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


                                    FORM 10-K


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

                   For the fiscal year ended December 31, 2000

                                       OR

  [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                 For the transition period from ______ to ______

                        Commission File Number: 000-26889


                                JORE CORPORATION
             (Exact Name as Registrant as Specified in Its Charter)

           Montana                                          81-0465233
  (State of incorporation)                             (I.R.S. Employer ID)


                             45000 Highway 93 South
                              Ronan, Montana 59864
                    (Address of principal executive offices)

                                 (406) 676-4900
                         (Registrant's telephone number)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      None


           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                           Common Stock, no par value


     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  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes __X__ No____


     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K 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 this  Form  10-K or any
amendment to this Form 10-K.   [X]


<PAGE>


     The aggregate  market value of voting stock held by  non-affiliates  of the
Registrant,  computed with  reference to the closing price of such stock,  as of
March 1, 2001 was $12,463,504.

     The number of shares of common  stock  outstanding  as of March 1, 2001 was
13,946,843.


                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions  of  Registrant's  Proxy  Statement  for  the  Annual  Meeting  of
Shareholders  to be held June 4, 2001, are  incorporated  by reference into Part
III of this report.




                                      -2-
<PAGE>


                                JORE CORPORATION

                                    FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                      INDEX



PART I                                                                      PAGE
Item 1.    Business                                                           4
Item 2.    Properties                                                        21
Item 3.    Legal Proceedings                                                 22
Item 4.    Submission of Matters to a Vote of Security Holders               22
Item 4A    Executive Officers of the Registrant                              22

PART II
Item 5.    Market for the Registrant's Common Stock and Related
            Stockholders Matters                                             23
Item 6.    Selected Consolidated Financial Data                              24
Item 7.    Management's Discussion and Analysis of Financial
            Condition and Results of Operations                              26
Item 7A.   Quantitative and Qualitative Disclosure About Market
            Risk                                                             32
Item 8.    Financial Statements and Supplementary Data                       33
Item 9.    Changes in and Disagreements With Accountants on
            Accounting and Financial Disclosure (None)

PART III
Item 10.   Directors and Executive Officers of the Registrant                59
Item 11.   Executive Compensation                                            59
Item 12.   Security Ownership of Certain Beneficial Owners and
            Management                                                       59
Item 13.   Certain Relationships and Related Transactions                    59

PART IV
Item 14    Exhibits, Financial Statement Schedules and Reports on
                    Form 8-K                                                 60
Signatures                                                                   63


                                      -3-
<PAGE>


                                     PART I


"Jore"  (which may also be  referred to as the  "Company,"  "we," "us" or "our")
means Jore Corporation and its subsidiaries, as the context requires.

ITEM 1.  BUSINESS

OVERVIEW

Jore  Corporation  is a leader  in the  design,  manufacture  and  marketing  of
innovative  power tool  accessories  and hand tools for the  do-it-yourself  and
professional  craftsman markets. We offer a comprehensive  system of proprietary
drilling  and  driving   products   that  save  users  time   through   enhanced
functionality,  productivity  and ease of use. We manufacture our products using
advanced  technologies and equipment  designs,  intended to achieve  competitive
advantages in cost, quality and production capacity. Our products are sold under
private labels to the industry's  largest power tool retailers and manufacturers
such as Sears, Roebuck and Co., ("Sears"),  Tru*Serv Corporation,  Canadian Tire
Corporation  Limited,  Black & Decker  Corporation and Makita  Corporation.  Our
products also are sold under the Stanley(R) brand, to which we have an exclusive
licensing  agreement  for  power  tool  accessories,  at The Home  Depot,  Inc.,
Menard's, Andersons,  Mid-States and other retailers. We also recently signed an
exclusive  licensing  agreement for use of the Porter Cable(R)  brand,  which we
will introduce at Lowe's in the second quarter of 2001.

Our  2000  operating  results  reflect   difficult  but  important   initiatives
undertaken  to (i)  continue our  transition  to a  technology-based  vertically
integrated  manufacturing  operation,  (ii) implement a  direct-to-retail  sales
approach under the Stanley(R) brand, and (iii) complete the nationwide launch of
the Stanley(R) brand into the nation's largest home  improvement  retailer,  The
Home Depot. These transitional efforts resulted in a significant  operating loss
for the  year.  We  believe  the  transitional  efforts  are  now  substantially
complete.

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of  liabilities  in the normal  course of  business.  As shown in the  financial
statements,  during the year ended December 31, 2000, the Company incurred a net
loss of $10.9 million and the Company's current liabilities exceeded its current
assets by $42.1 million. The Company also holds significant amounts of inventory
which  has  been  written  down by $5.9  million  to net  realizable  value.  In
addition, the Company has substantial excess manufacturing capacity (see Note 14
of Consolidated Financial  Statements).  As described in Note 9, the Company was
not in compliance with several provisions of its long-term debt agreements as of
December 31, 2000,  and  accordingly,  long-term debt totaling $33.6 million has
been  classified as a current  liability.  These  factors,  among others,  raise
substantial  doubt about whether the Company will be able to continue as a going
concern for a reasonable period of time.


Jore  Corporation was  incorporated in Montana in 1993. Its principal  office is
located at 45000 Highway 93 South, Ronan, MT 59864.


                                      -4-
<PAGE>


INDUSTRY OVERVIEW

We compete in the tool industry,  with specific  participation in the power tool
accessories  market and, to a lesser extent,  the hand tool market.  We estimate
that the domestic markets for these industry  segments are $3.2 billion and $3.0
billion,  respectively,  with  worldwide  markets  roughly double those amounts.
Approximately  $1.4 billion of the  domestic  power tool  accessories  market is
attributable to drilling and driving accessories.

The development and widespread use of cordless power tools has created a growing
installed  base of these  tools  among  do-it-yourself  consumers,  professional
craftsmen,  contractors,  and  industrial  users.  The increased use of cordless
power drills has led to a growing demand for new  accessories to improve product
functionality  and ease of use.  This has led to the growth in the  quick-change
drilling and driving accessories market, which today totals approximately $80 to
$100 million.

Historically,  the  power  tool  accessories  market  has  been  addressed  by a
fragmented group of manufacturers that produce  traditional  drilling,  driving,
cutting, and surface preparation accessories.  In recent years, the industry has
been  consolidating  as  larger  manufacturers  seek to  broaden  their  product
offerings,  gain market leverage with leading  retailers,  and expand production
capacity.  Industry  production  techniques  largely  rely on  embedded  capital
equipment  and  production   facilities   which  use   traditional,   multi-step
manufacturing  methods that have remained  relatively  unchanged for years.  The
industry  generally has been slow to introduce  innovative new products or adopt
advanced manufacturing technologies.

STRATEGY

Our strategy is to capture additional  business  opportunities by leveraging the
significant investments that we have made in manufacturing capabilities,  retail
distribution,  and product  innovation.  Specific  elements of this strategy and
near-term opportunities include the following:

Grow Business with Existing Retail Customers:  We expect growth in revenues from
existing customers,  particularly The Home Depot, Sears and Lowe's. The roll-out
of Jore's products under the Stanley(R)  brand throughout The Home Depot's 1,100
store system was  substantially  completed in October 2000.  This product launch
has been  validated  by solid early sales  levels,  in spite of limited  initial
product  awareness  at the store level,  and the need to  fine-tune  product set
configurations  and merchandising  strategies.  Finally,  we anticipate that our
internal  sales  initiative  and licensed  brand product  roll-outs  will create
opportunities for increased  business with other customers,  including  Canadian
Tire, Tru*Serv, and Lowe's.

Expand  Retail  Customer  Base: We believe that our entrance into The Home Depot
will create opportunities with other major retailers.  In the near-term,  we are
examining  opportunities to sell our products to additional  retailers,  such as
Ace,   Wal-Mart,   Price-Costco,   Sam's  Club  and  others.   Key  elements  of
consideration  include  branding  strategies,  set  configurations,  pricing and
channel conflict issues.

Introduce  Innovative New Products:  Jore currently has a number of new products
in various stages of design and  development.  These include product  extensions
within the current quick-change drilling and driving system, new hand tools, and
new power tool accessories outside of the drilling and driving category. We have
also undertaken several new product development initiatives to broaden our shelf
space and customer base.


                                      -5-
<PAGE>


Enter the  Industrial  Market:  The Company  believes it has an  opportunity  to
leverage its  manufacturing  capacity into the  production of drill bits for the
industrial market.  Jore's  proprietary drill bit manufacturing  process enables
the  production  of  industrial-quality  bits at lower  cost  than  conventional
manufacturing  techniques.   This  is  particularly  significant  given  present
equipment  and  facility  utilization  rates.  We  have  initiated   preliminary
discussions with several large industrial  customers and distributors.  Based on
these  discussions,  we believe that we can  effectively  compete for industrial
business.

OPERATING STRATEGY

Sales  Transition:  We believe  our  initiative  to license the  Stanley(R)  and
Porter-Cable(R)  brands  and  sell our  products  directly  to  major  retailers
positions us for future success. Retailers are seeking direct relationships with
product  manufacturers  to avoid the margin  compression or price expansion that
results when the  manufacturer  sells to the branded OEM, which in turn sells to
the  retailer.  However,  the  transition  from  an  OEM  sales  strategy  to  a
direct-to-retail  branded  sales  strategy  was  not  without  difficulty.   OEM
customers, as expected, scaled back orders, resulting in an $8 million reduction
in OEM sales from 1999 to 2000.  At the same time,  the  lead-time and marketing
expenditures  required  to gain shelf space and  product  awareness  at The Home
Depot were greater than  anticipated.  Product line reviews for major  retailers
have occurred  infrequently.  For example,  we were not awarded the  fast-change
drilling and driving  category at The Home Depot until May 2000, much later than
anticipated,  and our  Stanley(R)-branded  products were not in place throughout
The Home  Depot  system  until  October  2000.  In the  intervening  months,  we
established  store-level  service and  product  support  functions,  developed a
distribution  system to support  the  requirements  of 1,100  stores  (versus 15
distribution  centers at Sears, for example),  built a new distribution  center,
and fine-tuned product set  configurations and merchandising  strategies for the
big-box store environment.

Operational  Transition:  We believe our  continuing  movement to  technological
vertical  integration  ("TVI")  in our  manufacturing,  assembly  and  packaging
operations  positions us for future success.  We believe our TVI approach allows
us to maintain our standards for product quality and innovation  while remaining
cost competitive.  However, the transition from an outsourced component approach
to our TVI strategy was also not without  difficulty.  During 1999 and 2000, the
Company invested nearly $70 million in new equipment and facilities.  Throughout
2000 we incurred inefficiencies as we continually dealt with revised and refined
equipment  installations,  cycle times and process flows. This resulted in lower
equipment  utilization  rates and higher  product  costs  which led to the sharp
decline in margins throughout 2000. We believe,  however, that implementation of
our TVI strategy has positioned us to increase our margins in future periods.

Focus on Creative Merchandising and Rapid Prototyping:  We distinguish ourselves
by our ability to quickly design and prototype  attractive  packaging and retail
displays.  In addition,  we  continually  evaluate the  logistics of  receiving,
displaying  and  purchasing  products in retail  environments.  As a result,  we
deliver our products and systems in  attractive  packages and  effective  retail
plan-o-grams that, in coordination with each customer's  requirements,  are easy
to set up and display and are aesthetically  appealing to consumers.  We believe
this  responsiveness  and  attention  to detail  provides us with a  competitive
advantage in serving our customers and encourages consumer purchases.


                                      -6-
<PAGE>


Enhance  Information  and Control  Systems  Technology:  Integrating our design,
development,  manufacturing,  sales  and  management  operations  is  critically
important. We continue to work towards refining our enterprise resource planning
software in order to facilitate  enterprise-wide  communication and coordination
among our employees. Real time communication among engineers,  product managers,
quality assurance  personnel,  and graphic designers will enable us to carefully
control the design, development, manufacture and marketing of our products.

Develop,  Motivate and Retain Highly Productive  Personnel:  We are committed to
creating a working  environment  that values the  contributions of all personnel
and  rewards  personal  initiative.  Whenever  possible  we seek to retrain  and
redeploy,  rather  than  displace,  employees  when we  implement  manufacturing
improvements  or technology  upgrades.  By  encouraging  employees to attend our
internal education programs,  we believe that we improve the capabilities of our
employees and leverage our  investment  in process  technology  and  information
management  systems.  Our programs  cover a range of topics  including  computer
aided design, spreadsheet and database management,  work-flow efficiency,  sales
education and automation training.

PRODUCTS

Jore manufactures and sells products in three categories, including quick-change
power tool accessories,  hand tools and industrial  quality drilling and driving
tools.

Quick-Change System: The heart of the Company's power tool accessories lineup is
a patented quick-change drilling and driving system that provides the user rapid
interchangeability  of a full range of hex-shank  drilling,  driving and surface
preparation accessories. Users chuck the connector into their drill and can then
quickly change  between  accessories  throughout  any project  without having to
continually   chuck  and  re-chuck  drill  bits,   screwdriver  bits,  or  other
accessories.  Our  proprietary  products  also include  reversible  drilling and
driving accessories, screw guides, and other specialized accessories designed to
save users time and improve tool functionality.

We offer  quick-change  connectors  in a variety  of styles and sizes to fit the
needs  of  both  do-it-yourself   consumers  and  professional  craftsmen.   The
connectors  are used in  conjunction  with a variety  of  hex-shank  accessories
including  high-speed drill bits,  masonry drill bits,  wood-boring  spade bits,
wire brushes and other surface preparation applications.

Hand Tools:  Jore also sells a multiple bit screwdriver  with bit storage in the
handle marketed to Sears as the Ready-Bit, with or without a ratcheting feature.
Additionally,  Jore markets its own proprietary Torque-Driver(R),  a screwdriver
with  interchangeable  bits and a flip-out  handle that  provides  the user with
additional torque for hand screwdriving  applications and which accepts multiple
sizes of Jore's quick-connect screwdriver bits.

Industrial Quality Drilling and Driving Accessories: The majority of our capital
investment in the last two years has been  concentrated in our  state-of-the-art
drill  bit  manufacturing  operation,  but has also  included  rotary  transfer,
plastic   injection,   metal   injection  and  machining   operations.   With


                                      -7-
<PAGE>

a co-development partner, Jore designed,  developed and has brought into service
41  rotary  transfer  drill  grinding  machines  that  grind  the most  advanced
geometries onto a  ground-from-solid  high-speed steel drill bit. These machines
can also be used to manufacture other cutting tools, including end mills, router
bits and masonry bits. Jore's Edgerton, Wisconsin facility produces a full range
of screwdriver bits.

Our products are principally sold in set configurations.  Sets typically include
high-speed steel drill bits, quick-change connectors, various screw and fastener
drivers,  screw guides,  reversible drills and drivers, and related accessories.
Some sets also include our  Torque-Driver(R)  product.  In addition to sets,  we
also sell individual  products as open stock to allow users to expand or replace
their accessories.

Manufacturing and Process Technologies

Jore's manufacturing  strategy has always been to utilize technology to mitigate
foreign   producers'   cost   advantage  in  labor,   while  also  allowing  for
sophisticated  product and process  design  advances.  The Company has  invested
nearly $70 million in property,  plant and equipment  over the past two years to
support these efforts. As currently configured,  our manufacturing operation has
the capacity to produce  approximately  50 million drill bits per year (see Note
14 of the consolidated financial statements).

While quick-change drilling and driving products make up the bulk of the current
revenue  mix,  Jore's  unique and  proprietary  computerized  processes  used in
manufacturing  round-shank  and  hex-shank  drill  bits make up the heart of our
manufacturing capabilities.

We use advanced  technology to create the highest quality,  most  cost-effective
processes  available  to  manufacture,  assemble  and package our  products.  We
operate based on the concept of "Kaizen," a Japanese word meaning  "never ending
improvement."  Our processes are based on  continuing  research into  materials,
technology  and  machines  from other  companies  and  industries.  Our focus on
innovation and continuous  process  improvement covers all facets of operations,
from  inspection  of raw  materials to final  assembly and  packaging of the end
product.  The  application  of advanced  technology  manufacturing  allows us to
enhance   product   quality,    lower   production   costs,   improve   customer
responsiveness,  and rapidly scale and increase  production  capacity to support
sales growth.

Our in-house  manufacturing  processes  include drill bit  grinding,  high-speed
machining,  injection  molding,  blow  molding,  die-casting,  metal forming and
stamping.  We have  jointly  designed  and  developed  a  proprietary  drill bit
manufacturing  machine  that  automates  all  aspects  of drill bit  production,
resulting in improved quality,  lower production costs and increased  production
capacity.

We also  operate  high  speed  machining  centers  to  produce a variety  of our
component  parts,  such as  screwdriver  bits and  countersinks.  Our  injection
molding operations produce a variety of plastic components such as storage cases
and screwdriver handles. We produce hex-shank  accessories using our proprietary
die-casting  processes  and screw  driving  accessories  are produced  using our
proprietary  metal forming and stamping  equipment.  Our equipment  incorporates
micro  processing  technology that allows us to capture,  analyze and manipulate
data to more effectively manage and coordinate our operations.


                                      -8-
<PAGE>


We constantly monitor all facets of the manufacturing process for inefficiencies
and strive to use technology or new processes that save time,  reduce costs, and
improve  quality.  We first seek to identify and quantify any advantages that we
believe we can achieve by  developing a new process.  We then seek a solution by
investigating  machine  manufacturing  companies  throughout  the world that can
potentially  address our needs. If an appropriate  machine is not available from
an outside  source,  we will  collaborate in the design with a  manufacturer  to
build process-specific equipment or design and build such equipment internally.

Product Development

We focus our efforts on the design and development of product  improvements  and
new products  based on an evaluation  of the needs and demands of consumers.  We
maintain an active  dialogue  with users of our products to  ascertain  the most
desirable  enhancements  for our current  products and systems and to aid in the
development  of new  products.  Our  product  and  process  innovation  group is
comprised of 48 people,  including 11  engineers,  7  industrial  designers  and
machinists, 8 graphics designers and 22 technicians.

We have a  disciplined  process by which we identify and develop  potential  new
products and bring them to market.

Conceptualization  and  Engineering  of New Products or  Improvement to Existing
Products:  Our personnel  visit job sites to observe  current  construction  and
manufacturing  methods  and  to  identify  potential  opportunities  to  improve
existing  products  or create new  products.  Once we  identify a need for a new
product or an  improvement to an existing  product we begin a  conceptualization
process involving feedback from end-users and personnel within our manufacturing
operations.    Using    computerized    engineering    software,    we   develop
three-dimensional  computerized drawings and manipulate these images to optimize
functionality and form.

Prototyped  Production:  Once we are  satisfied  regarding  the  functional  and
aesthetic objectives of a particular product, our engineering software sends the
three-dimensional computerized model to our rapid prototyping system. Our system
produces a  three-dimensional  plastic  model that we then test for  aesthetics,
functionality  and  general  design.  Once we are  satisfied  with  the  concept
prototype, we commission a fully functional prototype to be made for performance
testing  and  evaluation  as a  working  prototype.  In many  cases,  the  rapid
prototype model serves this function as well.

Selection  of Raw  Material  and  Production  Equipment:  In order to select the
appropriate  raw  material,  we use the working  prototype  to test  alternative
materials in many different conditions. After we have determined the appropriate
raw material and product specifications,  we send engineering drawings,  concept
prototypes and working prototypes to selected manufacturing  equipment suppliers
so that they are able to submit proposals on design and fixturing of appropriate
equipment.  Our equipment committee evaluates the proposals from these suppliers
and selects the best design to produce our product.

Assembly,  Packaging And Automation Fixtures:  We design automated work cells to
efficiently assemble and package our products. Our automation team evaluates and
selects the  appropriate  technology  and equipment  for each process.  Our work
cells,  comprised  of several  process-specific  work-centers,  are designed and
arranged  for  efficient  flow of product and  personnel.  Our  automation  team
designs  safe,  ergonomic  workstations  based upon the needs of our  production
team.


                                      -9-
<PAGE>


Customers

Historically,  we exclusively  sold our products under private labels to leading
power tool  manufacturers  and  retailers.  In mid-1999,  however,  we signed an
agreement  with The Stanley Works whereby we were granted the exclusive  license
to the Stanley(R) brand in the power tool accessories category in North America.
This licensing  agreement  allowed us to initiate efforts to market our products
under a highly  recognized name directly to major  retailers.  Today we sell our
products to three  categories  of  customers:  (i)  manufacturers  of power tool
accessories; (ii) private label to retailers under their proprietary brands; and
(iii) direct to retailers under licensed brands.

Power Tool  Manufacturers:  The Company  sells its products to select power tool
manufacturers  (or "OEM  customers"),  which in turn offer the products  through
their own  distribution  channels  under their own  brands.  Jore  supplies  the
products  either in final  packaged  form or as  unpackaged  products  which the
manufacturers combine and package with related drilling and driving products.

Our OEM  customers  include  Black & Decker and Makita,  which sell the products
under the DeWalt(R) and Makita(R) brands, respectively. These manufacturers were
some of Jore's initial customers and sales to these customers  continued to grow
in size through 1999. In 2000,  sales to OEM  customers  declined  sharply as we
became a direct  competitor with the  introduction of our own products under the
Stanley(R) brand.

Private Label Retailers: We sell our products to several leading retailers which
offer the  products in their  stores under their own private  label  brands.  We
coordinate  closely  with  these  customers  on  promotional  and  merchandising
strategies  and  displays,  and supply these  customers  with  products in final
packaged form. The customers then assume responsibility for shelf management and
product support at the store level.

Our private label retail customers include Lowe's,  Canadian Tire, and Tru*Serv,
which offer the products  under the Task  Force(R),  MasterCraft(R),  and Master
Mechanic(R)  brands,  respectively.  The  Company's  leading  customer  in  this
category is Sears,  our largest  overall  customer.  Sears offers Jore  products
under  the  Craftsman(R)  Speed-Lok(R)  trademark,  and has  enjoyed  tremendous
consumer  response to the products.  In recognition  of this success,  Sears has
honored Jore for three straight years with its Partner in Progress award,  which
is earned by only 1% of Sears' vendors. The Craftsman  Speed-Lok(R) line remains
the best selling product within Sears' power tool accessories category.

Direct to Retailers:  With our licensing of the Stanley(R)  brand,  we initiated
efforts in late 1999 and 2000 to sell our products  directly to major  retailers
under one of the most respected names in the tool business. In May 2000, we were
awarded the  fast-change  drilling and driving  category at The Home Depot,  the
nation's largest home improvement retailer. Jore's  Stanley(R)-branded  products
were in place throughout The Home Depot's 1100 store system by October 2000, and
generated strong results in the fourth quarter. We anticipate growth in sales of
our products at The Home Depot in 2001.  The


                                      -10-
<PAGE>


licensing of the Porter  Cable(R) brand in the first quarter of 2001 for initial
sales to  Lowes,  provides  another  opportunity  to grow  our  direct-to-retail
channel.

SALES AND MARKETING

Our  sales  and  marketing   resources  include  internal  sales  and  marketing
personnel,  an internal  graphics  department,  and contracted  regional service
groups. We seek to develop long-term, mutually beneficial relationships with our
customers at all levels of the customer's organization.  The sales and marketing
team  works  closely  with  customers  to  create  coordinated  promotional  and
merchandising  campaigns.  Specific marketing activities that we provide include
merchandising events, plan-o-grams, promotional displays, and packaging design.

We have  recently  undertaken  initiatives  to enhance  our sales and  marketing
organization, particularly in view of the transition to a direct-to-retail sales
strategy. Specifically, we are winding down our relationship with Manufacturers'
Sales Associates, LLC ("MSA") a sales representative  organization that receives
a commission on sales to specific customers.

Management  Structure:  In  mid-March,  2001,  a Vice  President  of  Sales  and
Marketing and three  individuals with broad retail experience joined the Company
to lead the Sales and Marketing Department. In 2000, we added a former associate
buyer for the power tool  accessories  product  category at Sears.  We intend to
establish  a  network  of  regional  sales  managers  as we  believe  there  are
opportunities  for rapid growth much like those already  experienced at The Home
Depot.

We believe these efforts to enhance our sales and  marketing  organization  will
improve  responsiveness  to customers,  enhance  manufacturing  coordination and
demand planning, and generate greater success with new business opportunities.

Internal  sales and  marketing  support is delivered  by our  in-house  graphics
department,  consisting of six graphic designers and two support personnel. This
group  is  responsible  for  designing  and   implementing   all  packaging  and
promotional  materials.  The group has  specialists  in computer  animation,  3D
renderings and package and promotional  material design. The graphics department
also develops our annual reports, brochures and catalogs.

To support  customers  and product  offerings at the store  level,  Jore now has
service  contracts  in place with the  leading  regional  service  groups in the
country.  These groups were  recommended  and introduced to us by The Home Depot
and Lowe's,  based on their  extensive  experience  with  customer  support.  We
believe that we are now  positioned to  effectively  and  efficiently  support a
national direct-to-retail sales strategy.

Most of our sales are derived from purchase  orders for products to be delivered
to our customers  within 30 days of receipt of the order. As is customary in the
power  tools  accessories  market,  we  rely  on  our  customers'  forecasts  to
anticipate  future order  volumes,  and  typically  do not enter into  long-term
supply agreements with our customers.  As a result, we typically do not maintain
a significant  backlog of purchase orders. See "Risk Factors--Our  dependence on
customer  forecasts  to manage  our  business  may cause us to  misallocate  our
production, inventory or other resources."


                                      -11-
<PAGE>


Competition

The  power  tool  accessories  market  and  the  hand  tool  market  are  highly
competitive.  Many  of our  competitors  are  established  companies  that  have
significantly greater financial, technical,  manufacturing, sales and marketing,
and  support  resources  than  Jore  Corporation.   In  addition,  many  of  our
competitors own well-known brands,  enjoy large end-user bases, and benefit from
long-standing  customer  relationships.  As we expand into new  markets,  we can
expect to encounter similar competitive environments.

Competitors in power tool  accessories  include  Vermont  American  Corporation,
Black & Decker,  Greenfield  Industries,  Inc.,  a  wholly-owned  subsidiary  of
Kennametal Inc., American Tool Companies, Inc., Snap-On Incorporated and others,
as well as a number of  independent  "job  shops"  that  supply  products  under
private labels to OEM and retail customers. Competitors in the hand tools market
include American Tool,  Cooper  Industries,  Inc., The Stanley Works and others,
including some foreign companies. Competitive factors in our markets include:

         o Establishing favorable brand recognition;

         o Maintaining manufacturing efficiency and expertise;

         o Developing a breadth of product offerings;

         o Implementing appropriate pricing;

         o Providing strong marketing support;

         o Manufacturing high quality products; and

         o Obtaining access to retail outlets and sufficient shelf space.

Intellectual Property

Our ability to compete effectively depends in part on our ability to develop and
protect our proprietary technology.  We have 14 United States and foreign design
and utility patents covering a variety of our products and processes.  While our
patents have been important to our business, we do not believe that our business
is  dependent on any single  patent or group of patents.  We also own or license
several  registered  trademarks  and sell many products to our  customers  under
arrangements  that allow us to maintain control of our trademarks while granting
customers  exclusive  use of  specified  trademarks  for limited  purposes.  For
example,  we have  granted  Sears the  exclusive  right to use the  Speed-Lok(R)
trademark  in  connection  with Sears' sales of  quick-change  systems and other
products,  provided  that Sears  purchases a minimum  quantity of Jore  products
annually.  The  primary  trademarks  we  own or  use  in  our  business  include
Speed-Lok(R),  Speed  Shank(R),  Quad-Driver(R),  Bit-Lok(R),  High Torque Power
Driver(R), Torque Driver(TM),  JoreTech(TM),  Where Innovation Meets Reality(TM)
and Auto Jaw(TM).  Certain of our trademarks are integral to our business and we
aggressively monitor and protect these and other trademarks.

In April 1999,  we entered into an agreement  with The Stanley Works that grants
us the exclusive  license to sell power tool  accessories  under the  Stanley(R)
brand in North  America.  The  Agreement  provides  for the payment by us to The
Stanley Works of a percentage of our sales of our  Stanley(R)-branded  products,
with certain minimum payment obligations,  during the term of the agreement. The
term of the Agreement is through December 2004, and may be renewed by us through
December 2009.


                                      -12-
<PAGE>


In  exchange  for our  agreement  to have The Norton  Company  be our  preferred
supplier of grinding wheels and surface preparation products, we were granted an
exclusive  license to use the  Speed-Lok(R)  name in connection with the sale of
power tool accessories.

We enter into confidentiality agreements with our employees and consultants upon
the commencement of an employment or consulting  relationship.  These agreements
generally require that all confidential  information  developed or made known to
the individual by us during the course of the individual's  relationship with us
be kept  confidential and not disclosed to third parties.  These agreements also
generally  provide that inventions  conceived by the individual in the course of
rendering services to us shall be our exclusive property.

Information Management

Through our information management systems, we seek to electronically  integrate
all aspects of our operations,  from procurement of raw materials to sale of our
packaged  products  to  end-users.  Our  fully-integrated   enterprise  resource
planning  software  system  allows  centralized  management  of  key  functions,
including inventory,  order processing,  accounts receivable,  accounts payable,
general ledger, shop floor control,  bar-coded inventory,  material requirements
planning,  scheduling and electronic data interchange.  This information  system
enables us to ship to customers on a same-day  basis,  respond  quickly to order
changes and provide a high level of customer service.  Our new system integrates
our internal processes and allows for cross-platform  information  sharing among
our various departments.  We are continually refining our management information
system   through   customization   and   employee   training  to  maximize   our
effectiveness.

Personnel and Human Resources

As of March 15,  2001,  we  employed  373  full-time  employees  and 5 part-time
employees,  of  whom  22  were  in  sales  and  marketing,  74  in  finance  and
administration,  22  in  technology  development  and  application  and  260  in
operations. All but 13 of our employees are located at our facilities near Ronan
and Missoula,  Montana,  with 11 being located at our Jore Edgerton  screwdriver
bit facility in Wisconsin.  No employees  are covered by  collective  bargaining
agreements,  we have never had a work  stoppage and we believe we maintain  good
relations with our employees.

Risk Factors

The  following   factors  should  be  considered  in  evaluating  our  business,
operations  and  prospects  and may  affect  our future  results  and  financial
condition.

Our rapid growth may make it difficult to effectively allocate our resources and
manage our business:

We expect growth in sales and  production  and cannot assure you that we will be
able to manage any future growth effectively.  The addition of The Home Depot as
a significant customer in 2000 strained our management, production, engineering,
financial and other resources. To manage our growth effectively, we must operate
our manufacturing  capacity efficiently while maintaining high levels of quality
and  customer  service.  We also  must  continue  to  enhance  our  operational,
financial and management  systems and successfully  attract,  train,  retain and
manage our employees.  Any failure to manage our growth effectively could have a
material  adverse  effect on our

                                      -13-
<PAGE>

business,  financial  condition and results of  operations,  such as declines in
revenues and profit  margins.

We are in violation of our debt  covenants and,  unless our lenders  continue to
waive their  rights under our debt  agreements,  we may be required to liquidate
our assets:

Our operating line of credit requires the following  financial ratio  covenants:
(i) current ratio not less than 1:1;  (ii)  leverage  ratio not to exceed 2.5:1;
and (iii) funded debt to EBITDA not to exceed 4.25:1. As of December 31, 2000 we
were out of compliance with all of these covenants.

We  entered  into a  forbearance  agreement  in March 2001 that  provides  us an
overadvance  limit of $8.1 million on our operating line of credit.  In exchange
for this  forbearance,  we have granted second mortgages on certain property and
plant equipment and certain officers have provided personal guarantees. The bank
forbearance  extends to April 30, 2001,  at which time it will be reviewed.  Our
current  borrowing base of eligible accounts  receivable and inventory  supports
$21  million  in  borrowings  and  the  agreement  allows  us  to  borrow  up to
approximately $29 million. We are currently overadvanced by $7.5 to $8 million.

We have 19  lenders  from  which we have  borrowed  money to  finance  equipment
purchases.  We have requested from each lender a three-month  forbearance on all
interest and  principal  payments due them.  Seven of the nineteen  lenders have
agreed to this  forbearance  and the  remaining  twelve  lenders have  requested
additional information.

There can be no assurance  that we will  successfully  restructure  our debt, or
that our creditors will waive their rights under our credit agreements.  Without
a debt restructuring or extension,  or an equity infusion,  we will be forced to
liquidate our assets.

We expect to continue to rely on debt to fund our operations:

We have historically  relied on debt and may seek additional debt funding in the
future. As of December 31, 2000, we had approximately $77 million of outstanding
debt,  which accounted for 69% of our total  capitalization.  Our leverage poses
the risks that:

     o    We may be unable to repay our debt due to a  decline  in  revenues  or
          disruption in cash flow;

     o    We may be unable to obtain additional financing;

     o    We  must  dedicate  a  substantial  portion  of  our  cash  flow  from
          operations  to servicing  the interest and  principal  payments on our
          debt,  and any  remaining  cash  flow  may be  inadequate  to fund our
          planned operations;

     o    We  have  pledged  substantially  all of our  inventory  and  accounts
          receivable as collateral; and

     o    We may be more  vulnerable  during  economic  downturns,  less able to
          withstand  competitive  pressures  and less  flexible in responding to
          changing business and economic conditions.

We may need  additional  capital which could dilute your interest in the Company
and which may not be available when needed:

We are currently  trying to  restructure  our existing  debt, and we may require
additional  equity or debt financing to meet future working capital needs and to
enhance our financial position for future operations.  We cannot assure


                                      -14-
<PAGE>


you that such additional financing will be available or, if available, that such
financing can be obtained on satisfactory  terms. If financing is unavailable to
us or is  available  only on a limited  basis,  we may be unable to  develop  or
enhance our products,  take  advantage of business  opportunities  or respond to
competitive pressures,  any of which could have a material adverse effect on our
business, operating results, and financial condition.

We have extended  unsecured  creditors  past their normal terms of payment which
could disrupt our sources of supply:

We have approximately $11.9 million of accounts payable,  half of which are more
than 60 days past due.  We are  working  with  equipment  providers  to defer or
cancel receipt of capital  equipment.  Most of our current  inventory  needs are
paid for on a COD basis,  which we expect will adequately support current sales.
However,  there can be no  assurance  that our vendors  will  continue to supply
Jore's  product  needs,  which could  ultimately  disrupt  our product  flow and
adversely effect our financial position and results of operations.

It may become more difficult to sell our stock in the public market:

Our common  stock is quoted in the Nasdaq  National  Market.  In order to remain
listed on this  market,  the  Company  must meet  Nasdaq's  listing  maintenance
standards.  If the bid  price of our  common  stock  falls  below  $1.00  for an
extended period, or we are unable to continue to meet Nasdaq's standards for any
other  reason,  our common  stock  could be  delisted  from the Nasdaq  National
Market.

If the common stock were delisted, we likely would seek to list the common stock
on the Nasdaq SmallCap Market or for quotation on the American Stock Exchange or
a regional  stock  exchange.  However,  listing our stock for quotation on these
markets or exchanges could reduce the liquidity for our common stock.

If the common  stock were not  listed or quoted on another  market or  exchange,
trading of the common stock would be conducted in the over-the-counter market on
an electronic  bulletin board established for unlisted securities or in what are
commonly  referred to as the "pink sheets." As a result,  an investor would find
it more difficult to dispose of, or to obtain accurate  quotations for the price
of the common stock.  In addition,  a delisting from the Nasdaq  National Market
and failure to obtain  listing or quotation on another  market or exchange would
subject our securities to so-called  "penny stock" rules that impose  additional
sales practice and market-making  requirements on broker-dealers who sell and/or
make a market in such securities. Consequently, removal from the Nasdaq National
Market and failure to obtain  listing or quotation on another market or exchange
could affect the ability or willingness of  broker-dealers to sell and/or make a
market in the common stock and the ability of  purchasers of the common stock to
sell their securities in the secondary market. In addition,  if the market price
of the  common  stock  falls  below  $1.00 per share,  we may become  subject to
certain penny stock rules even if our common stock is still quoted on the Nasdaq
National Market. While such penny stock rules should not affect the quotation of
our common stock on the Nasdaq National Market, such rules may further limit the
market  liquidity  if the common  stock and the ability of investors to sell the
common stock in the secondary market.

We face competition in the power tool accessories and hand tools markets:

The power  tool  accessories  and hand  tools  markets  are  mature  and  highly
competitive.  We cannot  assure  that we will be able to  compete  in our target


                                      -15-
<PAGE>


markets. In the power tool accessory market competitors include Vermont American
Corporation,  Black  &  Decker  Corporation,   Greenfield  Industries,  Inc.,  a
wholly-owned  subsidiary of Kennametal  Inc.,  American  Tool  Companies,  Inc.,
Snap-On  Incorporated  and others,  as well as a number of other  companies that
supply products under private labels to OEM and retail customers.  Some of these
competitors  offer products  similar to ours or different  products with similar
functionalities. In particular, Black & Decker has developed a product line with
similar  characteristics  to our quick-change  system.  In the hand tool market,
competitors include American Tool Companies, Inc., Cooper Industries,  Inc., The
Stanley Works and others, including foreign manufacturers such as Sandvik AB.

Many of our  competitors  are  established  companies  that  have  significantly
greater financial,  technical,  manufacturing,  sales and marketing, and support
resources  than Jore  Corporation.  In  addition,  many of our  competitors  own
well-known  brands,  enjoy large end-user bases, and benefit from  long-standing
customer  relationships.  We believe that consumers in our markets generally are
loyal to a particular brand. Therefore, it may be difficult to generate sales to
consumers who have purchased  products from competitors.  Our failure to compete
successfully  against current or future  competitors would have material adverse
effects on our business,  operating results,  and financial  condition including
loss of customers, declining revenues and loss of market share.

Our  initiative to enhance our sales and marketing  resources  could disrupt our
sales efforts:

We have terminated our  relationship  with  Manufacturing  Sales  Associates and
replaced it with an in-house  direct sales  organization.  These efforts include
adding  key  sales and  marketing  professionals  to our staff and  establishing
store-level   service  and  support  for  our  retail   customers.   Failure  to
successfully execute our sales and marketing initiatives could disrupt our sales
efforts and damage our customer relationships.

The loss of a large customer could result in a substantial decrease in revenues:

Historically,  most of our  sales  have  been  derived  from a small  number  of
customers   and,  due  to  the  continuing   consolidation   of  the  industry's
distribution  channels,  we expect a significant  portion of our future sales to
remain  concentrated  among a limited  number of  customers.  In 2000,  sales to
Sears,  The Home Depot,  Black & Decker/DeWalt  and Makita  accounted for 55.8%,
15.6%,  9.7%,  and 8.5%  respectively,  of our net revenues.  In 1999,  sales to
Sears,  Black & Decker/DeWalt  and Makita accounted for 58.3%,  22.8%, and 10.0%
respectively,   of  our  net  revenues.   In  1998,  sales  to  Sears,  Black  &
Decker/DeWalt and Makita accounted for 60.2%, 17.2% and 14.5%, respectively,  of
our net revenues. A significant decrease in sales to, or the loss of, any of our
major customers would have a material adverse effect on our business, prospects,
operating  results and financial  condition,  such as a  substantial  decline in
revenues.

Our  dependence  on customer  forecasts  to manage our  business may cause us to
misallocate our production, inventory or other resources:

Significant  or  numerous  cancellations,  reductions  or  delays in orders by a
principal  customer or a group of customers could have a material adverse effect
on our revenues,  inventory levels and profit margins. We rely on our customers'
forecasts to anticipate  their future volume of orders,  which  typically do not
become contractual obligations until approximately 30 days prior to shipment. We
rely on these forecasts when making commitments


                                      -16-
<PAGE>


regarding  the  level  of  business  that we will  seek and  accept,  the mix of
products that we intend to manufacture,  the timing of production schedules, and
our use of equipment and personnel.  The size and timing of orders placed by our
customers  varies  due  to a  number  of  factors,  including  consumer  demand,
inventory  management by customers,  our customers'  manufacturing  or marketing
strategies, and fluctuations in demand for competing and complementary products.
In  addition,  a variety of economic  conditions,  both  specific to  individual
customers  and  generally  affecting  the  markets for our  products,  may cause
customers  to  cancel,  reduce  or delay  orders  that were  previously  made or
anticipated.

The marketing of our products under the Stanley(R) brand may be unsuccessful and
may adversely affect our relationships with existing customers:

In April 1999, we signed an agreement with The Stanley Works that granted us the
exclusive  license to sell power tool  accessories  under the Stanley(R)  brand.
Some of our  existing  customers  appear to view our  license  arrangement  with
Stanley unfavorably, and therefore have reduced their purchases of our products.

In addition, retailers may choose not to offer our products under the Stanley(R)
or other licensed brands.  The time and resources we spent in 2000 marketing our
products   under  the  Stanley(R)   brand  lead  to  increased   sales  but  our
profitability  suffered.  We cannot be certain sales levels will increase  under
licensed  brands or that any such sales  will be at  acceptable  margins.  Other
potential risks in connection with licensing brands from third parties include:

     o    The failure by  licensors  to maintain  the  integrity  and quality of
          their brand's image in the minds of its consumers;

     o    Our inability to meet the  performance  requirements  of any licensing
          agreement may cause licensors to terminate such agreements; and

     o    Customer demand of exclusive arrangements.

Our failure to develop new  distribution  channels  could  diminish  our revenue
growth:

We cannot  assure that we will be able to develop new  distribution  channels or
penetrate the industrial  market or that this growth strategy can be implemented
profitably.  Our  growth  depends,  in  part,  on our  ability  to  develop  new
distribution  channels,  including  penetration of the industrial market for our
products.  Challenges  that we  face in  developing  new  distribution  channels
include:

     o    Obtaining customer acceptance of our products;

     o    Managing existing customer relationships;

     o    Establishing  relationships with new customers;

     o    Displacing   incumbent  vendor   relationships;   and

     o    Successfully introducing new products under licensed brands.

Our failure to develop new  distribution  channels could have a material adverse
effect on our business, operating results, and financial condition, particularly
future revenue levels.


                                      -17-


<PAGE>
The loss of any of our key  personnel  could  adversely  affect  our  ability to
manage our business:

Our performance and future success depends to a significant extent on our senior
management and technical personnel, and in particular on the skills, experience,
and continued efforts of Matthew Jore, Jore Corporation's founder, President and
Chief  Executive  Officer.  The loss of  Matthew  Jore or any of our  other  key
personnel could have a material adverse effect on our business and prospects. We
have  employment  agreements  with key  personnel,  but do not  have  employment
agreements with any of our other employees.

Our  production  processes  could be disrupted and our cost of production  could
increase significantly if our manufacturing  equipment does not meet performance
expectations or is not available for future purchase:

The failure of our manufacturing  equipment to perform reliably and as designed,
our  inability  to  source  such  equipment  from  present  suppliers,   or  the
obsolescence of our equipment could disrupt our production processes, reduce our
sales and increase production costs. Our business is dependent on the successful
implementation  and  operation  of  advanced  manufacturing  technologies.   Our
manufacturing  equipment  may  fail  to meet  our  performance  requirements  or
continue to operate reliably because of unexpected design flaws or manufacturing
defects. Moreover, we may be unable to continue to obtain equipment and supplies
from our present  suppliers if they cease producing or selling such equipment or
supplies or opt not to sell to us. For example, in 2000 we initiated  litigation
against an  equipment  supplier  regarding  its sale of  exclusive  equipment to
competitors of Jore. Pursuant to the litigation,  Jore is not taking delivery of
additional  equipment  or  making  minimum  payments  to  the  manufacturer.  In
addition,  we cannot be certain  that our  manufacturing  processes  will remain
competitive with new and evolving technologies.

Our  inability to introduce  new products  that are accepted by the market could
adversely affect our sales, our reputation as an innovative manufacturer and our
ability to obtain new customers:

Our future success will depend in part on our continuous and timely  development
and introduction of new products that address evolving market  requirements.  We
cannot assure that our new products will be introduced on a timely basis or will
achieve market acceptance.  We may be unable to successfully develop and produce
new products because of a lack of market demand, production capacity constraints
or the lack of relevant technical and engineering  expertise.  Factors affecting
the market acceptance of our new products include:

     o    Functionality, quality and pricing;

     o    Demand from end-users;

     o    Favorable reviews in trade publications;

     o    Adequate marketing support;

     o    The introduction of competitive products; and

     o    General  trends in the power  and hand  tool  industries  and the home
          improvement market.

Our  business is seasonal  and our  operating  results are subject to  quarterly
fluctuations:

Seasonality  and  unanticipated  changes  in  customer  demand  could  cause our
revenue,  expenses,   inventory  levels  and  operating  results  to  fluctuate.
Currently,  the majority of our sales occur  during the third and fourth  fiscal
quarters and our operating  results depend  significantly on the holiday selling
season. In 1998, 1999 and 2000 approximately  67%, 67% and 70% respectively,  of
our net revenues were generated during the third and fourth


                                      -18-
<PAGE>


quarters. To support this sales peak, we anticipate demand and build inventories
of finished goods  throughout the first two fiscal  quarters.  In addition,  our
customers may reduce or delay their orders during the first two fiscal  quarters
to balance their inventory between the holiday selling seasons. As a result, our
levels of raw  materials  and  finished  goods  inventories  tend to be at their
highest, relative to sales, during the first half of the year. These factors can
cause variations in our quarterly operating results and potentially expose us to
greater adverse effects of changes in economic and industry trends.

In addition,  a substantial portion of our sales depends upon receiving purchase
orders for products to be manufactured  and shipped in the same quarter in which
these orders are received.  While we monitor our customers'  needs, we typically
have a small backlog relative to net revenues,  and a significant portion of our
orders are placed for production and delivery within a few weeks from receipt of
the order.  As a result,  the timing of revenue  may be  affected  by changes in
production  volume in response to fluctuations in customer and end-user  demand,
introduction of new products by customers, and balancing of customers' inventory
to their sales estimates.

Our growth strategy depends in part on our expansion into foreign markets, which
may be difficult or unprofitable:

We intend to expand distribution of our products in foreign markets.  Because of
the size and  continued  growth of the power tools  accessories  market  outside
North America, the failure to successfully enter foreign markets could limit our
growth  prospects.  In our  attempt  to enter  foreign  markets,  we may  expend
financial and human resources  without a corresponding  increase in revenues and
profitability.  We  cannot  assure  that we will  be able to  penetrate  foreign
markets or that this growth strategy can be implemented profitably.  Penetrating
and conducting business in foreign markets involves challenges, including:

     o    Local acceptance of our products;

     o    Currency  controls  and  fluctuations  in foreign  exchange  rates;

     o    Regulatory requirements such as tariffs and trade barriers;

     o    Longer payment cycles and increased  difficulty in collecting accounts
          receivable;

     o    Unfavorable tax consequences; and o Transportation and logistics.

Existing and  potential  litigation  may divert  management  resources and could
adversely affect our operating results:

From time to time we have been,  and expect to continue to be,  subject to legal
proceedings and claims in the ordinary course of our business. Such claims, even
if not meritorious,  could require the expenditure of significant  financial and
managerial resources.

In December 2000, we entered into litigation with International Tool Machines of
Florida,  Inc.  ("ITM"),  the manufacturer and supplier of our proprietary drill
bit  manufacturing  machinery.  We  believe  that ITM  sold  and made  available
machines  that  are  substantially  identical  to our  proprietary  machines  in
violation  of  our  exclusive  agreement.  If  ITM  is  permitted  to  sell  our
proprietary  machines to third parties, we could lose a significant  competitive
advantage, which could have a material adverse effect on our operating results.


                                      -19-
<PAGE>


Unfavorable  changes in costs and  availability  of raw  materials may adversely
affect our  manufacturing  operations  and  ability to  satisfy  our  customers'
orders:

We purchase raw materials,  key components and certain products from third party
vendors.  Although  there are  alternative  sources  for  these  raw  materials,
components,  and products, we could experience manufacturing and shipping delays
if it became  necessary to change or replace  current  suppliers,  or to produce
certain  components  or  products  internally.  In  addition,  the prices of raw
materials  supplied by certain  vendors are  influenced  by a number of factors,
including  general economic  conditions,  competition,  labor costs, and general
supply  levels.  Our  inability  to  obtain  reliable  and  timely  supplies  of
out-sourced products and components and raw materials on a cost effective basis,
or any unanticipated  change in suppliers,  could have a material adverse effect
on our manufacturing operations, revenues and profitability.

We depend on patent,  trademark  and trade  secret  protection  to maintain  our
market position:

Our success  depends in part on our ability to obtain patent  protection for our
products,  maintain trade secret protection for our proprietary  processes,  and
operate  without  infringing on the proprietary  rights of others.  Our existing
U.S. and foreign patents expire between 2002 and 2019. We have filed, and intend
to file, applications for additional patents covering our products. We cannot be
certain that any of these patent  applications will be granted,  that any future
inventions  that we develop will be  patentable or will not infringe the patents
of others,  or that any patents issued to or licensed by us will provide us with
a competitive advantage or adequate protection for our technology.  In addition,
we cannot  assure you that any  patents  issued to or licensed by us will not be
challenged, invalidated or circumvented by others.

We believe that  trademarks  owned or licensed by us enhance our position in the
marketplace  and are important to our business.  Our inability to use any of our
trademarks could adversely affect our customer  relationships  and revenues.  We
cannot be certain that we will retain full rights to use our  trademarks  in the
future.

The cost of protecting  and defending our patents,  trademarks and trade secrets
may be significant:

The  defense  and  prosecution  of  patent  claims,  and  litigation   involving
intellectual  property rights generally,  is both costly and time consuming.  If
any of our products are found to have  infringed any patent or other third party
proprietary  right,  we  may  be  unable  to  obtain  licenses  to  continue  to
manufacture  and sell such  products  or may have to pay  damages as a result of
such  infringement.  We endeavor to protect our trade  secrets by entering  into
confidentiality  agreements  with third parties,  employees and  consultants and
generally  control access to our facilities and  distribution of our proprietary
documentation   and  other   materials.   Confidentiality   and   non-disclosure
obligations  are  difficult  to  enforce,  however,  and we may lack an adequate
remedy for breach of a confidentiality agreement.  Moreover, a third party could
gain  access  to our  trade  secrets  through  means  other  than by breach of a
confidentiality   agreement,   or  could   develop   independently   a   process
substantially  similar  to our trade  secrets.  In  addition,  the laws of other
countries in which we market or may market our products may afford  little or no
effective protection of our intellectual property.


                                      -20-
<PAGE>


We could become subject to product liability lawsuits:

We face a potential risk of product liability claims because our products may be
used in activities  where injury may occur such as the building and construction
industries.  Although we have product liability insurance coverage, we cannot be
certain that this insurance will adequately protect us against product liability
claims or that we will be able to maintain this insurance at reasonable cost and
on  reasonable  terms.  To the extent that we are found  liable for damages with
respect to a product  liability  claim and lack adequate  insurance  coverage to
satisfy such claim, our business,  operating  results,  and financial  condition
could be materially and adversely affected.

The Jore family controls all matters requiring  shareholder approval possibly in
conflict with your interests:

Matthew Jore,  acting alone, or the Jore family,  acting  together,  are able to
control all matters requiring shareholder approval.  Matthew Jore, President and
Chief Executive  Officer,  his brother  Michael Jore,  Executive Vice President,
trusts  controlled  by Matthew and Michael  Jore,  and other members of the Jore
family beneficially own approximately 62.2% of our outstanding common stock. Our
Articles  of  Incorporation  and Bylaws do not provide  for  cumulative  voting;
therefore,  the Jore family has the ability to elect all of our  directors.  The
Jore family also has the ability to approve or disapprove  significant corporate
transactions  without further vote by other investors.  This ability to exercise
control  over all  matters  requiring  shareholder  approval  could  prevent  or
significantly delay another company or person from acquiring or merging with us.

Unsatisfactory  performance of our new information  technology system could slow
our growth:

The  satisfactory  performance and  reliability of our  information  systems are
essential to our  operations  and continued  growth.  We have  implemented a new
information  technology system, parts of which became operational during July of
1999.  If the system fails to perform  reliably or  otherwise  does not meet our
expectations, or if we fail to successfully complete the implementation of other
modules of the system, we could experience design,  manufacturing,  and shipping
delays,  which in turn,  could increase our costs and result in deferred or lost
sales.  Failure  to  maintain  our new  information  system,  or  unsatisfactory
performance of the system, could disrupt manufacturing  operations and reporting
systems,  cause  delays in  production  and shipping of product,  and  adversely
affect our costs and our responsiveness to customers.

Certain  provisions  under state  corporate law and our corporate  charter could
have an adverse effect on our stock price:

Certain  provisions  of  our  Articles  of  Incorporation,  Bylaws  and  Montana
corporate law could be used by our incumbent management to make it substantially
more difficult for a third party to acquire control of Jore  Corporation.  These
provisions  could  discourage  potential  takeover  attempts and could adversely
affect the market price of our common stock.

ITEM 2.  PROPERTIES

Our  operations  are  housed  in  approximately  280,000  square  feet of  owned
facilities located on a 120 acre site near Ronan,  Montana, a 44,000 square foot
distribution facility located in Missoula, Montana, which we rent with an option
to purchase,  a 20,000  square foot leased  warehouse  in Missoula,  Montana and
approximately  10,000  square feet of leased space in Edgerton,  Wisconsin.  Our
existing  facilities in Ronan,  Montana  include three  buildings


                                      -21-
<PAGE>


from  which we  provide  manufacturing,  assembly,  packaging,  warehousing  and
administrative functions. We believe these facilities are sufficient to continue
to meet our needs for the foreseeable future

ITEM 3.  LEGAL PROCEEDINGS

From time to time we have been,  and expect to continue to be,  subject to legal
proceedings and claims in the ordinary course of our business,  including claims
of  alleged  infringement  of  third-party  trademarks  and  other  intellectual
property  rights.  Such  claims,  even if not  meritorious,  could  require  the
expenditure of significant financial and managerial resources.

In December 2000, we entered into litigation with International Tool Machines of
Florida,  Inc.  ("ITM"),  the manufacturer and supplier of our proprietary drill
bit  manufacturing  machinery.  We commenced this litigation  because we believe
that ITM has  sold  and made  available  machines  that  are  substantially  our
proprietary machines and the related technology to third parties in violation of
our exclusive  dealing and  nondisclosure  agreements with ITM. In addition,  we
believe ITM intends to  continue  doing so. We seek to prevent ITM from  selling
these or similar machines to others, including our competitors,  in violation of
existing  agreements  with ITM. ITM has filed a counterclaim  alleging breach of
contract and damages, among other things.

We  originally  commenced  similar  litigation in May 2000,  and had  previously
settled  the  case  in  June  2000.  However,  we  became  aware  of  additional
information  which  led us to the  conclusion  that  ITM  was not  honoring  the
agreements or the settlement agreement, and we recommenced the litigation.

If ITM is permitted to sell our proprietary drill bit manufacturing equipment to
third parties,  including our competitors,  we would lose our exclusive right to
these  technologically  advanced drill bit manufacturing  machines. As a result,
the  comparative  advantages that we enjoy over our competitors in our drill bit
manufacturing  process  could  be  lost,  and our  competitors  would be able to
achieve  significant  cost savings and quality  improvements  in producing drill
bits. An outcome  unfavorable to us in this matter could have a material adverse
effect on our competitive position in the drill bit market.

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

No matters were submitted for a vote of  stockholders  of the Company during the
fourth quarter of the year ended December 31, 2000.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

The executive  officers and directors of Jore Corporation,  as of March 1, 2001,
and their ages and positions, are as follows:

Name                         Age          Position

Matthew B. Jore               38          President, Chief Executive Officer
                                          and Chairman
Michael W. Jore               41          Executive Vice President and
                                          Director
David H. Bjornson             44          Executive Vice President, General
                                          Counsel, Secretary and Director
Monte Giese                   30          Chief Financial Officer
Mick Quinlivan                41          Controller
Jeffrey M. Heutmaker          38          Vice President--Strategic Initiatives

Matthew  B.  Jore is the  founder  of Jore  Corporation.  He has  served  as our
President  since June  1990,  Chief  Executive  Officer  since  March 1999 and a


                                      -22-
<PAGE>


Director  since  its  inception  in  February  1990.  He holds a B.S.  degree in
Economics from the University of Montana.

Michael W. Jore has served as Executive Vice  President  since November 1998 and
Director of Jore  Corporation  since February  1990.  From June 1990 to November
1998,  he was the  Vice  President  of Jore  Corporation.  Before  joining  Jore
Corporation,  he worked for Plum Creek Timber, L.L.C. for ten years. Matthew and
Michael Jore are brothers.

David H. Bjornson has served as General  Counsel since November 1998,  Executive
Vice President  since March 2000 and as a Director since May 1998. Mr.  Bjornson
also served as Chief  Financial  Officer from  November 1998 through March 2000.
From 1985 to 1998,  he was a partner  or  associate  attorney  with law firms in
Seattle,  Washington and Missoula, Montana, focusing his practice in the area of
business  transactions  and  corporate  and tax law. From 1979 to 1981 he worked
with the international accounting firm of Touche Ross & Co. in Seattle. He holds
an L.L.M.  degree in taxation  from New York  University,  and a J.D. and a B.A.
degree in Business  Administration  with honors from the  University of Montana.
Mr. Bjornson also holds a Certified Public Accountant Certificate.

Monte Giese has served as Chief  Financial  Officer  since  April  2000.  A 1993
graduate of Harvard  University,  from 1993 to 1995, Mr. Giese was an investment
banker with Alex Brown and Sons in Baltimore, Maryland. From 1995 to April 2000,
he was a Vice President in the investment  banking  division of D. A. Davidson &
Co.

Mick Quinlivan has served as Controller of Jore Corporation  since January 2001.
From 1996 to December 2000, Mr. Quinlivan served as Controller for Itron,  Inc.,
a manufacturer of data collection  systems.  Prior to 1996, he worked in various
financial  management  positions  for Itron,  Inc.  He has a B.B.A.  degree from
Gonzaga University and holds a CPA certificate.

Jeffrey M. Heutmaker has served as Vice  President--Strategic  Initiatives since
June 1999.  From June 1996 to June 1999 Mr.  Heutmaker  was an attorney with Van
Valkenberg Furber Law Group P.L.L.C, a law firm located in Seattle,  Washington.
From 1985 to 1996, Mr. Heutmaker practiced law in Seattle, Washington, including
with the  international  firm of Bogle & Gates,  where his  practice  focused on
securities law, licensing and mergers and acquisitions transactions.  He holds a
J.D.  degree  from  Notre Dame Law School  and a B.A.  degree in  Economics  and
English Literature from the University of Puget Sound.

Our  executive  officers  will serve as officers of Jore  Corporation  until the
regular meeting of the Board of Directors in June 2001 or until their respective
successors shall have been elected.

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS

Market Information

Our common stock is traded on the Nasdaq National Stock Market  ("Nasdaq") under
the symbol "JORE." Our common stock commenced trading on September 23, 1999. The
following  table sets forth the high and low daily  average  sale prices for our
common  stock as reported on the Nasdaq for the period from  September  23, 1999
through the end of fiscal year 1999, and for fiscal year 2000.


                                      -23-
<PAGE>


                                                      High           Low
Year ended December 31, 1999
         Third Quarter (from September 23)          $12.3125       $9.1000
         Fourth Quarter                             $12.8750       $7.0625

Year ended December 31, 2000
         First Quarter                              $ 9.9375      $ 5.5625
         Second Quarter                             $ 6.2500      $ 4.6875
         Third Quarter                              $ 5.7813      $ 4.8750
         Fourth Quarter                             $ 5.9844      $ 3.4063

Holders

As of March 1,  2001,  there  were  approximately  99  holders of record of Jore
common stock.

Dividends

We did not declare or pay any dividends in 2000,  and do not  anticipate  paying
cash dividends in the  foreseeable  future.  We intend to retain future earnings
for   reinvestment  in  the  operation  and  expansion  of  our  business.   Any
determination  to pay cash  dividends  will be at the discretion of the Board of
Directors  and  will be  dependent  upon our  financial  condition,  results  of
operations,  capital  requirements  and  such  other  factors  as the  Board  of
Directors deems relevant.

Under certain loan covenants associated with our line of credit facility, we are
restricted from declaring or paying  dividends,  or from purchasing,  redeeming,
retiring or otherwise  acquiring  for value any of our shares of stock,  or from
otherwise distributing property to shareholders with some limited exceptions.

Sales of Unregistered Securities

On December 22, 2000,  we issued 37,500 shares of our common stock for $4.00 per
share and warrants  exercisable  for three years for 15,000  shares at $5.00 per
share to an unrelated  party.  The offer and sale of these securities was exempt
from  registration  under the  Securities  Act of 1933, as amended,  pursuant to
section 4(2) thereof by virtue of the nature of the offering.


ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," our consolidated  financial  statements and notes thereto and other
financial information included elsewhere in this report.


                                      -24-

<PAGE>

<TABLE>
<CAPTION>
                                                                         (In thousands except per share amounts)

                                                                            2000       1999(*2)      1998       1997     1996
<S>                                                                      <C>          <C>          <C>       <C>       <C>
Operating Data

              Net sales                                                  $  52,847    $  53,872    $44,888   $23,656   $ 9,686

              Income (loss) from operations                                 (9,412)       9,255      7,734     3,445       (63)

              Net income (loss) before extraordinary item                  (13,325)       6,477      6,240     2,541      (558)
                and income taxes

              Provision (benefit) for income taxes                          (2,424)       2,545       --        --        --

              Income (loss) before extraordinary item                      (10,901)       3,932      6,240     2,541      (558)
              Extraordinary item:
              Loss related to early retirement of
                debt, net of taxes                                            --            914       --        --        --

              Net income (loss)                                          $ (10,901)   $   3,018    $ 6,240   $ 2,541   $  (558)


              Income (loss) before extraordinary item
                per common share:
                   Basic                                                     (0.79)   $    0.37    $  0.66   $  0.27
                   Diluted                                                   (0.79)   $    0.36    $  0.66   $  0.27

              Effect of extraordinary item on income (loss)
                per common share:
                   Basic                                                      --      $   (0.09)      --        --
                   Diluted                                                    --      $   (0.09)      --        --

              Net income (loss) per common share:
                   Basic                                                     (0.79)   $    0.28    $  0.66   $  0.27
                   Diluted                                                   (0.79)   $    0.28    $  0.66   $  0.27
              Shares used in calculation of income per share
                   Basic                                                    13,857       10,653      9,412     9,358
                   Diluted                                                  13,857       10,893      9,436     9,358

              Pro forma data (unaudited) *1:
                Net income                                                    --      $   3,018    $ 6,240   $ 2,541
                Proforma provision for income taxes                           --          1,303      2,343       900
              Pro forma net income                                            --      $   1,715    $ 3,897   $ 1,641

              Pro forma net income per common share
               (unaudited):
                Basic                                                         --      $    0.16    $  0.41   $  0.18
                Diluted                                                       --      $    0.16    $  0.41   $  0.18

     BALANCE SHEET DATA
              Inventories                                                $  26,206    $  27,795    $ 8,072   $ 4,740   $ 2,974
              Current assets                                                48,471       58,683     25,111    11,375     5,166
              Property, plant and equipment, net                            79,882       58,561     19,816     6,081     4,196
              Total assets                                                 129,284      117,908     45,963    17,759     9,548

              Total current liabilities                                  $  90,528    $  42,605    $25,083   $10,549   $ 5,210
              Long-term debt, net of current portion                         3,402       27,779     14,589     4,689     4,189
              Total liabilities                                             95,325       73,153     39,673    15,238     9,399
              Total shareholders' equity                                    33,959       44,754      6,289     2,521       149
</TABLE>

                                     -25-
<PAGE>


*1 - Pro Forma  Information  - Prior to its  initial  public  offering of common
stock  ("IPO") in September  1999,  the Company and its  subsidiaries  elected S
Corporation  status under the Internal Revenue Code. In connection with the IPO,
the Company's S Corporation status was terminated and the Company became subject
to federal and state income taxes applicable to C corporations. The accompanying
consolidated  statements of operations  reflect a pro forma income tax provision
or benefit for all periods prior to the Company's IPO as if the Company had been
taxed as a C corporation.

*2 - As restated.  See Note 15 to the consolidated financial statements.

ITEM 7.  MANAGEMENT'S  DISCUSSION AND ANAYLISIS OF FINANCIAL  CONDITION AND
         RESULTS OF OPERATIONS

Subsequent to the issuance of the consolidated financial statements for the year
ended  December 31,  1999,  the  Company's  management  determined  that the net
deferred tax liability  resulting from the conversion to a C corporation from an
S  corporation  should have been  recorded  as income tax expense  rather than a
direct reduction of equity in the 1999 consolidated  financial statements.  As a
result,  the  accompanying  1999  consolidated  financial  statements  have been
restated from amounts  previously  reported to give effect to the  correction of
this item. See Note 15 of the consolidated financial statements for a summary of
significant effects of the restatement.

Management's  discussion  and  analysis of  financial  condition  and results of
operations  for the years ended  December  31,  2000,  1999,  and 1998 have been
adjusted to reflect the restatement.

The following  discussion and analysis  should be read in conjunction  with Jore
Corporation's  Consolidated  Financial  Statements  and  related  Notes  thereto
included  herein  under  Item  8.  All  statements,  trend  analysis  and  other
information   contained  in  this  Form  10-K   relative  to  markets  for  Jore
Corporation's  products  and trends in  revenue,  gross  margin and  anticipated
expense  levels,  as well as other  statements  including  words such as "seek,"
"anticipate,"  "believe,"  "plan,"  "estimate,"  "expect" and "intend" and other
similar expressions, constitute forward-looking statements within the meaning of
Section  21E  of  the  Securities  Exchange  Act  of  1934,  as  amended.  These
forward-looking  statements are subject to business and economic risks,  and our
actual results of operations may differ  materially  from those contained in the
forward-looking  statements.  Factors  that could  cause or  contribute  to such
differences  include,  but are not  limited  to,  those  discussed  under  "Risk
Factors" set forth in Item 1 above. You should not rely on these forward-looking
statements,  which reflect only our opinion as of the date of this report. We do
not assume any obligation to update forward-looking statements.

Overview

We are a leader in the design,  manufacture  and marketing of  innovative  power
tool  accessories  and  hand  tools  for  the  do-it-yourself  and  professional
craftsman markets.  Our products include industrial quality drilling and driving
power tool accessories,  a proprietary quick-change drilling and


                                      -26-
<PAGE>


driving system, and selected hand tools. The quick-change  system provides rapid
interchangeability for a full range of hex-shank drilling,  driving, and surface
preparation  accessories.   The  system  also  includes  proprietary  reversible
drilling and driving  tools,  screw guides,  and other  specialized  accessories
designed to save users time and improve tool functionality.

We manufacture our products using advanced technologies and equipment designs to
achieve competitive advantages in cost, quality, and production capacity. During
the past two years we have  invested  nearly  $70  million  in  state-of-the-art
manufacturing and assembly capabilities.  We have also vertically integrated our
production  capabilities  which  include  metal  injection  and casting,  rotary
transfer  cutting,   plastic  injection  molding,  blow  molding,  and  advanced
machining.

Our business  commenced  in 1987 where we sold a limited  number of drilling and
driving  accessories  to  independent  local and  regional  hardware  stores and
building supply centers. In 1990, Makita became our first national customer.  By
1996, we expanded our product  portfolio to include our reversible  drilling and
driving  tools  and  contractor  versions  of our  products.  We also  began  to
diversify our customer  base by selling  products to Black &  Decker/DeWalt,  as
well as to  retail  customers.  In 1997 and 1998,  we  continued  to expand  our
customer base by selling to retailers  such as Sears,  The Home Depot,  Canadian
Tire, and Tru*Serv.  We increased our gross margins in 1999 by selling direct to
major  retailers,  and  through  sales of  private  label  and  Stanley  branded
products.

Our  2000  operating  results  reflect   difficult  but  important   initiatives
undertaken  to  complete  the  transition  to  a  technology-based,   vertically
integrated  manufacturing  operation,  generate incremental sales volume through
the  direct-to-retail  channel under the Stanley(R) brand, and enhance our sales
and marketing  organization  in light of the  direct-to-retail  sales  strategy.
These transitional  efforts resulted in significant  inefficiencies and start-up
costs totaling $9.8 million.

Because of our results for 2000, early in 2001, we made some critical  decisions
to improve our  operating  performance.  Specifically,  we: a) engaged in active
discussions with candidates to strengthen our senior management team; b) reduced
our workforce from approximately 600 employees one year ago to approximately 370
employees currently,  resulting in an insignificant charge to operations; and c)
retained  Glass &  Associates,  a  management  consulting  firm,  to  assist  in
improving  operations and restructuring our credit facilities.  In addition,  we
have retained the investment  banking firm of D.A.  Davidson to actively explore
strategic partnerships or equity financing.

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of  liabilities  in the normal  course of  business.  As shown in the  financial
statements,  during the year ended  December 31, 2000, we incurred a net loss of
$10.9 million and our current  liabilities  exceeded our current assets by $42.1
million.  We also hold  significant  amounts of inventory which has been written
down by $5.9 million to net realizable  value. In addition,  we have substantial
excess  manufacturing  capacity  (see  Note  14 in  the  consolidated  financial
statements).  As  described  in Note 9, we were not in  compliance  with several
provisions  of our  long-term  debt  agreements  as of December  31,  2000,  and
accordingly,  long-term  debt totaling  $33.6  million has been  classified as a
current liability.  These factors,  among others,  raise substantial doubt about
whether we will be able to continue as a going  concern for a reasonable  period
of time.


                                      -27-
<PAGE>


Results of Operations

The following table sets forth,  for the periods  indicated,  certain  financial
data as a percentage of net revenues:

                                                       Years Ended December 31,
                                                     ---------------------------
                                                      1998     1999      2000
                                                     ------   ------    ------
               Net revenues                          100.0%   100.0%    100.0%
               Cost of goods sold                     69.5     65.6      89.4
               Gross profit                           30.5     34.4      10.6
               Operating expenses:
               Product development                     1.1      1.2       2.4
               Sales and marketing                     5.6      6.0      14.0
               General and administrative              6.6     10.1      11.9
               Total operating expense                13.3     17.3      28.3
               Income (loss) from operations          17.2     17.1     (17.7)
               Other expense:
               Interest expense                        3.0      5.7       7.4
               Other income expense                    0.3     (0.5)      0.0
               Net other expense                       3.3      5.2       7.4
               Net income (loss) before
                 extraordinary item and
                 income taxes                         13.9%    12.0%    (25.2%)

2000 Compared to 1999

Net revenues  decreased 2% from $53.9  million in 1999 to $52.8 million in 2000.
We deferred  approximately  $1.0 million of revenue from the fourth quarter 2000
until the first  quarter  2001 to comply with the  guidance of Staff  Accounting
Bulletin 101,  "Revenue  Recognition  in Financial  Statements."  This guidance,
among  other  things,  stipulates  revenue  recognition  according  to  terms of
shipment.  We expect that  adoption  of this new  accounting  guidance  will not
materially affect cash flows, financial position or results of operations in the
future.

The  overall  decrease in net  revenues in 2000 is  primarily a result of Jore's
shift in sales focus from power tool  manufacturers  to  direct-to-retail  sales
under licensed or private label brands.  Revenues from the OEM channel were $9.6
million  in 2000 as  compared  to  $17.7  million  in  1999.  Revenues  from the
direct-to-retail  channel  under  licensed  brands were $8.3 million in 2000, up
from $1.4  million  in 1999.  Revenues  to  private  label  retailers  increased
slightly to $35.0 million in 2000 from $34.7 million in 1999.

We expect that  revenues  from the OEM channel will  continue to decrease in the
future as we focus on growing our sales through the direct-to-retail channels.

Cost of goods sold, excluding inventory and manufacturing  variances,  increased
from  $35.3  million  in 1999 to $37.5  million  in  2000.  As a  percentage  of
revenues, cost of goods sold increased from 65.6% in 1999 to 71.0% in 2000. This
increase is attributable to aggressive  pricing on large sets,  volume discounts
provided to new retail customers, and increased outgoing freight costs.

Inventory   and   manufacturing   variances:   Throughout   2000,   we  incurred
inefficiencies  as we  continually  dealt with,  revised  and refined  equipment
installations,  cycle times, and process flows. This resulted in lower equipment
utilization  rates and higher  product  costs which led to the sharp  decline in
margins  during 2000.  During 2000 we incurred  $9.8  million of  inventory  and
manufacturing  variances  related to  production  inefficiencies,  and  start-up
costs.  Of the total,  $5.9  million was  comprised of excess labor


                                      -28-
<PAGE>


and overhead  associated with start-up  activities for the nationwide rollout of
our fast-change products to The Home Depot, and inventory builds in anticipation
of higher revenues for the year.  Construction of our new distribution center in
the second half of the year,  and  deployment of additional  capital  equipment,
compounded  some of the  inefficiencies.  The remaining  variance amount of $3.9
million   consists   equally  of  inventory   count   variances  and  shrinkage,
extraordinary  freight charges for material and product  expediting,  and higher
purchase costs for raw materials.

Our 2001 beginning  inventories are stated at market value, and as such, we will
not generate profits as we sell this inventory.

Product development  expenses increased from $621,000 in 1999 to $1.3 million in
2000,  representing a 106.9%  increase.  Increases in professional and technical
staff during 2000 accounted for the majority of the increase. In addition to the
labor  expensed in 1999 and 2000, we  capitalized  $1.3 million and $1.5 million
respectively,  of labor  related  to  equipment  constructed  in-house.  Product
development  expenses  are expected to decrease in 2001 as we scale back certain
activities and staffing.

Sales and marketing expenses increased from $3.2 million in 1999 to $7.4 million
in 2000, representing a 129% increase. Advertising and promotional expenses grew
$2.6 million due to increased retail  advertising,  primarily intensive in-store
consumer education and promotional activities to support the nationwide roll-out
at The Home Depot, and promotional  activities at other retailers.  Higher sales
commission expenses and the addition of inside sales  professionals  during 2000
also contributed to the overall increase. We expect sales and marketing expenses
to decrease slightly in 2001.

General and administrative  expenses increased from $5.5 million in 1999 to $6.3
million in 2000, or 15%. This growth results from selected staff  additions,  an
increase  in   professional   fees  paid  to  outside   consultants  and  higher
depreciation  and  property  taxes.  General  and  administrative  expenses  are
expected  to  decline  in 2001 due  primarily  to  staff  reductions  that  were
implemented early in 2001.

Other expense:  Net interest expense increased 39%, from $2.8 million in 1999 to
$3.9  million in 2000 due to a higher  level of debt used to finance our capital
expansion  program.  Interest  expense is  expected  to  increase  in 2001 as we
complete the majority of our vertical  integration  efforts and  correspondingly
capitalize a lesser amount of interest,  and from  anticipated  higher  interest
rates on our operating line of credit.  Capitalized interest was $1.1 million in
1999 and $2.2 million in 2000.

Income taxes: Our effective tax rate was 53% (pro forma as restated. See Note 15
to  the   consolidated   financial   statements)  and  18%  in  1999  and  2000,
respectively.  We provided  valuation  allowances  on our deferred tax assets in
2000,  causing  the  effective  rate to decrease  from the  previous  year.  The
valuation  allowances were provided  because certain  components of our deferred
tax assets may expire before they can be utilized. Our effective tax rate varies
from  year-to-year  due to changes in valuation  allowances,  new or revised tax
legislation,  and differences in the level of business  performed in various tax
jurisdictions.

1999 Compared to 1998

Net  revenues  increased  from $44.9  million in 1998 to $53.9  million in 1999,
representing a 20.0% increase.  Of the $9.0 million increase,  sales to existing
customers  accounted for $6.2 million and sales to new  customers  accounted for
$2.8 million.  Most of this increase for new customers  resulted


                                      -29-
<PAGE>


from additional sales under the Stanley(R) brand to The Home Depot,  Menards and
various other outlets.

Cost of goods  sold  increased  from $31.2  million in 1998 to $35.3  million in
1999,  representing  a 13.3%  increase.  Cost of goods sold as a  percentage  of
revenues  decreased  from  69.4%  in 1998 to 65.6% in  1999.  This  decrease  is
attributable to an increase in sales to direct  retailers at better  margins,  a
larger sales volume over which to spread fixed  overhead  costs,  reductions  in
material costs, and savings related to new manufacturing processes.

Product  development  expenses  increased  from  $495,000 in 1998 to $621,000 in
1999, representing a 25.4% increase.  Professional and technical labor accounted
for the majority of the increase as we hired additional engineers and machinists
to develop our proprietary  products and  corresponding  processes.  Capitalized
labor for equipment  constructed in-house was $211,000 in 1998 and $1,276,000 in
1999.

Sales and marketing expenses increased from $2.5 million in 1998 to $3.2 million
in 1999,  representing  a 28.7%  increase.  Advertising  and promotion  expenses
increased by approximately $1.0 million due to increased retail advertising, but
this  increase  was  partially  offset by a  decrease  in the  sales  commission
percentage paid to our sales representative. We increased our internal marketing
and  graphics  staff  to  accommodate   increased  sales  and  customer  support
activities from growing customer diversification.

General and administrative  expenses increased from $3.0 million in 1998 to $5.5
million in 1999,  representing an 82.8% increase. The increase resulted from the
hiring of three new senior level  executives  as well as  increased  finance and
administrative  staff from 67 at December  31, 1998 to 115 at December 31, 1999.
Other nonrecurring  items which increased general and administrative  costs were
training and other costs associated with our new management  information system,
costs associated with our year 2000 computer systems review and compliance,  and
certain indirect costs associated with our initial public offering.

Other expense  increased  from $1.5 million in 1998 to $2.8 million in 1999, due
to a larger amount of debt and the corresponding increase in interest expense.

Extraordinary  item: We incurred an extraordinary  expense of approximately $1.0
million in August 1999 related to the  termination of our former  operating line
of credit.  We expensed the  prepayment  penalty and the  unamortized  financing
costs  associated with the credit line. The proceeds to extinguish the debt came
from our new credit line with First Security Bank.

Pro forma  provision for income taxes:  The pro forma provision for income taxes
reflects  the  estimated  tax expense  that we would have  incurred  had we been
subject to federal and state income taxes as a C corporation  during the period.
The pro forma provision for 1999 reflects a tax rate of 52.7% (as restated,  see
Note 15 to the  consolidated  financial  statements),  which  differs  from  the
federal  statutory  rate due primarily to the effects of state and foreign taxes
and certain tax credits.

Liquidity and Capital Resources

Capital  expenditures and financing associated with those expenditures have been
primary factors  affecting our financial  condition  during the last four years.
Historically,  we have funded our operating and investing  needs with short-term
lines of credit and term loans for equipment  purchases and, to a lesser extent,
cash  provided by  operations.  Our initial  public  offering of


                                      -30-
<PAGE>


common stock in September  1999 provided cash of $38.6  million.  These proceeds
were  used to  repay  debt,  distribute  the  accumulated  but  undistributed  S
Corporation earnings of the Company,  purchase capital equipment,  and invest in
marketable  securities.  Cash, cash equivalents and short-term  investments were
$477,000 as of December  31,  2000,  compared to $7.8 million as of December 31,
1999.  This  decrease is  primarily  attributable  to funding  our 2000  capital
acquisitions.

Net cash used by operating activities was $0.9 million in 1998, $12.3 million in
1999 and $1.9  million  in 2000.  The  significant  decline  in  operating  cash
required for 2000 as compared to 1999 was due to lower cash needs for inventory,
accounts payable and accounts receivable, partially offset by the 2000 net loss.
We expect the lower cash needs for inventory will continue in 2001.

Net cash used by investing  activities was $16.5 million in 1998,  $49.7 million
in 1999 and $18.0 million in 2000. Acquisitions of plant and equipment decreased
from $41 million in 1999 to $26.2 million in 2000.  Over the past three years we
have made minimum annual purchases of certain drill bit  manufacturing  machines
under an agreement that provides Jore the exclusive right to own and operate the
machines.  As more fully  described in Footnote 14 of Notes to our  Consolidated
Financial Statements, we have initiated legal action against the manufacturer of
these  machines  for  marketing  them to our  competitors  in  violation  of our
agreement. Consequently, we are no longer honoring the terms of the agreement as
it  relates  to  minimum  annual  purchase  commitments.  In  addition,  we have
substantially  completed  our vertical  integration  efforts,  and  therefore we
expect to spend less than $8.0  million for capital  equipment  acquisitions  in
2001.

Net cash  provided by  financing  activities  was $17.3  million in 1998,  $62.0
million in 1999 and $20.7 million in 2000. Our initial  public  offering in 1999
provided $38.6 million in cash.  Proceeds from long-term  borrowings  were $24.9
million  in 1999 and $18.3  million in 2000.  Proceeds  from  borrowings  on our
operating line of credit were $11.5 million in 1999 and $10.0 million in 2000.

We have a  revolving  line of credit  with First  Security  Bank,  N.A.,  with a
maximum borrowing limit of $35 million.  Advances on the line are limited to 85%
of eligible accounts receivable and 65% of eligible  inventory.  Interest on the
revolving  credit  line is at the prime rate plus  one-half  percent  or, at our
option,  LIBOR plus 3%. The term of the agreement is through  August 2001.  This
line is secured by receivables,  inventory,  real estate,  equipment and general
intangibles. At December 31, 2000, we had outstanding advances of $35 million on
this line.

On January 6, 2000, the Company closed a Rural Development Guaranteed Commercial
Real Estate Loan through  Mountain West Bank, N.A.,  Missoula  Branch,  for $8.6
million.  The loan is  collateralized  by real estate and buildings owned by the
Company  and  is  personally  guaranteed  by  Matthew  B.  Jore,  the  principal
shareholder of the Company and our Chief Executive Officer.  The terms include a
20-year  amortization,  monthly  payment of $77,734,  with  interest at the Wall
Street  Journal Prime Rate plus .5%,  adjusted  every 5 years,  9% at inception.
This loan refinanced short-term debt of $2.5 million from the same lender, which
is reflected in Note 9.

We  entered  into a  forbearance  agreement  in March 2001 that  provides  us an
overadvance  limit of $8.1 million on our operating line of credit.  In exchange
for this  forbearance,  we have granted second mortgages on certain property and
plant equipment and certain officers have provided personal guarantees. The bank
forbearance  extends to April 30, 2001,  at which time it


                                      -31-
<PAGE>


will be reviewed. Our current borrowing base of eligible accounts receivable and
inventory  supports $21 million in  borrowings  and the  agreement  allows us to
borrow up to approximately $29 million. We are currently overadvanced by $7.5 to
$8 million.

There can be no assurance  that we will  successfully  restructure  our debt, or
that our creditors will waive their rights under our credit agreements.  Without
a debt restructuring or extension,  or an equity infusion,  we will be forced to
liquidate our assets.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging  Activities,"  and established  standards for derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts and hedging  activities.  The accounting standard is effective for the
Company  beginning in fiscal  2001.  The adoption of SFAS No. 133 did not have a
material effect on the Company's financial statements.

In the fourth quarter 2000, the Company applied the guidance of Staff Accounting
Bulletin 101 ("SAB 101"),  "Revenue  Recognition in Financial  Statements." This
guidance, among other things,  stipulates revenue recognition according to terms
of shipment.  We expect that adoption of this new  accounting  guidance will not
materially effect cash flows, financial position or results of operations in the
future.

Inflation and Interest Rate Risk

Our  operating  results  may be affected  by changes in rates of  inflation  and
market interest  rates.  In particular,  increases in market interest rates will
adversely affect our net income,  as most of our indebtedness  bears interest at
floating  rates  tied to the  prime  rate or  other  interest  rate  benchmarks.
Inflation does not currently affect our operating results materially,  and we do
not expect  inflation to materially  affect our  operations  in the  foreseeable
future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Substantially  all of our cash  equivalents  and short-term  investments  are at
fixed  interest  rates,  and, as such,  the fair value of these  instruments  is
affected  by  changes  in  market  interest  rates.  However,  all of  our  cash
equivalents and marketable  securities  mature within one year. As a result,  we
believe  that the  market  risk  arising  from our  holding  of these  financial
instruments is minimal.  In addition,  all of our current  customers pay in U.S.
dollars  and,   consequently,   our  foreign  currency  exchange  rate  risk  is
immaterial.  We do not have any  derivative  instruments  and do not  engage  in
hedging transactions.

The Company has exposure to interest rate risk from its short-term and long-term
debt.  The Company's  long-term  debt is both fixed rate and variable  rate. The
Company had $42.3 million and $31.3  million of long-term  debt with fixed rates
at  December  31,  2000  and  1999,  respectively  (see  Notes  8 and  9 to  the
consolidated  financial statements for additional  information on short-term and
long-term borrowings). Market risk for fixed-rate long-term debt is estimated as
the potential  decrease in fair value  resulting from a  hypothetical  100 basis
points  increase  in interest  rates and amounts to $500,274 as of December  31,
2000.  The  Company  does not use  derivative  financial  instruments  to manage
interest  rate risk.  The  annualized  cash flow risk for the variable rate debt
based upon a hypothetical 100 basis point increase is estimated at $89,412 as of
December 31, 2000.


                                      -32-


<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Jore Corporation
Ronan, Montana

We have audited the accompanying consolidated balance sheets of Jore Corporation
and subsidiaries (collectively, the "Company") as of December 31, 2000 and 1999,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period  ended  December  31, 2000.
Our audits also included the financial  statement  schedules  listed at Item 14.
These   financial   statements  and  financial   statement   schedules  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial position of Jore Corporation and subsidiaries
as of December 31, 2000 and 1999, and the results of their  operations and their
cash flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America.  Also,  in  our  opinion,  such  financial  statement  schedules,  when
considered in relation to the basic consolidated financial statements taken as a
whole,  present  fairly  in all  material  respects  the  information  set forth
therein.

As discussed in Note 15, the accompanying 1999 consolidated financial statements
have been restated.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's loss from operations,  negative
working  capital,  and  noncompliance  with  long-term  debt  covenants,   raise
substantial doubt about its ability to continue as a going concern. Management's
plans  concerning  these matters are also described in Note 1. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

DELOITTE & TOUCHE LLP

Salt Lake City, Utah
March 21, 2001


                                      -33-

<PAGE>

<TABLE>
<CAPTION>
JORE CORPORATION

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   2000                  1999
<S>                                                                                             <C>                   <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                                                     $     353,174         $      94,283
  Short term investments                                                                              124,169             7,691,791
  Accounts receivable, net of allowances for doubtful accounts of $142,384
    and $56,645, respectively                                                                      16,081,543            19,031,479
  Shareholder notes receivable                                                                      1,145,753             1,564,219
  Notes receivable from affiliates                                                                     24,754                11,799
  Inventories                                                                                      26,206,127            27,795,284
  Other current assets                                                                              4,535,751             2,494,509
                                                                                                -------------         -------------
           Total current assets                                                                    48,471,271            58,683,364

PROPERTY, PLANT, AND EQUIPMENT, Net                                                                79,882,489            58,560,925

INTANGIBLES AND OTHER LONG-TERM ASSETS                                                                930,046               663,268
                                                                                                -------------         -------------
TOTAL ASSETS                                                                                    $ 129,283,806         $ 117,907,557
                                                                                                =============         =============
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                              $  11,943,635         $   7,255,786
  Accrued expenses                                                                                  4,348,739             5,966,163
  Operating line of credit                                                                         35,000,000            25,000,000
  Current portion of long-term debt                                                                38,898,805             3,530,287
  Shareholder notes payable                                                                           337,273                81,495
  Other current liabilities                                                                              --                 770,981
                                                                                                -------------         -------------
           Total current liabilities                                                               90,528,452            42,604,712

LONG-TERM DEBT, Net of current portion                                                              3,401,648            27,779,153

DEFERRED INCOME TAX LIABILITIES
                                                                                                    1,394,956             2,769,253
                                                                                                -------------         -------------
           Total liabilities                                                                       95,325,056            73,153,118

COMMITMENTS AND CONTINGENCIES (Notes 1, 8, 9, 11, and 14)

SHAREHOLDERS' EQUITY:
  Preferred stock, no par value
    Authorized, 30,000,000 shares; no shares issued or outstanding                                       --                    --
  Common stock, no par value
    Authorized, 100,000,000 shares; issued and
    outstanding, 13,917,191 and 13,826,020 shares, respectively                                    41,235,617            40,757,891
  Deferred compensation - stock options                                                               (25,793)              (16,529)
  Retained earnings (deficit)                                                                      (7,251,074)            4,013,077
                                                                                                -------------         -------------
           Total shareholders' equity                                                              33,958,750            44,754,439
                                                                                                -------------         -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                      $ 129,283,806         $ 117,907,557
                                                                                                =============         =============
See notes to consolidated financial statements
</TABLE>


                                      -34-
<PAGE>

<TABLE>
<CAPTION>
JORE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
------------------------------------------------------------------------------------------------------------------------------------
                                                                                      2000              1999               1998
                                                                                                     (As Restated
                                                                                                      see Note 15)
<S>                                                                                <C>                <C>                <C>
NET REVENUES                                                                       $ 52,847,038       $ 53,871,762       $44,888,324

COST OF GOODS SOLD (including  $9.8 million of inventory
  variances in 2000, see  Notes 15 and 16)                                           47,265,837         35,313,825        31,167,724
                                                                                   ------------       ------------       -----------
GROSS PROFIT                                                                          5,581,201         18,557,937        13,720,600

OPERATING EXPENSES:
  Product development                                                                 1,285,035            620,950           495,235
  Sales and marketing                                                                 7,398,908          3,227,881         2,508,818
  General and administrative                                                          6,308,324          5,454,268         2,983,035
                                                                                   ------------       ------------       -----------
     Total operating expenses                                                        14,992,267          9,303,099         5,987,088
                                                                                   ------------       ------------       -----------
INCOME (LOSS) FROM OPERATIONS                                                        (9,411,066)         9,254,838         7,733,512

OTHER (INCOME) EXPENSE:
  Interest expense, net                                                               3,894,623          2,873,674         1,337,938
  Other (income) expense                                                                 18,944            (95,709)          159,059
                                                                                   ------------       ------------       -----------
     Net other expense                                                                3,913,567          2,777,965         1,496,997
                                                                                   ------------       ------------       -----------
MINORITY INTEREST                                                                                                              3,519
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
  AND INCOME TAXES                                                                  (13,324,633)         6,476,873         6,240,034

INCOME TAX EXPENSE (BENEFIT)                                                         (2,423,748)         2,544,890              --
                                                                                   ------------       ------------       -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                                             (10,900,885)         3,931,983         6,240,034

EXTRAORDINARY ITEM -
  Loss related to early retirement of debt, net of taxes of $106,428                       --              913,952              --

NET INCOME (LOSS)                                                                  $(10,900,885)      $  3,018,031       $ 6,240,034
                                                                                   ============       ============       ===========
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
  PER SHARE:
     Basic                                                                         $      (0.79)      $       0.37       $      0.66
     Diluted                                                                       $      (0.79)      $       0.36       $      0.66

EFFECT OF EXTRAORDINARY ITEM ON NET INCOME (LOSS) PER SHARE:
     Basic                                                                         $       --         $      (0.09)      $      --
     Diluted                                                                       $       --         $      (0.09)      $      --

NET INCOME (LOSS) PER SHARE:
     Basic                                                                         $      (0.79)      $       0.28       $      0.66
     Diluted                                                                       $      (0.79)      $       0.28       $      0.66

SHARES USED IN CALCULATION OF INCOME (LOSS) PER SHARE:
     Basic                                                                           13,857,294         10,653,247         9,412,497
     Diluted                                                                         13,857,294         10,893,393         9,435,777

PRO FORMA DATA (UNAUDITED):
  Net income                                                                               --         $  3,018,031       $ 6,240,034
  Proforma provision for income taxes                                                      --         $  1,303,057       $ 2,343,193
  Pro forma net income                                                                     --         $  1,714,974       $ 3,896,841

PRO FORMA NET INCOME PER SHARE (UNAUDITED):
  Basic                                                                                    --         $       0.16       $      0.41
  Diluted                                                                                  --         $       0.16       $      0.41
</TABLE>

See notes to consolidated financial statements.

                                      -35-
<PAGE>

<TABLE>
<CAPTION>
JORE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
----------------------------------------------------------------------------------------------------------------------
                                                     Common Stock             Deferred       Retained
                                            -------------------------------   Compensa-      Earnings
                                                Shares          Amount          tion        (Deficit)         Total
<S>                                              <C>         <C>           <C>            <C>             <C>
BALANCE, JANUARY 1, 1998                         9,390,521   $   736,392   $      --      $  1,784,420    $  2,520,812

     Common stock issued                            63,587       757,000                                       757,000
     Common stock issued for land                   54,436       195,048                                       195,048
     Shareholder distributions                                                              (3,425,127)     (3,425,127)
     Noncash compensation - stock options                                        1,623                           1,623
     Deferred compensation - stock options                         6,491        (6,491)                           --
     Net income                                                                              6,240,034       6,240,034
                                                ----------   -----------   -----------    ------------    ------------

BALANCE, DECEMBER 31, 1998                       9,508,544     1,694,931        (4,868)      4,599,327       6,289,390

     Common stock issued for land                   14,256        82,302                                        82,302
     Common stock warrants                                       311,629                                       311,629
     Common stock , initial public
       offering, net                             4,300,000    38,609,246                                    38,609,246
     Exercise of stock options                       3,220        23,846                                        23,846
     Noncash compensation - stock options                                       24,276                          24,276
     Deferred compensation - stock options                        35,937       (35,937)                           --
     Shareholder distributions                                                              (3,604,281)     (3,604,281)
     Net income (as restated, see Note 15)                                                   3,018,031       3,018,031
                                                ----------   -----------   -----------    ------------    ------------

BALANCE, DECEMBER 31, 1999                      13,826,020    40,757,891       (16,529)      4,013,077      44,754,439

     Common stock issued                            37,500       150,000                                       150,000
     Common stock purchased through ESPP            29,675       135,579                                       135,579
     Exercise of stock options                      23,996       143,766                                       143,766
     Noncash compensation - stock options                                       21,429                          21,429
     Deferred compensation - stock options                        30,693       (30,693)                           --
     Tax benefit attributable to appreciation
       of common stock options exercised                          17,688                                        17,688
     Shareholder distributions                                                                (363,266)       (363,266)
     Net loss                                                                              (10,900,885)    (10,900,885)
                                                ----------   -----------   -----------    ------------    ------------
BALANCE, DECEMBER 31, 2000                      13,917,191   $41,235,617   $   (25,793)   $ (7,251,074)   $ 33,958,750
                                                ==========   ===========   ===========    ============    ============

</TABLE>

See notes to consolidated financial statements.


                                      -36-


<PAGE>

<TABLE>
<CAPTION>
JORE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                   2000               1999                 1998
                                                                                                  (As Restated,
                                                                                                   See Note 15)
<S>                                                                            <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                            $(10,900,885)       $  3,018,031        $  6,240,034
  Adjustments to reconcile net income (loss) to net
    cash used by operating activities:
    Depreciation and amortization                                                 4,894,796           2,479,596           1,129,247
    Deferred income taxes                                                        (2,328,527)          2,328,527
    Extraordinary item, early retirement of debt, before tax                                          1,020,380
    Provision for inventory obsolescence                                          1,351,728             287,218              24,552
    Changes in operating assets and liabilities:
      Accounts receivable                                                         2,796,738          (4,430,498)         (8,587,968)
      Inventories                                                                   237,433         (20,011,004)         (3,356,048)
      Other current assets                                                       (1,087,013)         (1,169,059)           (771,949)
      Accounts payable                                                            4,687,849             149,726           3,643,664
      Accrued expenses                                                           (1,617,421)          3,892,461             831,615
      Other current liabilities                                                      79,379             183,171             (22,107)
                                                                               ------------        ------------        ------------
          Net cash used by operating activities                                  (1,885,923)        (12,251,451)           (868,960)
                                                                               ------------        ------------        ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                            (26,199,344)        (41,018,613)        (15,216,599)
  Increase in intangibles and other long-term assets                               (298,727)           (911,207)           (862,686)
  Advances on notes receivable                                                                           (7,500)            (25,000)
  Proceeds on notes receivable                                                                           30,176                 560
  Advances on shareholder notes receivable                                         (108,245)         (2,909,618)         (1,077,893)
  Proceeds on shareholder notes receivable                                          526,711           2,604,382
  Advances on notes receivable from affiliates                                      (12,955)             (1,800)           (326,272)
  Proceeds on notes receivable from affiliates                                                           73,918             304,933
  Purchase of investments                                                                            (7,691,791)
  Proceeds from sale of investments                                               7,567,622
  Other, net                                                                         17,936             152,253             676,788
                                                                               ------------        ------------        ------------
           Net cash used by investing activities                                (18,507,002)        (49,679,800)        (16,526,169)
                                                                               ------------        ------------        ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Distributions paid to shareholders                                               (363,266)         (3,604,281)         (3,425,127)
  Proceeds from initial public offering, net                                                         38,609,246
  Proceeds from options exercised                                                   143,766              23,846
  Proceeds from employee stock purchase plan                                        135,579
  Capital contributions                                                             150,000                                 757,000
  Proceeds from long-term debt                                                   18,274,514          24,887,217          17,149,307
  Payments on long-term debt                                                     (7,283,501)        (10,165,315)         (6,016,653)
  Proceeds from short-term debt                                                     744,078          15,120,487
  Payments on short-term debt                                                    (1,149,353)        (14,355,597)
  Proceeds from operating line of credit, net                                    10,000,000          11,475,195           8,851,867
                                                                               ------------        ------------        ------------
           Net cash provided by financing activities                             20,651,817          61,990,798          17,316,394
                                                                               ------------        ------------        ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                258,892              59,547             (78,735)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                         94,283              34,736             113,471
                                                                               ------------        ------------        ------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                         $    353,175        $     94,283        $     34,736
                                                                               ============        ============        ============
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
  Interest (net of amounts capitalized)                                        $  4,408,412        $  2,839,645        $  1,368,383
  Income taxes                                                                      131,097

SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
  AND INVESTING ACTIVITIES:
  Property acquired under capital leases                                       $ 11,510,704        $ 21,514,918        $     76,466
  Warrants issued with debt                                                            --               311,629                --
  Common stock issued for land                                                         --                82,302             195,048
</TABLE>

See notes to consolidated financial statements

                                      -37-
<PAGE>


JORE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
--------------------------------------------------------------------------------


1.   DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description  of  Business  - Jore  Corporation  (Jore) is a Montana  corporation
engaged in the  design,  manufacture  and  marketing  of  innovative  power tool
accessories and hand tools for the  do-it-yourself  and  professional  craftsman
markets.  Jore sells its products  under its own licensed  Stanley(R)  label and
under  private  labels  to the  industry's  largest  power  tool  retailers  and
manufacturers.

Reorganization  - Prior to its initial  public  offering  (IPO) on September 23,
1999,  Jore  merged  with  two  affiliated  companies.  Because  these  business
combinations  were  with  companies  under  common  control,  the  mergers  were
accounted  for in a  manner  similar  to a  pooling-of-interests.  The  combined
entities included Montana American Manufacturing  Corporation (MAMC) and Montana
American Equipment, LLC (MAE).

MAMC, a Montana corporation, was formed March 26, 1996. On October 1, 1998, MAMC
merged with Jore, and the former MAMC  shareholders  received  360,654 shares of
the Company's common stock.

MAE, a Montana  limited  liability  company,  was formed  September 9, 1996.  On
January  1,  1999,   Jore  acquired  the  assets  of  MAE,  net  of  outstanding
indebtedness, in exchange for 452,774 shares of the Company's common stock.

Principles of Consolidation - The financial  statements  include the accounts of
Jore Corporation and its subsidiaries  which include MAMC, MAE, JB Tool, LLC (JB
Tool), and Jore International Ltd.  (collectively referred to as the "Company").
Intercompany  transactions and balances have been  eliminated.  JB Tool, LLC was
dissolved  on  July  1,  2000,  and  all  of its  assets  and  liabilities  were
distributed to and assumed by Jore Corporation effective as of that date.

Basis of Presentation - The accompanying  consolidated financial statements have
been prepared on a going concern basis,  which  contemplates  the realization of
assets and the satisfaction of liabilities in the normal course of business.  As
shown in the consolidated  financial statements,  during the year ended December
31, 2000, the Company  incurred a net loss of $10.9 million,  and as of December
31, 2000, the Company's current liabilities exceeded its current assets by $42.1
million.  The Company also holds significant amounts of inventory which has been
written down by $5.9 million to net realizable  value. In addition,  the Company
has substantial excess manufacturing  capacity and has entered into an agreement
to make additional  purchases of equipment as discussed in Note 14. As described
in Notes 8 and 9, the Company was not in compliance  with several  provisions of
its debt  agreements as of December 31, 2000 and,  accordingly,  long-term  debt
totaling  $33.6  million,  has been  classified  as a current  liability.  These
factors, among others, raise substantial doubt about whether the Company will be
able to continue as a going concern for a reasonable period of time.


                                      -38-
<PAGE>


The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going  concern.  The Company's  continuation  as a going
concern is dependent upon its ability to generate  sufficient  cash flow to meet
its obligations on a timely basis, to comply with the terms and covenants of its
financing  agreements,  to obtain additional  financing or refinancing as may be
required, and ultimately to attain successful operations.

Management is taking several steps to improve financial  performance and enhance
shareholder  value.  First,  the senior  management  team is being  strengthened
through the addition of a new vice president of sales and  marketing,  and a new
financial  controller.  Jore is also seeking a new president and chief operating
officer.  Second,  the Company has reduced its workforce from  approximately 600
employees at February 1, 2000 to approximately 300 employees  currently.  Third,
Jore is  restructuring  its  internal  sales  organization  and winding down its
relationship  with a third party  sales  organization.  Lastly,  the Company has
hired an outside consultant to assist with debt restructuring, and an investment
banking firm to explore other strategic alternatives.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates - The  preparation of financial  statements in conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires the Company to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities,  and  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  estimates.  Material  estimates  that are  susceptible  to  change  in the
near-term relate to the determination of inventory  obsolescence  reserves,  and
the estimated cash flows used in evaluating recoverability of long-lived assets.

Cash and Cash Equivalents - The Company considers all highly liquid  investments
with an original maturity of three months or less to be cash equivalents.

Short term  Investments  -  Short-term  investments  consist of FNMA  Notes,  US
Treasury Notes, and  Certificates of Deposit,  which mature in one year or less,
and  are  classified  as  held-to-maturity.  In  accordance  with  Statement  of
Financial   Accounting   Standards  (SFAS)  No.  115,   Accounting  for  Certain
Investments   in  Debt  and  Equity   Securities,   investments   classified  as
held-to-maturity are reported at amortized cost.

Inventories - Inventories are stated at the lower of cost  (first-in,  first-out
basis) or market.  The Company provides for obsolete and unsaleable  inventories
based on management's evaluation of current demand and recent usage.

Barter  Transactions  - In  December  2000,  the Company  entered  into a barter
transaction  whereby  inventories in the amount of $1.0 million,  at cost,  were
exchanged  for  trade  credits  of  $1.4  million.   The  Company  expenses  the
capitalized  barter  credits  over a  three-year  period,  or as they are  used.
Capitalized  barter credits amounted to  approximately  $1.0 million at December
31, 2000. The trade credits  expire in December  2003. The Company  accounts for
such  transactions at the lower of the net realizable  value of the inventory or
the barter credits.


                                      -39-
<PAGE>

Property, Plant and Equipment - Property, plant and equipment are stated at cost
less accumulated depreciation. Cost includes acquisition,  delivery, set-up, and
interest   costs  incurred  prior  to  actual   production.   Betterments   that
significantly  improve equipment  utilization or output, or extend useful lives,
are  recorded  as  additions  to cost.  Maintenance  and  repairs are charged to
expense as incurred.

Depreciation of buildings, most manufacturing equipment, and office equipment is
recorded using the units of production method and straight-line methods over the
following useful lives:

          Buildings                                                40 years
          Land and leasehold improvements                       10-15 years
          Plant, tooling, and packaging equipment                5-10 years
                                                        units of production
          Office equipment and furniture                          3-7 years
          Vehicles                                                  5 years

Intangibles  and Other  Assets -  Patents  and  trademarks  are  amortized  on a
straight-line  basis over their  estimated  useful  lives of 17 years.  Deferred
financing  costs  incurred in connection  with  borrowings are  capitalized  and
amortized to interest expense over the life of the related obligation.

Revenue  Recognition - Revenues  from sales of product are generally  recognized
upon shipment,  or when received by the customer,  depending on shipping  terms.
Provision for estimated  sales returns and allowances is recorded at the time of
sale. The effect of  implementing  Staff  Accounting  Bulletin 101 in the fourth
quarter of fiscal year 2000, combined with accounting for the arrangement with a
new customer,  resulted in the deferral of approximately $1.0 million of revenue
from fiscal  year 2000 into  fiscal year 2001.  The effect on net income was not
significant.

Product  Development  - Product  development  expenses  consist  principally  of
personnel costs and material associated with the development of new products and
changes to existing products, which are charged to operations as incurred.

Advertising  and Promotion - Costs  associated  with  advertising  and promoting
products are expensed as incurred.

Long-Lived  Assets -  Long-lived  assets are reviewed  for  impairment  whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable or whenever management has committed to a plan to dispose
of the assets. Such assets are carried at the lower of book value or fair value.
An asset is considered  impaired when estimated future  undiscounted  cash flows
are less than the carrying amount of the asset. In the event the carrying amount
of such asset is not deemed recoverable,  the asset is adjusted to its estimated
fair value.

Net  Income  (Loss) Per  Common  Share - Basic net  income  per common  share is
calculated  by  dividing  net income by the  weighted  average  number of common
shares  outstanding  during the period.  Diluted net income per common  share is
calculated  by  dividing  net income by the  weighted  average  number of shares
outstanding  plus all additional  common shares that would have been outstanding
if  potentially  dilutive  common  shares had been  issued.  For the net loss in
fiscal year 2000, the number of shares used for basic and diluted net income per


                                      -40-
<PAGE>

share is the same,  because  the  effect of  including  the  additional  111,383
potentially dilutive common shares would be antidilutive.

The following  table  reconciles the number of shares utilized in the net income
(loss) per share calculations:


<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                               -----------------------------------------------------------
                                                   2000                    1999                  1998

<S>                                            <C>                      <C>                    <C>
Numerator - income (loss) available
  to common shareholders                       $(10,900,885)            $ 3,018,031            $6,240,034

Denominator - weighted average number
  of common shares outstanding:
  Common shares-- basic                          13,857,294              10,653,247             9,412,497

  Effect of dilutive stock options                                          240,146                23,280
                                               ------------             -----------            ----------

  Common shares-- diluted                        13,857,294              10,893,393             9,435,777
                                               ============             ===========            ==========
</TABLE>


Stock Split - A 216.017-for-1  split of the Company's  common stock was effected
on May 12, 1999.  All  references in the financial  statements to shares,  share
prices,  per share amounts and stock plans have been adjusted  retroactively  to
reflect the split.

Deferred  Income  Taxes - The Company uses an asset and  liability  approach for
financial  accounting and reporting for income taxes.  Deferred income taxes are
provided for temporary  differences  in the bases of assets and  liabilities  as
reported for financial statement purposes and income tax purposes.

Pro forma  Consolidated  Income Statement Data - The unaudited pro forma results
of operations  information includes a pro forma income tax provision for each of
the two years ended December 31, 1999 and 1998,  assuming effective tax rates of
52.7% and 37.6%,  respectively (see Note 12), comparable to what would have been
reported had Jore  operated as a C Corporation  during the years ended  December
31, 1998 and the entire year ended  December  31, 1999.  Prior to the  Company's
IPO, it was treated as an S corporation for income tax purposes.

Extraordinary  Item - On August 27, 1999, the Company  recorded an extraordinary
expense of approximately $1.0 million from the termination of its operating line
of credit.  The extraordinary  expense consisted of a prepayment penalty and the
remaining  unamortized financing costs, net of taxes. The proceeds to extinguish
the debt came from a newly established credit line.

Recent  Accounting  Pronouncements  - In June  1998,  the  Financial  Accounting
Standards  Board  issued SFAS No. 133, as  amended,  Accounting  for  Derivative
Instruments and Hedging  Activities,  and  established  standards for derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts and hedging  activities.  The standard is effective for the Company on
January 1, 2001. The adoption of SFAS No. 133 did not have a material  effect on
the Company.



                                      -41-
<PAGE>

Financial   Instruments  -  Financial  instruments  consist  of  cash  and  cash
equivalents,  short-term  investments,  accounts  receivable,  notes receivable,
accounts  payable  and  long-term  debt.  The  carrying  value  of cash and cash
equivalents,  short-term  investments,  notes  receivable,  and accounts payable
approximates fair value because of the short-term maturity of those instruments.
The Company has estimated the fair value of accounts receivable discounted based
on average  outstanding  days, at the interest rate of the Company's credit line
at December 31, 2000.  The fair value of long-term  debt with variable  interest
rates  approximates  the carrying  amount as the  borrowings  are at  adjustable
interest rates which reprice based on fluctuations in market  conditions and the
level of  operating  cash flow of the Company.  The fair value of the  Company's
long-term debt with fixed  interest rates was based on the estimated  equivalent
rate on the last  business  day of the year.  The  following is a summary of the
carrying amounts and estimated fair values for the Company:

<TABLE>
<CAPTION>
                                                  2000                               1999
                                ----------------------------------- ----------------------------------
                                     Carrying         Estimated           Carrying          Estimated
As of December 31                     Amount          Fair Value            Amount          Fair Value

<S>                                <C>                <C>                <C>                <C>
Cash and cash equivalents          $   353,174        $   353,174        $    94,283        $    94,283
Short-term investments                 124,169            124,169          7,691,791          7,676,100
Accounts receivable                 16,081,543         15,580,683         19,031,479         18,703,640
Notes receivable                        24,754             24,754             11,799             11,799
Accounts payable                    11,943,635         11,943,635          7,255,786          7,255,786
Long-term debt - variable            8,941,217          8,941,217         11,083,331         11,083,331
Long-term debt - fixed              33,359,236         33,270,927         20,226,109         20,138,032
</TABLE>

Comprehensive Income - The Company classifies  components of other comprehensive
income by their nature in the financial  statements and displays the accumulated
balance of other  comprehensive  income as a separate component of shareholder's
equity in the  consolidated  balance sheets.  There were no other  components of
comprehensive income other than the net income (loss) during the periods covered
by the accompanying financial statements.

Significant Customers - A majority of the Company's sales are concentrated among
a few major customers.  Sales to customers who individually accounted for 10% of
total sales for each of the three years in the period  ended  December  31, 2000
and  receivables  from  customers  who  individually  accounted for 10% of total
receivables at December 31, 2000 and 1999 are as follows:

                                             2000           1999           1998
Sales to:
  Customer A                                 55.8%          58.3%          60.2%
  Customer B                                 15.6            2.7            0.0
  Customer C                                  9.7           22.8           17.2
  Customer D                                  8.5           10.0           14.5
                                            -----          -----          -----
                                             89.6           93.8           91.9
All other customers                          10.4            6.2            8.1
                                            -----          -----          -----
                                            100.0%         100.0%         100.0%
                                            =====          =====          =====


                                      -42-
<PAGE>


                                                         2000               1999

Receivables from:
Customer A                                                72.9%            69.5%
Customer B                                                10.3              0.0
Customer C                                                 2.7             18.1
                                                         -----            -----
                                                          85.9             87.6
   All other customers                                    14.1             12.4
                                                         -----            -----
                                                         100.0%           100.0%
                                                         =====            =====


Sales are made  without  collateral  and bad debt  expense  for the years  ended
December 31, 2000, 1999 and 1998 was $151,234, $56,645, and $-0-, respectively.

Interest Costs - Interest costs are  capitalized for assets that are constructed
or produced by/for the Company.  Capitalized  interest costs for the years ended
December 31, 2000 and 1999 were $2.1 million and $1.1 million, respectively.

Reclassifications  - Certain  prior  year  balances  have been  reclassified  to
conform to the current year classifications.


                                      -43-
<PAGE>


SHORT-TERM INVESTMENTS

Short-term  investments  as of  December  31,  2000  and  1999  consist  of  the
following:

                                                      2000               1999

Certificates of deposit                            $  124,169         $  558,712
FNMA securities                                                        4,143,105
U.S. Treasury notes                                                    2,989,974
                                                   ----------         ----------
Short term investments                             $  124,169         $7,691,791
                                                   ==========         ==========

4.  INVENTORIES

Inventories  consist  of  the  following  as  of  December  31,  2000  and  1999
(work-in-progress includes finished sub-assemblies, which can be sold in bulk or
added to a packaged set):

                                                   2000                1999

Component parts/raw materials                  $ 10,464,839        $ 13,135,170
Work-in-progress                                 11,077,262          11,880,460
Finished goods                                    6,438,675           3,268,239
Obsolescence reserve                             (1,774,649)           (488,585)
                                               ------------        ------------
Inventories                                    $ 26,206,127        $ 27,795,284
                                               ============        ============

5.  PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consists of the following as of December 31, 2000
and 1999:

                                                      2000              1999

  Buildings and leasehold improvements           $ 12,468,396      $  7,478,959
  Land and land improvements                        2,579,985         2,557,169
  Plant, tooling, packaging equipment              53,920,033        24,436,751
  Office equipment and furniture                    3,149,867         2,264,524
  Vehicles                                            109,259           279,654
  Construction-in-progress                            241,401         3,828,129
  Machinery-in-progress                            16,757,511        22,212,966
                                                 ------------      ------------
                                                   89,226,452        63,058,152
  Accumulated depreciation                         (9,343,963)       (4,497,227)
                                                 ------------      ------------
Property, plant, and equipment, net              $ 79,882,489      $ 58,560,925
                                                 ============      ============


                                      -44-
<PAGE>

6.  OTHER CURRENT ASSETS

Other current assets consist of the following as of December 31, 2000 and 1999:

                                                     2000               1999

Deferred tax assets                                $1,394,956         $  440,726
Supplies inventory                                  1,072,063            767,648
Barter credits                                      1,024,816
Prepaid expenses and other                            885,099          1,207,531
Income tax receivable                                 131,097
Other receivables                                      27,720             47,704
Notes receivable                                                          30,900
                                                   ----------         ----------
Other current assets                               $4,535,751         $2,494,509
                                                   ==========         ==========

7.  OTHER CURRENT LIABILITIES

Other current  liabilities  consist of the following as of December 31, 2000 and
1999:

                                                        2000              1999

Notes payable at 6.75%                                                  $660,346
Income taxes payable                                                     109,933
Other current liabilities                                                    702
                                                      --------          --------
Other current liabilities                                 None          $770,981
                                                      ========          ========

8.  LINE OF CREDIT

The Company has an accounts  receivable  and inventory  revolving line of credit
with  First  Security  Bank with a maximum  borrowing  limit of $35  million  at
December 31, 2000.

Advances on the line are limited to 85% of eligible accounts  receivable and 65%
of inventory.  Interest on the  revolving  credit line advances is at prime plus
one-half of a percent or LIBOR plus 3% at the Company's option (10.25% and 9.00%
at  December  31, 2000 and 1999,  respectively).  The term of the  agreement  is
through August 2001, and the agreement  contains personal  guarantees by certain
Company shareholders. Outstanding advances on the line at December 31, 2000 were
$35 million. This line is secured by receivables, inventory, patents and general
intangibles.

The line of credit requires the following financial ratio covenants: (i) current
ratio not less than 1:1; (ii)  leverage  ratio not to exceed 2.5 to 1; and (iii)
funded  debt to EBITDA not to exceed  4.25 to 1. As of December  31,  2000,  the
Company was not in compliance with any of these covenants.

The bank and the Company completed and signed a forbearance agreement related to
the line of credit on March 21, 2001 that provides an over


                                      -45-
<PAGE>


advance limit of $8.1 million.  The Company's  borrowing  base on March 21, 2001
supported  approximately  $21 million in  borrowings  and the  agreement  allows
borrowings  up to $29 million.  As of March 21,  2001,  the Company is currently
over advanced by approximately $7.5 to $8.0 million. This forbearance extends to
April 30, 2001, at which point it will again be reviewed.

9.  LONG-TERM DEBT

As of  December  31,  2000 and 1999,  the  Company  has  entered  into  numerous
long-term borrowings with various financial  institutions,  primarily to finance
the purchase of manufacturing  equipment.  Unless otherwise noted, the following
long-term  obligations require monthly principal and interest payments,  and are
secured by underlying equipment.

<TABLE>
<CAPTION>
                                                                    2000          1999

<S>                                                             <C>           <C>
Notes payable:
       Due July 2002, interest at 9.87%*                        $   141,025   $   219,172
       Due January 2003, interest at prime plus 2%*
         (11.50% at December 31, 2000)                               59,194        85,529
       Due March 2003, interest at 8.90%                                          869,778
       Due March 2003, interest at 8.90%                            934,905
       Various notes payable due November 2003*
        through June 2004, interest rates from 7.00% to 9.00%        49,124        67,959
       Due June 2004, interest at 9.37%                             440,156       533,069
       Due June 2004, interest at 9.66%                             474,892       583,688
       Due October 2004, interest at 8.96%*                         519,004       627,626
       Due October 2004, interest at 8.96%*                         692,010       836,837
       Due December 2004, interest at 8.97%*                      1,485,045     1,780,531
       Due December 2004, interest at 8.97%*                        421,916       505,850
       Due December 2004, interest at 9.74%*                        231,394       276,518
       Due December 2004, interest at 9.87%*                         78,498        93,754
       Due February 2005, interest at 8.85%                         567,248       677,231
       Due August 2005, interest at 7.8%                            631,444       741,669
       Due October 2005, interest at 8.095%                         637,113       742,572
       Due January 2020, interest at 9.00%                                      2,500,000
       Due January 2020, interest at 9.00%*                       8,483,984
                                                                -----------   -----------
       Total notes payable                                      $15,846,952   $11,141,783
                                                                ===========   ===========
</TABLE>

*As of December  31, 2000,  these notes are in  violation  of debt  covenants or
default provisions.


                                      -46-
<PAGE>

<TABLE>
<CAPTION>

<S>                                              <C>             <C>
Capital lease obligations
   Various leases due July 2001 to December 2003,
   interest from 6.844% to 18.924%               $     99,013    $    173,641
Due November 2002, interest at 7.990%                   7,168          10,937
Due June 2003, interest at 7.9%                        14,548          19,732
Various leases due November 2004 to July 2005,
   interest from 6.658% to 6.759%                      85,267         102,106
Due July 2005, interest at 9.121%*                    335,628         385,659
Due July 2005, interest at 8.447%*                    767,211         884,356
Due October 2005, interest at 7.771%*                 556,362         637,607
Due November 2005, interest at 10.219%                202,707
Due December 2005, interest at 7.996%*                300,386         342,258
Due January 2006, interest at 7.148%                   32,520
Due January 2006, interest at 8.13%*                  382,890         447,302
Due April 2006, interest at 8.271%*                   295,718         333,774
Due June 2006, interest at 8.926%*                    249,714         283,394
Due June 2006, interest at 9.495%*                  1,565,244       1,772,263
Due June 2006, interest at 8.916%*                  1,282,592       1,455,645
Due July 2006, interest at 8.924%*                    421,973         477,818
Due August 2006, interest at 9.140%*                  169,163         190,966
Due August 2006, interest at 9.140%*                  767,537         866,460
Due September 2006, interest at 9.172%*               715,136         805,493
Due November 2006, interest at 9.275%*              3,028,965       3,396,419
Due February 2007, interest at 9.250%                                  79,710
Due February 2007, interest at 9.250%                                 114,631
Due March 2007, interest at 9.250%                                    685,875
Due March 2007, interest at 9.250%                                    399,584
Due March 2007, interest at 9.724%*                 2,295,073
Due April 2007, interest at 9.230%*                 1,293,340       1,446,623
Due April 2007, interest at 9.250%                                  1,120,699
Due April 2007, interest at 9.233%*                   960,143
Due April 2007, interest at 9.233%*                   799,572
Due May 2007, interest at 9.250%                                    1,810,000
Due June 2007, interest at 9.261%*                  2,317,412
Due June 2007, interest at 9.261%*                  1,947,625
Due July 2007, interest at 8.954%*                    729,477
Due July 2007, interest at 9.250%                                     630,000
Due September 2007, interest at 10.642%*              582,533
Due November 2007, interest at 10.00%*                617,429
Due December 2007, interest at 9.196%*              3,282,550
Due December 2007, interest at 9.500%*                178,078       1,181,022
Due January 2008, interest at 9.500%*                 170,527         113,685
                                                 ------------    ------------
Total capital lease obligations                    26,453,501      20,167,659
                                                 ------------    ------------
Total long-term debt                               42,300,453      31,309,440
Less current portion                              (38,898,805)     (3,530,287)
                                                 ------------    ------------
Total long-term debt                             $  3,401,648    $ 27,779,153
                                                 ============    ============
</TABLE>


                                      -47-
<PAGE>


*As of December 31, 2000,  these capital lease  obligations were in violation of
debt covenants or default provisions.

As of December 31, 2000,  scheduled  future  maturities of long-term debt are as
follows:

                                                    Obligations under
                                     Notes Payable   Capital Leases      Total

Year ending December 31:
2001                                 $ 1,644,062   $  5,976,272    $  7,620,334
2002                                   1,768,755      5,821,954       7,590,709
2003                                   2,714,594      5,804,150       8,518,744
2004                                   1,797,275      5,789,800       7,587,075
2005                                     487,989      5,880,308       6,368,297
Thereafter                             7,434,277      6,457,096      13,891,373
                                     -----------   ------------    ------------

Subtotal                              15,846,952     35,729,580      51,576,532
Less amounts representing interest          --       (9,276,079)     (9,276,079)
                                     -----------   ------------    ------------
                                     $15,846,952   $ 26,453,501    $ 42,300,453
                                     ===========   ============    ============

Several of these long-term debt obligations have financial covenant requirements
which were not met as of December 31, 2000. Accordingly, long-term debt totaling
$33.6 million, has been classified as a current liability.

The Company has  requested  from its nineteen  equipment  lenders a  three-month
forbearance on all interest and principal due them. As of March 21, 2001,  seven
of the nineteen lenders have agreed to this forbearance and the remaining twelve
lenders have requested additional information.

10.  SHAREHOLDERS' EQUITY

Authorized Shares - On May 11, 1999, the Articles of Incorporation  were amended
to increase the authorized  number of shares of the Company's  common stock from
50,000  to  100,000,000  shares of no par value  common  stock and to  authorize
30,000,000  shares of no par value preferred stock. On May 12, 1999, the Company
effected a 216.017-for-1  split of the Company's common stock. All references in
the financial  statements to shares,  share prices,  per share amounts and stock
plans have been adjusted retroactively to reflect the stock split.

Public Offering - On September 23, 1999, the Company completed an initial public
offering (the IPO) in which it raised net proceeds of $38.6  million,  including
exercise of the overallotment  option. A portion of the net proceeds was used to
repay debt, fund a distribution to shareholders  representing  previously  taxed
but undistributed S corporation earnings, and acquire capital equipment.

S  Corporation  Dividend  - The  Board  of  Directors  declared  a  dividend  to
shareholders of record on September 22, 1999, equal to the amount of accumulated
but  undistributed  S  corporation  earnings of the Company.  This  dividend was
distributed  to such  shareholders  on a pro rata basis  depending on the number
shares of common stock held by each shareholder,  and the number of days in 1999
that each shareholder held such shares. The total dividend was $4.0 million. The
difference  between  the S


                                      -48-
<PAGE>


corporation  distribution and historical retained earnings consists primarily of
temporary  differences between book and tax income,  prior year distributions in
excess of accumulated  adjustment  account,  effect of  elimination  entries and
retained earnings of the subsidiaries.

Dividend Restrictions - Under certain loan covenants associated with its line of
credit facility,  the Company is restricted from declaring or paying  dividends,
or from purchasing,  redeeming, retiring or otherwise acquiring for value any of
its shares of stock,  or from otherwise  distributing  property to  shareholders
with some limited exceptions.

11.  STOCK OPTION, STOCK WARRANTS, AND STOCK PURCHASE PLANS

1997 Stock Plan - On  September  15, 1997,  the Board of Directors  approved the
implementation  of the 1997 Stock Plan (the Stock Plan). The Stock Plan provides
employees an opportunity to purchase  shares of stock which qualify as incentive
stock options  under the Internal  Revenue Code (the Code).  Employees,  outside
directors,  and  consultants  of the Company may purchase  shares of stock under
nonqualified stock options. The Stock Plan also provides for the direct award or
sale of shares to employees,  outside directors, and consultants of the Company.
Options granted under the Stock Plan generally expire ten years from the date of
grant  and  typically  vest  over a period  of four  years  such  that 20% vests
immediately and an additional 20% vests after each additional year of continuous
service.  As of December 31, 2000,  762,620 shares  remained  available out of a
total of 2,400,000 shares of stock authorized as available under the Stock Plan.

Activity and price information regarding the options are summarized as follows:

<TABLE>
<CAPTION>
                                                     2000                       1999                       1998
                                             ------------------------  --------------------------  -------------------------
                                                              Weighted                   Weighted                   Weighted
                                                               Average                    Average                   Average
                                                              Exercise                   Exercise                   Exercise
                                                 Shares         Price        Shares        Price         Shares      Price

<S>                                          <C>               <C>         <C>            <C>         <C>           <C>
   Outstanding at beginning
     of year                                 $ 1,508,166       $   7.69       422,312     $   4.42         None
   Granted                                       183,916           6.84     1,089,074         8.95       422,312    $   4.42
   Exercised                                     (23,996)          5.93        (3,220)        7.41
   Cancelled                                     (57,922)          8.76           --            --            --
                                             -----------                   ----------                 ----------

Outstanding at end of year                     1,610,164           7.58     1,508,166         7.69       422,312        4.42
                                             ===========                   ==========                 ==========

   Options exercisable at
     end of year                               1,057,744                      516,004                     84,482
                                             ===========                   ==========                 ===========

   Weighted average fair
     value of options granted
     during year                             $      4.91                   $     3.08                 $     0.14
                                             ===========                   ==========                 ===========
</TABLE>

Information  regarding stock options  outstanding and exercisable as of December
31, 2000 is summarized as follows:


                                      -49-
<PAGE>


<TABLE>
<CAPTION>
                                         Options Outstanding                       Options Exercisable
                             --------------------------------------------       ---------------------------
                                               Weighted-
                                                Average
                                 Number        Remaining      Weighted-            Number       Weighted-
                             Outstanding at    Contractual     Average           Outstanding     Average
                                                                                     at
Range of                     December 31,        Life         Exercise          December 31,     Exercise
Exercise Prices                  2000         (in years)        Price               2000          Price

<S>                           <C>              <C>              <C>              <C>              <C>
$4.42                           406,431             7.75        $    4.42          242,272        $    4.42
$5.25 - 5.88                    117,500             9.38        $    5.64           89,500        $    5.68
$7.06 - 8.81                    451,080             8.41        $    8.07          268,391        $    7.79
$9.10 - 11.63                   635,153             8.36        $    9.43          457,581        $    9.62
                              ---------        ---------        ---------        ---------        ---------
$4.42 - 11.63                 1,610,164             8.29        $    7.58        1,057,744        $    7.69
                              =========        =========        =========        =========        =========
</TABLE>


The Company has elected to follow the measurement  provisions of APB Opinion No.
25, under which no  recognition  of expense is required in accounting  for stock
options  granted to employees for which the exercise price equals or exceeds the
fair market value of the stock at the grant date.  All options  granted  through
December  31, 2000 have been  granted at an option price at or greater than fair
market value on the date of grant.  Accordingly,  the Company has  recognized no
compensation  expense for  employees  during the years ended  December 31, 2000,
1999 and 1998. The Company did record compensation  expense of $21,429,  $24,276
and $1,623 for options granted to non-employees for the years ended December 31,
2000, 1999 and 1998, respectively.

To estimate  compensation  expense that would be recognized  under SFAS No. 123,
Accounting  for  Stock-Based   Compensation,   the  Company  uses  the  modified
Black-Scholes  option  pricing  model.  The  following  assumptions  for options
granted,  and the  corresponding  compensation  expense  are  shown in the table
below:

<TABLE>
<CAPTION>
                                                     2000                     1999                  1998

<S>                                             <C>                        <C>                    <C>
Risk-free interest rate                         5.67% - 6.04%              4.21% - 6.28%                4.21%
Expected volatility                                 78.26%                   0% - 36.33%                  0%
Dividend yield                                       0                          0                         0
Expected life (years)                                6                        2 to 6                      6

Compensation expense                            $    837,751               $  583,797             $   12,797
Net income (loss) as reported                    (10,900,885)               3,018,031              6,240,034
Pro forma net income (loss)                      (11,738,636)               2,434,234              6,227,237
Pro forma EPS - basic                                 $(0.85)                   $0.23                  $0.66
Pro forma EPS - diluted                               $(0.85)                   $0.22                  $0.65

</TABLE>

In February 1999, the Company granted  nonqualified  options to purchase 311,064
shares of common stock to certain directors. The options are fully vested. These
nonqualified  options were granted outside of the Stock Plan. Because these fall
under APB 25 there is no compensation value recognized.

In February 1999, the Company granted  warrants to purchase 11,881 shares of the
Company's  common stock in exchange  for  services to be provided in  connection
with the Company's IPO.


                                      -50-
<PAGE>


On April 7, 1999, the Company closed a loan for $2 million from D.A.  Davidson &
Co., who were the managing  underwriters  of the Company's IPO. The rate is 6.5%
plus warrants to purchase  71,933 shares of common stock at an exercise price of
$10.00 per share. The debt was subsequently  paid at the closing of the IPO. The
warrants expire three years from the date of grant.

From June 4 to June 11, 1999, the Company closed  short-term  loans with various
unrelated parties for a total of $4,045,000.  Rates range from 6.5% to 7.0% plus
warrants to purchase  201,800  shares of the Company's  common stock at $9.10 to
$10.00 per share.  All except  $146,909  was paid at the closing of the IPO. The
warrants  expire three years from the date of grant,  and have an estimated fair
value of $174,600.  The proceeds of the debt were allocated between the debt and
the warrants  based on the relative fair value of the two securities on the date
of issuance. The portion allocated to the warrants is being accreted to interest
expense over the term of the debt agreement.

From July 14 to August 9, 1999, the Company closed short-term loans with various
unrelated  parties for a total of  $7,390,000.  Rates range from 6.5% to 7% plus
warrants to purchase  325,600  shares of the Company's  common stock at $9.10 to
$10.00 per share.  All except $513,438 was  subsequently  paid at the closing of
the IPO. The warrants expire three years from the date of the grant, and have an
estimated  fair  value of  $137,299.  The  proceeds  of the debt were  allocated
between the debt and the warrants  based on the  relative  fair value of the two
securities  on the date of  issuance.  The portion  allocated to the warrants is
being accreted to interest expense over the term of the debt agreement.

On December 22, 2000, the Company closed a transaction with a private  investor,
issuing 37,500 shares and a warrant to purchase 15,000 shares of common stock of
the Company at an exercise price of $5.00.  The warrant  extends for three years
from the date of the grant  and has an  estimated  fair  value of  $16,476.  The
proceeds from this transaction were used for general corporate purposes.

1999 Employee Stock Purchase Plan - Under the Company's  Employee Stock Purchase
Plan, the Company is authorized to issue up to 1,000,000  shares of common stock
to its eligible employees who work more than 20 hours each week and are employed
more than five months in any calendar year.  Employees who own 5% or more of the
Company's  common stock are not eligible to participate  in the Plan.  Under the
terms of the Plan, eligible employees can choose payroll deductions each year of
up to 15% of their  gross  base pay.  Such  deductions  are  applied  toward the
discounted  purchase price of the common stock. The purchase price of the common
stock is 85% of the fair  market  value of the  stock as  defined  in the  Plan.
Approximately 40% of eligible  employees have participated in the Plan since its
inception on December 31, 1999.  Under the Plan,  the Company sold 29,675 shares
to employees in 2000.

12. INCOME TAXES

The  provision  for income taxes  consists of the  following for the years ended
December 31, 2000 and 1999:


                                      -51-
<PAGE>


<TABLE>
<CAPTION>
                                                               2000                     1999

<S>                                                        <C>                         <C>
Current income tax expense (benefit)
    Federal                                                $   (64,196)                $  216,363
    State                                                      (31,025)
                                                           -----------                 ----------
Total current income tax expense (benefit)                     (95,221)                   216,363
                                                           -----------                 ----------
Deferred income tax expense (benefit)
    Federal                                                 (1,448,220)                 2,105,057
    State                                                     (880,307)                   223,470
                                                           -----------                 ----------
Total deferred income tax expense (benefit)                 (2,328,527)                 2,328,527
                                                           -----------                 ----------
Total income tax expense (benefit)                         $(2,423,748)                $2,544,890
                                                           ===========                 ==========
</TABLE>

A  reconciliation  of the federal  statutory  income tax rate and the  Company's
effective income tax rates follows:


<TABLE>
<CAPTION>
                                                                     Year Ended December
                                                     ------------------------------------------------
                                                        2000               1999            1998
                                                                        (Pro forma)     (Pro forma)

<S>                                                  <C>                <C>                <C>
Federal statutory income tax rate                        (34.0)%          34.0%           34.0%
State income taxes                                        (4.5)            4.5             4.5
Native American employment credit                         (0.8)           (2.9)           (1.2)
Foreign sales corporation                                 (0.1)           (1.5)             --
Meals and entertainment                                    0.1             0.2             0.2
Other                                                     (0.9)           (0.8)            0.1
Conversion to C Corporation                                               19.2
Valuation allowance                                       22.0              --              --
                                                         -----            ----            ----
Effective tax rate                                       (18.2)%          52.7%           37.6%
                                                         =====            ====            ====
</TABLE>


                                      -52-
<PAGE>



The components of the net deferred tax assets and liabilities  recognized on the
accompanying balance sheets are as follows:

<TABLE>
<CAPTION>
                                                          2000                               1999
                                             ----------------------------------- ---------------------------------
                                                Current          Long-Term            Current         Long-Term

<S>                                           <C>                <C>                  <C>              <C>
   Deferred tax assets:
    Net operating loss carryover              $                  $ 8,033,301          $   --           $      --
    Inventory obsolescence reserves              540,317                               268,000
    Allowance for sales returns
      and bad debts                              701,908                                22,000
    Accrued vacation and wages                   152,731                               151,000
    General business credits
      carryover                                                      240,668
    Valuation allowance                                           (2,447,003)
                                              ----------         -----------          --------         -----------
          Total deferred tax assets           $1,394,956         $ 5,826,966          $441,000         $      --
                                              ----------         -----------          --------         -----------
Deferred tax liabilities:
    Depreciation                                                  (6,741,638)                           (2,769,000)
    Other                                                           (480,284)
                                              ----------         -----------          --------         -----------
    Total deferred tax liabilities                                (7,221,922)                           (2,769,000)
                                              ----------         -----------          --------         -----------
Net deferred income tax
  asset (liability)                           $1,394,956         $(1,394,956)         $441,000         $(2,769,000)
                                              ==========         ===========          ========         ===========
</TABLE>


As of December  31,  2000,  the Company has  recorded a valuation  allowance  of
approximately  $2.4 million  against its  deferred  tax assets.  The Company had
available  at  December  31,  2000  unused  tax  operating  loss  carryovers  of
approximately $20.9 million, which may be applied against future taxable income,
and expire in 2020.

Pro Forma  Income Taxes  (Unaudited)  - Prior to filing its IPO, the Company and
its subsidiaries  elected S Corporation status, under the Internal Revenue Code.
As  discussed  in  Note 2 and in  connection  with  the  IPO,  the  Company's  S
Corporation  status was terminated and the Company became subject to federal and
state income taxes applicable to C corporations.  The accompanying  consolidated
statements of operations reflect a pro forma income tax provision or benefit for
all periods prior to the Company's IPO.

13. RELATED PARTY TRANSACTIONS

Jore Land, LLC (Jore Land), is owned by the Company's  majority  shareholder and
owned certain real property leased to the Company under an agreement that was to
expire on September  30, 2003,  with an option to renew for an  additional  five
year term. The lease was accounted for as an operating lease. Amounts paid under
this lease during the years ended  December 31, 2000,  1999, and 1998 were $-0-,
$42,000, and $84,000, respectively. On February 1, 1999, the Company acquired an
option to purchase  approximately 40 acres of land and the attached construction
improvements,  including  the property  referred to above,  at fair market value
from Jore Land,  LLC. On June 28, 1999,  the Company  exercised the option,  for
payment of $2.7 million, and the lease was terminated.

At December 31, 2000, 1999, and 1998, Jore Land owed the Company the net amounts
of $-0-, $9,999 and $34,102, respectively.


                                      -53-
<PAGE>


Periodically,   the   Company's   employees   perform  work  for  Jore  Land  in
administrative and technical areas, such as engineering and accounting.  Charges
for these types of services  by the  Company  for the years ended  December  31,
2000, 1999, and 1998 were $-0-, $20,417, and $10,157, respectively.

Shareholder notes receivable  totaling $1.1 million and $1.6 million at December
31, 2000 and 1999, respectively,  are due on demand and bear interest at 6%. The
total amount of interest income earned in 2000 and 1999 from  shareholder  notes
was $121,570 and $54,589, respectively.

Shareholder  notes payable are due on demand and bear interest at 10%. The total
amount of accrued interest  expense in 2000 and 1999 from shareholder  notes was
$13,009 and $143, respectively.

Beginning  January  1,  1998,  the  Company's  sales  affiliate,   Manufacturers
Specialty Marketing,  Inc. (MSM),  received a commission on Company sales, which
amounted to $1,785,913  during the year ended December 31, 1998. Of this amount,
$225,279 was payable at year-end 1998.  Beginning  January 1, 1999, most Company
sales were made through Manufacturers' Sales Associates, LLC (MSA), an affiliate
of  MSM.  MSA  receives  a  commission  on most  Company  sales.  The  agreement
terminates  upon  notice  by  either  party at least 60 days in  advance  of the
intended  termination  date. MSM was owned 100% by one non-employee  director of
Jore and one other non-employee former director of the Company.  MSA is owned by
the same two  individuals  and four other  non-employee  salesmen who market the
Company's  products.  Commissions earned by MSA for the years ended December 31,
2000 and 1999 were $1,380,817 and $1,245,424,  respectively.  As of December 31,
2000 and 1999,  the  Company  had prepaid  commissions  to MSA of  $412,791  and
$298,608, respectively.

MBJ Flying  Service,  a company  owned by the father of the  Company's  majority
shareholder,  provides aviation  services to the Company.  Total payments to MBJ
Flying Service during the years ended December 31, 2000 was $60,178.  There were
no payments made in 1999 or 1998.

Printing  Press,  Incorporated  (PPI),  a  company  partially  owned by a former
non-employee  director  and  shareholder  of  the  Company,  provides  packaging
services  to the  Company.  Total  purchases  from PPI  during  the years  ended
December 31, 2000, 1999, and 1998 were $1,880,653,  $2,597,810,  and $2,003,062,
respectively.  Related  accounts  payable balances at December 31, 2000 and 1999
were $132,975 and $256,775, respectively.

The Company has entered into consulting  agreements with a non-employee director
of the Company. Total fees incurred during the years ended December 31, 2000 and
1999 were  $107,916 and $16,667,  respectively.  An  additional  $90,417 will be
incurred in 2001 under this agreement.

Affiliates  of a  non-employee  director of the Company were  participants  in a
bridge  loan  facility,  which was  closed  in June  1999 and  repaid in full in
October 1999. The affiliates of the director received warrants for 20,000 shares
of Company  common stock at a purchase price of $9.10,  exercisable  for 3 years
from  their date of  issuance.  The  warrants  have an  estimated  fair value of
$18,698.


                                      -54-


<PAGE>


14. COMMITMENTS AND CONTINGENCIES

Operating Leases - The Company has  noncancellable  operating leases for various
property and equipment.  These leases expire at various times over the next five
years. A material  portion of the leases are for  manufacturing  equipment.  The
agreements  pertaining to the manufacturing  equipment are five-year leases with
two  one-year  renewal  options.  The  majority of these  operating  leases were
amended to become  capital  leases in November  of 1999.  Their  maturities  are
reflected in the debt footnote disclosure.

Rent  expense for each of the years ended  December  31,  2000,  1999,  and 1998
totaled $277,781,  $535,618,  and $301,181,  respectively.  Future minimum lease
payments required under operating leases are as follows:

                Year ending December 31:
                  2001                                         $366,243
                  2002                                          251,868
                  2003                                          264,598
                  2004                                          210,204
                  2005                                          140,135
                  Thereafter                                       None

License Agreements - In January 1998, the Company entered into an agreement with
a third party for its  interest in one  invention.  The Company pays the party a
fee based on the  manufacturing  cost and the Company's  margin  related to this
invention.  Expenses for the years ended December 31, 2000 and 1999 were $17,592
and $41,090, respectively.

On April 28, 1999,  the Company  signed an agreement with The Stanley Works that
grants the  exclusive  license to the  Stanley(R)  brand name for all power tool
accessories  for a  contracted  royalty  rate.  The terms of the  agreement  are
through  December 2004, and may be renewed by the Company through December 2009.
Royalties  paid to The  Stanley  Works as of  December  31,  2000 and 1999  were
$110,000 and $117,336, respectively.

On December 27, 1999, the Company signed agreements with The Norton Company,  to
purchase  substantially  all of the  Company's  grinding  wheels,  abrasives and
surface  preparation  products from Norton or its  affiliates.  The terms of the
agreement are through December 2004. In exchange for this purchasing  agreement,
the  Company  obtained  an  exclusive,  royalty-free  license  to use  the  name
"Speed-Lok(TM)"  for sales of drilling and driving products in North America for
an indefinite  duration.  There are no minimum purchase volumes or fixed pricing
agreements required. If the supply arrangements are terminated, the Company will
be required to pay a royalty of 3% on all "Speed-Lok(TM)" product sales annually
to Norton, with a minimum royalty of $500,000.

Purchase  Commitments  - In May  1999,  the  Company  entered  into a  strategic
alliance  agreement with a manufacturer of certain  proprietary  equipment.  The
manufacturer  agreed to produce and sell to the Company this  equipment for five
years on an exclusive basis provided it purchases  approximately $5.3 million in
equipment each year. In addition to the minimum purchases,  the Company must pay
an additional $1.0 million to the principal of the  manufacturer  for consulting
services in placing the  equipment  in service,  of which  $400,000  was payable
during the first year and $200,000 in each  subsequent year until fully paid. In
exchange for these payments,  the Company will receive  exclusive  access to the


                                      -55-
<PAGE>


equipment and its proprietary design for the five-year period. This equipment is
being  financed  through  capital  leases  under a master lease  agreement.  The
Company is currently in litigation with the  manufacturer  regarding its sale of
the  exclusive  equipment  to  competitors  of  the  Company.  Pursuant  to  the
litigation, the Company is no longer purchasing or taking delivery of additional
equipment. See discussion below at Litigation.

Research and Development  Agreements - During 1999, the Company entered into two
agreements  with a third  party  to  accomplish  certain  product  research  and
development.  The two  agreements  require  total  payments of  $500,000.  Total
payments to date under this agreement are $309,566.

Product Warranty Reserve - In the past, the Company  experienced minimal returns
of manufactured products.  Therefore,  the financial statements do not include a
product warranty reserve at December 31, 2000 or 1999.

Litigation  - In  December  2000,  the  Company  entered  into  litigation  with
International  Tool Machines of Florida,  Inc.  ("ITM"),  the  manufacturer  and
supplier  of its  proprietary  drill  bit  manufacturing  machinery.  Management
believes  that  ITM  has  violated  its  exclusive   dealing  and  nondisclosure
agreements with the Company as well as a previous settlement  agreement with ITM
with respect to previous  breach of contracts.  The Company seeks to prevent ITM
from  selling  these or  similar  machines  to  others.  ITM has  filed  several
counterclaims alleging breach of contract and damages.

If ITM is permitted to sell the Company's  proprietary  drill bit  manufacturing
equipment  to third  parties,  including  its  competitors,  it  would  lose its
exclusive  right to  these  technologically  advanced  drill  bit  manufacturing
machines.  An  unfavorable  outcome to the Company in this  matter  could have a
material adverse effect on the Company's  competitive  position in the drill bit
market. No estimate of the range of possible loss can be made at this time.

The Company is, from time to time,  a party to various  other legal  actions and
administrative  proceedings  and subject to various other claims  arising in the
ordinary  course of  business.  The  Company and its legal  counsel  believe the
disposition  of these  matters  will not have a material  adverse  effect on the
financial position or operations of the Company.

15. RESTATEMENT

Subsequent to the issuance of the consolidated financial statements for the year
ended  December 31,  1999,  the  Company's  management  determined  that the net
deferred tax liability  resulting from the conversion to a C corporation from an
S  corporation  should have been  recorded  as income tax expense  rather than a
direct reduction of equity in the 1999 consolidated  financial statements.  As a
result,  the  accompanying  1999  consolidated  financial  statements  have been
restated from the amounts  previously  reported to give effect to the correction
of this item. The effect of the restatement is an increase in income tax expense
from $633,238 to  $2,544,890,  a decrease in income before  extraordinary  items
from  $5,843,635  ($0.55 and $0.54 per basic and  diluted  share) to  $3,931,983
($0.37 and $0.36 per basic and diluted share), and a decrease in net income from
$4,929,683  ($0.46 and $0.45 per basic and diluted  share) to $3,018,031  ($0.28
and $0.28 per basic and diluted share) for the year ended December 31, 1999. Net
equity for the related period did not change.


                                      -56-
<PAGE>


Previously  reported  quarterly  results  for 2000 have also  been  restated  to
reflect  unfavorable  inventory  variances  that were  identified  in the fourth
quarter. See further discussion at Note 16.

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

Subsequent  to  the  issuance  of  the  Company's  unaudited  interim  financial
statements on a Form 10-Q for the period ended September 30, 2000, the Company's
management determined that approximately $4.6 million of a total $9.8 million in
2000 inventory and manufacturing  variance adjustments recorded to cost of sales
in the fourth quarter should have been recorded in the previous interim periods.
As a result,  the interim results of operations for the quarters ended March 31,
June 30, and September  30, 2000 have been restated from the amounts  previously
reported in the  Company's  Form 10-Q's.  A summary of the  unaudited  quarterly
financial information including the effects of the restatement is as follows:


<TABLE>
<CAPTION>
                                                                           (Quarter Ended)
                                                  (In Thousands, except for per share information) (Unaudited)
                                      -----------------------------------------------------------------------------------
                                              March 31,              June 30,            September 30,       December 30,
                                                2000                   2000                  2000               2000
                                      ----------------------  ---------------------   ---------------------  ------------
                                            As                    As                      As
                                        Previously      As    Previously      As      Previously      As
                                         Reported   Restated   Reported    Restated    Reported    Restated                  Total

<S>                                    <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Net revenues                           $  7,063    $  7,063    $  9,018    $  9,018    $ 15,870    $ 15,870    $ 20,896    $ 52,847
Cost of goods sold                        4,988       5,733       7,086       8,359      10,862      12,569      20,605      47,266
                                       --------    --------    --------    --------    --------    --------    --------    --------

Gross profit                              2,075       1,330       1,932         659       5,008       3,301         291       5,581
Operating expenses:
  Productdevelopment                        110         110         339         339         397         397         439       1,285
  Sales and marketing                       483         483       1,163       1,163       1,575       1,575       4,178       7,399
  General and
    administrative                        1,679       1,679       1,558       1,558       1,628       1,628       1,443       6,308
                                       --------    --------    --------    --------    --------    --------    --------    --------
  Total operatingexpenses                 2,272       2,272       3,060       3,060       3,600       3,600       6,060      14,992
                                       --------    --------    --------    --------    --------    --------    --------    --------

Income (loss) from
operations                                 (197)       (942)     (1,128)     (2,401)      1,408        (299)     (5,769)     (9,411)
Other expense (income)                      608         608         948         948       1,053       1,053       1,305       3,914
                                       --------    --------    --------    --------    --------    --------    --------    --------

Income (loss) before
 income tax                                (805)     (1,550)     (2,076)     (3,349)        355      (1,352)     (7,074)    (13,325)
Income tax  benefit                        (282)       (282)       (714)       (609)       (101)       (246)     (1,287)     (2,424)
                                       --------    --------    --------    --------    --------    --------    --------    --------

Net income (loss)                      $   (523)   $ (1,268)   $ (1,362)   $ (2,740)   $    254    $ (1,106)   $ (5,787)   $(10,901)
                                       ========    ========    ========    ========    ========    ========    ========    ========
Net income (loss) per share:
Basic                                  $  (0.04)   $  (0.09)   $  (0.10)   $  (0.20)   $   0.02    $  (0.08)   $  (0.42)   $  (0.79)
Diluted                                $  (0.04)      (0.09)   $  (0.10)   $  (0.20)   $   0.02    $  (0.08)   $  (0.42)   $  (0.79)

Weighted average
  common shares
 Outstanding:
 Basic                                   13,836      13,836      13,844      13,844      13,867      13,867      13,857      13,857

 Diluted                                 13,836      13,836      13,844      13,844      13,932      13,867      13,857      13,857
</TABLE>


                                      -57-
<PAGE>


The  results  for 2000 were  adversely  affected  by the $9.8  million  in costs
relating to inventory and  manufacturing  variances  generated  from  production
inefficiencies  and  start-up  costs.  Of the  total  costs,  $5.9  million  was
comprised of excess  manufacturing  and labor costs associated with start-up for
the nationwide rollout of the Company's  fast-change products at The Home Depot,
construction and implementation of a new distribution  center, and deployment of
capital equipment for the Company's  continuing  vertical  integration  efforts.
These  inefficiencies  and costs  also  were  related  to  building  product  in
anticipation  of  higher  revenue  for the  year.  The  Company  experienced  an
unexpected softness in the retail market in the fourth quarter and was unable to
rapidly  scale back  production.  The  remaining  $3.9  million of the costs was
comprised  of physical  count  variances,  extraordinary  freight  charges,  and
purchase price variances.

The following is a summary of unaudited quarterly financial  information for the
year ended December 31, 1999:


<TABLE>
<CAPTION>
                                     --------------------------------------------------------------
                                                             QUARTER ENDED
                                     --------------------------------------------------------------
                                                             (In Thousands)

                                                                   Sept. 30, 1999                              Total
                                     March 31,    June 30,       As            As          Dec. 31,       As           As
                                       1999        1999      Previously     Restated,        1999     Previously    Restated,
                                                              Reported     see Note 15                 Reported    see Note 15

<S>                                    <C>         <C>         <C>          <C>            <C>          <C>          <C>
Net revenues                           $9,798      $8,259      $14,378      $ 14,378       $21,436      $53,871      $53,871
Cost of goods sold                      6,858       5,886        9,282         9,282        13,287       35,313       35,313
                                       ------      ------      -------      --------       -------      -------      -------

Gross profit                            2,940       2,373        5,096         5,096         8,149       18,558       18,558
                                       ------      ------      -------      --------       -------      -------      -------

Operating expenses:
  Product development                     117         109          268           268           127          621          621
  Sales and marketing                     376         382          822           822         1,648        3,228        3,228
  General and administrative            1,150       1,167        1,618         1,618         1,519        5,454        5,454
                                       ------      ------      -------      --------       -------      -------      -------

Total operating expenses                1,643       1,658        2,708         2,708         3,294        9,303        9,303
                                       ------      ------      -------      --------       -------      -------      -------

Income from operations                  1,297         715        2,388         2,388         4,855        9,255        9,255
Other expense                             457         598        1,069         1,069           654        2,778        2,778
                                       ------      ------      -------      --------       -------      -------      -------

Income before income tax                  840         117        1,319         1,319         4,201        6,477        6,477
Income tax expense                                      7           25         1,937           601          633        2,545
                                       ------      ------      -------      --------       -------      -------      -------
Income (loss) before
  extraordinary item                      840         110        1,294          (618)        3,600        5,844        3,932
Extraordinary item                                                 914           914                        914          914
                                       ------      ------      -------      --------       -------      -------      -------

Net income (loss)                      $  840      $  110      $   380      $ (1,532)      $ 3,600      $ 4,930      $ 3,018
                                       ======      ======      =======      ========       =======      =======      =======
</TABLE>

Certain  amounts in prior quarters have been  reclassified to conform to current
presentation.


                                      -58-
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information  with  respect to the  Directors  of the Company is set forth in the
Proxy Statement  relating to the Company's  annual meeting of stockholders to be
held on June 4, 2001 (the  "Proxy  Statement")  under the heading  "Election  of
Directors," which information is incorporated  herein by reference.  Information
regarding the executive officers of the Company is included as Item 4A of Part I
of this Form 10-K.  Information  required by Item 405 of  Regulation  S-K is set
forth in the Proxy Statement under the heading "Compliance with Section 16(a) of
the Securities  Exchange Act of 1934," which information is incorporated  herein
by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information  relating to executive  compensation is set forth under the captions
"Board  of  Directors"  and  "Executive  Compensation"  in the  Company's  Proxy
Statement, which information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT

Information  relating to security  ownership  of certain  beneficial  owners and
management is set forth under the caption "Security  Ownership of Management and
Other Beneficial Owners" in the Company's Proxy Statement,  which information is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  relating to certain  relationships and related  transactions is set
forth under the caption "Certain  Relationships and Related Transactions" in the
Company's  Proxy  Statement,   which  information  is  incorporated   herein  by
reference.


                                      -59-
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

          1.   Financial  Statements.  The following financial statements of the
               Company  and the  report of the  independent  public  accountants
               thereon,  are  included  in this Form  10-K.

                         Report of Independent Public Accountants

                         Balance Sheets as of December 31, 2000 and
                           December 31, 1999

                         Statements of Operations for the years ended  December
                           31, 2000, 1999 and 1998

                         Statements of Stockholders' Equity for the years
                           ended December 31, 2000, 1999 and 1998

                         Statements of Cash Flows for the years ended
                           December 31, 2000, 1999 and 1998

                         Notes to Financial Statements

          2.   Financial Statement Schedules

                         Schedule II - Valuation and Qualifying Accounts

                         All other  schedules  have  been  omitted  because  the
required information is included in the consolidated financial statements or the
notes thereto, or is not applicable or required.

          3.   Exhibits

               3.1       Amended and Restated Articles of Incorporation (1)
               3.2       Bylaws (1)
               4.1       Description  of capital stock  contained in the Amended
                         and Restated Articles (See Exhibit 3.1)
               4.2       Description of rights of security holders  contained in
                         the Bylaws (See Exhibit 3.2)
               4.3       Form of common stock certificate (1)
               4.4       Form of Common Stock Warrant  issued in pre-IPO  bridge
                         financing
               4.5       Form  of  Registration  Rights  Agreement  executed  in
                         pre-IPO bridge financing
               10.1      Amended and Restated Jore  Corporation  1997 Stock Plan
                         (1)
               10.1.1    Amendment  dated  October  25,  1999 to the Amended and
                         Restated Jore Corporation 1997 Stock Plan (2)
               10.2      Common Stock Purchase Option, dated February 10,  1999,
                         between Jore Corporation and William M. Steele, Trustee
                         of the Steele Family Trust
               10.4      Exclusive  Supply  Agreement,  dated  October  1, 1998,
                         between  Jore  Corporation  and Sears,  Roebuck and Co.
                         *(1)
               10.8      Master Equipment Lease  Agreement,  dated July 6, 1998,
                         between Key Corp and Jore Corporation (1)


                                      -60-
<PAGE>

               10.9      Interim  funding  Loan and  Security  Agreement,  dated
                         March  3,  1999,  between  Key  Corp  Leasing  and Jore
                         Corporation (1)
               10.10     Patent Assignment,  dated January 1, 1999, between Jore
                         Corporation and Matthew Jore (1)
               10.12     Patent Assignment,  dated January 1, 1999, between Jore
                         Corporation and Matthew Jore (1)
               10.13     Patent Assignment,  dated January 1, 1999, between Jore
                         Corporation and Matthew Jore (1)
               10.14     Form of Lock-up  Agreement  executed by certain of Jore
                         Corporation's shareholders (1)
               10.15     Patent  Assignment,  dated April 2, 1999,  between Jore
                         Corporation and Matthew Jore (1)
               10.16     License  Agreement,  dated April 28, 1999, by and among
                         Stanley  Logistics,  Inc.,  The Stanley  Works and Jore
                         Corporation*(1)
               10.18     Patent Assignment,  dated January 1, 1999, between Jore
                         Corporation and Matthew Jore (1)
               10.19     Limited Craftsman(R) Trademark License Agreement, dated
                         May 3, 1999,  between  Sears,  Roebuck and Co. and Jore
                         Corporation (1)
               10.20     Sales and Marketing  Agreement,  dated January 1, 1999,
                         between  Jore  Corporation  and  Manufacturers'   Sales
                         Associates, LLC*(1)
               10.21     Employment  Agreement,  dated  June  8,  1999,  between
                         Matthew B. Jore and Jore Corporation (1)
               10.22     Purchase Agreement,  dated April 7, 1999, between DADCO
                         and Jore Corporation (1)
               10.23     Guaranty, dated April 7, 1999, given by Matthew B. Jore
                         to DADCO (1)
               10.24     Purchase Agreement,  dated June 4, 1999, between Blaine
                         Huntsman and Jore Corporation (1)
               10.25     Guaranty,  dated June 4, 1999, given by Matthew B. Jore
                         to Blaine Huntsman (1)
               10.26     Registration  Rights  Agreement,  dated  June 4,  1999,
                         between Jore Corporation and Blaine Huntsman (1)
               10.27     Independent Contractor Agreement,  dated June 30, 1999,
                         between Thomas E. Mahoney and Jore Corporation (1)
               10.27.1   First  Amendment to Independent  Contractor  Agreement,
                         dated July 23, 1999, between Thomas E. Mahoney and Jore
                         Corporation
               10.27.2   Second Amendment to Independent  Contractor  Agreement,
                         dated September 30, 1999, between Thomas E. Mahoney and
                         Jore Corporation
               10.28     Strategic  Alliance  Agreement,   dated  May  7,  1999,
                         between  Jore   Corporation  and   International   Tool
                         Machines of Florida, Inc. (1)
               10.29     Business Consultant and Management Agreement, dated May
                         7, 1999,  between Jore  Corporation  and Karl Giebmanns
                         (1)
               10.30     Credit Agreement,  dated August 19, 1999, between First
                         Security Bank, N.A. and Jore Corporation (1)


                                      -61-
<PAGE>

               10.31     Indemnity Agreement,  dated September 14, 1999, between
                         Matthew B. Jore,  Michael W. Jore,  Merle B. Jore,  The
                         Michael  Jore Family  Trust,  The  Matthew  Jore Family
                         Trust and The Merle and Faye Jore Family Trust (1)
               10.32     Jore Corporation 1999 Employee Stock Purchase Plan (3)
               10.32.1   Jore  Corporation 1999 Employee Stock Purchase Plan, as
                         amended
               10.33     Supply  Agreement,  dated  December 27,  1999,  between
                         Norton Company and Jore Corporation
               10.34     Trademark License  Agreement,  dated December 27, 1999,
                         between Norton Company and Jore Corporation
               10.35     Amendment dated as of September  20, 2000,  relating to
                         the  License Agreement  dated  as  of  April  28, 1999,
                         between Jore Corporation,  Stanley Logistics, Inc., and
                         the Stanley Works *(4)
               16.1      Letter,  dated July 7, 1999,  from  Galusha,  Higgins &
                         Galusha re change in certifying accountant (1)

               21.0      List of Jore Corporation's Subsidiaries (1)

               23.1      Consent of Deloitte & Touche LLP

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

*  Portions  of this  exhibit  have  been  omitted  pursuant  to an order of the
Commission granting the Company's application respecting  confidential treatment
thereof.

(1)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-1, No. 333-78357 as amended.

(2)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-8,  No.   333-94029.

(3)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-8, No. 333-94043.

(4)  Incorporated by reference to 10-Q filed on November 14, 2000.

     (b)  Reports on Form 8-K.

          Jore  Corporation  filed no  reports  on Form 8-K  during  the  fourth
          quarter of 2000.


                                      -62-
<PAGE>


-------------------------------------------------------------------------------
SIGNATURES
-------------------------------------------------------------------------------

In accordance with the requirements of the Securities  Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                           JORE CORPORATION


                                           /s/ MONTE W. GIESE
                                           -------------------------------------
                                           By:     Monte W. Giese
                                           Title:  Chief Financial Officer

Date: April 13, 2001

Pursuant to the requirements of the Securities Exchange 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:

Date:


                  /s/ Matthew B. Jore       President, Chief Executive Officer
-------------     -----------------------   Chairman
                      Matthew B. Jore       (Principal Executive Officer)


                  /s/ Monte W. Giese        Chief Financial Officer
-------------     -----------------------   (Principal Financial and Accounting
                      Monte W. Giese        Officer)

                  /s/ Michael W. Jore       Executive Vice President and
-------------     -----------------------   Director
                      Michael W. Jore


                  /s/ David H. Bjornson     Executive Vice President, General
-------------     -----------------------   Counsel, Secretary and Director
                      David H. Bjornson


                  /s/ Thomas E. Mahoney     Director
-------------     -----------------------
                      Thomas E. Mahoney


                  /s/ James K.Loebbecke     Director
-------------     -----------------------
                      James K.Loebbecke


                  /s/ James Mathias         Director
-------------     -----------------------
                      James Mathias


                                      -63-
<PAGE>


                                            Schedule II
                                            Valuation and Qualifying
                                            Accounts

<TABLE>
<CAPTION>
Year Ended              Balance at       Charged/(Credited) to              Inventory         Balance at end of
                        beginning of     costs and                          disposed or       period
                        period           expenses                           written off

Inventory Valuation Allowance

<S>                     <C>              <C>                                <C>                 <C>
December 31, 2000       $488,585         $1,351,728                         $(65,664)           $1,774,649

December 31, 1999        435,354            287,218                        ($233,987)              488,585

December 31, 1998        410,802             24,552                                0               435,354

<CAPTION>
Accounts    Receivable    Valuation
Allowance

Year Ended              Balance at        Charged/(Credited) to             Accounts             Balance at end of
                        beginning of      costs and                         receivable written   period
                        period            expenses                          off

<S>                     <C>              <C>                                <C>                  <C>
December 31, 2000       $ 56,645         $ 151,234                          $ (65,495)           $ 142,384

December 31, 1999             --            56,645                                 --               56,645

December 31, 1998             --                --                                 --                   --
</TABLE>



                                      -64-