UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                      For the Year Ended: October 31, 2004

                         Commission File Number: 0-27002

                        INTERNATIONAL DISPLAYWORKS, INC.
             (Exact name of Registrant as specified in its charter)

             Delaware                                  94-3333649
             --------                                  ----------
    (State of 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,  (ss.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).  [X] Yes    [ ] 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 December
16, 2004 was $240,672,138.90.

The  number  of shares of the  registrant's  common  stock,  $0.001  par  value,
outstanding on December 22, 2004 was 30,759,357.

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

<PAGE>

                                TABLE OF CONTENTS




PART I
         ITEM 1.  Business                                                   1
         ITEM 2.  Properties                                                12
         ITEM 3.  Legal Proceedings                                         13
         ITEM 4.  Submission of Matters to a Vote of Security Holders       13

PART II

         ITEM 5.  Market for Registrant's Common Equity and Related
                  Stockholder Matters and Issuer Purchases of Equity
                  Securities                                                13
         ITEM 6.  Selected Consolidated Financial Data                      15
         ITEM 7.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                       17

RISK FACTORS
         ITEM 7A. Quantitative and Qualitative Disclosures About Market
                  Risk                                                      37
         ITEM 8.  Financial Statements and Supplementary Data               F1
         ITEM 9.  Changes in and Disagreements With Accountants and
                  Financial Disclosure                                      39
         ITEM 9A. Controls and Procedures                                   39
         ITEM 9B. Other Information                                         39

PART III
         ITEM 10. Directors and Executive Officers of the Registrant        39
         ITEM 11. Executive Compensation                                    39
         ITEM 12. Security Ownership of Certain Beneficial Owners and
                  Management                                                39
         ITEM 13. Certain Relationships and Related Transactions            39
         ITEM 14. Principal Accounting Fees and Services                    40

PART IV
         ITEM 15. Exhibits, Financial Statement Schedules                   40

Signatures                                                                  44

Exhibits Index
         Exhibit 31.1
         Exhibit 31.2
         Exhibit 32


<PAGE>

                                     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 and EMS 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 and EMS  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  and
manufacturing  services,  for which we design and develop  proprietary  products
that are sold by our OEM and EMS  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 2,000 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 a different line of business.  Through a series
of transactions, we assumed the reporting obligations of Morrow Snowboards, Inc.
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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                                [GRAPH OMITTED]


     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

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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.

     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  semi-conductor  devices.
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 and EMSs increasingly believe that a display interface
is important because it can make 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 and EMSs 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 and EMSs 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 and EMSs often include in their products  unique  display  modules and
features as a means of differentiating their products from those of competitors.
OEMs and EMSs  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 and EMSs 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 and EMSs 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  and EMSs  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 and EMS 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.

     Our  internal  estimates  show the small form factor LCD  market,  where we
currently focus our business,  is estimated to be approximately $11 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

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hand-held  data  collection  devices,  as well as  benefits  from the  increased
digitalization of data displays across many applications.

     Industry Structure

     We  purchase  from  raw  material  manufacturers  (e.g.,  glass), component
manufacturers and from Integrated Circuit (chip or driver chip) manufacturers or
their  distributors.  Sometimes the chip has been  designed by a "fabless"  chip
design company which has  contracted a chip foundry to  manufacture  the chip to
their design. Chips are not usually  interchangeable without design changes that
may require re-qualification with the customer and / or the customer's approval.

     We supply to OEMs (Original Equipment  Manufacturers) - these normally have
a recognized  brand name, or EMSs (Electronic  Manufacturing Service  providers)
which  assembles  our  display  and  module  into the  final  product.  EMSs are
contracted  by OEMs who  sometimes  nominate us as their chosen  display  module
supplier.

Our Strategy

     We are focused on expanding our position as a provider of LCD manufacturing
services  to major OEMs and EMSs 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:

o 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.

o 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,  color
supertwisted  nematic, or CSTN, 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.

o Maximize  utilization  of  manufacturing  capacity.  We have been  following a

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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.

o 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.

o 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.

o 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.   We  are  certified  under  ISO  9001,  the  International
Organization for  Standardization's  highest quality standards in respect of our
existing  monochrome line and module  operations.  We are also QS9000 certified,
which is the  established  standard for the  automotive  industry.  Our existing
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.  We  are in the  process  of  obtaining
certification  for  our  new  facility  where  we have  installed  the  recently
purchased color line.

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

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o Reduction of total  production  cost. OEMs and EMSs continually need to reduce
costs to remain  competitive.  Providers of components  and modules  manufacture
products  at reduced  total  costs to OEMs and EMSs  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 and EMSs to take  advantage  of  producing in
low-cost geographical regions.

o Access to  leading  technologies.  OEMs and EMSs  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.

o Acceleration of time-to-market. OEMs and EMSs face the demands of increasingly
shorter product  life-cycles.  OEMs and EMSs 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.

o 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  and  EMSs to lower  their  investment  in
inventory  and  manufacturing  assets  and shift  more of 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   85%  of  our  business   from  17   customers.
Historically,  we have had substantial recurring sales from one customer.  Sales
to that customer for the year ended October 31, 2004, the year ended October 31,
2003 and the year ended October 31, 2002, accounted for  approximately 16%,  29%
and 30%,  respectively,  of total  sales.  Sales to our five  largest  customers
accounted  for 62%,  48%  and  51% of our net sales  during  the  periods  ended
October 31, 2004, 2003 and 2002, respectively.

     Sales to our OEM and EMS 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.

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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, HTN, STN, CSTN 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 an LCD product to be designed,  manufactured and sold
to an OEM  customer  varies  substantially,  ranging  from a few days to several
months, including the design, proof and production period. Initially, an OEM and
EMS customer  gathers data from its sales  personnel for products in which there
is market interest,  including  features and anticipated unit costs. The OEM and
EMS 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 and EMS  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 and EMS  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  these
costs over a period of time and over a 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

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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
original fully  automated  front-end  processing  line is capable of producing a
monthly  quantity of 35,000 panels measuring 14" by 16" each. Our newly acquired
color line is capable of producing  45,000 panels per month measuring 12" by 14"
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:

o    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, 2004,  we had
     four COG lines. These machines provide a total production capacity of up to
     550,000 chip bonds per month. We recently acquired  additional COG capacity
     of approximately 1,250,000 chip bonds per month bringing total COG capacity
     to approximately 1,800,000 chip bonds per month.

o    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, 2004, 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.

o    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,
     2004, we had six systems of TAB with ACF machines.  The machines  provide a
     total production capacity of up to 500,000 seals per month.

o    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 connections. This method is highly specialized and is used in the
     production  of finished  products such as PDAs. At October 31, 2004, we had
     12  machines  utilizing  FPHS  technology.  The  machines  provide  a total
     production capacity of up to 500,000 seals per month.

o    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, 2004,  we had three SMT  production
     lines.  Our total  mounting  capacity is 20,000,000  components  per month.


Environmental  Laws

     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

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our own standby  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.  In addition,  sewage produced by dormitory facilities which
house our labor force is coming  under  greater  environmental  legislation.  We
believe that all hazardous and/or toxic waste is being stored, used and disposed
of in accordance with applicable laws.

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 a raw material 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  or higher  component  costs.
These supply  shortages may  contribute  to an increase in our inventory  levels
and/or a  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 BYD,  Data Image,  Data Vision,
Hantronics,  Ocular, Optrex, Tian Ma, Truly Semiconductors  Limited,  Varitronix
Ltd., Wintek Corporation, and other similar companies.

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

                                       9
<PAGE>

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.

     We are  certified  under  ISO  9001,  the  International  Organization  for
Standardization's   highest  quality   standards  in  respect  of  our  existing
monochrome line and module  operations.  We are also QS9000 certified,  which is
the established standard for the automotive industry. Our existing manufacturing
facility  located in  Shenzhen  is also  certified  under ISO 14001,  the latest
recognized quality standard, which provides a structured basis for environmental
management and control. We are in the process of obtaining certification for our
new facility where we have installed the recently purchased color line. "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.  In addition,
we receive 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  through our sales
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.

Seasonality

     Our business  does not  experience  seasonality.

Backlog

     As of December 1, 2004, we had a backlog of orders of  approximately  $21.0
million,  as compared  with a backlog of $13.3  million as of December 31, 2003.
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

                                       10
<PAGE>

given  with an  average  of 12 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.

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 and EMS 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
--------------------------------------------------------------------------------
                                                 2004        2003        2002
                                            ------------------------------------

United States                                $ 19,615     $ 10,824     $ 11,266
China (including Hong Kong)                     8,440        4,916        6,753
Asia (excluding Hong Kong and
China)                                         10,152        4,538        2,183
Europe                                          7,051        1,690          566
Other                                           1,119          878          160
                                            ------------------------------------
                                             $ 46,377     $ 22,846     $ 20,928
                                            =========     ========     =========


                                       11
<PAGE>

        "Long-lived Assets"
        ------------------------------
                                                    2004            2003
                                                 -------------------------------

        United States                             $   112           $  109
        China (including Hong Kong)                16,306            4,687
        Asia (excluding Hong Kong and
        China)                                          -                -
        Europe                                          -                -
        Other                                           -                -
                                                 -------------------------------

                                                  $16,418           $4,796
                                                 ===============================


Employees

     As of October 31, 2004, we employed approximately 2,000 persons, 11 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.

ITEM 2.  PROPERTIES.

     We now have two manufacturing  facilities,  ten minutes from each other and
both are 30 minutes  from the center of the city of Shenzhen  and about one hour
from Hong  Kong.  Our South  campus  manufacturing  facilities  consist of three
buildings totalling approximately  270,000 square feet situated on four acres of
leased land in an industrial  suburb of Shenzhen,  Southern  China known as Heng
Gang. Our North campus  facility  (housing our newly  installed  color LCD line)
consists of one building totalling  approximately 140,000 square feet. The North
Campus facility has just been leased on a ten-year lease  commencing in November
2004 and expiring in 2014 with an option to renew for an additional ten years at
the same terms and rate. The annual rental expense is $283,100. The South campus
buildings  are  approximately  13  years  old,  and the LCD  production  line is
approximately six years old. Only the state may own land in China. Therefore, we
lease the land under our South Campus facility, 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 adjacent properties
and ancillary  accommodations  in the area for senior staff at a current cost of
$256,800 per year from the Heng Gang Village.

                                       12
<PAGE>

     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 Saline, Michigan and Woking,
Surrey, United Kingdom.

ITEM 3. LEGAL PROCEEDINGS.

     We are not a party to any legal proceedings 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.

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, 2004.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.

     Our  common  stock is traded on the OTC  Bulletin  Board  under the  symbol
"IDWK." As of December  16,  2004,  there were  approximately  2,600  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 December 12, 2004, a total of 3,343,214  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.  Over-the-counter  market
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission and may not necessarily represent actual transactions.

                                            Low                 High
                                            ---                 ----
Fiscal 2004:
------------

Fourth Quarter (to October 31)             $3.09                $5.12

Third Quarter (to July 31)                 $3.84                $5.89

Second Quarter (to April 30)               $2.56                $6.26

First Quarter (to January 31)              $0.48                $2.56

                                       13
<PAGE>

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


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.

Recent Sales of Unregistered Securities

     During the fiscal year ended  October 31, 2004, we have sold and issued the
following securities:

     1. 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.  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.

     2. In May 2004,  the Company  completed a private  financing  of  4,500,000
shares of common stock at $4.50 per share.  The net  proceeds  from the offering
were $20,250,000.  Roth Capital  Partners,  LLC acted as the placement agent for
the financing and received an eight percent (8%) fee based on gross proceeds.

     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 there from.

                                       14
<PAGE>

Repurchases of Stock

     The  Company  did not  repurchase  any of its stock  during the fiscal year
ended October 31, 2004.

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, 2004,  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 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" and our  Consolidated
Financial Statements and Notes thereto appearing elsewhere in this report.
<TABLE>
<CAPTION>
<S>                                      <C>               <C>              <C>              <C>               <C>

                                       (in thousands, except per share data)
                                                           October 31,      October 31,      October 31,
                                      October 31, 2004    2003 (twelve     2002 (twelve       2001 (ten      December 30, 2000
                                      (twelve months)        months)          months)          months)        (eleven months)

Net sales                             $   46,377          $   22,846       $   20,928        $   14,658      $   17,804

Cost of goods sold                        36,266              17,600           15,730            11,468          12,593
                                      -----------------------------------------------------------------------------------------
  Gross Profit                            10,111               5,246            5,198             3,190           5,211
                                      -----------------------------------------------------------------------------------------
Operating expenses:

  General and administrative               5,403               3,637            4,036             4,071           5,124
  Selling, marketing and customer
service                                    2,096               1,655            1,562             1,231           1,545
  Engineering, advanced design and
product management                           625                 593              691               901             570

  Impairment of machinery                      -                   -              270                 -               -

  Impairment of goodwill                       -                   -            5,287                 -               -
                                      ------------------------------------------------------------------------------------------
Total operating expenses                   8,124               5,885           11,846             6,203           7,239
                                      ------------------------------------------------------------------------------------------
Operating income (loss)                    1,987                (639)          (6,648)           (3,013)         (2,028)
                                      ------------------------------------------------------------------------------------------
Other income (expenses):

  Interest                                  (396)               (389)            (464)             (530)           (442)

  Loss on investment                           -                   -                -                 -          (1,000)

  Other income                               108                 220              170               972             (29)

Litigation settlement                       (625)                  -                -                 -               -
                                      ------------------------------------------------------------------------------------------
                                            (913)               (169)            (294)              442          (1,471)
                                      ------------------------------------------------------------------------------------------
Income (loss) from continuing
operations before income taxes             1,074                (808)          (6,942)           (2,571)         (3,499)

Provision for income taxes                     -                   -                -                 -               -
                                      ------------------------------------------------------------------------------------------
Income (loss) from continuing
operations                                 1,074                (808)          (6,942)           (2,571)         (3,499)
Loss from discontinued operations,
net of income taxes                            -                   -                -                 -            (581)
                                      ------------------------------------------------------------------------------------------

Net income (loss)                     $    1,074                (808)          (6,942)           (2,571)         (4,080)
                                      ==========================================================================================

                                       15
<PAGE>

Net income (loss) per share -
continuing operations

     Basic                            $     0.04          $    (0.04)       $   (0.36)        $   (0.14)       $   0.20
                                      ==========================================================================================
     Diluted                          $     0.04          $    (0.04)       $   (0.36)        $   (0.14)       $   0.20
                                      ==========================================================================================
Net income (loss) per share -
discontinued operations

     Basic                            $        -          $        -        $       -         $       -        $  (0.03)
                                      ==========================================================================================
     Diluted                          $        -          $        -        $       -         $       -        $  (0.03)
                                      ==========================================================================================
Net income (loss) per share

     Basic                            $     0.04          $    (0.04)       $   (0.36)        $   (0.14)       $  (0.23)
                                      ==========================================================================================
     Diluted                          $     0.04          $    (0.04)       $   (0.36)        $   (0.14)       $  (0.23)
                                      ==========================================================================================
Weighted average number of shares
used in computing per share amounts

     Basic                            25,647,763          19,448,718       19,207,246        19,192,611      17,482,583
                                      ==========================================================================================
     Diluted
                                      27,511,228          19,448,718       19,207,246        19,192,611      17,482,583
                                      ==========================================================================================


                                                            October 31,      October 31,      October 31,
                                      October 31, 2004        2003             2002             2001        December 30, 2000
                                     -------------------------------------------------------------------------------------------
Consolidated Balance Sheet Data

Cash and cash equivalents            $  10,186              $  1,178         $   1,556        $    982       $      885

Net current assets from continuing
operations                              28,504                 9,264             6,618           5,950            6,151

Property, plant and equipment, net      16,418                 4,796             5,197           6,389            7,297

Total assets from continuing
operations                              34,736                14,060            11,815          18,058           19,543

Current liabilities                     15,718                 7,959             6,093           5,861            5,631

Long-term debt and capital lease
obligations, net of current portion         70                 1,877             1,280             807              201

Stockholders' equity                    29,134                 4,224             4,442          11,390           13,735

</TABLE>

                                       16
<PAGE>

                 SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA
                                 (In thousands)

<TABLE>
<CAPTION>
<S>                                   <C>            <C>              <C>              <C>                <C>

                                                                                      Diluted           Basic
                                                                                      Earnings         Earnings
                                                                   Net Earnings      (Loss) Per       (Loss) Per
               2004                  Sales        Gross Profit        (Loss)           Share            Share
               ----                 -------       ------------     ------------       ------           ---------
First Quarter                       $ 9,796       $  2,378           $   621          $ 0.03           $    0.02

Second Quarter                       10,624          2,168              (449)          (0.02)              (0.02)

Third Quarter                        11,654          2,434               370            0.01                0.01

Fourth Quarter                       14,303          3,131               532            0.02                0.02
                                    --------------------------------------------------------------------------------
Total                               $46,377       $ 10,111           $ 1,074          $ 0.04           $    0.04
                                    ================================================================================

               2003
               ----
First Quarter                       $ 5,121       $  1,492           $    24          $    -           $       -

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)
                                    ================================================================================
</TABLE>


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 years ended October
31, 2004, October 31, 2003, and October 31, 2002.

                                       17
<PAGE>

Overview

     We manufacture LCDs and LCD modules and assemblies for major OEMs and EMSs,
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,  in these
industries.  Developments  in our industry  over the past years have 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.

     We have been focusing on development of new key customers with high volume,
multi-product  needs for displays and display modules and have  strengthened our
core  engineering  competencies  and  manufacturing  processes,  enabling  us to
maintain our contribution  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.

     This year we have  completed  the  acquisition  of a second LCD line.  This
line, unlike our existing line which produces  monochrome displays only, is able
to produce both  monochrome and color  displays.  Installation  was completed in
December 2004 and we expect to be producing  samples for prospective  customers'
evaluation  in the  very  near  future.  This  line  and the  additional  module
equipment  acquired  with  it  will  provide  us  with  enhanced  technical  and
productive  capacity  with which to service the needs of our  targeted  customer
base.

     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  for our module business and existing  monochrome line
and we emphasize our quality and manufacturing  processes,  and we are generally
pre-qualified through quality inspections by our significant  customers.  We are

                                       18

<PAGE>

in the  process  of  obtaining  ISO  certification  for our new color  line.  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
significant  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 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. 104 "Revenue  Recognition in Financial  Statements."  SAB No.
104 requires that revenue be recognized when all of the following conditions are
met:

o    Persuasive evidence of an arrangement exists;
o    Delivery has occurred or services have been rendered;
o    Price to the customer is fixed or determinable; and
o    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

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<PAGE>

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.

Depreciation

     Depreciation  has not been recorded on the new color LCD line  purchased in
June 2004 or on improvements to the new  manufacturing  facility as installation
was not completed at the year end.

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, 2004,  we had
approximately $10,351,000 of net operating loss carry forward  available for use
resulting in approximately $4,192,000 of deferred tax assets. We have provided a
valuation  allowance of 100% of the $4,192,000 based primarily on our history of
losses.

Results of Operations

Comparison of the year ended October 31, 2004 to the year ended October 31, 2003

     Net sales - Net sales for the fiscal year ended October 31, 2004  increased
103% to $46,377,000  from  $22,846,000.  As we stated last year, our goal was to
restructure our sales operation to focus on specific multinational  customers in
expanded  geographic  markets.  We have  achieved  this  goal  adding  four such
customers representing 98% of our 103% sales growth.

     Cost of sales - Cost of sales  increased 1.2% to 78.2% of net sales for the
fiscal  year ended  October 31, 2004 from 77.0% of net sales for the fiscal year
ended  October 31, 2003.  The 1.2%  increase was  attributable  to increased raw
material  costs (6%) as a percent of sales due  primarily to one customer  being
sold to on a fixed contract price  representing  (14%) of total revenue;  due to
unfavorable  exchange  rates of the Japanese Yen; and  increased  semi-conductor
costs and changes in PRC legislation which reduced the amount of VAT recoverable
(1%).   These   increases  were  offset  by  absorption  of  overhead  (5%)  and
depreciation (2%) over a larger revenue base.

     General and administrative  expenses - General and administrative  expenses
were  $5,403,000  for the fiscal year ended October 31, 2004, and $3,637,000 for

                                       20

<PAGE>

the fiscal year ended October 31, 2003, an increase of 48.6%. As a percentage of
sales,  general and administrative  expenses were 11.7% and 15.9% for the fiscal
years ended October 31, 2004 and 2003,  respectively.  The increase is primarily
attributed to increases in payroll due to the  recruitment  of the Company's new
CEO,  expansion of the internal audit department and Sarbanes Oxley  compliance;
increase in legal and accounting  fees;  increased credit insurance costs on the
Company's  accounts  receivable;  and  increased  depreciation,  bad  debt,  and
exchange loss  expense.  The Company  expects that its costs for Sarbanes  Oxley
compliance  will  continue  in  fiscal  2005 at the  current  rate.  Significant
elements of this  expense  include  employee  related  expenses  of  $2,792,000,
professional  fees of  $684,000,  rent,  telephone  and  utilities  of $165,000,
insurance  of  $308,000,   local  Chinese  government  fees  of  $194,000,   and
depreciation of $130,000.

     Sales, marketing,  and customer service - Sales,  marketing,  and  customer
service expenses were $2,096,000 for the fiscal year ended October 31, 2004, and
$1,655,000 for the fiscal year ended October 31, 2003, an increase of 26.6%.  As
a percentage of sales, sales, marketing, and customer service expenses were 4.5%
and 7.2% for the fiscal  years ended  October  31, 2004 and 2003,  respectively.
Increased  commission  expense at $921,000  ($498,000 for the year ended October
31,  2003)  accounts for 96% of the  increase in sales,  marketing  and customer
service  expenses in fiscal 2004 due to higher volumes of  commissionable  sales
during the year.  Significant  elements  of this  expense  consist  of  employee
related expenses of $749,000,  commission expense of $921,000, travel expense of
$135,000 and rent of $81,000.

     Engineering, advanced design and project management expenses - Engineering,
advanced  design and project  management  expenses  were $625,000 for the fiscal
year ended  October 31, 2004 and $593,000 for the fiscal year ended  October 31,
2003 an increase of 5.4%. As a percentage of sales, engineering, advanced design
and project  management  expenses  were 1.3% and 2.6% for the fiscal years ended
October 31, 2004 and 2003,  respectively.  The increase is attributable to costs
related to the  addition  of our  equipment  development  department  in the 4th
quarter of fiscal 2003 and continuing through fiscal 2004.  Significant elements
of this expense consist of employee related  expenses of $522,000,  rent expense
of $57,000 and travel expenses of $34,000.

     Interest  expense - Interest  expense  increased to $396,000 for the fiscal
year ended  October 31, 2004,  from $389,000 for the year ended October 31, 2003
an increase of 1.8%. As a percentage of sales  interest  expense was 1% and 1.7%
for the fiscal years ended October 31, 2004 and 2003, respectively. The increase
can be attributed to increased  borrowings on the Company's accounts  receivable
line of credit  offset  by the  repayment  of the  Company's  outstanding  notes
payable at a significantly higher interest rate.

     Other income - Other income for the fiscal year ended  October 31, 2004 was
$108,000 and $220,000 for the fiscal year ended  October 31, 2003.  The decrease
in other income is primarily  as a result of $150,000 of accrued  expenses  that
were reversed in fiscal 2003 related to previous  operations,  such reversal did
not occur in fiscal 2004. The significant  component was $85,000 received from a
sublet of leased property.

     Litigation settlement - Other expense for the fiscal year ended October 31,
2004 was  $625,000.  Other  expense  was a result of  settlement  of  previously
disclosed litigation, now concluded.

                                       21
<PAGE>

     Net  income  - The net  income  for the year  ended  October  31,  2004 was
$1,074,000.  The net loss for the year ended October 31, 2003 was $808,000.  The
significant reason for the increase in net income was the 103% increase in sales
while a  considerable  portion of costs are fixed or  increased  at a lower rate
than the increase in sales.

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.

     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.

                                       22
<PAGE>

     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 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.

Liquidity and Capital Resources

     The  Company  and  its   subsidiaries   generated  income  from  continuing
operations of $1,074,000 during the period ended October 31, 2004 and net losses
from continuing  operations of $808,000 and $6,942,000  ($953,000 before charges

                                       23
<PAGE>

for   amortization  and  write-off  of  goodwill  of  $5,719,000  and  equipment
impairment  charges of $270,000)  during the periods  ended October 31, 2003 and
2002,  respectively.  The Company and its subsidiaries  also have an accumulated
deficit of  $36,579,000  as of October 31, 2004,  of which  $23,833,000  is from
discontinued operations and $12,746,000 is from continuing operations.

     The Company required  capital to repay certain existing fixed  obligations,
to provide for additional  working capital and to invest in capital equipment to
grow in accordance with its business plan. To this end the Company completed the
following transactions in the fiscal year ended October 31, 2004:

o              A $5,000,000 private placement, on December 23, 2003, 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.

o              A  new  $5,000,000  asset-based  credit  line  with  Wells  Fargo
               Business Credit,  Inc. The new line replaced an existing domestic
               only  receivable  line and creates up to $3,000,000 in additional
               working capital with more favorable terms.

o              A  $20,250,000  private  placement  through the sale of 4,500,000
               shares of the Company's common stock at $4.50 a share.  Proceeds,
               net of expenses of $1,770,000, were $18,480,000.

     Management  believes  that these  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.

     In addition  the Company  made an early  repayment of notes due on December
31, 2004,  bearing an interest rate of 12%, in the amount of  $1,524,000.  There
was no  prepayment  penalty  for the  early  payment  and the  Company  saved on
interest expense.

     At October 31,  2004,  the  Company had debt  falling due in fiscal 2005 of
$496,000 and a further amount of $70,000 due in fiscal 2006.

                                       24
<PAGE>

                                  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

We have just purchased a Color LCD line.

     In June 2004, we contracted for the purchase of a used color LCD line on an
"as is, where is" basis. The line has now been installed in new factory premises
on property in close  proximity to our existing campus on which we have executed
a rental  agreement  for a period of ten years  with an option to extend  for an
additional ten years at the current rent. We have only just begun test operation
of the line and do not yet have reliable  information on the yield or throughput
capacity  achievable  in  mass  production,  although  we  do  have  statistical
information  available from the seller. We have not as yet produced samples that
have been accepted by customers;  however,  we have received  prototyping orders
from  existing  customers.  We have also  determined  that this line can produce
monochrome  displays and have identified  monochrome  projects to be run on this
line. If our color yields are not as expected, the resulting lower margins would
adversely affect operating results in future periods.

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 has been cyclical and subject to significant
downturns characterized by diminished product demand,  production over-capacity,
and accelerated erosion of average selling prices. 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 2004,  five  customers  contributed  62% of total sales  revenue,
including one customer which contributed 16% of our revenue.  This compares with
fiscal 2003 when five customers  contributed  48% of our total sales revenue and
one customer contributed 29% of our revenue. Under present conditions,  the loss

                                       25

<PAGE>

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

     Our  customers  generally  do not  provide us with firm,  long-term  volume
purchase  commitments.  In addition,  the worldwide  product  demand have 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  and  material  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 purchase 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  penalties,  inventory
carrying costs or inventory obsolescence.

                                       26
<PAGE>



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,  particularly  as we have  committed to a
ten-year lease of new facilities and completed the purchase of a second LCD line
primarily for the production of color displays.  Our factory utilization will be
dependent  on our success in acquiring  new business for the expanded  capacity,
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, maintenance of contaminant-free operations and availability of power,
water and labor resources.

     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 to movement in commodity
prices,  particularly  the  cost  of  electrical  power  for  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 BYD, Data Image, Data Vision,
Hantronics, Ocular, Optrex, Tian Ma, Truly Semiconductors,  Limited, Varitronix,
Ltd.,  Wintek  Corporation,  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

                                       27

<PAGE>

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  and EMSs 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.  While the Company
maintains  credit  insurance  on  all  of its  accounts  receivable,  collection
difficulties  could result in the  insurance not being renewed which may have an
affect on our  liquidity as we borrow  under an asset based  credit line,  under
which uncollected  receivables are a major asset and our collection record a key
indicator of  performance  to our lender.  In the fiscal year ended  October 31,
2004,  the Company  recorded  expenses of $82,000  related to the  extension  of
credit.

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 thin film
transistor,  ("TFT"),  and organic liquid  emissive  displays,  ("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:

    o    research  and  development activities on existing and potential product
         solutions;

    o    additional engineering and other technical personnel;

    o    advanced design, production and test equipment;

    o    manufacturing services that meet changing customer needs;

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<PAGE>

    o    technological changes in manufacturing processes; and

    o    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 and EMSs who on sell to OEMs, who
then incorporate  them into the products they sell. They 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 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, 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,

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<PAGE>

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 loss of  business,  loss of  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,  we may be  required  to expend  funds and to commit
resources to research and development activities,  possibly requiring additional
engineering and other technical  personnel;  purchasing 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

                                       30
<PAGE>

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.

We are exposed to the limit on the availability and price of electricity.

     The primary energy supply to our  operations is electricity  from the local
power company.  There is not an extensive and resilient connection to a national
or regional power grid.  Thus, we may be exposed to power outages and shut downs
which our standby  generators  would only partially  mitigate.  Fluctuations  in
world oil  prices  and  supply  could also work to affect our supply and cost of
electricity.

We are exposed to the limit on the availability of water.

     We depend on a continuous supply of water in our  manufacturing  processes.
To  date  when we have  experienced  shortages,  we  have  been  able to  obtain
supplementary supplies from alternative local sources. We cannot be certain that
such an  arrangement  will  always  be  available  and that no  interruption  to
production will result.

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 two dormitories.  In addition, an outbreak could negatively affect the
willingness of our customers and suppliers to visit our facilities.

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 standby  electrical power generation plant that operates on diesel fuel.
The amounts of our hazardous waste are expected to increase in the future as our

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<PAGE>

manufacturing  operations  increase,  and  therefore,  our cost of compliance is
likely to increase.  In addition,  sewage produced by dormitory facilities which
house  our  labor  force is  coming  under  greater  environmental  legislation.
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.

From time-to-time, we may seek additional equity or debt financing and may not
be able to secure this financing at acceptable terms.

     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 locations from one
to two and are increasing 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  further  increase  the  number  of  locations  from  which  we
manufacture and sell. Our ability to manage our planned growth  effectively will
require us to:

    o    enhance our operational, financial and management systems;

    o    expand our facilities and equipment; and

    o    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.  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,

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<PAGE>

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 Shenzhen or China as a whole 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 arm's length  pricing to this process.  Should a
tax authority in any  jurisdiction  consider the pricing not to be arm's 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.

We are installing a new ERP system and are required to comply with the
provisions of the Sarbanes Oxley Act of 2002.

     We are working  diligently  toward  evaluating and documenting our internal
control  systems in order to allow  management to report on, and our independent
auditors  to attest  to, our  internal  control  over  financial  reporting,  as
required by Section 404 of the Sarbanes-Oxley  Act of 2002. In addition,  we are
in the process of converting our accounting and record-keeping software to a new
software system.  We cannot assure the  implementation of the new system will be
completed on a timely basis. In addition, we may experience  difficulties in the
transition to the new software that could affect our internal  control  systems,
processes and  procedures.  Should we have to defer part of the  implementation,
reliance on our current system for the purpose of complying with  Sarbanes-Oxley
Section 404 will require significant effort in a compressed  timeframe,  as well
as result in our incurring costs to comply with Sarbanes-Oxley  Section 404 that
will duplicate  compliance costs that will be associated with the implementation
of our new system.  There can be no assurances  that the evaluation  required by
Sarbanes-Oxley  Section 404 will not result in the identification of significant

                                       33
<PAGE>

control  deficiencies  or that  our  auditors  will be  able  to  attest  to the
effectiveness of our internal control over financial reporting.

We are at risk for potential product liability claims not covered by insurance
from our discontinued snowboard business.

     We were acquired by Morrow  Snowboards,  Inc., which  previously  designed,
manufactured  and  distributed  snowboards and apparel.  Those  operations  were
discontinued in 1999, but the snowboards previously manufactured and distributed
may still be in use.  To the extent  there is an accident  involving  the use of
those old snowboards,  we could be named in a civil action  alleging  liability.
Although  we  do  not  think   there  are  defects  in  the  boards   previously
manufactured,  it is not  uncommon  for  an  injured  snowboarder  to  name  the
manufacturer when the injuries are serious. We are currently not insured against
any such claims and although we do not believe such actions are likely given the
length of time that has lapsed since we last manufactured snowboards,  there are
no assurances that such actions will not result in the future.  To the extent an
action is brought and  successfully  prosecuted  to a judgment,  the claim could
have a material affect on our financial performance.

                    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  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

                                       34

<PAGE>

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.

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 The  People's
Republic  of China,  Hong  Kong,  and the  British  Virgin  Islands.  Because we
manufacture all of our products in The People's Republic of China, substantially
all of the net book value of our total fixed  assets and a major  portion of our
inventory 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

                                       35
<PAGE>

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,
electrical  power 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, 2004, one installment of RMB 3.3 million was
outstanding  and is due for  repayment in 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.

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. 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 or  changes  to  tax  laws  or  their
interpretation,  which  could  increase  our future tax  liabilities  or deny us
expected concessions or refunds.

                           Risks Related to Our Shares

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 October 31, 2004, our officers and directors as a group  beneficially
owned  approximately  16.3% of our common shares. As a result,  acting together,

                                       36
<PAGE>

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.

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  October  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 has been  discussion in some circles  concerning  the advantages of the
floating 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. and
others  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 and minimal
effect on our monetary assets denominated in RMB as cash holdings broadly equate
to the remaining  installment  of RMB 3.3 million (US$ 403,000 at current rates)
due on a three mortgage repayable in June 2005.

     We also  incur  liabilities  in  Japanese  Yen  from  the  purchase  of raw
materials.  We do not currently hedge against this exposure and are 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.

                                       37
<PAGE>

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  inflation  expected to run between
five  and  ten  percent  annually.  Such  inflation  represents  a  risk  to our
profitability  if sustained  and not  compensated  for by a movement in exchange
rates or productivity improvements.

                                       38
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                TABLE OF CONTENTS

                                                                           Page
                                                                           ----

Report of Independent Registered Public Accounting Firm                     F-2

Consolidated Financial Statements

   Consolidated Balance Sheets as of October 31, 2004 and 2003              F-3

   Consolidated Statements of Operations for the year ended October
     31, 2004, the year ended October 31, 2003 and the year ended
     October 31, 2002                                                       F-4

   Consolidated Statements of Stockholders' Equity for the year
     ended October 31, 2004, the year ended October 31, 2003 and the
     year ended October 31, 2002                                            F-5

   Consolidated Statements of Cash Flows for the year ended October
     31, 2004, the year ended October 31, 2003 and the year ended
     October 31, 2002                                                       F-6

   Notes to Consolidated Financial Statements                               F-7

Supplementary Information                                                   F-30



                                      F-1
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Shareholders of
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, 2004  and
2003 and the related consolidated statements of operations, stockholders' equity
and cash  flows,  for each of the three  years in the period  ended  October 31,
2004. 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 audits.

We conducted  our audits in  accordance  with  auditing  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
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, 2004  and  2003 and the results of its
operations  and its cash flows for each of the three  years in the period  ended
October 31, 2004, 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 three years in the period  ended  October 31,  2004.  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 8, 2004


                                      F-2

<PAGE>


                INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In Thousands, Except Share Data)
<TABLE>
<CAPTION>
<S>                                                                                      <C>                    <C>


                                                                                 --------------------    ------------------
                                         ASSETS                                      October 31,            October 31,
                                         ------                                         2004                   2003
                                                                                 --------------------    ------------------
Current assets:
      Cash and cash equivalents
         Cash in banks                                                            $           8,187       $        1,178
         Cash in commercial paper                                                             1,999                    -
                                                                                 --------------------    ------------------
         Total cash and cash equivalents                                                     10,186                1,178
      Accounts receivable,
          net of allowance for doubtful accounts of $101 and $40                             11,378                4,260
      Inventories                                                                             5,780                2,465
      Prepaid expense and other current assets                                                1,160                1,361
                                                                                 --------------------    ------------------
         Total current assets                                                                28,504                9,264
                                                                                 --------------------    ------------------

Property and equipment at cost, net                                                          16,418                4,796
                                                                                 --------------------    ------------------
         Total assets                                                             $          44,922        $      14,060
                                                                                 ====================    ==================

                          LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                                            $           7,236       $        4,770
      Accrued liabilities                                                                     3,588                1,636
      Line of credit                                                                          4,398                1,051
      Current portion of long term debt - related parties                                         -                   50
      Current portion of long term debt                                                         496                  452
                                                                                 --------------------    ------------------
         Total current liabilities                                                           15,718                7,959

Long-term debt, net of current portion - related parties                                          -                  524

Long-term debt, net of current portion                                                           70                1,353
                                                                                 --------------------    ------------------
         Total liabilities                                                                   15,788                9,836
                                                                                 --------------------    ------------------

Commitments and contingencies

Shareholders' equity
      Preferred stock, par $0.001, 10,000,000 shares authorized,
         no shares issued or outstanding
      Common stock, par $0.001, 40,000,000 shares authorized
         30,573,383 and 20,984,913  shares issued and outstanding
         at October 31, 2004 and October 31, 2003 respectively                               65,642               41,806
      Accumulated deficit                                                                   (36,579)             (37,653)
      Cumulative translation adjustment                                                          71                   71
                                                                                 --------------------    ------------------
         Total shareholders' equity                                                          29,134                4,224
                                                                                 --------------------    ------------------
         Total liabilities and shareholders' equity                               $          44,922        $      14,060
                                                                                 ====================    ==================
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-3

<PAGE>
                INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, Except Share and per share data)

<TABLE>
<CAPTION>
<S>                                                        <C>                     <C>                     <C>

                                                     ---------------------------------------------------------
                                                                           For the Years Ended
                                                     ---------------------------------------------------------
                                                      October 31,         October 31,        October 31,
                                                         2004                2003               2002
                                                     ---------------------------------------------------------

Net sales                                            $     46,377         $     22,846       $     20,928

Cost of goods sold                                         36,266               17,600             15,730
                                                     ----------------     ---------------    -----------------
     Gross profit                                          10,111                5,246              5,198
                                                     ----------------     ---------------    -----------------

Operating expenses:
     General and administrative                             5,403                3,637              4,036
     Sales, marketing and customer service                  2,096                1,655              1,562
     Engineering, advanced design and
        product management                                    625                  593                691
     Impairment of machinery                                    -                    -                270
     Impairment of goodwill                                     -                    -              5,287
                                                     ----------------     ---------------    -----------------
        Total operating expenses                            8,124                5,885             11,846
                                                     ----------------     ---------------    -----------------

Income (loss) from operations                               1,987                 (639)            (6,648)
                                                     ----------------     ---------------    -----------------

Other income (expense):
     Interest expense                                       (396)                 (389)              (464)
     Other income                                            108                   220                170
     Litigation settlement                                  (625)                    -                  -
                                                     ----------------     ---------------    -----------------
        Total other expense                                 (913)                 (169)              (294)
                                                     ----------------     ---------------    -----------------

Income (loss) before income taxes                          1,074                  (808)            (6,942)

     Provision for income taxes                                -                     -                  -
                                                     ----------------     ---------------    -----------------

Net income (loss)                                    $     1,074          $       (808)      $     (6,942)
                                                     ================     ===============    =================

Net income (loss) per common share:
     Net income (loss) - basic                       $      0.04          $      (0.04)      $      (0.36)
                                                     ================     ===============    =================
     Net income (loss) - diluted                     $      0.04          $       (0.04)     $      (0.36)
                                                     ================     ===============    =================

Weighted average number of shares used in
  computing share amounts:
     Basic                                            25,647,763             19,448,718        19,207,246
                                                     ================     ===============    =================

     Diluted                                          27,511,228             19,448,718        19,207,246
                                                     ================     ===============    =================
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-4
<PAGE>
                INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                 (In Thousands, Except Share and Per Share Data)

      For the Year Ended October 31, 2004, the Year Ended October 31, 2003
                      and the Year Ended October 31, 2002

<TABLE>
<CAPTION>
<S>                                           <C>                 <C>                <C>                  <C>               <C>


                                                    Common Stock                                     Cumulative
                                         -----------------------------------      Accumulated        Translation
                                             Shares              Amount             Deficit           Adjustment         Total
                                         -------------------------------------------------------------------------------------------

                                         ------------------                 --------------------------------------------------------
 Balance, November 1, 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)

     Common stock options exercised          (104,000)                7                                                         7

     Warrants issued                                                  4                                                         4

                                         ----------------    ---------------    ----------------------------------------------------

Balance, October 31, 2002                  19,217,246          $ 41,216           $ (36,845)           $   71           $   4,442
-------------------------                -------------------------------------------------------------------------------------------

     Comprehensive loss

        Net loss                                                                       (808)                                 (808)

        Translation adjustment                                                                              -                   -
                                                                                                                        ------------
     Total comprehensive loss                                                                                                (808)

     Common stock options exercised

     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
                                         ===========================================================================================

     Comprehensive income

        Net income                                                                    1,074                                 1,074

        Translation adjustment                                                                              -                   -
                                                                                                                        ------------
     Total comprehensive loss                                                                                               1,074

     Common stock options exercised           635,375               302                                                       302

     Common stock warrants exercised        1,051,760               608                                                       608

     Warrants issued                                                 85                                                        85

     Stock issued                           7,901,335            22,841                                                    22,841
                                         -------------------------------------------------------------------------------------------
Balance October 31, 2004                   30,573,383          $ 65,642           $ (36,579)           $   71           $  29,134
------------------------                 ===========================================================================================
</TABLE>


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

                                      F-5
<PAGE>

                INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
<TABLE>
<CAPTION>
<S>                                                                                  <C>            <C>           <C>

                                                                                 ---------------------------------------------
                                                                                             For the Years Ended
                                                                                 October 31,    October 31,    October 31,
                                                                                    2004           2003           2002
                                                                                 ---------------------------------------------
Cash flows from operating activities:
                                                                                 $  1,074       $   (808)      $   (6,942)
     Adjustments to reconcile net loss to net cash provided
         by (used in) operating activities:
            Depreciation                                                              910            811            1,096
            Impairment of goodwill                                                      -              -            5,287
            Amortization of goodwill                                                    -              -              432
            Stock issued for services                                                  58             16                -
            Warrants issued for extension of debt terms                                 -             29                -
            Impairment of machinery                                                     -              -              270
            Loss on disposal of fixed assets                                            9             58                9
            Loss (income) on foreign currency translation                               -              -              (17)
                                                                                 ---------------------------------------------
                                                                                    2,051            106              135
            Changes in operating assets and liabilities, net of business
                 combinations:
                     (Increase) decrease in accounts receivable                    (7,118)        (1,196)             167
                     (Increase) in inventories                                     (3,315)        (1,005)            (138)
                     Increase (Decrease) in prepaid expenses and other current
                     assets                                                           201           (823)            (123)
                     Increase in accounts payable                                   2,466          1,700            1,120
                     Increase in accrued liabilities                                1,952            271              107
                                                                                 ---------------------------------------------
                                   Net cash provided by (used in)
                                                 operating activities              (3,763)          (947)           1,268
Cash flows from investing activities:
     Acquisitions of property, plant and equipment                                (12,541)          (491)            (183)
     Proceeds from disposal of property, plant & equipment                              -             23                -
                                                                                 ---------------------------------------------
                                   Net cash used in investing activities          (12,541)          (468)            (183)
Cash flows from financing activities:
     Proceeds from issuance of common stock                                        23,693            500                7
     Issuance of warrants                                                              85             45                4
     Proceeds (payment) from lines of credit, net                                   3,347             46             (447)
     Proceeds on debt - related parties                                                 -            100                -
     Proceeds from debt                                                                 -            848                -
     Payment on debt - related parties                                               (574)          (100)             (75)
     Payment on debt                                                               (1,239)          (402)               -
                                                                                 ---------------------------------------------

         Net cash provided by (used in) financing activities                       25,312          1,037             (511)
Increase (decrease) in cash and cash equivalents                                    9,008           (378)             574
Cash and cash equivalents at beginning of period                                    1,178          1,556              982
                                                                                 ---------------------------------------------
Cash and cash equivalents at end of period                                       $ 10,186       $  1,178       $    1,556
                                                                                 =============================================
Supplemental disclosure:
      Cash paid for interest                                                     $    396       $    389       $      464
                                                                                 =============================================

      Cash paid for income taxes                                                 $      -       $      -       $        -
                                                                                 =============================================
Non-cash financing activities:

     Stock issued for services                                                   $     58       $     16       $        -
                                                                                 =============================================
     Warrants issued for extension of debt terms                                 $      -       $     29       $        -
                                                                                 =============================================
</TABLE>

    The accompanying notes are an integral part of these financial statements

                                      F-6
<PAGE>

                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

          The  Company and its  subsidiaries  generated  income from  continuing
          operations of $1,074,000  during the period ended October 31, 2004 and
          net losses from  continuing  operations  of $808,000,  and  $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)  during the
          periods ended October 31, 2003 and 2002, respectively. The Company and
          its subsidiaries also have an accumulated  deficit of $36,579,000,  of
          which $23,833,000 is from  discontinued  operations and $12,746,000 is
          from continuing 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-7
<PAGE>


          o    A $5,000,000 private placement, on December 23, 2003, 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.

          o    A new  $5,000,000  asset  based  credit  line  with  Wells  Fargo
               Business Credit,  Inc. The new line replaced an existing domestic
               only  receivable  line and creates up to $3,000,000 in additional
               working capital with more favorable terms

          o    A  $20,250,000  private  placement  through the sale of 4,500,000
               shares of the Company's common stock at $4.50 a share.  Proceeds,
               net of expenses of $1,770,000 were a $18,480,000.

     Management  believes  that these  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.

     In addition  the Company  made an early  repayment of notes due on December
31, 2004,  bearing an interest rate of 12%, in the amount of  $1,524,000.  There
was no prepayment penalty for the early payment but an interest saving.

     On October 31,  2004 the  company had debt  falling due in 2005 of $496,000
and a further amount due of $70,000 all of which was repayable in 2006.

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:

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

               All significant  intercompany accounts and transactions have been
               eliminated on consolidation.

          b.   Fiscal Year
               -----------

               The Company operates on a fiscal year which ends on October 31.

                                      F-8
<PAGE>

          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.

               Depreciation  charges are  calculated  from the latter of date of
               acquisition or when the asset is placed in service.

               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 is as
               follows:

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

                                      F-9
<PAGE>

          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  $70,000,  $44,000,  and
               $2,200 for the periods  ending  October 31, 2004,  2003 and 2002,
               respectively.

          j.   Revenue Recognition
               -------------------

               The Company  recognizes  revenue from product sales in accordance
               with Staff Accounting Bulletin (SAB) No. 104 "Revenue Recognition
               in Financial  Statements."  SAB No. 104 requires  that revenue be
               recognized when all of the following conditions are met:

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

                                      F-10
<PAGE>

               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 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, 2004, 2003 and 2002,  shipping and handling costs expensed to
               cost  of  sales   were   $1,234,000,   $535,000   and   $356,000,
               respectively. During the periods ended October 31, 2004 and 2003,
               shipping and handling  costs  expensed to selling  expenses  were
               nil, and for the period ended October 31, 2002 were $50,337.

          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.

                                      F-11
<PAGE>

               Product development costs were approximately $69,000, $13,000 and
               $28,000 for the periods  ended  October 31, 2004,  2003 and 2002,
               respectively.

          o.   Net Earnings (Loss) per Share
               -----------------------------

               Basic net  earnings  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.
               Weighted-average number of shares outstanding at October 31, 2004
               were  25,647,763  basic  and  27,511,228  diluted.   Diluted  net
               earnings  (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 and 2002 the  weighted-average  number of common  shares
               outstanding  excludes  common stock  equivalents of 3,936,481 and
               2,889,709 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,  2004,  2003 and 2002,  the  exchange
               differences resulted in expense of $116,000, $67,000 and $48,900,
               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, 2004, 2003 and 2002.

          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

                                      F-12
<PAGE>

               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  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.

               In December  2004, the FASB issued SFAS No. 123R that amends SFAS
               No. 123  "Accounting for  Stock-Based  Compensation,"  to require
               public  entities  (other  than  those  filing  as small  business
               issuers) to report  stock-based  employee  compensation  in their
               financial  statements.  Unless  modified,  the  Company  will  be
               required to comply with the provisions of SFAS No. 123R as of the
               first  interim  period that begins after June 15, 2005 (August 1,
               2005 for the  Company).  The  Company  currently  does not record
               compensation   expense  related  to  its   stock-based   employee
               compensation plans in its financial statements.

               At October 31, 2004, 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, 2004,  2003 and 2002, 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.

                                      F-13
<PAGE>

<TABLE>
<CAPTION>
<S>                                                        <C>                <C>                 <C>

                                                      -----------------------------------------------------
                                                                For the Years Ended October 31,
                                                           2004               2003               2002
                                                      -----------------------------------------------------
Net income (loss) as reported                          $      1,074       $   (808)         $     (6,942)
Deduct:  Total stock-based employee compensation
expense determined under fair value based method
for all awards.                                                (181)           (65)                 (130)
                                                      ---------------    ---------------    ---------------
Pro-forma net income (loss)                            $        893       $   (873)         $     (7,072)
                                                      ===============    ===============    ===============

Earnings per share:
Basic - as reported                                    $       0.04       $  (0.04)         $      (0.36)
                                                      ===============    ===============    ===============
Basic - pro-forma                                      $       0.03       $  (0.04)         $      (0.37)
                                                      ===============    ===============    ===============
Diluted - as reported                                  $       0.04       $  (0.04)         $      (0.36)
                                                      ===============    ===============    ===============
Diluted - pro-forma                                    $       0.03       $  (0.04)         $      (0.37)
                                                      ===============    ===============    ===============
</TABLE>

               The Company has computed the value of all options  granted during
               the  periods  ending  October 31,  2004,  2003 and 2002 using the
               Black-Scholes  option-pricing  model and the  following  weighted
               average assumptions for grants for the periods ended:
<TABLE>
<CAPTION>
<S>                                         <C>                    <C>                     <C>

                                           October 31,           October 31,         October 31,
                                              2004                  2003                2002
                                         ----------------    --------------------   --------------------

            Risk-free interest rate            3.7%                  3.7%                   3.7%
            Expected dividend yield            0.0%                  0.0%                   0.0%
            Expected life (years)                5                     5                      5
            Expected volatility              100.7%                 92.4%                 100.1%
</TABLE>

               Using the Black-Scholes  methodology,  the total value of options
               granted during the periods ending October 31, 2004, 2003 and 2002
               was $1,033,515, $90,955 and $94,025, 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, 2004, 2003 and 2002 was $0.75, $0.29 and $0.42, 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.

                                      F-14
<PAGE>

               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.

                        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  1, 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

                                      F-15
<PAGE>

                    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.

            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):
<TABLE>
<CAPTION>
<S>                                                                <C>                      <C>

                                                                    2004                   2003
                                                             -------------------    --------------------

        Finished goods                                       $             917      $             687
        Work-in-progress                                                 1,820                    752
        Raw materials                                                    3,510                  1,537
        Less: reserve for obsolete inventory                              (467)                  (511)
                                                             -------------------    --------------------
                                                             $           5,780      $           2,465
                                                             ===================    ====================
</TABLE>

5.   PREPAID EXPENSES AND OTHER CURRENT ASSETS

     Prepaid  expenses and other  current  assets  consisted of the following at
October 31 (in thousands):

                                      F-16
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                 <C>                     <C>

                                                                    2004                   2003
                                                             -------------------    --------------------

        Prepaid expenses                                     $             259      $             377
        Advances to suppliers                                              447                    303
        PRC VAT recoverable                                                145                    354
        Other                                                              309                    327

                                                             -------------------    --------------------

                                                             $           1,160      $           1,361

                                                             ===================    ====================
</TABLE>

6.   PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment consisted of the following at October 31 (in
thousands):
<TABLE>
<CAPTION>
<S>                                                                 <C>                    <C>

                                                                    2004                   2003
                                                             -------------------    --------------------

        Land and buildings                                   $           1,185      $           1,185
        Furniture, fixtures and equipment                                2,503                  1,798
        Machinery                                                       14,476                  4,865
        Leasehold improvements                                             410                     83
        Construction in progress                                         1,857                      -

                                                             -------------------    --------------------

                                                                        20,431                  7,931

        Less accumulated depreciation                                   (4,013)                (3,135)

                                                             -------------------    --------------------

                                                             $          16,418      $           4,796

                                                             ===================    ====================
</TABLE>

          Depreciation expense totaled $910,000, $811,000 and $1,096,000 for the
          periods ended October 31, 2004, 2003 and 2002, 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, 2004,  the Company had  purchased  $8.7   million of
          machinery  related to its new color line which had been  delivered but
          not placed into service as of year end.

          As of October 31,  2004,  the  Company  had,  issued and  outstanding,
          purchase commitments for $2,086,000 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, 2004.

          In  accordance  with the  provisions of SFAS No. 121,  management  was
          required  to  periodically   review  the  operating   environment  and

                                      F-17
<PAGE>

          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 for the period
          ended October 31, 2002.

8.        ACCRUED LIABILITIES

          Accrued  liabilities  consisted  of  the  following  at October 31 (in
          thousands):
<TABLE>
<CAPTION>
<S>                                                                 <C>                    <C>

                                                                    2004                   2003
                                                             -------------------    --------------------

        Accrued payroll and related liabilities              $           1,335      $             747
        Accrued staff expenses                                             190                    219
        Accrued inventory purchases                                         27                     68
        Accrued royalties                                                   38                    129
        Accrued PRC government management fees                              72                    102
        Accrued asset acquisition costs                                  1,560                      -
        Other accrued liabilities                                          366                    371

                                                             -------------------    --------------------

                 Total accrued liabilities                   $                      $             1,636
                                                                         3,588

                                                             ===================    ====================
</TABLE>

9.       LONG-TERM DEBT

         Loans  and  notes  payable consisted of the following at October 31 (in
         thousands, except interest payments):
<TABLE>
<CAPTION>
<S>                                                                <C>                     <C>

                                                                October 31,             October 31,
                                                                    2004                   2003
                                                             -------------------    --------------------

        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 rate
         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

        Note payable to a director of the Company,
         interest and principal payments due in
         monthly installments of $10,000 at a

                                      F-18
<PAGE>

         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

        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

        Mortgage loan, at a variable yearly interest
         rate that ranges 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.                                       403                      805

        Capitalized Lease, term twenty four months,
         payable in eight quarterly installments of
         $23,260 beginning October 1, 2004,                             163                        -

                                                             -------------------    --------------------

                                                                        566                    2,379

        Less: current portion                                          (496)                    (502)

                                                             -------------------    --------------------

                                                             $           70         $          1,877

                                                             ===================    ====================
</TABLE>

         Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
<S>             <C>                       <C>                       <C>                     <C>

            Year Ending
            October 31,               Related parties            Third parties             Total
        --------------------    ------------------------    ---------------------   --------------------

               2005             $                   -       $           496         $            496
               2006                                 -                    70                       70

                                ------------------------    ---------------------   --------------------
                                $                   -       $           566         $            566

                                ========================    =====================   ====================
</TABLE>


          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

                                      F-19
<PAGE>

          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
          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 the principal due December 31, 2004. The proceeds
          were used for general working capital of the Company.

          On May 20,  2004,  the Company  repaid  notes due  December  31, 2004,
          bearing an annual  interest rate of 12%, in the amount of  $1,524,000.
          There was no prepayment penalty for early payment.

          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  due in June  2003.  As of
          October 31, 2004 approximately  $403,000 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 9, 2004, as subsequently amended, the Company entered into an
          asset based lending program for a $5,000,000 line of credit secured by
          IDW's accounts receivable,  inventory, equipment, and intangibles. The
          agreement  was for twenty four months at an interest  rate of 4% above
          the "prime rate"  (4.75% at October 31,  2004) with a minimum  monthly
          charge  of   $10,000.   As  of  October   31,  2004  the  Company  had
          approximately  $4,398,000  currently  due  on  the  facility  and  had
          available approximately $231,000 for use under this facility, based on
          eligible  receivables.  This line  replaced the  Company's  previously
          existing lines.

                                      F-20
<PAGE>

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:

                  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  May  1, 2020  and  costs
                      $233,700 per year.  The  expense recorded in  fiscal years
                      ended  October  31, 2004  and  2003  was  offset by rental
                      income of $85,000 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, 2004, the Company
                      entered into six of the  aforementioned  leases with terms
                      of between six and twelve months and yearly lease payments
                      of between $1,500 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 August 2004 the lease term
                      was extended to expire in July 2005.

                vi.   In  July  2004  the  Company entered into a ten-year lease
                      agreement  for  additional  factory and dormitory space in
                      Shenzhen, PRC.  The  lease  expires on August 31, 2014 and
                      costs $283,000 per year.  The lease has an option to renew
                      for an  additional  ten  years at the same terms and lease
                      rate.  The  expense  recorded  in  the  fiscal  year ended
                      October 31, 2004 was $47,000.

               The  following  is a schedule of future  minimum  lease  payments
               under non-cancelable  operating leases as of October 31, 2004 (in
               thousands):

                                      F-21
<PAGE>


                      Minimum Lease                          Net Lease
                       Commitments      Sublease Income      Commitments
                      -------------     ---------------      -----------

               2005         645                 (89)               556
               2006         547                   -                547
               2007         547                   -                547
               2008         524                   -                524
               2009         517                   -                517
         Thereafter       3,822                   -              3,822
                      -------------     ---------------      -----------
                          6,602                 (89)             6,513
                      =============     ===============      ===========

               For the periods  ended  October 31, 2004,  2003 and 2002,  rental
               expense was $515,000, $365,000 and $117,000, respectively.

         b.    Legal Matters
               -------------

               From time to time, the Company is involved in routine  litigation
               in the normal course of business.  Management is not aware of any
               outstanding litigation involving the Company.

         c.   Purchase Commitments
              --------------------

               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.

12.      STOCKHOLDERS' EQUITY

          a.   Issuance of Common Stock
               ------------------------

               In  November  2003  the  Company  issued  68,000  shares  of  the
               Company's common stock at $0.85 per share for services  rendered.
               55,000 shares were issued to the Company's  independent Directors
               as  compensation  and 13,000  shares were  issued for  consulting
               services. The securities issued for services rendered, other that
               those issued for Directors'  compensation  which were  registered
               under an S-8  registration  statement,  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.

               In December  2003,  the Company  issued  3,333,335  shares of the
               Company's common stock at $1.50 per share in a private placement.
               The  proceeds of  $5,000,000  were used for  working  capital and
               operating  expenses.   The  securities  issued  in  this  private
               placement were registered  under Form S-1 with the Securities and
               Exchange Commission on February 18, 2004.

                                      F-22
<PAGE>

               In May 2004, the Company issued 4,500,000 shares of the Company's
               common  stock at $4.50  per  share in a  private  placement.  The
               proceeds  of  $20,250,000  were  used  for  working  capital  and
               operating  expenses.   The  securities  issued  in  this  private
               placement were registered  under Form S-1 with the Securities and
               Exchange Commission on June 25, 2004.

               During the fiscal year ended October 31, 2004, the Company issued
               1,051,760  shares of the  Company's  common  stock as a result of
               warrant  exercises.  The shares were  issued at  exercise  prices
               ranging  from  $0.16 to $2.45 per  share.  280,000  shares of the
               securities  issued by exercise of warrants were registered  under
               Form S-1 with the Securities and Exchange  Commission on February
               18, 2004. The remaining  771,760 shares 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.

               During the fiscal year ended October 31, 2004, the Company issued
               635,375 shares as a result of stock options exercised. The shares
               were issued at exercise  prices ranging from $0.15 to $2.50.  The
               shares were issued under the Company's stock option plans.

          b.   Stock Option Plans
               ------------------

               The Company maintains the 1990 Employee Equity Incentive Plan for
               selected  executives,  employees  and directors for which 360,666
               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  8,166  options  cancelled  in the  plan in the  year  ended
               October 31,  2004,  25,000  options  cancelled in the plan in the
               year ended  October  31,  2003,  and there was no activity in the
               plan in the  year  ended  October  31,  2002.  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 1,375,000  options  granted,  238,375  options
               exercised  and  19,131  options  cancelled  during the year ended
               October 31, 2004;  536,006  options  granted and 205,000  options

                                      F-23
<PAGE>

               cancelled  during the year ended  October  31,  2003 and  515,000
               options  granted  and 68,000  options  cancelled  during the year
               ended October 31, 2002. At October 31, 2003 approximately 413,800
               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, 2004 there were 165,000 options  exercised and 11,432
               cancelled;  during the year  ended  October  31,  2003 there were
               6,000  options  granted  under the plan and 12,250  options  were
               cancelled;  and during the year ended October 30, 2002 there were
               30,000 options exercised under the Plan.

               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. No
               compensation  expense  was  recorded  for these  options  for the
               periods ended October 31, 2004,  2003, and 2002.  During the year
               ended October 31, 2004,  232,000 of these options were exercised.
               In  addition,  1,000,000  additional  options were granted to the
               Company's incoming CEO at an exercise price of $3.85.

               The  following is a summary of the status of all of the Company's
               stock  option  plans as of October  31,  2004,  2003 and 2002 and
               changes during the periods ended on those dates:
<TABLE>
<CAPTION>
<S>                                                                <C>                     <C>

                                                                                         Weighted
                                                                   Number                 Average
                                                                 Of Shares            Exercise Price
                                                            ---------------------   --------------------
            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

               Granted                                               1,375,000                   3.97
               Exercised                                              (635,375)                  0.46
               Cancelled                                               (38,729)                  2.04

                                      F-24
<PAGE>

            Options outstanding at
                October 31, 2004                                     2,655,500      $            2.57

                                                            =====================   ====================

            Options exercisable at :
               October 31, 2004                                      1,034,501      $            1.70

                                                            =====================   ====================

               October 31, 2003                                      1,157,098      $            1.18

                                                            =====================   ====================

               October 31, 2002                                      1,038,332      $            0.93

                                                            =====================   ====================
</TABLE>

               The following table  summarizes  information  about stock options
               outstanding and exercisable at October 31, 2004:
<TABLE>
<CAPTION>
<S>                             <C>                 <C>              <C>                <C>                 <C>

----------------------------------------------------------------------------------------------------------------------
                            Number of        Weighted average      Weighted                              Weighted
                             shares             remaining           average       Number of options      average
 Range of exercise        outstanding at     contractual life   exercise price     exercisable at     exercise price
        price            October 31, 2004        (years)           per share      October 31, 2004       per share
----------------------------------------------------------------------------------------------------------------------
$0.15-$0.25                    41,000                  3.12      $      0.15                  41,000   $       0.15
$0.26-$0.35                   422,000                  3.62      $      0.32                 153,751   $       0.32
$0.36-$0.55                   300,000                  2.26      $      0.41                 224,000   $       0.41
$0.56-$0.80                   118,000                  1.19      $      0.67                 118,000   $       0.67
$0.81-$1.20                    60,000                  1.11      $      0.85                  60,000   $       0.85
$1.21-$1.80                   314,500                  1.82      $      1.93                 202,750   $       1.74
$1.81-$2.70                    75,000                  0.82      $      3.70                  75,000   $       3.70
$2.71-$4.00                 1,000,000                  6.85      $      3.85                       -   $          -
$4.01-$6.00                   325,000                  4.21      $      5.19                 160,000   $       5.38
                        ----------------------------------------------------------------------------------------------
                           2,655,500                   4.29      $      2.57               1,034,501   $       1.70
                        ==============================================================================================
</TABLE>

          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, 2004,  2003 and 2002,  the Company had
               outstanding warrants to purchase 828,964, 2,066,887 and 1,234,861
               shares  of  common   stock,   respectively.   All   warrants  are
               exercisable at a weighted average price per share of $1.02,  have
               a term of five years and are exercisable  immediately or over the
               term of the related note if any. For the period ended October 31,
               2004,  206,666  warrants  were issued,  1,051,760  warrants  were
               exercised  and 67,440  warrants were  cancelled.  For the periods
               ended October 31, 2003 and 2002,  no warrants to purchase  common
               stock were  exercised  and none  lapsed.  For the  periods  ended
               October  31,  2003 and 2002,  458,437  and 15,000  warrants  were
               granted, respectively.

                                      F-25
<PAGE>

13.       INCOME TAXES

          The Company has not  recorded an income tax expense or benefit for the
          years ended October 31, 2004 and 2003.

          Income before  provision  for income taxes  consisted of the following
          (in thousands):
<TABLE>
<CAPTION>
<S>                                                    <C>                  <C>                  <C>

                                                     October 31,         October 31,         October 31,
                                                        2004                2003                 2002

           Domestic                                    (1,110)               (789)            (6,940)
           Foreign                                      2,184                 (19)                (2)
                                                     -----------         -----------         -----------

           Pre-tax profit (loss)                     $  1,074            $    808            $(6,942)
                                                     ===========         ===========         ===========
</TABLE>

          The  provision  for income taxes  differs from the amount  obtained by
          applying the statutory  federal income tax rate to income before taxes
          and follows (in thousands):


<TABLE>
<CAPTION>
<S>                                                <C>                 <C>                  <C>

                                                 October 31,         October 31,         October 31,
                                                    2004                2003                2002

        Pre-tax profit (loss)                   $     1,074        $      (808)        $     (6,942)
                                                --------------     --------------      --------------


        Computed Federal income tax
          benefit at 34.0%                              365               (275)              (2,360)
        Computed state income tax
          benefit at 8.4%, net of federal
          income benefit                                (65)               (47)                (202)
        Effect of difference between
          Hong Kong and PRC tax
          rates and U.S. Federal and
          state tax rates                              (341)               161                  207
        Impairment of goodwill                            -                  -                1,937
        Other permanent differences                    (447)              (234)                 561
        Change in valuation allowance                   488                395                 (143)
                                                --------------     --------------      --------------
                                                $        --        $        --         $         --
                                                ==============     ==============      ==============
</TABLE>


          The tax effects of temporary differences that give rise to significant
          portions  of  deferred  tax assets and  deferred  tax  liabilities  at
          October 31, 2004 and 2003 are presented below (amounts in thousands):

                                      F-26
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                     <C>                 <C>

                                                                        2004                2003
                                                                 --------------------------------------

          Deferred tax assets:
             Net operating loss (NOL) carry forwards                  $      3,996        $      3,564
             Allowance for doubtful accounts receivable                          -                   7
             Inventory obsolescence                                              2                  77
             Write-off of machinery                                              -                  41
             Accrued expenses                                                  302                  19

                                                                 -------------------------------------

               Total gross deferred tax assets                               4,269               3,708

          Deferred tax Liabilities:
             Depreciation and amortization                                     (77)                 (4)

                                                                 --------------------------------------

               Total gross deferred tax Liabilities                            (77)                 (4)

               Less valuation allowance                                     (4,192)             (3,704)

                                                                 --------------------------------------

                  Net deferred tax asset                         $               -   $               -
                                                                 =================   ==================
</TABLE>

          The  Company  has  provided  a  valuation  allowance  for  100% of its
          deferred tax assets at October 31, 2004,  2003 and 2002 as the Company
          concluded  that it was not more  likely than not that it would be able
          to realize these assets due  principally  to the Company's  history of
          losses.

          As of October 31, 2004 and 2003, the Company had an estimated  federal
          net  operating  loss carry  forward of  approximately  $10,351,000 and
          $9,493,000 respectively, expiring through 2024.

          PRC Taxation:
          ------------

          The fiscal tax year end of the PRC  subsidiaries  is December  31. The
          tax rate for both  companies  is 15%.  At  December  31, 2003 IDWT and
          MULCD  had  a  tax  loss  carry  forward  of  $116,000  and  $222,000,
          respectively.  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.

          Hong Kong Taxation:
          -------------------

          The rate of taxation in Hong Kong is 17.5%. 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.  As of October 31,  2004 and 2003 the Company had  estimated
          net  operating  loss  carry  forwards  in Hong  Kong of  approximately
          $256,000 and $729,000, respectively.

                                      F-27
<PAGE>

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.

          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).
<TABLE>
<CAPTION>
<S>                                                           <C>               <C>                 <C>

        Revenues                                                    Fiscal Year Ended October 31
        --------------------------------------------------------------------------------------------------------
                                                            2004               2003              2002
                                                     -----------------------------------------------------------

        United States                                $    19,615          $  10,824         $  11,266
        China (including Hong Kong)                        8,440              4,916             6,753
        Asia (excluding Hong Kong and China)              10,152              4,538             2,183
        Europe                                             7,051              1,690               566
        Other                                              1,119                878               160
                                                     -----------------------------------------------------------
                                                     $    46,377          $  22,846         $  20,928
                                                     ===========          =========         =========

</TABLE>
<TABLE>
<CAPTION>
<S>                                                         <C>                <C>

        "Long-lived Assets"
        --------------------------------------------
                                                            2004               2003
                                                     ------------------------------

        United States                                $       112          $     109
        China (including Hong Kong)                       16,306              4,687
        Asia (excluding Hong Kong and
        China)                                                 -                  -
        Europe                                                 -                  -
        Other                                                  -                  -
                                                     ------------------------------

                                                     $    16,418          $   4,796
                                                     ===========          =========
</TABLE>

                                      F-28
<PAGE>

          Major Customer
          --------------

          Sales to one customer for the periods ended October 31, 2004, 2003 and
          2002,  accounted for approximately  16%, 29% and 30%,  respectively of
          total sales.  This  customer  represented  5% and 9% of the  Company's
          accounts receivable at October 31, 2004 and 2003, respectively

16.       QUARTERLY CONSOLIDATED FINANCIAL DATA (UN-AUDITED)

          The  following  financial  information  reflects all normal  recurring
adjustments  that  are,  in the  opinion  of  management,  necessary  for a fair
statement of the results of the interim periods.  The quarterly  results for the
years  ended  October  31,  2004,  2003 and 2002 are set forth in the  following
table:
<TABLE>
<CAPTION>
<S>                                    <C>               <C>              <C>              <C>              <C>

                                                                                          Diluted          Basic
                                                                                         Earnings        Earnings
                                                                       Net Earnings     (Loss) Per      (Loss) Per
              2004                     Sales          Gross Profit        (Loss)           Share           Share
              ----                     -----          ------------        ------           -----           -----
First Quarter                      $   9,796          $  2,378         $      621       $    0.03       $   0.02
Second Quarter                        10,624             2,168               (449)          (0.02)         (0.02)
Third Quarter                         11,654             2,434                370            0.01           0.01
Fourth Quarter                        14,303             3,131                532            0.02           0.02
                                  ------------------------------------------------------------------------------------
Total                              $  46,377          $ 10,111         $    1,074       $    0.04       $   0.04
                                  ====================================================================================
              2003
              ----
First Quarter                      $   5,121          $  1,492         $       24       $       -       $      -
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)
                                  ====================================================================================
</TABLE>

                                      F-29

<PAGE>


                            SUPPLEMENTARY INFORMATION

                                      F-30
<PAGE>


                INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES

                                   SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In Thousands)

      For the Year Ended October 31, 2004, the Year Ended October 31, 2003
                         The Year Ended October 31, 2002
<TABLE>
<CAPTION>
<S>                                            <C>                <C>                 <C>                <C>

                                             Balance at         Charged to                             Balance
                                             beginning          costs and          Deductions          at End
             Description                     of Period           Expenses         (write-offs)        of Period
---------------------------------------    ---------------    ---------------    ---------------    --------------

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

October 31, 2004
   Allowance for doubtful accounts         $         40       $        82        $      (21)        $       101
   Allowance for obsolete inventory        $        511       $       (44)       $        -         $       467
</TABLE>


                                      F-31

<PAGE>


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 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 9B.  OTHER INFORMATION

     None.

                                    PART III

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.


                                       39
<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.

     The  information  called  for in  Item 14 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.

                                     PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

        (1)     Financial Statements (see Item 8.)

                o   Report  of  Independent  Registered  Public Accounting  Firm
                    (Grant Thornton)

                o   Consolidated  Balance  Sheets - October 31, 2004 and October
                    31, 2003

                o   Consolidated  Statements of Operations - Years Ended October
                    31, 2004, October 31, 2003 and October 31, 2002

                o   Consolidated  Statements  of  Stockholders'  Equity  - Years
                    Ended  October  31,  2004,  October 31, 2003 and October 31,
                    2002

                o   Consolidated  Statements of Cash Flows - Years Ended October
                    31, 2004, October 31, 2003 and October 31, 2002

                o   Notes to Consolidated Financial Statements

        (2)     Financial Statement Schedules

                o   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)
       4.3     Forms of Warrant (26)
       4.4     Forms of Placement Agent Warrant (27)
      10.1     Forms of Warrant (3)

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<PAGE>

      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 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)

                                       41
<PAGE>

      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)
      10.39    Memorandum    of    Understanding     between    Grand    Pacific
               Optoelectronincs Corporation and International DisplayWorks, Inc.
               (28)
      10.40    Form of Securities Purchase Agreement (29)
      10.41    Form of Registration Rights Agreement (29)

      10.42    Asset   Purchase   Agreement   by   and   between   International
               DisplayWorks (Hong Kong) Limited and Grand Pacific  Petrochemical
               Corporation dated June 24, 2004 (30)
      10.43    Employment  Letter Agreement with Thomas A. Lacey dated September
               7, 2004 (31)
      23.1     Consent of Grant Thornton
      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).

                                       42
<PAGE>

        (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).
        (28)   Incorporated  by reference  from the Company's  current report on
               Form 8-K filed on April 15, 2004 (File No 000-27002).
        (29)   Incorporated  by reference  from the Company's  current report on
               Form 8-K filed on May 13, 2004 (File No 000-27002).
        (30)   Incorporated  by reference  from the Company's  current report on
               Form 8-K filed on June 24, 2004 (File No 000-27002).
        (31)   Incorporated   by  reference  from  the  Company's   registration
               statement  on Form  S-8  filed  on  November  12,  2004  (File No
               333-120404).

                                       43
<PAGE>

                                   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:  January 3, 2005                        By: /s/ Thomas A. Lacey
        ---------------                           ------------------------------
                                                Thomas A. Lacey,
                                                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:  January 3, 2005                         By: /s/ Stephen C. Kircher
        ---------------                            -----------------------------
                                                   Stephen C. Kircher,
                                                   Chairman



Dated:  December 18, 2004                       By: /s/ Anthony Genovese
        -----------------                          -----------------------------
                                                   Anthony Genovese,
                                                   Vice-Chairman



Dated:  January 3, 2005                         By: /s/ William H. Hedden
        ---------------                            -----------------------------
                                                   William H. Hedden, Director



Dated:  December 19, 2004                       By: /s/ Ronald A. Cohan
        -----------------                          -----------------------------
                                                   Ronald Cohan, Director

                                       44
<PAGE>


Dated:  December 28, 2004                       By: /s/ Timothy B. Nyman
        -----------------                          -----------------------------
                                                   Timothy Nyman, Director



Dated:  December 20, 2004                       By: /s/ D. Paul Regan
        -----------------                          -----------------------------
                                                   D. Paul Regan, Director



Dated:  December 28, 2004                       By: /s/ Glenn Neland
        -----------------                          -----------------------------
                                                   Glenn Neland, Director



Dated:  January 3, 2005                        By: /s/ Thomas A. Lacey
        ---------------                           -----------------------------
                                                   Thomas A. Lacey,
                                                   Chief Executive Officer
                                                   (Principal Executive Officer)


Dated:  December 22, 2004                       By: /s/ Ian N. Bebbington
        -----------------                          -----------------------------
                                                   Ian N. Bebbington
                                                   Chief Financial Officer
                                                   (Principal Financial Officer


                                       45