No. 0-27002).                
|     |  |                                                                                                                                 
|(11) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated April 27, 1999 (File No. 0-27002).                
|     |  |                                                                                                                                 
|(12) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated June 28, 1999 (File No. 0-27002).                 
|     |  |                                                                                                                                 
|(13) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated August 25, 1999 (File No. 0-27002).               
|     |  |                                                                                                                                 
|(14) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated September 30, 1999 (File No. 0-27002).            
|     |  |                                                                                                                                 
|(15) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated November 12, 1999 (File No. 0-27002).             
|     |  |                                                                                                                                 
|(16) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated January 14, 2000 (File No. 0-27002).              
|     |  |                                                                                                                                 
|(17) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated January 31, 2000 (File No. 0-27002).              
|     |  |                                                                                                                                 
|(18) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated January 31, 2000 (File No. 0-27002).              
|     |  |                                                                                                                                 
|(19) |  | Incorporated by reference from the Companys Annual Report on Form 10-K
for the year ended January 1, 2000 (File No.0-27002).   
|     |  |                                                                                                                                 
|(20) |  | Incorporated by reference from the Companys Proxy Statement for the
meeting held on September 28, 2000 (File No. 707647).      
|     |  |                                                                                                                                 
|(21) |  | Incorporated by reference from the Companys current report on Form 8-K
filed October 15, 1999 (File No. 000-27002).            
|     |  |                                                                                                                                 
|(22) |  | Incorporated by reference from the Companys Annual Report on Form 10-K
for the year ended October 31, 2001 (File No 000-27002).
|     |  |                                                                                                                                 
|(23) |  | Incorporated by reference from the Companys registration statement on
Form S-8 effective May 1, 2002 (File No. 333-87296).     
|     |  |                                                                                                                                 
|(24) |  | Incorporated by reference from the Companys Annual Report on Form 10-K
for the year ended October 31, 2002 (File No 000-27002).
|     |  |                                                                                                                                 
|(25) |  | Incorporated by reference from the Companys current report on Form 8-K
filed on April 24, 2003 (File No. 000-27002).           
|     |  |                                                                                                                                 
|(26) |  | Incorporated by reference from the Companys current report on Form 8-K
filed on October 10, 2003 (File No. 000-27002).         
|     |  |                                                                                                                                 
|(27) |  | Incorporated by reference from the Companys current report on Form 8-K
filed on December 30, 2003 (File No 000-27002).         



| | (b) |  | Reports on Form 8-K                                                                                       
| | --- |  | ----------------------------------------------------------------------------------------------------------
|
| |     |  | The following reports on Form 8-K were filed during the last
quarter of the period covered by this report:

40



---



##### Table of Contents



|                       |  |                                                                                                               
|---------------------- |  | --------------------------------------------------------------------------------------------------------------
|Date of Event Reported |  | Item Reported                                                                                                 
|                       |  |                                                                                                               
|January 9, 2004        |  | Signing of the Commitment letter for $5 Million
Asset Based Credit Line with Wells Fargo Business
Credit, Inc.
|                       |  |                                                                                                               
|December 23, 2003      |  | Announcing $5 Million Dollar Private Placement                                                                
|                       |  |                                                                                                               
|December 2, 2003       |  | Announcing the Companys presentation at Friedland
Capitals Undervalued Equities Conference                  

41



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

|                        |  |                                                          |  |                                     
|----------------------- |  | -------------------------------------------------------- |  | ------------------------------------
|                        |  | INTERNATIONAL DISPLAYWORKS, INC.,
A Delaware corporation
|                        |  |                                                          |  |                                     
|Dated: February 3, 2004 |  | By:                                                      |  | /s/ Stephen C. Kircher              
|                        |  |                                                          |  |                                     
|                        |  |                                                          |  | Stephen C. Kircher,                 
|                        |  |                                                          |  | Chairman and Chief Executive Officer
|                        |  |                                                          |  | (Principal Executive Officer)       

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

|                        |  |                                                          |  |                                           
|----------------------- |  | -------------------------------------------------------- |  | ------------------------------------------
|                        |  | INTERNATIONAL DISPLAYWORKS, INC.,
A Delaware corporation
|                        |  |                                                          |  |                                           
|Dated: February 3, 2004 |  | By                                                       |  | /s/ Stephen C. Kircher                    
|                        |  |                                                          |  |                                           
|                        |  |                                                          |  | Stephen C. Kircher,                       
|                        |  |                                                          |  | Chairman and Chief Executive Officer      
|                        |  |                                                          |  | (Principal Executive Officer)             
|                        |  |                                                          |  |                                           
|Dated: February 3, 2004 |  | By:                                                      |  | /s/ Anthony Genovese                      
|                        |  |                                                          |  |                                           
|                        |  |                                                          |  | Anthony Genovese,                         
|                        |  |                                                          |  | Vice-Chairman and Chief Technology Officer
|                        |  |                                                          |  |                                           
|Dated: February 3, 2004 |  | By:                                                      |  | /s/ William H. Hedden                     
|                        |  |                                                          |  |                                           
|                        |  |                                                          |  | William H. Hedden, Director               
|                        |  |                                                          |  |                                           
|Dated: February 3, 2004 |  | By:                                                      |  | /s/ Ronald Cohan                          
|                        |  |                                                          |  |                                           
|                        |  |                                                          |  | Ronald Cohan, Director                    

42



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##### Table of Contents



|                        |  |     |  |                              
|----------------------- |  | --- |  | -----------------------------
|Dated: February 3, 2004 |  | By: |  | /s/ Timothy Nyman            
|                        |  |     |  |                              
|                        |  |     |  | Timothy Nyman, Director      
|                        |  |     |  |                              
|Dated: February 3. 2004 |  | By: |  | /s/ Ian Bebbington           
|                        |  |     |  |                              
|                        |  |     |  | Ian Bebbington,              
|                        |  |     |  | Chief Financial Officer      
|                        |  |     |  | (Principal Financial Officer)

43



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##### Table of Contents






EXHIBIT INDEX

|            |  |                                                                                                                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                              
|2.1         |  | Agreement and Plan of Merger merging Morrow Snowboards, Inc. into Granite Bay
Technologies, Inc. (1)                                                                                                                         
|            |  |                                                                                                                                                                                                                              
|2.2         |  | Agreement and Plan of Merger merging Granite Bay Technologies, Inc. into International
DisplayWorks, Inc.(2)                                                                                                                 
|            |  |                                                                                                                                                                                                                              
|3.1         |  | Certificate of Incorporation (2)                                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                              
|3.2         |  | Bylaws(22)                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                              
|4.2         |  | Securities Purchase Agreement dated October 31, 1997 among the Registrant, Morrow, LLC,
Morrow Snowboards ULC, Westbeach Snowboard Canada Ltd. and the security holders of
Westbeach Snowboard Canada Ltd. listed therein (6)





---



##### Table of Contents



|            |  |                                                                                                                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                              
|4.3         |  | Forms of Warrant (26)                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                              
|4.4         |  | Forms of Placement Agent Warrant (27)                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                              
|10.1        |  | Forms of Warrant (3)                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                              
|10.2        |  | Morrow Snowboards, Inc. Employee Equity Incentive Plan as amended and restated February
13, 1997 (4)                                                                                                                         
|            |  |                                                                                                                                                                                                                              
|10.3        |  | Form of Nonqualified Stock Option Agreement (3-4)                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                              
|10.4        |  | Form of Incentive Stock Option Agreement (3-4)                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                              
|10.5        |  | Form of Indemnification Agreement (3-4)                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                              
|10.6        |  | Stock Option Plan for Non-Employee Directors (3-4)                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                              
|10.7        |  | Securities Purchase Agreement dated October 31, 1997 among the Registrant, Morrow, LLC,
Morrow Snowboards ULC, Westbeach Snowboard Canada Ltd. and the Security holders of
Westbeach Snowboard Canada Ltd. listed therein (6)
|            |  |                                                                                                                                                                                                                              
|10.8        |  | Guarantee and Postponement of Claim by Morrow Westbeach Canada ULC in favor of Foothill
Capital Corporation dated as of May 7, 1998 (as assigned to Capitol Bay Management, Inc.)
(19)                                       
|            |  |                                                                                                                                                                                                                              
|10.9        |  | Intellectual Property and Security Agreement dated as of May 7, 1998, between Morrow
Snowboards, Inc. and Foothill Capital Corporation (as assigned to Capitol Bay Management,
Inc.)(19)                                     
|            |  |                                                                                                                                                                                                                              
|10.10       |  | General Security Agreement dated as of May 7, 1998, between Morrow Westbeach Canada ULC
and Foothill Capital Corporation (as assigned to Capitol Bay Management, Inc.)(19)                                                   
|            |  |                                                                                                                                                                                                                              
|10.11       |  | Security Agreement-Stock Pledge dated as of May 7, 1998, between Morrow Snowboards, Inc.
and Foothill Capital Corporation (as assigned to Capitol Management, Inc.)(19)                                                      
|            |  |                                                                                                                                                                                                                              
|10.12       |  | Assignment and Acknowledgment Agreement dated May 7, 1999, between Capitol Bay
Management, Inc. and Foothill Capital Corporation, the Registrant and Westbeach Snowboard
U.S.A. Inc.(19)                                     
|            |  |                                                                                                                                                                                                                              
|10.13       |  | Acquisition Agreement dated as of March 26, 1999, by and between K2 Acquisitions, Inc.
and the Registrant (10)                                                                                                               
|            |  |                                                                                                                                                                                                                              
|10.14       |  | Memorandum of Understanding between Capitol Bay Management, Inc. and
the Company (11)                                                                                                                                        
|            |  |                                                                                                                                                                                                                              
|10.15       |  | Payment Agreement effective June 17, 1999 among Morrow Snowboards, Inc., certain
Petitioning Creditors named therein and Robert K. Morrow, Inc., a Disbursing Agent for
the Petitioning Creditors (12)                       
|            |  |                                                                                                                                                                                                                              
|10.16       |  | Promissory Note dated August 25, 1999, given by Morrow Snowboards, Inc. to Dennis and
Carol Pekkola (12)                                                                                                                     
|            |  |                                                                                                                                                                                                                              
|10.17       |  | Trust Deed dated August 25, 1999, given by Morrow Snowboards, Inc. to Robert Smejkel, as
Trustee, with Dennis and Carol Pekkola as beneficiaries (13)                                                                        
|            |  |                                                                                                                                                                                                                              
|10.18       |  | Subordination Agreement dated August 25, 1999, among Morrow Snowboards, Inc., Robert K.
Morrow, as Escrow Agent for certain creditors of the Company and the Pekkolas (13)                                                   
|            |  |                                                                                                                                                                                                                              
|10.19       |  | Morrow Snowboards, Inc. 1999 Stock Option Plan for Non-Employee Directors (14)                                                                                                                                               
|            |  |                                                                                                                                                                                                                              
|10.20       |  | Asset Purchase Agreement dated as of November 12, 1999, among Westbeach Canada ULC and
Westbeach Sports Inc.(15)                                                                                                             
|            |  |                                                                                                                                                                                                                              
|10.21       |  | General Assignment dated as of November 12, 1999, among Westbeach Canada ULC                                                                                                                                                 





---



##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                      
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                      
|            |  | and Westbeach Sports Inc.(15)                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                      
|10.22       |  | Assignment of Lease and Consent among Westbeach Canada ULC, Westbeach Sports Inc. and
Western Immo Holdings, Inc. dated as of November 12, 1999 (15)                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                      
|10.23       |  | Assignment of Lease and Consent among Westbeach Canada ULC, Westbeach Sports Inc. and
Welf Arne Von Dehn dated as of November 12, 1999 (15)                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                      
|10.24       |  | Bill of Sale between Westbeach Canada ULC and Westbeach Sports Inc. dated as of November
12, 1999 (15)                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                      
|10.25       |  | Letter from Arthur Andersen, LLP dated January 24, 2000 (16)                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.26       |  | Placement Agent Agreement dated January 13, 2000, between Morrow Snowboards, Inc. and
Capitol Bay Securities, Inc (17)                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                      
|10.27       |  | Securities Purchase Agreement effective as of January 31, 2000, among Morrow Snowboards,
Inc. and the Sellers (18)                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                      
|10.28       |  | Sale and Purchase Agreement February 1, 2000 among Vikay Industrial (Hong Kong) Ltd. and
International DisplayWorks, Inc. (19)                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                      
|10.29       |  | Supplemental Deed and Charge dated February 1, 2000, between International DisplayWorks
(Hong Kong) Ltd. and International DisplayWorks, Inc., as Chargors, and Vikay Industrial
Ltd. (in Judicial Management) and Vikay Industrial (Hong Kong) Ltd. as Chargees (18)
|            |  |                                                                                                                                                                                                                                                                      
|10.30       |  | 2000 Equity Incentive Plan for Non-Employee Directors (21)                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|10.31       |  | Stock Option Agreements [Form of] (23)                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                      
|10.32       |  | Equity Incentive Plan (21)                                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|10.33       |  | Employment Contract with Ian Bebbington (24)                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.34       |  | Manufacturing Agreement (25)                                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.35       |  | Form of Common Stock Purchase Agreement (26)                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.36       |  | Form of Promissory Note (26)                                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                      
|10.37       |  | Form of Securities Purchase Agreement (27)                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|10.38       |  | Form of Registration Rights Agreement (27)                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|23.1        |  | Consent of Grant Thornton                                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                      
|23.2        |  | Consent of Perry Smith                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                      
|31.1        |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|31.2        |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                      
|32          |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act                                                                                                                                               



|(1) |  | Incorporated herein by reference from the Companys Current Report on
Form 8-K dated November 6, 2000 (File No. 0-753683).
|--- |  | --------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated October 31, 2001 (File No. 0-27002).        
|   
|(3) |  | Incorporated herein by reference from the Companys registration
statement on Form S-1 (File No. 33-97800).               
|   
|(4) |  | Incorporated by reference from the Companys Proxy Statement for
the meeting held on May 22, 1997 (File No. 000-27002).   
|   
|(5) |  | Incorporated herein by reference from the Companys 1995 Annual Report on
Form 10-K (File No. 0-27002).                   
|   
|(6) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated October 31, 1997 (File No. 0-27002).        
|   
|(7) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated November 11,1997 (File No. 0-27002).        





---



##### Table of Contents





|(8)  |  | Incorporated by reference from the Companys 1997 Annual Report on Form
10-K (File No. 0-27002).                                
|---- |  | --------------------------------------------------------------------------------------------------------------------------------
|    
|(9)  |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated May 8, 1998 (File No. 0-27002).                   
|    
|(10) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated March 26, 1999 (File No. 0-27002).                
|    
|(11) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated April 27, 1999 (File No. 0-27002).                
|    
|(12) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated June 28, 1999 (File No. 0-27002).                 
|    
|(13) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated August 25, 1999 (File No. 0-27002).               
|    
|(14) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated September 30, 1999 (File No. 0-27002).            
|    
|(15) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated November 12, 1999 (File No. 0-27002).             
|    
|(16) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated January 14, 2000 (File No. 0-27002).              
|    
|(17) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated January 31, 2000 (File No. 0-27002).              
|    
|(18) |  | Incorporated by reference from the Companys Current Report on Form 8-K
dated January 31, 2000 (File No. 0-27002).              
|    
|(19) |  | Incorporated by reference from the Companys Annual Report on Form 10-K
for the year ended January 1, 2000 (File No.0-27002).   
|    
|(20) |  | Incorporated by reference from the Companys Proxy Statement for the
meeting held on September 28, 2000 (File No. 707647).      
|    
|(21) |  | Incorporated by reference from the Companys current report on Form 8-K
filed October 15, 1999 (File No. 000-27002).            
|    
|(22) |  | Incorporated by reference from the Companys Annual Report on Form 10-K
for the year ended October 31, 2001 (File No 000-27002).
|    
|(23) |  | Incorporated by reference from the Companys registration statement on
Form S-8 effective May 1, 2002 (File No. 333-87296).     
|    
|(24) |  | Incorporated by reference from the Companys Annual Report on Form 10-K
for the year ended October 31, 2002 (File No 000-27002).
|    
|(25) |  | Incorporated by reference from the Companys current report on Form 8-K
filed on April 24, 2003 (File No. 000-27002).           
|    
|(26) |  | Incorporated by reference from the Companys current report on Form 8-K
filed on October 10, 2003 (File No. 000-27002).         
|    
|(27) |  | Incorporated by reference from the Companys current report on Form 8-K
filed on December 30, 2003 (File No 000-27002).