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



                                    FORM 10-Q


        (Mark One)

     [X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934. For the quarterly period ended December 31, 2000



                                       or

     [ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934.

                         Commission file number 0-22558

                           IWERKS ENTERTAINMENT, INC.

             (Exact name of registrant as specified in its charter)

          Delaware                                         95-4439361
-------------------------------                 -------------------------------
(State or other jurisdiction of                 (I.R.S. Employer Identification
 incorporation or organization)                              Number)



            4520 West Valerio Street, Burbank, California 91505-1046
      -------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)



                                 (818) 841-7766
      --------------------------------------------------------------------
               (Registrant's telephone number including area code)



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 __.

The number of shares outstanding of the registrant's Common Stock, $0.001 par
value, at February 9, 2001 was 3,540,911 shares.



<PAGE>



                           IWERKS ENTERTAINMENT, INC.

                                      INDEX

PART I.  FINANCIAL INFORMATION                                      Page Number

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets as December 31,2000
         and June 30, 2000                                                 3

         Condensed Consolidated Statements of Operations for the
         Three and Six Months ended December 31, 2000 and 1999             5

         Condensed Consolidated Statements of Cash Flows for the
         Six Months ended December 31, 2000 and 1999                       6

         Notes to the Condensed Consolidated Financial Statements          7

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                         9

PART II  OTHER INFORMATION

Item 4.   Submission of Matters to a of Security Holders                   22

Item 6.  Exhibits and Reports on Form 8-K                                  22

Signatures                                                                 23


                                     Page 2
<PAGE>


                           IWERKS ENTERTAINMENT, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                     ASSETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                               DECEMBER 31,          JUNE 30,
                                                                   2000               2000
                                                               (Unaudited)          (Audited)
                                                             -----------------    ---------------
<S>                                                          <C>                  <C>
Current assets:
  Cash and Cash Equivalents (Note 2).................          $    2,657           $    2,733

  Trade accounts receivable, net of
    allowance for doubtful accounts..................               2,855                3,963

  Costs and estimated earnings in excess of
    billings on uncompleted contracts................                 719                2,194

  Assets held for sale - current.....................                 473                  858

   Inventories and other current assets..............               2,869                3,147
                                                             -----------------    ---------------

Total current assets.................................               9,573               12,895

Property and equipment at cost, net of
   accumulated depreciation..........................               3,554                3,693

Film inventory at cost, net of accumulated
   amortization......................................               1,634                2,222

Goodwill, net of accumulated amortization............               1,882                1,953

Other assets.........................................               3,132                3,292

Assets held for sale - long term.....................               1,755                1,755
                                                             -----------------    ---------------

Total Assets.........................................           $  21,530            $  25,810
                                                             =================    ===============
</TABLE>


                             See accompanying notes.


                                     Page 3
<PAGE>


                           IWERKS ENTERTAINMENT, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>

                                                               DECEMBER 31,          JUNE 30,
                                                                   2000                2000
                                                               (Unaudited)           (Audited)
                                                             -----------------    ---------------
<S>                                                          <C>                  <C>
Current Liabilities:

  Accounts Payable...................................         $    1,969          $    3,943

  Accrued expenses...................................              5,699               5,780

  Notes payable, current portion.....................              1,836               1,842

  Billings in excess of costs and estimated
    earnings on uncompleted contracts................              3,177               3,797

  Deferred revenue...................................                 33                 136

  Capital lease obligations, current portion.........                230                 459
                                                             -----------------    ---------------

  Total current liabilities..........................             12,944              15,957

  Notes payable, net of current portion..............                472                 333
                                                             -----------------    ---------------

  Total liabilities..................................             13,416              16,290

  Stockholders' equity:

Preferred stock, $0.001 par value, 1,000,000
shares authorized, none issued and outstanding.......                  -                   -

  Common stock, $0.001 par value, 50,000,000 shares
    authorized; 3,540,911 and 3,540,911 issued and
    outstanding .....................................                 57                  57

  Additional paid-in capital.........................             78,086              78,086

  Treasury Stock, 91,600 shares at cost..............               (341)               (341)

  Common stock warrants..............................                250                 250

  Accumulated deficit................................            (69,938)            (68,532)
                                                             -----------------    ---------------

  Total stockholders' equity.........................              8,114               9,520

                                                             -----------------    ---------------
  Total liabilities and stockholders' equity.........          $  21,530           $  25,810
                                                             =================    ===============
</TABLE>



                             See accompanying notes.


                                     Page 4
<PAGE>


                           IWERKS ENTERTAINMENT, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED         SIX MONTHS ENDED
                                                          DECEMBER 31,              DECEMBER 31,
                                                       --------------------    ---------------------
                                                           2000       1999         2000       1999
                                                       ---------- ---------    ---------- ----------
<S>                                                    <C>        <C>          <C>        <C>
Revenue                                                $  6,780   $  9,159     $  11,692  $  16,768

Cost of sales                                             5,080      7,903         9,167     14,268
                                                       ---------- ---------    ---------- ----------

Gross margin                                              1,700      1,256         2,525      2,500

Selling, general and administrative expenses              1,892      3,176         3,911      5,951
                                                       ---------- ---------    ---------- ----------

Loss from operations                                       (192)    (1,920)       (1,386)    (3,451)

Interest income                                              74         91            90        149

Interest expense                                            (66)       (54)         (110)      (152)
                                                       ---------- ---------    ---------- ----------

Net loss                                               $   (184)  $ (1,883)    $  (1,406) $  (3,454)
                                                       ========== =========    ========== ==========

Net loss per common share-basic and diluted            $ (0.05)   $ (0.55)     $  (0.41)  $  (1.00)
                                                       ========== =========    ========== ==========

Weighted average shares outstanding-basic and diluted     3,449      3,449         3,449      3,448
                                                       ========== =========    ========== ==========
</TABLE>



                             See accompanying notes.


                                     Page 5
<PAGE>


                           IWERKS ENTERTAINMENT, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                 FOR THE SIX MONTHS ENDED
                                                                       DECEMBER 31,
                                                                ----------------------------
                                                                   2000             1999
                                                                ------------     -----------
<S>                                                             <C>              <C>
OPERATING ACTIVITIES
Net loss                                                        $  (1,406)       $  (3,454)
Depreciation and amortization                                       1,275            1,728
Changes in operating assets and liabilities                           150           (1,673)
                                                                ------------     -----------
  Net cash provided by (used in) operating activities                  19           (3,399)

INVESTING ACTIVITIES
Purchases of property, plant and equipment                           (222)            (575)
Net proceeds from the sale of portable simulation units               385               --
Additions to film inventory                                            --             (430)
Investments in debt securities                                         --            2,500
                                                                ------------     -----------
  Net cash provided by investing activities                           163            1,495

FINANCING ACTIVITIES
Proceeds from Issuance of Debt                                        300               --
Principal payments on notes payable                                  (167)            (180)
Payments on capital leases                                           (229)            (385)
Proceeds from issuance of common stock warrants                        --              250
Deferred financial fees                                                --             (252)
Other                                                                (162)              --
                                                                ------------     -----------
  Net cash used in financing activities                              (258)          (1,347)
                                                                ------------     -----------

Net decrease in cash and cash equivalents                             (76)          (3,251)

Cash and cash equivalents at beginning of period                    2,733            4,217
                                                                ------------     -----------

Cash and cash equivalents at end of period                      $   2,657        $     966
                                                                ============     ===========

Supplemental disclosures
  Interest paid during the period                                  $   27          $   127
                                                                ============     ===========
  Income taxes paid during the period                              $   10          $    10
                                                                ============     ===========
</TABLE>



                             See accompanying notes.



                                     Page 6
<PAGE>


                           IWERKS ENTERTAINMENT, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1. INTRODUCTION

        The accompanying condensed consolidated financial statements of Iwerks
Entertainment, Inc. (the "Company") have been prepared without audit pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the consolidated financial position of the Company as of December
31, 2000 and the results of its operations for the three and six months ended
December 31, 2000 and 1999 and the cash flows for the six months ended December
31, 2000 and 1999 have been included. The results of operations for interim
periods are not necessarily indicative of the results which may be realized for
the full year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's latest Annual Report
on Form 10-K as filed with the SEC.


NOTE 2. RESTRICTED CASH

        Included in the December 31, 2000 cash and cash equivalents balance is
$200,000 of cash received from one customer, which is restricted as to its use.
This restriction will remain in effect until the Company reaches a certain
milestone related to the completion of the project. The milestone is expected to
be reached by the third quarter of fiscal 2001 at which time this cash will
become available for Company use.


NOTE 3. ASSETS HELD FOR SALE

        On September 30, 1999 the Company decided to sell the assets relating to
the touring division. These assets are described as the portable motion theatres
and are reflected at management's estimate of their fair value less cost to
sell. Management discontinued depreciating these assets and will continue to
periodically assess the net fair value of these assets. The Company has sold two
units since June 30, 2000 with aggregate net proceeds of $485,000.


NOTE 4. ISSUANCE OF WARRANTS

        On September 8, 1999 the Company appointed two outside members to its
Board of Directors. The two new members purchased warrants to purchase an
aggregate of 442,857 shares of Iwerks common stock. The warrants were issued in
four tranches of equal amounts ranging in a per share exercise price of $5.01 to
$10.50. Certain restrictions apply to the exercise of these warrants, which have
a term of five years. These two board members resigned on January 18, 2000. The
warrants remain outstanding with the same terms described above.


NOTE 5. DEPRECIATION AND AMORTIZATION

        Depreciation expense and amortization expense of property and equipment,
goodwill and other is computed using the straight-line method over the estimated
useful lives of the assets. Film costs are amortized using the individual film
forecast method.


                                     Page 7
<PAGE>

<TABLE>
<CAPTION>
                                              Three Months Ended             Six Months Ended
                                                 December 31,                  December 31,
                                           ------------------------------------------------------
                                                2000           1999          2000         1999
                                           ------------------------------------------------------
<S>                                          <C>            <C>           <C>          <C>
 Depreciation on fixed assets                $  191,000     $  199,000    $  361,000   $  389,000
 Depreciation on portable ride
   simulation theaters                               --             --            --      161,000
 Amortization of film                           220,000        373,000       513,000      556,000
 Amortization of goodwill and other             183,000        304,000       401,000      622,000
                                           -------------------------------------------------------

 Total depreciation and amortization         $  594,000     $  876,000    $1,275,000   $1,728,000
                                           =======================================================
</TABLE>

Depreciation and amortization included in cost of sales was $248,000 and
$377,000 for the quarters ended December 31, 2000 and 1999, respectively and
$541,000 and $723,000 for the six months ended December 31, 2000 and 1999,
respectively.

NOTE 6 - NOTES PAYABLE

        On October 19, 2000, the Company issued a five-year, 8% convertible
debenture in the amount of $300,000. Interest is paid semi-annually and the
debenture is convertible at $2.00 per share. See Note 10.

NOTE 7. NET LOSS PER COMMON SHARE

        For the three and six months ended December 31, 2000 and 1999, the basic
and diluted per share data is based on the weighted average number of common
shares outstanding during the period. Common equivalent shares, consisting of
outstanding stock options and warrants, are not included in the diluted loss per
share calculation since they are antidilutive.

        On January 13, 2000, the Company's stockholders approved an amendment to
the Company's certificate of incorporation to effect a one for three and
one-half reverse stock split for stockholders of record. The reverse stock split
was effective January 18, 2000. All references to per share amounts and shares
outstanding included herein have been retroactively restated to reflect the
stock split.

NOTE 8. INCOME TAXES

        At June 30, 2000, the Company had available federal and state tax net
operating loss carryforwards of approximately $36,200,000 and $13,100,000,
respectively. The federal and state net operating loss carryforwards expire, in
varying amounts, through 2019. As a result of these net operating loss
carryforwards and current period losses, the Company's effective tax rate was
negligible and consequently no income tax provision or benefit was recorded in
the periods presented.

NOTE 9. LITIGATION

        The proceedings to which the Company is a defendant consist of routine
litigation in the ordinary course of business. In the opinion of management,
and, based in part upon the advice of outside counsel, resolution of these
matters will not have a material adverse impact on the Company's consolidated
financial position or results of operations.

NOTE 10. SUBSEQUENT EVENTS

        On October 19, 2000, the Company announced the signing of a strategic $4
million investment transaction with the S. Kumars Group. The transaction was to
have been funded through a combination of convertible debentures and common
stock. In connection with this financing, the Company issued a $300,000
convertible debenture (see Note 6). Subsequent to December 31, 2000, other than
with respect to the $300,000 convertible debenture, the financing transaction
was terminated.


                                     Page 8
<PAGE>



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

This Report contains statements that constitute "forward-looking statements"
within the meaning of Section 21E of the Exchange Act and Section 27A of the
Securities Act. The words "expect", "estimate", "anticipate", "predict",
"believe" and similar expressions and variations thereof are intended to
identify forward-looking statements. Such statements appear in a number of
places in this filing and include statements regarding the intent, belief or
current expectations of Iwerks, its directors or officers with respect to, among
other things (a) trends affecting the financial condition or results of
operations of Iwerks and (b) the business and growth strategies of Iwerks. The
stockholders of Iwerks are cautioned not to put undue reliance on such
forward-looking statements. Such forward-looking statements are not guarantees
of future performance and involve risks and uncertainties, and actual results
may differ materially from those projected in this Report, for the reasons,
among others, discussed in the Sections - "Management's Discussion and Analysis
of Financial Condition and Results of Operations", and "Future Operating
Results". Iwerks undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. Readers should review carefully the risk factors described in
other documents the Company files from time to time with the SEC, including the
Annual Report on form 10-K filed by the Company on September 29, 2000, the
Quarterly Reports on Form 10-Q filed by the Company on November 14, 2000, the
Quarterly Reports on Form 10-Q to be filed by the Company in calendar year 2001
and any Current Reports on Form 8-K filed by the Company.

RESULTS OF OPERATIONS

HARDWARE SALES AND SERVICE

Revenues on sales of theatre systems are recognized on the percentage-of-
completion method over the life of the contract. The gross margin for each
contract varies based upon pricing strategies, competitive conditions and
product mix.

FILM LICENSING

Revenues and related expenses from film licensing are recognized at the
beginning of the license period at which time the customer is billed the license
fee and the film is delivered to the customer.

CAMERAS AND OTHER PRODUCTION SERVICES

The Company contracts with third parties to lease its 15/70 and 8/70 large
format cameras and related equipment, (including a 3D rig, lenses and
accessories). Rental periods range from several days to several months.

The Company has developed and manufactured one 15/70 large format camera and is
in the process of completing two additional 15/70 cameras. The Company also
provides technical and post-production services to third party producers for a
fee and maintains a 15/70 and 8/70 projection room at its Burbank facilities for
rent to large format filmmakers for use in the post-production process.

The Company's internal executive production capability develops and oversees
production of films for the Company's film productions as well as for third
party custom film projects.

OWNED AND OPERATED

Revenues from owned and operated (O&O) consist of portable ride simulation
theatre revenues (touring) derived primarily from corporate sponsorship or
ticket sales at state fairs, air shows, and similar events, as well as revenues
derived from fixed site joint venture revenues which includes Iwerks'
contractual share of the sites' revenues or profits as applicable. The Company
has made the determination to shut down the touring division and sell the
related assets in an effort to concentrate on its core business.


                                     Page 9
<PAGE>


THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1999

For the three months ended December 31, 2000 the Company recorded revenues of
$6,780,000 compared to $9,159,000 for the same period last year. For the three
months ended December 31, 2000, the Company recorded a net loss of $184,000 or
$.05 per share compared to a net loss of $1,883,000 or $.55 per share for the
same period last year.

REVENUES

Revenue for the three months ended December 31, 2000 decreased by $2,379,000 or
26% from the three months ended December 31, 1999.

The following table presents summary information regarding revenues (amounts in
thousands):


                                              Three Months Ended
                                                 December 31,
                                              --------------------
                                                2000       1999
                                              --------------------

       Hardware Sales & Service                $  4,794  $  5,588
       Film Licensing and Prints                    993     1,809
       Cameras and Other Production Services        935     1,134
       Owned and Operated                            58       628
                                              --------------------
       Total                                   $  6,780  $  9,159
                                              ====================


Hardware Sales and Service for the three months ended December 31, 2000
decreased by approximately $794,000 or 14% from the prior fiscal period. During
the second quarter of fiscal year 2001, hardware sales recognized in the
Asia-Pacific region decreased by approximately $1.6 million, hardware sales
recognized in Europe and the Middle East increased by approximately $500,000,
hardware sales recognized in South America decreased by approximately $730,000
and hardware sales recognized in North America increased by approximately $1.2
million. Revenue generated from Customer Service decreased by $155,000 in the
second quarter of fiscal 2001 compared to the comparable period in the prior
year. Generally, hardware sales are subject to quarterly fluctuations as they
are dependent on customer installation dates.

Film Licensing and Prints revenues for the quarter ended December 31, 2000
decreased by approximately $816,000 or 45% compared to the same period last
year. This decrease primarily is due to one large multi-year license agreement
that was signed in the second quarter of fiscal 2000. Additionally, two
significant license agreements that were expected to be renewed in the second
quarter of fiscal 2001 are expected to be renewed in the third quarter of fiscal
2001.

Cameras and Other Production Services revenue for the three months ended
December 31, 2000 decreased by approximately $199,000 compared to the same
period last year. The decrease primarily is due to one major film production
deal for the quarter ended December 31, 2000 compared to three productions
during the quarter ended December 31, 1999.

Owned and Operated revenue for the three months ended December 31, 2000
decreased by approximately $570,000 as compared to the same period last year,
primarily due to declining sales in the touring division. In September 1999, the
Company determined to shut down the touring division and sell the related
assets in an effort to concentrate on its core business. Revenues generated from
the touring division were approximately $27,000 during the quarter ended
December 31, 2000 compared to $441,000 during the quarter ended December 31,
1999. Revenue from the joint venture venues decreased by approximately $256,000.
The decrease primarily is due to lower attendance at the joint venture
locations.


                                    Page 10
<PAGE>


COST OF SALES

Cost of sales primarily includes costs of theatre systems sold, expenses
associated with operating portable ride simulation theatres, and costs
associated with film production and licensing fees. The cost of theatre systems
includes the cost of components, customization, engineering, project management,
assembly, system integration and installation. Also included in cost of sales
are royalties payable to a former joint venture partner and estimated warranty
expenses. The costs associated with film license fees primarily reflect
amortization of film production costs over the lives of certain films and
royalties paid to third parties. The cost of sales associated with operating
portable ride simulation theatres includes costs for personnel, event fees,
fuel, insurance and maintenance.

Cost of sales as a percentage of sales was 75% for the three months ended
December 31, 2000 as compared to 86% for the three months ended December 31,
1999. The decrease resulted primarily from shutting down the touring division
operations. For the fiscal quarter ended December 31, 1999, the touring division
had a negative gross margin.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include, among other things,
personnel costs, trade shows and other promotional expenses, sales commissions,
travel expenses, public relation costs, outside consulting and professional
fees, depreciation on fixed assets, amortization of goodwill, departmental
administrative costs and research and development costs.

Selling, general and administrative expenses were approximately $1.9 million and
$3.2 million, for the quarters ended December 31, 2000 and 1999, respectively.
This decrease primarily is attributable to senior management cost containment
efforts including marketing, travel and entertainment expense and office expense
and reduced depreciation and amortization, commission and research and
development expenses.

INTEREST INCOME & EXPENSE

Interest income for the quarters ended December 31, 2000 and 1999 was
approximately $74,000 and $91,000, respectively. The decrease resulted primarily
from a reduction in the invested cash balances during the three months ended
December 31, 2000.

Interest expense for the quarters ended December 31, 2000 and 1999 was
approximately $66,000 and $54,000, respectively. The increase was primarily due
to a note payable recorded in the quarter ended December 31, 2000.

NET LOSS

The Company recorded a net loss of approximately $184,000 in the quarter ended
December 31, 2000, compared to a net loss of approximately $1.9 million in the
quarter ended December 31, 1999 due to the reasons mentioned above.

SIX MONTHS ENDED DECEMBER 31, 2000 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1999

For the six months ended December 31, 2000 the Company recorded revenues of
approximately $11.7 million compared to approximately $16.8 million for the same
period last year. For the six months ended December 31, 2000, the Company
recorded a net loss of approximately $1.4 million or $0.41 per share compared to
a net loss of approximately $3.5 million or $1.00 per share for the same period
last year.

REVENUES

Revenue for the six months ended December 31, 2000 decreased by $5,076,000 or
30% from the six months ended December 31, 1999.


                                    Page 11
<PAGE>


The following table presents summary information regarding revenues (amounts in
thousands):

                                               Six Months Ended
                                                 December 31,
                                              --------------------
                                                2000      1999
                                              --------------------
       Hardware Sales & Service               $  7,057   $ 10,348
       Film Licensing and Prints                 2,058      2,797
       Cameras and Other Production Services     2,216      1,951
       Owned and Operated                          361      1,672
                                              --------------------
       Total                                  $ 11,692   $ 16,768
                                              ====================

Hardware Sales and Service for the six months ended December 31, 2000 decreased
by approximately $3.3 million or 32% from the prior fiscal year. During the six
months ended December 31, 2000, hardware sales recognized in the Asia-Pacific
region decreased by approximately $2.1 million, hardware sales recognized in the
South America region decreased by approximately $1.0 million, hardware sales
recognized in Europe and the Middle East decreased by approximately $700,000 and
hardware sales recognized in the North American region increased by
approximately $400,000. In addition, revenue generated from Customer Service
decreased by $261,000 in the six months ended December 31, 2000 compared to the
six months ended December 31, 1999.

Film Licensing and Prints revenues for the six months ended December 31, 2000
decreased by approximately $739,000 or 26% compared to the same period last
year. The decrease primarily is due to one large multi-year license agreement
that was signed in the second quarter of fiscal 2000. Additionally, two
significant license agreements that were expected to be renewed in the second
quarter of fiscal 2001 are expected to be renewed in the third quarter of fiscal
2001.

Cameras and Other Production Services revenue for the six months ended December
31, 2000 increased by approximately $265,000. This was primarily due to the
Company securing one large film production deal during the six months ended
December 31, 2000 compared to three smaller projects during the six months
ended December 31, 1999.


Owned and Operated revenue for the six months ended December 31, 2000 decreased
by approximately $1.3 million as compared to the same period last year,
primarily due to declining sales in the touring division. Revenues generated
from the touring division were approximately $65,000 during the six months ended
December 31, 2000 compared to $1.2 million during the six months ended December
31, 1999. Revenue from the joint venture venues decreased by approximately
$350,000. The decrease primarily is due to lower attendance at the joint venture
locations.


COST OF SALES

Cost of sales as a percentage of sales was 78% for the six months ended December
31, 2000 as compared to 85% for the six months ended December 31, 1999. The
decrease resulted primarily from shutting down the touring division operations.

Selling, general and administrative expenses decreased to approximately $3.9
million for the six months ended December 31, 2000 compared to approximately
$6.0 million for the six months ended December 31, 1999. This decrease was
related to senior management cost containment efforts including marketing,
travel and entertainment expense and office expense and reduced depreciation and
amortization, commission and research and development expense.


                                    Page 12
<PAGE>


INTEREST INCOME & EXPENSE

Interest income for the six months ended December 31, 2000 and 1999 was
approximately $90,000 and $149,000, respectively. The decrease resulted
primarily from the reduction in the invested cash balances.

Interest expense for the six months ended December 31, 2000 and 1999 was
approximately $110,000 and $152,000, respectively. The decrease was due to lower
daily overall balances outstanding quarter to quarter during fiscal 2001.

NET LOSS

The Company recorded a net loss of approximately $1.4 million in the six months
ended December 31, 2000, compared to a net loss of approximately $3.5 million in
the six months ended December 31, 1999 due to the reasons mentioned above.

FUTURE OPERATING RESULTS

The market for the Company's products is intensely competitive and is undergoing
significant changes, primarily due to technological developments as well as
changing consumer tastes. Numerous companies are developing and are expected to
develop new entertainment products or concepts for the out-of-home entertainment
industry.

There is competition for financial, creative and technological resources in the
industry and there can be no assurance that existing products will continue to
compete effectively or that products under development will ever be competitive.

The Company and its principal competitor in the giant screen market, Imax
Corporation, are aggressively competing, particularly in the United States
market, for new 15 perforation, 70 millimeter format (15/70) theatre
installations. The Company primarily competes in this market based upon the
price and terms of its projection technology. Imax, the dominant competitor in
the market, competes primarily on the basis of its brand identity and its larger
base of installed theatres. These factors, and Imax's access to greater
financial and other resources, are expected to continue to place the Company at
a competitive disadvantage in this market and could have a negative impact on
the Company's gross margins in this market. However, the Company believes there
is potential and is pursuing the 8 perforation, 70 millimeter (8/70) format
theatre market in addition to its 15/70 sales efforts. Imax does not offer an
8/70 product.

In addition to competition in the giant screen market, the Company faces
competition in the simulation industry from a number of other competitors. The
Company competes in this market based upon the breadth of its product offerings
and the size and quality of its film library. Few of its competitors in this
market have sufficient financial resources to effectively compete with the
Company based on these criteria. The Company's competitive position in this
market segment could be materially affected if any of its existing competitors
or a new entrant were to assemble the financial, technical and creative
resources required to effectively compete with the Company's range of product
offerings and film library.

The Company recognizes these competitive issues and is in the process of
creating new products, such as a 3D/4D FX TM specialty attraction system which
includes multiple sensory effects and the development of a new generation of
smaller ride simulation configurations that can accommodate the potential
opportunity in the mass retail environment and movie theatres. The Company
already has made three sales of its new 3D/4D FXTM theatre system. All three of
the sales were in China, the first of which opened in February 2000. The other
two theater systems are scheduled to open in the current fiscal year.

Iwerks has experienced quarterly fluctuations in operating results and
anticipates that these fluctuations will continue in future periods. Operating
results and cash flow can fluctuate substantially from quarter to quarter and
periodically as a result of the timing of theatre system deliveries, contract
signing, the mix of theatre systems shipped, the completion of custom film
contracts, the existence of world expos, the amount of revenues from film
licensing agreements, the timing of sales of ride simulation attractions, the
timing of delivery and installation of such sales (pursuant to percentage of
completion accounting) and any delays therein caused by permitting or
construction delays at the customer's site, the size, type and configuration of
the attractions sold, the timing of film rental


                                    Page 13
<PAGE>


payments from existing attractions and the performance of those attractions that
pay film rental based on a percentage of box office and the timing of sales and
marketing efforts and related expenditures. In particular, fluctuations in
theatre system sales and deliveries from quarter to quarter can materially
affect quarterly and periodic operating results, and theatre system contract
signing can materially affect quarterly or periodic cash flow. Accordingly,
Iwerks' revenues and earnings in any particular period may not be indicative of
the results for any future period.

The seasonal fluctuations in earnings also may cause volatility in the stock
price of Iwerks. While a significant portion of Iwerks' expense levels are
relatively fixed, the timing of increases in expense levels is based in large
part on Iwerks' forecasts of future sales. Iwerks may also choose to reduce
prices or increase spending in response to market conditions, which may have a
material adverse effect on Iwerks' results of operations. If net sales are below
expectations in any given period, the adverse impact on results of operations
may be magnified by Iwerks' inability to adjust spending quickly enough to
compensate for the sales shortfall.

Additionally, the Company plans to continue to evaluate and, when appropriate,
make acquisitions of complementary technologies, products or businesses. The
Company will continue to evaluate the changing value of its assets, and when
necessary, make adjustments thereto. While the Company cannot predict what
effect these various factors may have on its financial results, the aggregate
effect of these and other factors could result in significant volatility in the
Company's future performance and stock price.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities for the three months ended December
31, 2000 was approximately $19,000. This was primarily attributable to the net
loss of approximately $1.4 million offset with positive changes in operating
assets and liabilities of approximately $150,000 and by non-cash charges of
approximately $1.3 million for depreciation and amortization. Investing
activities for the three months ended December 31, 2000 consisted of purchases
of property and equipment that was offset by the proceeds from the sale of two
portable simulation units. Cash provided by financing activities consisted
primarily of proceeds from the issuance of debt that was partially offset by the
payments on capital leases and notes payable.

At December 31, 2000, the Company had cash and cash equivalents of approximately
$2.7 million of which $200,000 was restricted from use by the Company due to it
being held as collateral for a standby letter of credit on a hardware project.
This restriction is expected to be released in the third quarter of fiscal 2001.
The Company's cash and short-term investment balances have continued to decline
since June 30, 2000 and the Company expects to experience further declining
balances during the remainder of fiscal 2001. Because of the substantial
reductions in the Company's cash balances over the last eighteen months, and
contractual restrictions on the use of some of its cash balances, the Company
may not be able to continue operations at its current levels. The Company is
dependent upon current cash collections to meet its operating needs and pay its
current liabilities. The Company has experienced significant difficulty in
accurately projecting its cash balances historically. The Company's cash flow is
dependent on the timing of delivery of hardware systems, collections and the
signing of new contracts, all of which are difficult to predict with accuracy.
Further complicating its ability to project cash balances is that the timing of
progress payments of the hardware projects are dependent upon achieving certain
performance milestones under its hardware sales agreements.

On October 19, 2000, the Company announced the signing of a strategic $4 million
investment transaction with the S. Kumars Group, an Indian company. As part of
the investment transaction, on October 19, 2000, the Company issued to S. Kumars
Group a $300,000 convertible subordinated debenture. On January 19, 2001, the
Company announced that other than the issuance of the convertible debenture, the
investment transaction was terminated and the Company does not expect to receive
any additional funds in connection with that financing.

The Company determined to sell its portable ride simulation theaters, which when
sold, will generate cash and is considering a number of other options to improve
the financial condition of the Company. The Company sold two portable ride
simulation units during the first six months of the fiscal year. There can be no
assurance that any additional ride simulation theaters will be sold.


                                    Page 14
<PAGE>


In order to preserve cash, the Company has been required to reduce expenditures
for capital projects (including new films), research and development, and in its
corporate infrastructure, any of which may have a material adverse affect on the
Company's future operations. Further reductions in its cash balances could
require the Company to make more significant cuts in its operations, which would
have a material adverse impact on its future operations. There can be no
assurance that the Company can achieve these reductions over a short enough
period of time in order to allow it to continue as a going concern.

The Company will need to aggressively seek additional debt or equity financing
and other strategic alternatives. However, recent operating losses, the
Company's declining cash balances, the Company's historical stock performance,
the delisting of the Company's common shares from The Nasdaq Stock Market, the
recent decline in revenue, and a general decrease in investor interest in the
Company's industry, may make it difficult for the Company to attract equity
investments or debt financing or strategic partners on terms that are deemed to
be favorable to the Company. If the Company's financial condition continues to
worsen and it is unable to attract alternative equity or debt financing or other
strategic transactions, the Company could be forced to consider steps that would
protect its assets against its creditors. The Company's independent auditors'
report contains an emphasis paragraph indicating there is substantial doubt
about the Company's ability to continue as a going concern.


                                    Page 15
<PAGE>


RISK FACTORS

THERE IS DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

        We have experienced significant operating losses in the current and
prior years. Our cash and short-term investment balances continue to decline
since June 30, 2000 and we expect to experience further declining balances. We
have been unable to pay all of our trade creditors and certain other obligations
in accordance with their terms and some of our creditors have refused to provide
further product or services except on a C.O.D. basis. We intend to improve
liquidity by the continued monitoring and reduction of manufacturing, facility
and administrative costs including reduction of personnel and the sale of our
portable ride simulation units. We expect that our cash on hand and short-term
investments, together with cash generated by operations, cannot sufficiently
fund future operating losses and capital requirements. We have attempted to
raise additional capital through debt or equity financings and to date have had
nominal success. If we are unable to obtain financing on terms acceptable to us,
or at all, we will not be able to accomplish any or all of our initiatives and
could be forced to consider steps that would protect our assets against our
creditors.


WE HAVE A HISTORY OF LOSSES AND THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE
TO ACHIEVE PROFITABLE OPERATIONS IN FISCAL 2001.

        We have not been profitable in five of the last six years and have an
aggregate net loss for the last six years of $59.2 million. During the six
months ended December 31, 2000, we incurred a net loss of $1.4 million and for
the fiscal year ended June 30, 2000, we incurred a net loss of $22.5 million.
Because substantial portions of our expenses are fixed and our gross margin is
relatively low, achieving profitability depends upon our ability to generate and
sustain substantially higher revenues. Although we have implemented plans to
increase revenues and operating margin, we cannot assure you that we will be
able to do so and consequently we expect to experience additional losses in
fiscal 2001.

OUR COMMON SHARES HAVE BEEN DELISTED FROM THE NASDAQ STOCK MARKET.

        On November 1, 2000, we were notified by The Nasdaq Stock Market that we
did not meet the continued listing requirements of The Nasdaq Small Capital
Market and our common shares were delisted on the close of business on November
1, 2000. Our common stock currently is trading on the Over the Counter Bulletin
Board. It may be more difficult to raise additional debt or equity financing
while trading on the Over the Counter Bulletin Board. If we are unable to raise
additional financing, we will not be able to accomplish our business objectives
and may consider steps to protect our assets against creditors.

WE DEPEND ON SINGLE OR LIMITED SUPPLIERS FOR CERTAIN OF OUR COMPONENTS AND IF
THESE SUPPLIERS ARE UNABLE TO PROVIDE THESE COMPONENTS, WE MAY EXPERIENCE DELAYS
IN PRODUCT SHIPMENT AND ADDITIONAL COSTS.

        We currently use only one or a limited number of suppliers for certain
of the components that we use in our theater systems. If our suppliers are
unable to deliver these components to us we may be unable to locate an alternate
source of these components, which would result in a material adverse effect on
our revenues, results of operations, liquidity and financial position. Our
reliance on a limited number of vendors involves many risks including:

     o    Shortages of certain key components;

     o    Delays in product shipment;

     o    Product performance shortfalls;

     o    Additional costs associated with the purchase of the components from
          alternative suppliers; and


                                    Page 16
<PAGE>


     o    Reduced control over delivery schedules, manufacturing capabilities,
          quality and costs;

        If any of our suppliers suffers business disruptions, financial
difficulties, or if there is any significant change in condition of our
relationship with the supplier, our costs of goods sold may increase or we may
be unable to obtain these key components for our products. In either event, our
revenues, results of operations, liquidity and financial condition would be
adversely affected. While we believe that we can obtain most of the components
necessary for our products from other manufacturers, any unanticipated change in
the source of our supplies, or unanticipated supply limitations, could adversely
affect our ability to meet our product orders.


IT IS POSSIBLE THAT OUR CURRENT FILM SOFTWARE MAY NOT SUSTAIN ITS POPULARITY AND
OUR NEW FILM SOFTWARE MAY NOT BECOME POPULAR.

        A substantial portion of our revenue is dependent upon the production
and distribution of entertainment film software for exhibition on our theatre
systems. Each production is an individual artistic work. We try to develop and
produce film software that will achieve high market acceptance. However, market
acceptance depends upon many factors beyond our control, including:

     o    audience reaction;

     o    competing programming;

     o    other forms of entertainment; and

     o    perceived quality of programming.

        We cannot assure you that our film software will obtain market
acceptance. If our film software becomes less popular, we will most likely
derive less revenue from the license of our film library and from new hardware
sales.

OUR COMPETITIVE POSITION IS DEPENDENT ON CONTINUING TO INVEST IN NEW FILM
PRODUCTIONS. IF WE ARE UNABLE TO DO SO, IT COULD HAVE A NEGATIVE IMPACT ON OUR
REVENUES.

We believe that our extensive library of popular films provides a competitive
advantage and that we must continue to add to this library if we are to be
successful. Film production is expensive. We typically spend $100,000 -
$2,000,000 to produce a film. Although we try to reduce the financial impact of
a new film by entering into licensing, participation or other financing
arrangements with third parties, prior to release we typically do not recoup our
costs until 2-3 years later. Even if we are able to reduce the costs of
production, we cannot assure you that the films we produce and acquire will be
popular. In addition, because our cash balances have continued to decline, we
have had to decrease substantially the level of our investment in film software
and this may have an adverse impact on our revenues in future periods.

OUR PRINCIPAL COMPETITORS DEVOTE GREATER FINANCIAL, PERSONNEL AND MARKETING
RESOURCES TO THE DEVELOPMENT AND EXPANSION OF COMPETITIVE PRODUCTS.

        We face significant competition in each of the markets in which we
operate. Our principal direct competition for customers comes from manufacturers
of competing movie-based attractions, and in the case of amusement and theme
parks, manufacturers of traditional amusement park attractions. In addition,
there is also competition from systems integrators and some amusement and theme
parks developing and constructing their own attractions. We have significantly
fewer financial, technical, manufacturing, marketing and other resources than
certain of our competitors and these limited resources may harm our business in
many ways. Our competitors may leverage their greater resources to:

     o    develop, manufacture and market products that are less expensive or
          technologically superior to our products;


                                    Page 17
<PAGE>


     o    reach a wider array of potential customers through increased marketing
          and sales activities;

     o    attend more trade shows and spend more on advertising and marketing;

     o    operate at lower margins for longer periods;

     o    respond more quickly to new or changing technologies, customer
          requirements and standards; or

     o    reduce prices in order to preserve or gain market share.

        In addition, the out-of-home entertainment industry in general is
undergoing significant changes, primarily due to technological developments as
well as changing consumer tastes. Many companies are developing and are expected
to develop new entertainment products or concepts in response to these
developments that may be directly competitive with our products.

        We believe these competitive pressures are likely to continue. We cannot
guarantee that our resources will be sufficient to address this competition or
that we will manage costs and adopt strategies capable of effectively utilizing
our resources. If we are unable to respond to these competitive pressures
successfully, our prices and profit margins may fall and our market share may
decrease.

OUR FUTURE SUCCESS WILL DEPEND IN PART UPON OUR ABILITY TO ANTICIPATE CHANGES IN
TECHNOLOGY AND DEVELOP NEW AND ENHANCED PRODUCTS ON A TIMELY AND COST-EFFECTIVE
BASIS.

        We operate in a technology-driven segment of the entertainment industry.
Consequently, it is important for us to develop new and enhanced products in
response to technological changes. Risks inherent in the development and
introduction of new products include:

     o    difficulty in forecasting customer demand accurately;

     o    our inability to expand capacity fast enough to meet customer demand;

     o    the possibility that new products may cannibalize current products;

     o    delays or interruptions in the manufacture and installation of new
          products;

     o    competitors' responses to our introduction of new products;

     o    the desire by customers to evaluate new products for longer periods of
          time before making a purchase decision; and

     o    the possibility the market may reject certain new technology and
          products.

        If we are unable, for technological or other reasons, to develop
products in a timely manner or the products or product enhancements that we
develop do not achieve market acceptance, our revenues may decline and our
financial condition would be adversely affected.

A SIGNIFICANT PORTION OF OUR SALES AND CUSTOMERS ARE LOCATED OUTSIDE THE UNITED
STATES. CURRENCY FLUCTUATIONS AND THE INCREASED COSTS ASSOCIATED WITH
INTERNATIONAL SALES COULD MAKE OUR PRODUCTS UNAFFORDABLE IN FOREIGN MARKETS,
WHICH COULD REDUCE OUR PROFITABILITY.

        Sales to customers outside the United States accounted for approximately
46%, 56%, 70% and 70% of our revenues in fiscal 1998, 1999 and 2000, and the six
months ended December 31, 2000, respectively. We believe that international
sales will continue to represent a significant portion of our total sales. Our
foreign sales subject us to a number of risks including:


                                    Page 18
<PAGE>


     o    although we denominate our international sales in U.S. dollars,
          currency fluctuations could make our products unaffordable to foreign
          purchasers or more expensive compared to those of foreign
          manufacturers;

     o    greater difficulty of administering business overseas may increase the
          costs of foreign sales and support;

     o    foreign governments may impose tariffs, quotas and taxes on our
          products;

     o    longer payment cycles typically associated with international sales
          and potential difficulties in collecting accounts receivable may
          reduce the profitability of foreign sales;

     o    political and economic instability may reduce demand for our products
          or our ability to market our products;

     o    restrictions on the export or import of technology may reduce or
          eliminate our ability to sell in certain markets; and

     o    although we have met certain international manufacturing standards,
          our lack of ISO 9000 certification, a widely accepted method of
          establishing and certifying the technical characteristics and quality
          of our products, may hinder our foreign sales.

        These risks may increase our costs of doing business internationally and
reduce our sales or profitability.

WE ARE DEPENDENT ON THE STRENGTH OF THE NATIONAL AND INTERNATIONAL ECONOMIES.
RECESSIONARY OR DEFLATIONARY CONDITIONS IN ANY OF OUR PRINCIPAL MARKETS COULD
REDUCE OUR SALES AND PROFITABILITY.

        Our revenues and profitability are dependent on the strength of the
national and international economies. In a recessionary or deflationary
environment, sales of our products may be adversely affected.

        Theme parks and other out-of-home entertainment venues may also
experience a downturn in sales which could reduce the funds available for
capital improvements and film licensing, resulting in price and other
concessions and discounts by us in order to maintain sales activity.

OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE DIFFICULT TO FORECAST. IF
REVENUES AND OPERATING RESULTS FLUCTUATE UNEXPECTEDLY FROM QUARTER TO QUARTER,
OUR STOCK PRICES MAY FLUCTUATE.

        Our quarterly revenues and operating results are difficult to forecast.
As a result, we believe that the period-to-period comparisons for operating
results are not necessarily reliable indicators of our future performance. A
variety of factors may affect our operating results, including factors that are
outside our control. These factors include the following:

     o    the size and timing of customer orders;

     o    the timing, introduction or enhancement of products by us or our
          competitors; and

     o    the timing and level of our operating expenses.

        Any unanticipated change in operating results may cause our stock price
to fluctuate since such changes reflect new information for investors and
analysts. New information causes investors and analysts to revalue our stock and
this in the aggregate could cause our stock price to fluctuate.


                                    Page 19
<PAGE>


OUR CUSTOMERS HAVE THE RIGHT TO TERMINATE THEIR CONTRACTS WITH US IN CERTAIN
CIRCUMSTANCES, WHICH CAN HAVE AN ADVERSE EFFECT ON OUR CASH FLOW.

        Our hardware sales contracts typically provide that the customer may
terminate our contract prior to delivery. However, a customer canceling its
contract is obligated to pay to us a cancellation fee equal to the costs
committed or incurred plus 20%. Customers typically pay a deposit upon execution
of a contract. If a customer cancels a contract and the amount of the deposit
exceeds the cancellation fee, we are contractually obligated to refund the
excess to the customer. In the event of a large refund, we could experience a
negative impact on cash flow.

IF WE ARE SUED ON A PRODUCT LIABILITY CLAIM, OUR INSURANCE POLICIES MAY NOT BE
SUFFICIENT.

        Although we maintain general liability insurance and product liability
insurance, our insurance may not cover all potential types of product liability
claims to which manufacturers are exposed or may not be adequate to indemnify us
for all liability that may be imposed. Any imposition of liability that is not
covered by insurance or is in excess of our insurance coverage could harm our
business.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS ADEQUATELY, THE
ADVANTAGES OF OUR RESEARCH, MANUFACTURING AND DISTRIBUTION SYSTEMS MAY BE
REDUCED AS COMPETITORS ADOPT SOME OR ALL OF THESE TECHNIQUES.

        Since our business depends in part on intellectual property rights, our
ability to compete effectively depends in part on our ability to develop and
maintain proprietary aspects of our technology in creative works. We currently
hold several patents on the design elements of our products and also rely on a
combination of trademark, trade secret, copyright and other intellectual
property laws to protect our proprietary rights. Such rights, however, may not
preclude competitors from developing products that are essentially equivalent or
superior to ours. In addition, many aspects of our product are not subject to
intellectual property protection and therefore may be reproduced by our
competitors.

INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US COULD BE TIME CONSUMING AND
EXPENSIVE TO DEFEND AND MAY HARM OUR BUSINESS.

        In recent years there has been significant litigation in the United
States involving patents and other intellectual property rights. While we
currently are not engaged in any material intellectual property litigation or
proceedings, we may become involved in the future. An adverse outcome of
litigation could force us to do one or more of the following:

     o    stop selling, incorporating or using our products for services that
          use the challenged intellectual property;

     o    subject us to significant liabilities to third parties;

     o    obtain from the owners of the infringed intellectual property right a
          license to sell or use the relevant technology, which license may not
          be available on reasonable terms or at all; or

     o    redesign those products and services that use such technology, which
          redesign may be either economically or technologically unfeasible.

        Whether or not an intellectual property litigation claim is valid, the
cost of responding to it, in terms of legal fees and expenses and the diversion
of management resources, could harm our business.


                                    Page 20
<PAGE>


THE ABILITY OF OUR BOARD OF DIRECTORS TO ISSUE PREFERRED STOCK AND OUR
STOCKHOLDER RIGHTS PLAN MAY MAKE TAKEOVER ATTEMPTS DIFFICULT OR IMPOSSIBLE.

        Our Board of Directors has the authority, without any action of the
shareholders, to issue up to one million shares of Preferred Stock and to fix
the rights and preferences of those shares. In addition, we have in place a
Stockholder Rights Plan. The ability of our Board to issue Preferred Stock and
the existence of the Stockholder Rights Plan may have the effect of delaying,
deferring or preventing a change of control, may discourage bids for our common
stock at a premium over its market price and may adversely affect the market
price, and the voting and rights of the holders of our Common Stock.


                                    Page 21
<PAGE>


PART II - OTHER INFORMATION



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

        On December 7, 2000, the Company held its Annual Meeting of
Stockholders. The following sets forth the identity of the director elected as a
Class III Director to hold office for three years and until his successor has
been elected and related voting results.

<TABLE>
<CAPTION>
                                                                                     BROKER
  PROPOSAL                       YES             WITHHELD          ABSTAIN          NON-VOTE
  -----------------------  ----------------   ---------------   ---------------   -------------
  <S>                      <C>                <C>                <C>              <C>
  Election of director       2,723,658           12,446              0                0
  -----------------------  ----------------   ---------------   ---------------   -------------
</TABLE>


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          a.   EXHIBITS:

               (i)     Exhibit 27.1. Financial Data Schedule.

          b.   REPORTS ON FORM 8-K FILED DURING THE QUARTER ENDED
               DECEMBER 31, 2000

               None.


                                    Page 22
<PAGE>


                                   SIGNATURES



Pursuant to the requirements of Sections 13 or 15(d) 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, in the city of Burbank, State of
California on the 9th day of February, 2001.



                           IWERKS ENTERTAINMENT, INC.
                                  (Registrant)


                             By: /S/ JEFFREY M. DAHL
                                --------------------
                              Senior Vice President
                             Chief Financial Officer
                           (Principal Finance Officer)


                             By: /S/ DEBRA L. WISE
                                -------------------
                           Vice President / Controller
                         (Principal Accounting Officer)


DATE: FEBRUARY 9, 2001



                                    Page 23