MORROW SNOWBOARDS INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

For the Fiscal Period Ended: October 31, 2001

Commission File Number: 0-27002

INTERNATIONAL DISPLAYWORKS, INC.
(Formerly Granite Bay Technologies, Inc.)
(Exact name of Registrant as specified in its charter)

Delaware 94-3333649
-------- ----------
(State or Incorporation) (I.R.S. Employer Identification No.)

599 Menlo Drive, Suite 200, Rocklin, California 95765
----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)

(916) 415-0864
(Registrant's telephone number, including area code)

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

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K, and no disclosure will be contained, to the best of the
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment of this
Form 10-K. [ ]

Aggregate Market Value of the voting stock held by non-affiliates of the
registrant based on the closing sale price as reported by Bulletin Board on
January 31, 2002 is $3,378,099.

The number of shares of the registrant's common stock, no par value, outstanding
on January 31, 2002 was 19,321,246.

Documents incorporated by reference: None.

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

PART I
ITEM 1. BUSINESS

Granite Bay Technologies, Inc. ("GBAY"), merged into its wholly owned
subsidiary, International DisplayWorks, Inc. (the "Company," "IDW,", "we" or
"us") on October 31, 2001. IDW assumed the reporting obligations of GBAY. As a
result of the merger, the Company is now a Delaware corporation. GBAY was
originally incorporated under Oregon law as Morrow Snowboards, Inc., to
manufacture and market snowboard equipment and apparel. In 1999, we sold the
snowboard business to K2 and the apparel business to Westbeach and on January
31, 2000, we purchased all of the outstanding shares of Common Stock of IDW from
four private investors and IDW became our wholly owned subsidiary. On February
1, 2000, IDW acquired through its wholly-owned subsidiary, International
DisplayWorks (HK) Ltd. ("IDWHK"), a company organized under the laws of Hong
Kong, SAR, all of the shares of MULCD Microelectronics Company Ltd. ("MULCD")
and IDW Shenzhen Technology Development Company Ltd. ("IDWT"), companies
organized under the laws of the People's Republic of China from Vikay Industrial
Ltd., a Singapore company operating under judicial management ("Vikay Group").
(IDW, IDWHK, MULCD, and IDWT are collectively referred to as "IDW," the "Group,"
the "Company," "we" or "us") (MULCD and IDWT are collectively referred to as the
"PRC Companies"). IDW Singapore was incorporated by the Company in the third
quarter of 2000 and discontinued operations in June of 2001 as a result of
general cost cutting and reorganization programs.

The principal business of the Group is conducted through IDW, IDWHK and the
PRC Companies. IDW has adopted October 31st as its fiscal year end and is thus
reporting for the ten-month period ending October 31, 2001. The following
discussion is presented on a consolidated basis, and analyzes the financial
condition and results of operations of IDW and its subsidiaries for the
ten-month fiscal period ended October 31, 2001.

Our headquarters are located in Rocklin, California. We design and
manufacture a wide range of display products including liquid crystal displays
("LCD"), LCD modules, turnkey assemblies, front panel display systems, and
printed circuit board assemblies for use in the end products of Original
Equipment Manufacturers ("OEM") and products incorporating LCDs for

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use in telecommunications and other electronics equipment, including appliance
controllers, and personal communication devices.

The LCDs and circuits we design and manufacture are used in
telecommunications (cell phones and other wireless communication devices), as
well as in medical equipment, household appliances, utility applications,
automotive equipment, retail and office equipment and consumer electronic
products. Targeted areas for new applications include office equipment (copiers,
facsimile machines, and printers), high-resolution graphic display products for
personal digital assistants ("PDA") and small computers and map displays. We are
maintaining an efficient display manufacturing operation that will include the
latest product and production technologies and high production yields. The
design and manufacturing of our products is conducted in our facilities in the
PRC where we employ approximately 1,300 people.

The PRC Companies were purchased from the Vikay Group, while it was under
Judicial Management in Singapore. Judicial Management is a form of bankruptcy
proceeding in Singapore. The PRC Companies had higher sales prior to their
parent entering Judicial Management. We are actively working to re-build
revenues throughout the group by focusing on accounts located throughout the
world, some of which are relationships lost during the Judicial Management era,
and some of which are new relationships we have been developing since the
acquisition. To remain competitive, we are expanding production technology and
capabilities, improving the organization and deployment of the staff at the
manufacturing facilities and increasing the level of senior management
supervision. We are focusing on high-volume production and management support to
increase yields and decrease unit costs, reducing inventories through careful
planning and scheduling, increasing design staff to support new projects and
product development and reducing overall costs. We have established internal
systems to improve the level of communications among the factory, sales offices
and customers to reduce lead times for price quotations, design and production.

These internal changes lay the foundation for the future development of the
Group and give us strength in designing prototypes and producing products on a
timely and cost-efficient basis, including a wide variety of custom design,
high-quality display modules required in the end products of OEMs and increase
the volume and efficiency throughout our LCD line.

Industry Overview

The Technology

Since the commercial production of the first light emitting diodes ("LED")
in the 1960s and twisted nematic ("TN") liquid crystal displays in the 1970s,
the use of LCD and LED indicators has become widespread in industrial and
consumer electronics products with LCD now the predominant technology. These
technologies were developed to overcome limitations in uses, principally in
terms of size, life and power consumption of standard displays or indicators.

An LCD modifies light that passes through or is reflected by it, rather
than emitting light like an LED. An LCD generally consists of a layer of liquid
crystalline material suspended between two glass plates. The crystals align
themselves in a predictable manner, which changes

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when stimulated electrically. The change in alignment produces a visual
representation of the information desired when used in conjunction with
polarizers and either an external light source or natural ambient light.

The flexibility of liquid crystal technology allows for easy customization
in both size and design. Displays are manufactured in sheet form and the images
can be changed by generating artwork to the customer's requirements. Display
size can be controlled by programming the cutting tool to the desired
dimensions. There is no significant additional manufacturing cost for a fully
custom display that allows each product to have its own unique appearance such
as icons, annunciators and color printing.

The Industry

OEMs often design their products to contain unique display modules and
features as a highly cost-effective means of differentiating their products from
those of competitors. OEMs then make the decision whether to use standard
devices, design and produce devices in-house or outsource design and/or
production. In making the decision, OEMs often recognize that their greatest
strengths are consumer recognition of their brand names, market research and
product development expertise and effective sales and distribution channels
rather than in manufacturing. OEMs also recognize that the time constraints and
limitations of available resources often preclude them from maintaining the
specialized in-house expertise and equipment necessary to design and manufacture
custom devices and those standard "off-the-shelf" devices are not always
available. As a result, many OEMs outsource the design and production of devices
and components in which they lack the requisite technology and expertise and
focus their resources on the areas where they have the greatest expertise and
leverage. Outsourcing allows them to gain access to specialized design and
manufacturing technology and expertise, accelerate the design process, and
reduce their own investment in equipment, facilities, and the personnel
necessary for specialized design and production. By reducing design and
manufacturing costs by utilizing the specialized resources of a supplier, such
as ourselves, and concentrating their resources on their strengths in the
production and distribution of their core products, they can maximize
profitability and reduce risk and time to market. Our specialization on design
and production provides a partnership advantageous to both parties and provides
value through focus and economies of scale. This is further enhanced by locating
our manufacturing operations in the PRC.

Several major OEMs in the electronics industry have announced their
decision to outsource production of components and final assembly of end
products, including major cellular phone, PDA manufacturers and many others. We
believe that these decisions have been made to allow major OEMs to concentrate
on designing concepts for finished products, marketing the finished product and
to better control costs by reducing the need for specialized equipment, while
the Company can produce products for multiple companies. IDW expects to benefit
from these decisions because it will provide us with more design input and
create more value-added opportunities, resulting in increased module and
assembly business, and solidified relationships, while providing our customers
with quality, reliability and lower overall product and service costs.

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The estimated world market for segmented and character LCDs only is
reported to be $1.3 billion, of which $225 million is in North America. The
module and assembly market is of significantly greater size than the LCD market.

Products and Service

Our products consist of LCDs and subassemblies, ranging from the low-end
LCDs for calculators, watches and electronic games to STN-LCDs for use in
applications that require high multiplex rates and wide viewing angles. Such
devices are used in cellular telephones, consumer appliances, office equipment,
bar code readers, hand held computers, automotive equipment and medical
electronics. The display company, MULCD, produces the LCDs. The electronics
company, IDWT, designs and manufactures customized LCD modules adding value to
the basic displays with electronics, keypads, interface circuitry, back lighting
and mounting hardware. This division also produces assemblies without LCDs. IDWT
has production and design capability in module processes, including
chip-on-glass (COG), surface mount technology ("SMT"), chip-on-board ("COB"),
chip-on-film ("COF"), tape automated bonding ("TAB"), keypads and back lighting.

We currently emphasize custom-design display modules. We believe that
custom devices will represent approximately 90% of our sales and the best
opportunity for higher profits and potential growth. For each custom device, we
work directly with our customer to develop and produce the original design and
then manufacture the device in accordance with the customer's specifications. We
identify the specific needs of existing and prospective customer's applications.
We then assign a cross-functional team of our engineers to a custom design
project to develop the product working with the customer's engineers throughout
the design phase, prototype development and manufacturing process. This effort
results in a complete system or product, which requires a specific visual
display (cellular telephones, medical instruments or hand-held data collection
devices). We, also, have an inventory of completed designs that are currently
generating revenue and are expected to generate additional revenue in the
future.

We are instituting a careful marketing and customer selection process to
more closely align our growth and development with that of the customers and
industries, which offer the greatest opportunity for growth. Our research and
development is focused upon technological developments and products that meet
the current and future requirements of those industries and companies.

With our LCD manufacturing line at the MULCD facilities, we are focusing
our efforts on creating advanced display technologies. These advanced display
technologies will allow us to provide customers with differentiating products or
products that provide higher information content than either custom or standard
devices.

Manufacturing

We have a broad range of production processes to manufacture a variety of
LCD types and features, including TN and STN displays, which incorporate a wide
variety of interface technologies, as well as appearance and environmental
options. MULCD, the display subsidiary,

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has a state-of-the-art, fully automated, LCD front-end sheet processing
production line that started in 1998, supported by back-end processing and
testing operators. MULCD's LCD line was awarded an ISO 9001 certification for
quality. (ISO is a quality standard established by the International
Organization for Standardization.)

IDWT, the module and assembly subsidiary is an ISO 9001 certified display
module and assembly production facility. Current manufacturing technologies are
COG, COB, SMT, TAB assembly and heat seal flex circuitry assembly to which we
are adding QVGA. IDWT has the option to buy displays from outside sources in
order to expand its production capabilities or to have a second source to meet
customers' requirements. IDWT's production capabilities include SMT lines for
high-speed electronic component placement and production lines for LCD Modules,
PCB assemblies. IDWT also produces printed circuit board assemblies without
LCDs.

Wage costs for manufacturing are currently materially lower in China than
in the mature markets of the West. We are thus positioned with a competitive
advantage to compete effectively for business in the United States and Europe as
well as Asia. IDW may be less able to compete for customers outside China or
with companies with closer manufacturing facilities if this wage advantage were
to decrease or other cost differentials affecting IDW's ability to provide
products at competitive prices were eroded.

We seek to increase our value to customers by providing responsive,
flexible, total design and manufacturing services. To date, manufacturing
services have been concentrated towards the manufacture of LCDs and assembly of
custom design display modules. IDW will provide extended manufacturing services
beyond those base services if the customer requests them. Extended services
include design, process development and turnkey manufacturing.

Quality Control

IDW has an aggressive quality control program and maintains quality systems
and processes that meet or exceed the requirements set by many leading OEMs and
competitors in our targeted industries. IDW's quality control program is based
upon Total Quality Management ("TQM"). IDW routinely performs product testing on
its standard and custom products to ensure product reliability and quality. IDW
analyzes test results and takes actions to adjust the manufacturing process or
enhance product design and quality. IDW's customers generally evaluate price in
the quotation process, while delivery and quality are evaluated after the
product is shipped. Therefore, many customers evaluate a company's quality by
reviewing the quality systems employed. IDW's receipt of an ISO 9001
certification for quality for the MULCD facility and an ISO 9001 certification
for the IDWT facility give its clients assurance as to IDW's quality control
processes. IDW is also certified with QS9000 for automotive products, which
qualifies it to work with North American automakers.

Sales and Marketing

IDW has sales representative organizations and a network of sales
representatives covering North America and the key markets in the Far East and
Europe, including Hong Kong, Singapore,

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Malaysia, Taiwan and PRC. In support of our sales force, we employ design and
sales support engineers for technical backup.

IDW's sales in Asia were approximately 43% of total sales in fiscal year
2001, primarily concentrated in the Hong Kong market. The United States
accounted for 52% of total sales and Europe accounted for approximately 5% of
total sales in fiscal year 2001.

Customers

IDW operates under Non-Disclosure Agreements with many of its major
customers and thus, cannot provide specific customer details. Our largest
customer accounted for approximately 35% of sales in fiscal year 2001. Sales to
our five largest customers represented more than 57% of sales in fiscal year
2001.

Research and Development

IDW is currently developing wide temperature LCD displays for automotive,
appliance and outdoor utility meters; high density graphic displays for handheld
computers, cell phones and personal digital assistants; cold cathode and white
LED backlighting for black and white, half tone and color displays; and is
developing standard and custom chip-on-glass displays for personal products and
appliances.

Additionally, IDW will conduct research and development that is focused on
improving technology, developing improved designs, improving manufacturing
processes and improving the overall quality of the products and services that
IDW offers. IDW expects to increase its research and development efforts on new
display technologies and more sophisticated display technologies. IDW expects to
restore research and development funding activities to appropriate levels and is
hiring research personnel to accomplish that goal.

Seasonality and Backlog

IDW's business experiences a minimal amount of seasonality. Our production
tends to ramp up in the second calendar quarter, continuing through the fourth
quarter, but declines somewhat in the first quarter leading up to and
immediately following the Chinese Lunar New Year. Our manufacturing facility is
closed during the Chinese Lunar New Year. We attempt to produce our customers
requirements prior to the plant shut down. Chinese Lunar New Year occurs in late
January to early February. As of October 31, 2001, IDW had a backlog of orders
in excess of $4.1 million scheduled for delivery in fiscal 2002. The changing
economic environment has encouraged customers to place orders on a shorter order
cycle, thus reducing overall value of IDW's backlog. However, customers are
ordering consistently and on a more frequent basis. We believe that IDW will
continue to receive orders from its key customers, resulting in increased
revenues overall.

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Intellectual Property

IDW relies upon a combination of trade secrets, confidential procedures and
contractual provisions to protect its intellectual property. IDW's core business
is not dependent on any patent or trademark protection and IDW does not expect
to seek patent protection for any technology in the near future and does not
presently hold any patents for existing technology.

Raw Materials/Suppliers

The principal raw materials used in producing IDW's products consist of raw
and coated glass, polarizers, liquid crystal, chemicals, PCBs, driver ICs,
molded plastic parts, electronic components and packaging materials. The PRC
Companies electric power plant requires the use of diesel fuel to generate
electricity. IDW has alternative sources of supply for the majority of these
materials and believes that additional sources would be available if any of our
existing suppliers were to go out of business or not be able to furnish
materials. Several of these materials, however, must be obtained from foreign
suppliers, which subjects IDW to the risk inherent in obtaining materials from
foreign sources, including currency fluctuations and supply interruptions. IDW's
ability to produce a significant percentage of its requirements for LCD glass
has reduced its dependence on foreign LCD glass suppliers. The PRC Companies are
evaluating the opportunity to switch to the local utility power grid, which
would eliminate the need for consuming diesel fuel to generate electricity.

Employees

As of October 31, 2001, the Company and its subsidiaries employed
approximately 1,300 persons. Of those, most are employed by the PRC Companies,
with 9 employed by IDW in California, and 18 by IDW HK in Hong Kong. Over 90% of
our employees in the PRC Companies work in manufacturing. We consider our
relationships with employees to be good and that compensation provided to our
employees is similar to comparable employers in the same geographic markets and
industry. Our employees do not belong to a union or other collective bargaining
unit.

Environmental

IDW's operations generate small amounts of hazardous waste as manufacturing
byproducts, including various gases, epoxies, inks, solvents and other wastes.
The PRC Companies also operate a diesel-fired electricity plant on its property.
As IDW's operations expand, the amount of such hazardous waste produced may
increase. Over time, hazardous waste has received increased regulation from
federal, state, local and international governments. Our operations comply with
all applicable environmental regulations and all hazardous waste is being
stored, used, and disposed of in accordance with applicable laws.

Competition

IDW believes that there are many competitors in its industry. Some of these
competitors are presently larger companies that are believed to have greater
financial, technical, marketing, manufacturing, research and development and
personnel resources than IDW. IDW's success, including its revenue and
profitability, depends substantially on its ability to compete with the

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other suppliers of display modules. There is no assurance that IDW will continue
to be able to compete successfully with such companies. There are also other
companies in the electronics industry that have significantly greater resources
than the Company and these other companies could decide to enter the LCD market
and become major competitors. However, we believe that IDW can compete favorably
on the basis of customer relationships, service, technical innovation, design
capability, product performance, cost, quality and timely delivery. To remain
competitive and increase market share, IDW needs to develop more sophisticated,
higher-end LCD displays.

ITEM 2. PROPERTY

The PRC Companies own manufacturing facilities which consist of three
buildings totaling approximately 270,000 square feet situated on four acres of
leased land in Heng Gang Industrial Estate located 30 minutes from the center of
the city of Shenzhen, PRC and about one hour from Hong Kong. The buildings are
approximately eleven years old, the LCD production line approximately four
years old, the SMT production machinery approximately two to four years old.
There is sufficient land to accommodate future expansion and growth of the
business. There is additional production floor space for available support and
expansion of IDW's manufacturing operations. The PRC Companies' facilities are
on land leased pursuant to a 50-year land lease expiring in 2043 at an annual
land rent of approximately $70,000, subject to certain periodic rent increases.
We also lease dormitory facilities for our production employees on an adjacent
property from the local government.

The Group's corporate offices consist of 9,300 square feet in an industrial
park in Rocklin, California. The lease is for a term of 62 months and expires in
April 2005. Besides the base rent of $105,000 per year, IDW pays a proportionate
share of operating expenses of approximately $25,000 per year. In February of
2002, the warehouse facility will be returned to the landlord reducing the
square footage occupied to 4,700. The annual base rent will be reduced to
$69,000 and an additional $12,000 for operating expenses.

ITEM 3. LEGAL PROCEEDINGS

The company is currently involved in the litigation and proceeding
described below.

Nicolas Steenolsen vs. Squaw Valley Ski Corporation, Granite Bay Technologies,
Inc., Morrow Snowboards, Inc., et al., Superior Court of California, Los Angeles
County, Case No. BC243817, a complaint for personal injuries that arose from
plaintiff's use of a snowboard allegedly manufactured by Morrow Snowboards, Inc.
The complaint seeks unspecified general damages and unspecified past and future
medical expenses. The Company is defending the action. Indications are that the
company will be dismissed from this action, but there has been no ruling to that
affect. There is no basis for determining amount of damages or probability of
recovery at this time.

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

At the Annual Meeting of Shareholders held on October 11, 2001 at the
company's corporate headquarters in Rocklin, California the shareholders elected
the following persons as directors of the Company:

Name Votes For Votes Against Withheld
- ---- --------- ------------- --------
Stephen C. Kircher 14,677,611 0 15,380
William H. Hedden 14,677,611 0 15,380
Anthony G. Genovese 14,577,711 0 115,280
Timothy Nyman 14,677,611 0 15,380
Ronald Cohan 14,677,611 0 15,380

The Shareholders approved the Company to change of its state of
incorporation from California to Delaware effective through a merger of Granite
Bay Technologies, Inc. into its wholly owned subsidiary, International
DisplayWorks, Inc., a Delaware corporation.

Votes For Votes Against Abstain Withheld
--------- ------------- ------- --------
9,999,745 119,412 13,292 4,560,542

PART II

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

From December 14, 1995 until February 18, 2000 the Company's Common Stock
was trading under the symbol "MRRW," from February 18, 2000 until November 8,
2001 the Company's Common Stock was trading under the symbol "GBAY," and since
November 8, 2001 under the symbol "IDWK." On April 27, 1999, the Company was
delisted from the NASDAQ National Market. The Company traded on the NASDAQ Pink
Sheets from that date until it was upgraded to OTC Bulletin Board on September
21, 2001. As of October 31, 2001, there were approximately 859 registered
holders of Common Stock of the Company. Because many of the shares of Common
Stock are held in street names, there may be additional beneficial holders of
the Company's Common Stock.

The following table shows the range of high and low market prices as
reported by Pink Sheets or Over-the-Counter Bulletin Board while the Company was
involved in its current operations:

Low High
Fiscal 2001: ------- --------
- --------------------------
Fourth Quarter(October 31) $0.28 $0.45

Third Quarter (September 29) $0.20 $0.56

Second Quarter (June 30) $0.42 $0.63

First Quarter (March 31) $0.47 $0.87

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Low High
Fiscal 2000 -------- ---------
- --------------------------
Fourth Quarter (December 30) $0.45 $1.90

Third Quarter (October 1) $1.60 $2.30

Second Quarter (July 2) $1.50 $3.31

First Quarter (April 2) $0.28 $5.25

Dividends

The Company has paid no dividends on its Common Stock since its inception.
For the foreseeable future any earnings will be retained to finance the growth
of the Company and accordingly, the Company does not anticipate the payment of
cash dividends.

Recent Sales of Unregistered Securities

For the fiscal year ended October 31, 2001, the Company has sold and issued
the following securities which were not previously reported in our quarterly
reports:

1. We granted an aggregate of 405,000 shares of Common Stock to our
employees, officers and directors under our 2000 Equity Incentive Plan
with exercise prices ranging from $0.36 to $0.75 per share.

2. In settlement of a put option entered into in August 2000, the Company
issued 125,000 shares of Common Stock valued at a price of $0.75 and
75,000 warrants to purchase shares of Common Stock at a price of
$0.75.

3. On October 31, 2001, we changed our corporate domicile from California
to Delaware pursuant to a merger agreement. Each outstanding share of
Common Stock and option and warrant to purchase shares of Common Stock
of our predecessor automatically became one share of our Common Stock
or option or warrant to purchase shares of our Common Stock. The
corporate existence of our predecessor ceased. We relied on the
exemption of registration contained in Rule 145(a) (2) of the
Securities Act of 1933.

4. In connection with consulting services rendered, the Company issued
45,706 shares of Common Stock valued at a price of $0.36 and 100,000
warrants to purchase Common Stock at a price of $0.36 in payment for
consulting services.

5. In connection with the $3,000,000 asset based line of credit obtained
from BFI Finance, Inc., the Company issued 100,000 warrants to
purchase Common Stock at a price of $0.60.

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6. During fiscal year 2001, the Company closed various unit offerings
consisting of debt instruments and warrants to purchase shares of
Common Stock of the Company equal to 20% of the investment amount.
Under the debt instruments, the Company will pay interest only
payments each month at a rate of 12.68% per year with the total amount
borrowed due one year from the date of issue. The Company issued
185,000 warrants with exercise prices ranging from $0.36 to $0.75 per
share for a period of five (5) years. The Company's proceeds from
the offerings were $1,100,000. There were no broker or placement
agents in these transactions.

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

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents a summary of selected financial data for each
of the three years ended January 1, 2000, December 30, 2000 and for the ten
month period ended October 31, 2001. The financial data includes the Company's
discontinued snowboard and apparel operations, except where noted.

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INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)

Periods Ended
-----------------------------------------------------------------------
Ten Months
Ended October December 30, January 1,
31,2001 2000 2000
-----------------------------------------------------------------------
(in thousands, except share and per share data)

Net sales $ 14,658 $ 17,804 $ -
Cost of goods sold 11,468 12,593
----------- ----------- -----------
Gross profit 3,190 5,211 -
----------- ----------- -----------
Operating expenses:
Selling, marketing & customer service 1,231 1,545
Engineering, advance design and product
management 901 570
General and administrative 4,071 5,124 347
----------- ----------- -----------
Total operating expenses 6,203 7,239 347
----------- ----------- -----------

Operating loss (3,013) (2,028) (347)
----------- ----------- -----------
Other income (expense):
Unrealized loss on asset - (1,000)
Interest expense (530) (442) (27)
Other income (expense) 950 (29) -
----------- ----------- -----------
Total other income (expense) 420 (1,471) (27)
----------- ----------- -----------
Loss from continuing operations before income taxes (2,593) (3,499) (375)

Income tax benefit
----------- ----------- -----------
Loss from continuing operations (2,593) (3,499) (375)
----------- ----------- -----------
Income on discontinued snowboard operations 22 69 165
Loss on disposition of snowboard operations (269) -
Income (loss) on discontinued apparel operations (112) (3,309)
Loss on disposition of apparel operations (269) (132)
----------- ----------- -----------
Income (loss) from discontinued snowboard and apparel
operations, net of taxes 22 (581) (3,276)
----------- ----------- -----------
Net loss $ (2,571) $ (4,080) $ (3,650)
=========== =========== ===========
Net loss per common share:

Loss from continuing operations - basic $ (0.14) $ (0.20) $ (0.06)
Loss from continuing operations - diluted $ (0.14) $ (0.20) $ (0.06)

Loss from discontinued operations - basic $ 0.00 $ (0.03) $ (0.51)
Loss from discontinued operations - diluted $ 0.00 $ (0.03) $ (0.51)

Net loss - basic $ (0.14) $ (0.23) $ (0.57)
Net loss - diluted $ (0.14) $ (0.23) $ (0.57)

Weighted average number of shares used in computing per
share amounts:
Basic 19,192,611 17,482,583 6,377,556
=========== =========== ===========
Diluted 19,192,611 17,482,583 6,377,556
=========== =========== ===========

As Of
--------------------------------------------------------------------------------
October 31, December 30, January 1,
2001 2000 2000

--------------------------------------------------------------------------------
(in thousands, except share and per share data)
Balance Sheet Data

Cash and cash equivalents 982 885 1,930

Net current assets from continuing operations 5,928 6,151 2,111

Net current assets from discontinued operations 12 24 2,332

Equipment, fixtures, and property, net 6,389 7,297 3,061

Total assets from continuing operations 18,047 19,543 6,172

Total net assets from discontinued operations 12 24 2,404

Current liabilities 5,794 5,631 3,298

Long-term debt and capital lease obligations,
net of current portion 807 201

Shareholders' equity 11,459 13,735 4,603

14

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

Overview

Since its formation in 1989 until 1999, the Company focused its business
activities on designing, manufacturing and marketing premium snowboards and
related products under the "Morrow" brand name. In 1999, the Company sold its
snowboarding and related businesses resulting in discontinuance of all
operations. On January 31, 2000, the Company, through its subsidiary IDW HK,
acquired 100% of the shares of the PRC Companies. The PRC Companies are engaged
in the manufacturing and assembly of liquid crystal displays and assemblies in
the Peoples Republic of China ("PRC Companies").

The following discussion is presented on a consolidated basis, and analyzes
the financial condition and results of operations of IDW and its subsidiaries
for the ten-month fiscal year ended October 31, 2001 and the eleven months from
the acquisition of the PRC Companies on January 31, 2000 through December 30,
2000.

Comparison of the Periods Ended October 31, 2001 and December 30, 2000

Continuing Operations - The Company's continuing operations consist of IDW,
IDWHK and the PRC Companies, which manufacture liquid crystal displays and
assemblies. As previously mentioned the Company discontinued snowboard and
apparel operations in 1999. In fiscal year 2001 there was $22,000 in revenue
related to discontinued operations primarily from collection of duty drawback,
insurance premium refunds and recovery of bad debts.

Net Sales - Net sales for the ten months ended October 31, 2001 were
$14,658,000 and for the eleven months ended December 30, 2000 were $17,804,000,
an annualized reduction of 10%. This decrease can be attributed to pricing
pressures and the overall down-turn of the world economy first noticed in early
2001.

Cost of Goods Sold - Cost of sales increased to 78.2% of net sales for the
ten months ended October 31, 2001 from 70.7% for the eleven months ended
December 30, 2000. This increase can be attributed to pricing pressures from our
customers and under-absorption issues resulting from decreased production.

Operating Expenses - Operating expenses consist of selling, marketing,
customer service, engineering, and general and administrative expenses.
Operating expenses decreased 14.3% to $6,203,000 for the ten months ended
October 31, 2001 from $7,239,000 for the eleven months ended December 30, 2000.
These expenses included a fourth quarter charge for the costs of staff
reductions and downsizing of administrative and sales operations in Hong Kong
during the period ended October 31, 2001.

Selling, Marketing and Customer Service - Selling, Marketing and Customer
Service expenses decreased 20% to $1,231,000 for the ten months ended October
31, 2001 from $1,545,000 for the eleven months ended December 30, 2000.
Significant decreases in this category were made in the second quarter of fiscal
2000 by the closure of the Singapore Sales office and other cost reductions. The
effect was minimized by the accrual of expenses related to the downsizing of the
Hong Kong sales office. Significant elements of this expense consist of employee
related expenses of $513,000, commission expense of $424,000 and rent of
$54,000.

Engineering Advanced Design and Project Management - Engineering, advanced
design and project management expenses increased 58% to $901,000 for the ten
months ended October 31, 2001 from $570,000 for the eleven months ended December
30, 2000. The significant increase was due to reclassification of some expenses
from General and Administrative to this category. Significant elements of this
expense include employee related expenses of $844,000, rent of $10,000 and
travel and lodging of $25,000.

15

General and Administrative - General and Administrative expenses decreased
21% to $4,071,000 for the ten months ended October 31, 2001 from $5,124,000 for
the eleven months ended December 30, 2000. The effects of cost reductions in
this category are minimized by the accruals for the downsizing of the Hong Kong
and Rocklin offices. Significant elements of this expense include employee
related expenses of $1,242,000, professional fees of $786,000, amortization of
goodwill of $360,000, rent, telephone and utilities of $314,000, insurance of
$201,000, local PRC government fees of $184,000 and bad debt expense of
$113,000.

Interest Expense - Interest expense increased 20% to $530,000 for the ten
months ended October 31, 2001 from $442,000 for the eleven months ended December
31, 2000. The overall increase in interest expense is a direct result of use of
lines of credit for the factoring of accounts receivable established this fiscal
year and the mortgage on the Company's manufacturing facility in the PRC.

Other Income - Other income for the ten months ended October 31, 2001 was
$950,000. Significant elements of this category include gain on the issue of
Common Stock to satisfy the put option of $57,000; duty drawback, insurance
refunds and recovery of bad debt from discontinued operations of $22,000 and
reversal of over accruals of $744,000.

Net Loss - The net loss for the ten months ended October 31, 2001 was
$2,571,000 compared to $4,080,000 for the twelve months ended December 30, 2000.
This 37% decrease can be attributed to the Company's loss for discontinued
operations of $581,000 and the loss of $1,000,000 from the Company's write-down
of its investment in Globalgate in fiscal year 2000. The loss from continuing
operations was $2,593,000 for the ten months ended October 31, 2001 compared to
$3,499,000 for the period ended December 30, 2000. This difference can be
attributed to the loss of $1,000,000 from write-down of the Company's investment
in Globalgate.

Discontinued Operations - Income from discontinued operations was $22,000
for the ten months ended October 31, 2001. This consisted of duty drawback,
insurance refunds and bad debt recovery related to the snowboard and apparel
operations.

Comparison of Years Ended December 30, 2000 (Fiscal 2000) and January 1, 2000
(Fiscal 1999)

Continuing Operations - The Group's continuing operations consist of IDWUS,
IDWHK and the PRC Companies, which manufacture liquid crystal displays and
assemblies. As previously mentioned IDW discontinued snowboard and apparel
operations in 1999. As a result of the discontinued operations, the consolidated
financial statements report the transactions of discontinued operations as net
amounts separate from continuing operations. All continuing operations ceased in
1999 for the snowboard and apparel operations except for general and
administrative expenses incurred to wind down operations and interest expense on
the Company's bridge loan. The results of continuing operations in fiscal 2000
as compared to fiscal 1999 follow.

Revenues - IDW had consolidated net sales of $17,804,000 from the sale of
liquid crystal displays and assemblies for electronic equipment for the year
ended December 30, 2000. Such sales represent sales of IDW and its subsidiaries
for the eleven-month period from their acquisition on January 31, 2000 through
December 30, 2000. All sales of the Company in fiscal 1999 were from
discontinued operations, therefore, are not compared to the fiscal 2000 results.
16

Gross Profit - Gross profit from continuing operations in the fiscal year
ended December 30, 2000 was $5,211,000, which represents continuing operations
of IDW and its subsidiaries for the eleven-month period from their acquisition
on January 31, 2000 through December 30, 2000. All prior year gross profit is
part of the Company's discontinued operations and therefore is not compared to
the 2000 results.

Operating Expenses - Operating expenses from continuing operations in the
fiscal year ended December 30, 2000 was $7,239,000, which represents continuing
operations of IDW and its subsidiaries for the eleven-month period from their
acquisition on January 31, 2000 through December 30, 2000. All prior year gross
profit is part of the Company's discontinued operations and therefore is not
compared to the 2000 results.

Selling, Marketing and Customer Service - Selling, marketing and customer
service expenses for the year ended December 30, 2000 were $1,545,000, which
represents continuing operations of IDW and its subsidiaries from the
acquisition date of January 31, 2000 through December 30, 2000. There were no
selling, marketing and customer service expenses in fiscal 1999 related to
continuing operations. Significant elements of this expense in fiscal 2000
consist of staff and related expenses of $1,071,000, travel and related expenses
of $65,000 and advertising expense of $73,000.

Engineering, Advanced Design, and Project Management - Engineering,
advanced design, and project management expenses for the year ended December 30,
2000 were $570,000 representing continuing operations of IDW and its
subsidiaries from the acquisition date of January 30, 2000 through December 30,
2000. There were no engineering, design, and project management expenses during
fiscal 1999 related to continuing operations. The significant element of
engineering, design and project management expenses for continuing operations
during fiscal 2000 was staff and employee related expenses of $522,000.

General and Administrative - General and administrative expenses for the
year ended December 30, 2000 were $5,124,000, which represents continuing
operations of IDW and its subsidiaries from the acquisition date of January 31,
2000 through December 30, 2000 and continuing corporate administration of IDW.
The significant elements of the general and administrative expenses of IDW and
its subsidiaries during fiscal 2000 consist of staff and employee related
expenses of $1,696,000; rent, telephone and utilities of $288,000; legal
expenses of $158,000; accounting expenses of $238,000, and local PRC government
expenses of $122,000. Significant elements of the continuing operations for
IDW's ongoing corporate administration include $310,000 for accounting fees,
$249,000 for legal fees, $213,000 for insurance costs, $175,000 for salaries and
benefits, and $395,000 in amortization of goodwill from the IDW acquisition.
Depreciation of general and administrative facilities amounted to $341,000.

Interest Expense - Interest expense increased by $415,000 to $442,000 for
the year ended December 30, 2000 from $27,000 for the year ended January 1,
2000. The interest expense in fiscal 2000 related primarily to interest on
obligations incurred to raise funds for the acquisition of IDW and its
subsidiaries. The interest expense in fiscal 1999 related to payments on the
$675,000 outstanding bridge loan.

17

Other Expense - Other expenses of continuing operations in fiscal 2000
amounted to $1,000,000 unrealized loss resulting from the write-off of an
investment in common shares of Globalgate, an e-commerce company that had
suffered deteriorated financial condition such that the Company believed its
investment had little or no market value, and $29,000 representing small items
of other income and expense. There was no other income or expense in 1999 of
continuing operations.

Net Loss - Net loss for fiscal year 2000 was $4,080,000 compared to net
loss of $3,650,000 for fiscal 1999. The loss from continuing operations in 2000
was $3,499,000 or an increase of $3,125,000 over the loss from continuing
operations of $374,000 in 1999. The loss from continuing operations in 2000
represents the results of operations of IDW and its subsidiaries while the
activities in 1999 were primarily focused on discontinued operations of the
snowboard and apparel segments. The loss from discontinued operations was
$581,000 in fiscal 2000, a decrease $2,695,000 from the loss from discontinued
operations of $3,276,000 in fiscal 1999. The decrease is attributable to the
closure of operations of the discontinued segments. Cost of winding down the
discontinued operations and losses on disposition of their assets in excess of
previous estimates resulted in the fiscal 2000 loss from discontinued
operations.

Discontinued Operations - The net loss from discontinued snowboard and
apparel operations in fiscal 2000 was $581,000 consisting of a loss of $43,000
from discontinued operations ($69,000 income for snowboards and $112,000 loss
for apparel) and a loss of $538,000 from disposition of assets of the
discontinued operations ($269,000 from snowboards and $269,000 from apparel).
The loss from discontinued operations represents the differences between
incurred costs of winding down the operations and losses on disposal of the
assets of discontinued operations and estimates made in prior years when the
decision was made to discontinue the two segments activities.

Liquidity and Capital Resources

IDW requires capital to pay certain existing fixed obligations, provide
working capital for the PRC Companies, and cover administrative overhead and
certain costs related to being a public company. As discussed below, IDW intends
to generate working capital to implement its current Business Plan.

Net cash used in operating activities from continuing operations was
$2,218,000 for the ten months ended October 31, 2001 resulting primarily from a
net loss of $2,571,000, increases in accounts receivable of $361,000, decrease
in inventories of $747,000, increases in prepaid expenses of $184,000, decreases
in accounts payable of $910,000, decreases in accrued liabilities of $394,000
and partially offset by non-cash expenses of depreciation and amortization of
$1,301,000. This compares to cash provided by operating activities for fiscal
2000 of $1,314,000 resulting from an operating loss of $4,080,000, increases in
accounts receivable of $1,485,000 and decreases in accounts payable of
$1,004,000, partially offset by non-cash expenses of depreciation and
amortization of $2,307,000, and loss from write off of a $1,000,000 investment
and from loss of discontinued operations of $2,975,000.

18

Net cash used in investing activities for the ten months ended October 31,
2001 was $854,000, which represents payments to complete the purchase of the
PRC Companies of $821,000 and acquisition of property and equipment of $33,000.
This compares with net cash used in investing activities for fiscal 2000 of
$4,493,000, which represents payments toward the purchase the PRC Companies of
$4,208,000 and $285,000 used for the acquisition of property and equipment.

Net cash provided by financing activities for the ten months ended October
31, 2001 was $3,020,000 consisting primarily of $2,261,000 from the issuance of
long-term debt ($1,200,000 of which is secured by a thee year mortgage on the
buildings of our manufacturing facility in the PRC) and $1,076,000 from line of
credit borrowings. Net cash provided by financing activities in fiscal 2000 was
$2,134,000, consisting of $6,078,000 from sale of shares of Common Stock in
private placements and partially offset by $7,141,000 of net repayment of debt.

The planned future expansion of IDW and its subsidiaries which include
$360,000 of additional capital expenditures is expected to be needed during
fiscal 2002 to enhance existing production capabilities, assure future product
quality and reduce costs. IDW plans continued use of its credit facilities and
extension of related party short term debt. Events such as non-renewal of credit
facilities or requirements to repay short-term debt could affect ability to fund
capital expenditures and working capital.

Factors That May Affect Future Results

A wide variety of factors will affect IDW's operating results and could
impact net sales and profitability. Significant factors in our success will be
our ability to establish design and manufacturing relationships with key OEM
customers that will generate sufficient orders, including orders of high margin
products to increase revenues and profitability.

Our products are incorporated in a wide variety of communications, consumer
and appliance products. A slowdown in demand for such products that utilize
IDW's displays and modules as a result of economic or other conditions and the
market served by IDW or other factors could adversely affect IDW's operating
results. Our products are sold into an industry characterized by increasingly
rapid product turnaround, increasingly shorter lead times, product obsolescence,
order cancellation and other factors that make it difficult to forecast future
orders, production and personnel needs and other resource requirements with a
high level of certainty. Our ability to anticipate such factors and respond to
them in a timely fashion will affect IDW's ability to utilize manufacturing
capacity effectively, maintain a proper product mix and avoid downtimes due to
product conversions and other factors. Such uncertainty also creates
difficulties in maintaining adequate supplies of raw materials to meet shifting
customer needs and customer orders placed on short notice.

IDW's 2001 Operating Results - The actual performance of IDW for 2001 was
materially less than forecasted. This performance resulted from the unexpected
downturn in the world-wide economy in 2001, longer than expected time to raise
capital for the entry into the COG market and an increasingly difficult
environment for raising new capital.

19

IDW's Capital Resources - In addition, the longer than expected time to
complete the final payments and reconciliation with the Judicial Managers, and
the protracted accounting and legal issues relating to the complexity of buying
companies out of distress situations, has affected the timeliness of IDW
regaining its listing on NASDAQ, which, along with an increasing difficult
environment in North America for raising new capital, has slowed our ability to
provide for the financing requirements of the Company. While the Company is
closer to producing a positive cash flow, if we are unsuccessful in raising
capital when required, then the Company could face the risk of loss of its
investment. Further, any financing involving equity or rights to acquire equity
interests, would result in dilution in the percentage ownership of existing
stockholders when such equity interest were issued and, depending on the sales
price, a dilution in book value. Further, to capitalize on certain growth
opportunities for the PRC Companies or if projected revenues are less and/or
costs higher than projected, we would have to raise additional financing beyond
that outlined above. Without such expansion, we are limited; and this could
affect the value of the Company's Common Stock.

Dependence on Key Personnel - Our success is largely dependent upon the
expertise of key members of the Company's management team, including its founder
and Chief Technical Officer, Anthony Genovese, and Philip Gregory, its Vice
President of Manufacturing. Loss of their services could materially and
adversely affect our business, its future prospects and operating results,
including its ability to penetrate the United States market. We do not presently
have long-term employment agreements with these key employees. Our business and
operating results also depend substantially on the efforts and abilities of our
senior management and technical personnel. The competition is for qualified
management and technical personnel are intense. The loss of service of one or
more of its key employees or the inability to add and retain key personnel could
have a material adverse effect. We do not presently maintain key-person life
insurance.

A Few Customers and Applications Account for a Significant Portion of IDW's
Sales - In fiscal 2001, five customers represented 57% of total sales revenue,
including one customer representing 35% of the Company's revenue. At our present
size, the loss of any one of these customers could have a material affect on the
Company's health. Customers have not made firm long-term purchase commitments.
Delay or reduction of customer orders could result in under-absorption of
manufacturing capacity. These risks are enhanced because of the large percentage
of sales to electronic industry customers who are subject to severe competitive
pressures, repaid technological change and obsolescence. While we expect to
continue to receive orders from existing customers, there is no assurance orders
will be received, and if received, not cancelled, delayed or reduced, which
could have material adverse effect on the Company's results of operations. To
reduce this risk, we expect to continue to emphasize custom devices where
purchase orders are generally longer term with more limited cancellation
provisions.

Need for Additional Financing - The opportunities for long-term growth in
the Company's lines of business are dependent upon having sufficient capital
resources available to realize the rapid growth potential of significant OEM key
accounts, which we have identified and targeted. We expect to need additional
financing to fuel the Company's growth for both working capital and our capital
expenditure program.

20

The inability to include new display devices in the Company's product
offerings may affect our ability to seek business from certain customers who
want complete solutions to all their display device needs or could adversely
affect the Company's operating results if technology shifts to such higher-end
devices in general.

Ramifications of Long Period of Judicial Management - The longer than
expected time to complete the final payments and reconciliations with the
Judicial Managers continued to affect the Company's performance in fiscal 2001.
During the period of Judicial Management (December 6, 1997 through January,
2000), many of our customers found second sources of supply or purchased goods
elsewhere. The probability of recovering much of that lost business has been
impaired by the passage of time. Judicial management continued to impact
supplier relationships in fiscal 2001. In many cases, supplier relationships may
have been impacted in both the short and long term. The Company has had to
establish new sources of supply to ensure adequate credit terms and pricing
consistent with industry standards. The Company also believes that the judicial
management resulted in financial and operating performances that are not
reliable in terms of predicting future financial performance.

IDW Faces Intense Competition - We operate in a competitive environment
that is characterized by price erosion, technological change and competition.
IDW competes with major Asian and international companies. Because of a greater
capital base, most of IDW's competitors have greater market recognition and
substantially; greater financial, technical, marketing, distribution,
manufacturing, and other resources than IDW. Further, many of our competitors
have manufacturing and sales forces that are geographically diversified allowing
them to reduce transportation, tariff costs and currency fluctuations for
certain customers in markets where their facilities are located. Many
competitors have production lines that allow them to produce more sophisticated
and complex devices than IDW and to offer broader range of display devices to
customers. New emerging companies or companies in related industries may also
increase their participation in display module market, which would increase
competition.

IDW's ability to compete successfully depends on a number of factors, both
in and outside of its control. Those factors include: the price, quality,
performance, reliability, ease of use and features of our products; the variety
of our product solutions; foreign currency fluctuation; trade barriers and
customs duties which may effect the cost of products; our ability to design and
manufacture new product solutions, including incorporating new technology; the
availability and price of raw materials; our ability to fully utilize our
manufacturing facility; new product technology or solutions by our competitors;
the number of success of competitors; and general market and economic
conditions. Our competitive position can also be adversely affected if one or
more of our customers, including key customers, decide to design and manufacture
their own display modules, use different devices or purchase devices from
competitors. We cannot assure that we will compete successfully in the future.

Risk of Inability to Produce High-End Products - IDW's success will be
partly dependent upon our ability to effectively offer or manufacture higher-end
products such as large graphic STN, color graphic displays, micro-displays and
black mask automotive products.

21

These products offer both the opportunity to increase utilization of
existing manufacturing capacity and also the opportunity to generate higher
margins and profits at given revenue levels. The production of such products
requires increased custom design and manufacturing and maintenance of strong
customer relationships. This will require that we maintain and upgrade our
research, engineering and design capabilities to remain in the forefront of
developments in the industry.

Changing Technologies - IDW operates in an industry characterized by
technological advances, the introduction of new products and new design and
manufacturing technologies. As a result, IDW will be required to expend
substantial funds and to commit significant resources to continuing research and
development activities, engaging additional engineering and other technical
personnel; purchasing new design, production, and test equipment; and
continually enhancing design and manufacturing processes and techniques. IDW's
future operating results will depend significantly on our ability to provide
timely design and manufacturing services for new products that compete favorably
with design and manufacturing capabilities of OEMs and third party suppliers.

IDW could invest significant sums in design and manufacturing services for
new product solutions that may not receive or maintain customer or market
acceptance or effectively address customer needs, which could adversely affect
the Company's future operating results. Further, customers may change or delay
product introductions or terminate existing products without notice for any
number of reasons unrelated to IDW, including lack of market acceptance for a
product.

We may also be required to increase our design staff and other personnel
and incur other expenses on capital equipment and other items to meet
anticipated or actual demand of our customers. Those additional costs may
adversely impact operating margins in the short term.

Maintenance of Satisfactory Manufacturing Yields and Capacities;
Variability of Customer Requirements - The profitability and operating results
of IDW are dependent upon a variety of factors, including: product mix,
utilization rates of its manufacturing lines, downtime due to product
changeover, impurities in raw materials causing shutdowns, maintenance of
contaminant-free operations and other factors.

Risks Associated with International Operations - IDW has made a decision to
locate all of its manufacturing operations in China and to establish sales
offices in Asia, Europe and the United States. The geographical distance between
its manufacturing facilities in China and in North America create a number of
logistical and communications challenges. Because of the location of the
manufacturing facilities in China, IDW may be affected by economic and political
conditions in that country, as well as economic and political conditions in the
countries in which it markets and distributes its products, including, without
limitation, problems related to labor unrest, lack of developed infrastructure,
variances in payment cycles, currency fluctuations, overlapping taxes and
multiple taxation issues, employment and severance taxes, compliance with local
laws and regulatory requirements, greater difficulty in collections accounts
receivable, political and economic instability and the burdens of cost and
compliance with a variety of foreign laws.

22

Further, changes in policies by the United States or other foreign
governments resulting in, among other things, increased duties, higher taxation,
currency conversion, limitations and restrictions on the transfer or
repatriation of funds or limitations on imports or exports, or the expropriation
of private enterprises could also have a materially adverse effect on IDW and
its results of operations. China does not have a comprehensive or highly
developed system of laws, particularly with respect to foreign investment
activities and foreign trade. Enforcement of existing and future laws and
contracts is uncertain and implementation and interpretation of such laws may be
inconsistent. Changes in existing laws, the adoption of new laws and preemption
of local regulations by national laws may adversely affect foreign investment in
China. IDW could also be adversely affected by other factors, including: the
imposition of austerity and other monetary measure to fight inflation or to
achieve other economic objectives; inadequate development or maintenance of
infrastructure, including adequate power and water supplies; transportation; raw
materials availability; or the deterioration in the general political, economic
or social environment.

Risks Associated with Collectibility of Receivables - IDW extends credit to
its customers based on assessment of a customer's financial circumstances,
generally without requiring collateral, in both the United States and in various
countries in the Far East and Europe. These extended payment terms, if
continued, may increase our exposure to risk of uncollected receivables. The
inability to collect on these accounts receivable could have a materially
adverse effect on our results of operations and profitability.

Risks Associated with Currency Fluctuations and International Trade - Sales
in global markets, primarily Europe, the United States and other parts of Asia,
are expected to increase significantly in fiscal year 2002 and subsequent years.
Economic and political conditions internationally may adversely affect the
manufacture and sale of IDW's products. Protectionist trade legislation in the
United States or foreign countries, such as a change in export or import
compliance laws, tariff or duty structures, or other trade policies, could
adversely affect our ability to sell devices in foreign markets, to purchase raw
materials or equipment from foreign suppliers.

IDW transacts business in a variety of currencies including Hong Kong
dollars, Singapore dollars, US dollars and the Chinese Yuan Renminbi ("RMB").
Increased sales to Europe may result in receivables in other currencies, such as
the Euro. Further, IDW accounts for a portion of its costs, such as payroll,
land rent and certain other costs in RMB. Foreign currency exchange fluctuations
are not expected to materially affect our operations because IDW uses RMB
derived from sales to meet its RMB obligations such as payroll, material
purchases and land rent. Currency devaluations and changes in exchange rate
fluctuations could affect the value of deposits of currencies IDW holds. The RMB
has experienced significant devaluation against most major currencies in the
past.

IDW May Experience Shortages of Raw Material Supplies - Principal raw
materials used in producing IDW's products consist of raw and coated glass,
polarizers, liquid crystal, chemicals, printed circuit boards, drive ICs, molded
plastic parts, electronic components and packaging materials. For its energy
supply, IDW uses diesel fuel. IDW purchases most of these materials in Asia.

23

We do not have long-term supply contracts with our suppliers. IDW believes that
it has secondary sources of supplies for most of its products and, if we were to
lose any of our primary or secondary sources, we could develop new sources of
supply. However, because IDW's sources for many materials are from foreign
suppliers, IDW may be subject to certain risks, including: tariffs, currency
fluctuations and supply interruptions. The impact of price increases will affect
operating costs and product margins, the materiality of which cannot be
presently determined.

Environmental Regulations - Our manufacturing processes result in the
creation of small amounts of hazardous wastes, including: various gases,
epoxies, inks, solvents and other organic wastes. IDW is, therefore, subject to
PRC governmental regulations related to the use, storage and disposal of such
hazardous wastes used in the manufacturing processes. IDW also has its own
electrical power generation plant that operates on diesel fuel. The amounts of
such hazardous waste are expected to increase in the future as our manufacturing
operations increase. The failure to comply with present and future environmental
regulation can result in the imposition of fines, suspension or halting of
production or closure of manufacturing operations. Environmental compliance may
also require IDW to purchase pollution-control equipment or to incur significant
capital or other expenses. Although we believe we are operating in compliance
with applicable environmental laws, there is no assurance that IDW is in
compliance or will remain in compliance as such laws and regulations change.

Governmental Regulations - IDW is subject to numerous foreign, state and
local governmental regulations. We are subject to laws and regulations governing
our relationship with our employees, including: wage and hour requirements,
working and safety conditions, citizenship requirements, work permits and travel
restrictions. Further, the PRC Companies are leasing the land under their
facilities under a 50-year lease, which expires in the year 2043. We are also
subject to significant government regulation to property ownership and use,
import restrictions, currency restrictions and other areas, all of which
consistently impact profits and operating results.

Other Risks - Other risks IDW faces include the cyclical nature of the
electronics industry, the protection of IDW's trade secrets and technology,
management of expected rapid growth in personnel, capital equipment, outside
sales force, sales and accounts receivable and other items and maintenance of
adequate research and development efforts and personnel.

Besides the general risk factors noted above, there are several specific
risks that should be noted:

Future Potential Depressive Effect in Stock Prices from Recently Issued
Securities - In fiscal year 2000 and 2001, the company issued an additional
9,973,951 and 170,706 shares of its Common Stock, respectively. All of those
shares are restricted under federal and state securities laws and may only be
resold pursuant to exemptions under Rule 144 in the future. Under Rule 144, each
of the holders of those securities, after holding them for one year, may sell in
any given calendar quarter thereafter, the greater of (i) 1% of the outstanding
Common Stock, (currently approximately 194,000) per quarter, or (ii) the average
weekly trading volume for Common Stock for the prior full calendar weeks. Under
Rule 144, a significant amount of stock could be sold in any calendar quarter
after January 31, 2001, with a potential depressive effect on the Company's
stock prices. During fiscal 2001, there were approximately 934,052 shares of the
Company's Common Stock sold under Rule 144.

24

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

Inflation Risk

We do not expect inflation to have a material effect on the company's
operating expenses.

Interest Rate Risk

We do not believe that any change in interest rates will have a material
impact on the Company during fiscal 2002. Currently, our long-term debt is at a
fixed interest rate.

Foreign Currency Exchange Risk

IDW accumulates foreign currency from payment of accounts, which it then
uses to pay its foreign vendors, workers, and suppliers or converts to U.S.
dollars, exposing IDW to minimal risk fluctuations in currency exchange rates.
The Company currently holds foreign currencies which are translated in U.S.
Dollars using the year-end exchange rate, for a total of $310,000. The potential
loss in fair value resulting from an adverse change in quoted foreign currency
exchange rates of 10% amounts to $30,000. Actual results may differ. The Company
does not hold other market sensitive instruments and therefore does not expect
to be affected by any adverse changes in commodity prices, or marketable equity
security prices.

25

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE

For the Years Ended October 31, 2001, December 31, 2000 and January 1, 2000

TABLE OF CONTENTS
-----------------

Page
----
Independent Auditors Report..............................................27

Consolidated Financial Statements

Consolidated Balance Sheet............................................28

Consolidated Statement of Operations..................................29

Consolidated Statement of Shareholders' Equity........................30

Consolidated Statement of Cash Flows..................................31

Notes to Consolidated Financial Statements............................32-47

Supplemental Schedule - Supplementary Information Required
under the Securities and Exchange Act of 1934....................48-49

INDEPENDENT AUDITOR'S REPORT

Board of Directors
International DisplayWorks, Inc.
And Subsidiaries

We have audited the accompanying consolidated balance sheet of
International DisplayWorks, Inc. and subsidiaries (the "Company") as of October
31,2001 and December 30, 2000, and the related consolidated statements of
operations, shareholders' equity and cash flows for the ten months ended October
31, 2001 and for the years ended December 30, 2000 and January 1, 2000. These
consolidated financial statements and the schedules referred to on the following
pages are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and
supplemental schedules based on our audits.

We conducted our 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
International DisplayWorks, Inc. and subsidiaries as of October 31, 2001 and
December 30, 2000, and the consolidated results of their operations and their
cash flows for the ten months ended October 31, 2001 and for the years ended
December 30, 2000 and January 1, 2000, in conformity with accounting principles
generally accepted in the United States of America.

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, certain matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plan in regard to these matters is described in Note 1. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

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

Sacramento, California
January 23, 2002

26

INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)

ASSETS October 31, December 30,
-------- 2001 2000
---------- -----------
Current assets:
Cash and cash equivalents $ 982 $ 885
Accounts receivable,
net of allowance for doubtful accounts of $196 and $127 3,231 2,939
Inventories 1,322 2,069
Prepaid expense 391 207
Other Assets - 51
Net current assets of discontinued operations 12 24
---------- -----------
Total current assets 5,938 6,175
---------- -----------
Property and equipment at cost, net 6,389 7,297
---------- -----------
Other assets:
Goodwill, net 5,719 6,079
Other assets, net 12 16
---------- -----------
Total other assets 5,731 6,095
---------- -----------
Total assets $ 18,058 $ 19,567
========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------

Current liabilities:
Accounts payable $ 1,950 $ 2,860
Accrued liabilities 1,258 1,451
Current portion of long term debt 2,653 1,320
---------- ----------
Total current liabilities 5,861 5,631

Long-term debt, net of current portion 807 -
---------- ----------
Total liabilities 6,668 5,631

Put options - 201
Commitment and contigencies - -
---------- -----------
Shareholders' equity:
Preferred stock, no par, 10,000,000 shares authorized,
no shares issued or outstanding - -
Common stock, no par, 40,000,000 shares authorized,
19,321,213 and 19,150,507 shares issued and outstanding in 2001 and 41,205 40,997
2000 respectively
Accumulated deficit (29,903) (27,332)
Cumulative translation adjustment 88 70
---------- ----------
Total shareholders' equity 11,390 13,735
---------- ----------
Total liabilities and shareholders' equity $ 18,058 $ 19,567
========== ==========

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

27

INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)

Periods Ended
-----------------------------------------------------------------------
Ten Months
Ended October December 30, January 1,
31,2001 2000 2000
-----------------------------------------------------------------------
(in thousands, except share and per share data)

Net sales $ 14,658 $ 17,804 $ -
Cost of goods sold 11,468 12,593
----------- ----------- -----------
Gross profit 3,190 5,211 -
----------- ----------- -----------
Operating expenses:
Selling, marketing & customer service 1,231 1,545
Engineering, advance design and product
management 901 570
General and administrative 4,071 5,124 347
----------- ----------- -----------
Total operating expenses 6,203 7,239 347
----------- ----------- -----------

Operating loss (3,013) (2,028) (347)
----------- ----------- -----------
Other income (expense):
Unrealized loss on asset - (1,000)
Interest expense (530) (442) (27)
Other income (expense) 950 (29) -
----------- ----------- -----------
Total other income (expense) 420 (1,471) (27)
----------- ----------- -----------
Loss from continuing operations before income taxes (2,593) (3,499) (374)

Income tax benefit
----------- ----------- -----------
Loss from continuing operations (2,593) (3,499) (374)
----------- ----------- -----------
Income on discontinued snowboard operations 22 69 165
Loss on disposition of snowboard operations (269) -
Income (loss) on discontinued apparel operations (112) (3,309)
Loss on disposition of apparel operations (269) (132)
----------- ----------- -----------
Income (loss)from discontinued snowboard and apparel
operations, net of taxes 22 (581) (3,276)
----------- ----------- -----------
Net loss $ (2,571) $ (4,080) $ (3,650)
=========== =========== ===========
Net loss per common share:

Loss from continuing operations - basic $ (0.14) $ (0.20) $ (0.06)
Loss from continuing operations - diluted $ (0.14) $ (0.20) $ (0.06)

Loss from discontinued operations - basic $ 0.00 $ (0.03) $ (0.51)
Loss from discontinued operations - diluted $ 0.00 $ (0.03) $ (0.51)

Net loss - basic $ (0.14) $ (0.23) $ (0.57)
Net loss - diluted $ (0.14) $ (0.23) $ (0.57)

Weighted average number of shares used in computing per
share amounts:
Basic 19,192,611 17,482,583 6,377,556
=========== =========== ===========
Diluted 19,192,611 17,482,583 6,377,556
=========== =========== ===========

28

INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands, except share data)
Cumulative
Common Stock Accumulated Translation
Shares Amount Deficit Adjustment Total
-------------------------------------------------------------------------------------------
Balance, December 26, 1998 6,176,556 $ 27,116 $(19,602) $ (19) $ 7,495
Common stock options exercised 3,000,000 750 750

Comprehensive Income (Loss)
Net loss (3,650) (3,650)
Translation adjustment 8 8
-------
Total comprehensive loss (3,642)
--------------------------------------------------------------------------------------------
Balance, January 1, 2000 9,176,556 27,866 (23,252) (11) 4,603
--------------------------------------------------------------------------------------------
Comprehensive Income (Loss)
Net loss (4,080) (4,080)
Translation adjustment 81 81
-------
Total comprehensive loss (3,999)
Stock issued for acquisition 2,680,000 7,236 7,236
Stock issued in private placement 7,251,601 6,078 6,078
Common stock options exercised 42,350 18 18
Common stock subject to put option (201) (201)
--------------------------------------------------------------------------------------------
Balance, December 30, 2000 19,150,507 40,997 (27,332) 70 13,735
--------------------------------------------------------------------------------------------
Comprehensive Income (Loss)
Net loss (2,571) (2,571)
Translation adjustment 18 18
-------
Total comprehensive loss (2,553)
Stock issued in private placement 170,706 59 59
Warrants issued 149 149
--------------------------------------------------------------------------------------------

Balance, October 31, 2001 19,321,213 $ 41,205 $(29,903) $ 88 $ 11,390
============================================================================================

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

29

INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

Periods Ended
------------- ------------- -----------
October 31, December 30, January 1,
2001 2000 2000
------------ ------------ -----------
Cash flows from operating activities:
Net loss $ (2,571) $ (4,080) $ (3,650)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 941 1,912 671
Amortization of goodwill 360 395 87
Write off of investment - Globalgate 1,000
Loss on impairment of assets 2,659
Loss on retirement of fixed assets 33 30
(Income) Loss on discontinued operations 12 2,975 1,267
Other Income 18 2 8
Provision for doubtful accounts 69 66
Changes in operating assets and liabilities
(net of business combinations)
(Increase) decrease in accounts receivable (361) (1,485) 3,339
Decrease (increase) in inventories 747 (231) 4,099
(Increase) decrease in prepaid expenses (184) 99 469
Decrease (increase)in refundable deposits - 54 (54)
Decrease (increase) in other assets 55 849 (431)
(Decrease) increase in accounts payable (910) (1,004) (257)
(Decrease) in accrued liabilities (394) 726 (1,998)
Increase (decrease) in accrued loss on disposal 3 (1,498)
-------- ------- ---------
Net cash (used in) provided by operating activities (2,218) 1,314 4,741
-------- ------- ---------

Cash flows from investing activities:
Purchase of subsidiary, net of cash acquired (4,208) -
Purchase of investment (1,000)
Proceeds from sale of equipment 1,574
Acquisition of property and equipment ( 33) (285) (209)
-------- -------- ---------
Net cash provided by (used in) investing activities ( 33) (4,493) 365
-------- -------- ---------

Cash flows from financing activities:
Proceeds from issuance of common stock 59 6,078 750
Issuance of warrants 149
Net proceeds from notes payable 1,333 2,100 675
Proceeds from issuance of long-term debt 807 1,320
Principal payments on note payable (7,141) (2,251)
Payment of loan fees (223)
Line of credit borrowings (payments), net (3,698)
-------- -------- ---------
Net cash provided by (used in) financing activities 2,348 2,134 (4,524)
-------- -------- ---------
Increase (decrease) in cash and cash equivalents 97 (1,045) 582

Cash and cash equivalents at beginning of period 885 1,930 1,348
-------- -------- ---------

Cash and cash equivalents at end of period $ 982 $ 885 $ 1,930
======== ======== =========

30

INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Description of Business

International DisplayWorks, Inc. and subsidiaries (the "Company"),
headquartered in Rocklin, California was organized in July of 1999 and
recently merged with its parent Granite Bay Technologies, Inc. which was
organized in the State of Oregon as Morrow Snowboards, Inc., in October of
1989. The company is engaged in the design, manufacture and worldwide
distribution of liquid crystal displays (LCD's), modules, and assemblies
for major original equipment manufacturers (OEMs) applications in
telecommunication, automotive, industrial, medical, and consumer products.

Granite Bay Technologies, Inc. (formerly Morrow Snowboards, Inc.) was
originally organized to design, manufacture and market snowboards, boots,
bindings, apparel and accessories to retail outlets in the United States,
as well as international distributors in several foreign countries, which
business was conducted from organization through discontinuance of the
snowboard and apparel operations in November 1999. In March 1999, Granite
Bay Technologies, Inc. sold all of its "Morrow" intellectual property,
along with all 1999-2000 snowboard inventories and its snowboard and
binding production equipment to K2 Acquisitions, Inc. ("K2"). In November
1999, a subsidiary of Granite Bay Technologies, Inc., Westbeach Canada ULC
sold all of its operations, along with all apparel inventories to Westbeach
Sports, Inc., an unrelated company. The results of operations for these
business segments have been reflected as discontinued operations in the
accompanying Consolidated Statements of Operations (Note 16).

During the period ended October 31, 2001, the Company operated in the
single business segment of electronic equipment and parts.

Going Concern

The Company incurred net losses of $2,571,000, $4,080,000, and $3,650,000
in fiscal periods ended October 31, 2001 (Fiscal 2001), December 30, 2000
(Fiscal 2000), and January 1, 2000 (Fiscal 1999). Losses from continuing
operations for these same periods were $2,593,000, $3,499,000 and $374,000
respectively. The results for fiscal years ended December 30, 2000 and
January 1, 2000 include losses from discontinued operations of $581,000 and
$3,276,000 respectively. The Company has experienced liquidity problems as
a result of recurring losses from operations.

The Company completed several private placements of common stock during
fiscal year 2000 (Note 9). Consistent with management's strategic plans for
the Company, the proceeds from the offerings were used to facilitate the
acquisition of the PRC Companies. Management believes that the Company will
generate sufficient revenue and liquidity to sustain the Company's
operating needs in fiscal year 2002. Further, in the event of a capital
shortfall, management of the Company believes that it has the ability to
raise additional equity capital and debt financing. However, there can be
no assurances that the Company's recent acquisitions will operate
profitably or that management will be successful in raising additional
capital.

31

The matters described above raise a substantial doubt about the Company's
ability to continue as a going concern. The consolidated financial
statements do not include any adjustments relating to the recoverability
and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be
unable to continue as a going concern.

2. INTERNATIONAL DISPLAYWORKS, INC.

Merger

On October 31, 2001, by approval of the shareholders, Granite Bay
Technologies, Inc. merged into its wholly owned subsidiary International
DisplayWorks, Inc. and changed its state of incorporation to Delaware.

Acquisition

On January 31, 2000, Granite Bay Technologies, Inc. acquired 100% of the
outstanding shares of International DisplayWorks, Inc. (IDW) a Delaware
corporation headquartered in Rocklin, California, through issuance of
2,680,000 shares of common stock. The acquisition was accounted for using
the purchase method of accounting. On February 1, 2000, IDW through its
wholly owned subsidiary, International DisplayWorks (Hong Kong) Ltd.,
(IDWHK) acquired 100% of the shares of MULCD Microelectronics Company Ltd.
(MULCD) and IDW Shenzhen Technology Development Company, Ltd. (IDWT). MULCD
and IDWT are engaged in the manufacturing and assembly of LCDs and modules
in Peoples Republic of China (PRC Companies). The PRC Companies manufacture
LCDs and assemblies for the USA, Europe, and Far East markets. The
acquisition, which was accounted for by the purchase method of accounting,
required a total payment of approximately $8,481,000. On April 11, 2001 the
final payment of $821,000 was made to the Judicial Managers for all
remaining amounts due under the Sales and Purchase Agreement and the
Supplemental Deed and Charge, thereby finalizing all matters relating to
the acquisition on February 1, 2000 of MULCD and IDWT.

In addition to the acquisition of the PRC Companies, IDWHK entered into a
Supplemental Deed and Charge agreement with IDW and IDWHK as the Chargors,
and Vikay Industrial (Hong Kong) Ltd., and Vikay Industrial, Ltd., as
Chargees. Under the Deed and Charge agreement, IDW pledged the Common Stock
of IDWHK and the PRC Companies' assets to collateralize the deferral of the
payment of the balance of the purchase price for the PRC Companies. All
charges under this agreement have been released.

The consolidated financial statements include accounts and transactions of
IDW and the PRC Companies from January 31, 2000, the date of their
acquisition.

32

The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition had take place on the first
day of each of the years ended as follows (in thousands, except weighted
average shares outstanding and earnings per share):

Years Ended
----------------------------------------------------------
December 30, January 1,
2000 2000
---------------------- -------------------

Net sales $ 19,320 $ 22,292
Cost of goods $ 13,804 $ 19,199
Operating expenses $ 7,360 $ 2,431
Net loss $ (3,916) $ (2,778)
Weighted average shares outstanding 17,703,341 9,057,556
Loss per share $ (.22) $ (.31)
$ $

These unaudited pro forma results of operations have been prepared for
comparative purposes only and do not purport to be indicative of the
results of operations which actually would have resulted had the
acquisition occurred on the date indicated, or which may result in the
future.

3. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company,
and its wholly owned subsidiaries: International DisplayWorks (Hong Kong)
Ltd. (and its subsidiaries), Westbeach Canada ULC (a Nova Scotia unlimited
liability company). All significant intercompany accounts and transactions
have been eliminated in consolidation.

Fiscal Year

The Company changed its fiscal year end to October 31st for fiscal year
2001. Accordingly the financial information presented for the fiscal year
ended October 31, 2001 is a short period (ten months).

Previously the Company used a 52 or 53 week fiscal year ending on the
Saturday nearest to December 31st. Accordingly, the 2000 fiscal year ended
on December 30, 2000 and the 1999 fiscal year ended on January 1, 2000.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and on deposit and highly
liquid investments purchased with a maturity of three months or less. The
Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits.

Financial Instruments

A financial instrument is cash or a contract that imposes or conveys a
contractual obligation, or right, to deliver or receive cash or another
financial instrument. The fair value of financial instruments approximated
their carrying value as of October 31, 2001 and December 30, 2000.

Inventories

Inventories for continuing operations are stated at the lower of cost or
market. Costs included in the valuation of inventory are labor, materials
(including freight and duty) and manufacturing overhead.

33

Investments

Investments as of October 31, 2001 and December 30, 2000 consist of equity
securities deemed by management to be available-for-sale and are reported
at fair value with net unrealized gains or losses, if applicable, reported
within shareholders' equity.

Property and Equipment

Property and equipment are carried at cost. Depreciation of property and
equipment is provided using the straight-line method over the estimated
useful lives of the assets, which are 10 to 35 years for buildings and
improvements and 3 to 12 years for equipment and fixtures. Amortization of
leasehold improvements and equipment under capital leases is provided using
the straight-line method over the expected useful lives of the assets or
the initial term of the lease (including periods related to renewal options
which are expected to be exercised), whichever is shorter. Amortization of
leasehold improvements is included in depreciation expense.

Goodwill and Other Long-Lived Assets

For the fiscal year ended October 31, 2001, goodwill resulting from the IDW
acquisition was amortized over 15 years using the straight-line method and
is recorded net of accumulated amortization of $755,000 and $395,000 for
the periods ended October 31, 2001 and December 30, 2000, respectively.

For fiscal years commencing November 1, 2001 the Company will account for
goodwill and other intangible assets under the guidance of Statement of
Financial Accounting Standards No. 142. Under Statement No. 142, Goodwill
and other intangible assets are periodically evaluated using current facts
and circumstances for indications that the value of such assets may be
impaired. Goodwill and other long-lived assets are periodically evaluated
when facts and circumstances indicate that the value of such assets may be
impaired. Valuations are based on non-discounted projected earnings. If the
valuation indicates that non-discounted earnings are insufficient to
recover the recorded assets, revised projected earnings are discounted to
recover the recorded assets, then the projected earnings are discounted to
determine the revised carrying value and the write-down for the difference
is recorded.

On October 31, 2001 Granite Bay Technologies, Inc. merged into its wholly
owned subsidiary, International DisplayWorks, Inc. Management does not
believe the impact of implementing Statement No. 142 will have a material
impact on the Company's financial positition or results of operations.

Warranty Costs

The Company asks that the customer report defects within fifteen days of
receipt of product. All products are fully replaceable if defective. As the
Company manufactures custom products to customer specifications and has not
experienced significant returns, the Company does not anticipate it will
incur a material amount of warranty expense.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred and included in
selling, marketing and customer service expenses. Advertising expenses were
approximately $17,000 and $73,000 for fiscal years October 31, 2001 and
December 30, 2000, respectively.

Revenue Recognition

The Company recognizes revenue from the sale of its products when the
products are shipped to customers.

34
Income Taxes

The Company accounts for income taxes using the liability method. The
estimated future tax effects of differences between the basis in assets and
liabilities for tax accounting purposes are accounted for as deferred
taxes. Deferred tax assets are also recognized for operating losses and
unused tax credits that are available to offset future taxable income. A
valuation allowance is established to reduce deferred tax assets when it is
more likely than not that all, or some portion of such deferred tax assets
will not be realized. A valuation allowance for substantially all of the
Company's deferred tax assets has been established due to the uncertainty
of realizing these deferred tax assets.

Stock Options and Warrants

The Company has elected to measure and record compensation costs relative
to employee stock option and purchase plans in accordance with the
provisions of Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and make pro forma disclosure of net income and
earnings per share as if the fair value based method of valuing stock
options has been applied.

Product Development Costs

Expenditures associated with the development of new products and
improvements to existing products are expensed as incurred. Product
development costs were approximately $636,000 and $314,000 for fiscal years
October 31, 2001 and December 30, 2000, respectively.

Net Loss Per Share

The shares used in the calculation of net loss per share are computed as
follows:

Periods Ended
October 31, December 30, January 1,
2001 2000 2000
------------------- ------------------------- -----------------------
Shares:
Weighted average shares out-
standing for basic earnings 19,192,611 17,482,583 6,377,556
per share
Dilutive effect of stock options
and warrants (1) - - -

-------------------- ------------------------ ----------------------
Weighted average shares out-
standing for diluted earnings 19,192,611 17,482,583 6,377,556
per share
============ ============ =============

(1) The effect of potential common securities issued pursuant to the
exercise of stock options and warrants of 2,457,709, 1,915,506, and
584,448 shares for fiscal years 2001, 2000, and 1999 respectively, are
excluded from the diluted earnings per share calculation as their
effect would be antidilutive.
35

Foreign Currency Translation

All foreign assets and liabilities have been translated in the preparation
of the consolidated financial statements at the exchange rates prevailing
at the respective balance sheet dates, and all income statement items have
been translated using the weighted average exchange rates during the
respective periods. The net gain or loss resulting from translation upon
consolidation of the financial statements is reported as a component of
comprehensive income (loss) of each period with accumulated foreign
currency gain or loss reported as a component of the equity category for
comprehensive income (loss).

The cash flows of the Company's foreign subsidiaries are translated using
the exchange rates prevailing at the respective balance sheet dates. The
effect of exchange rate changes on foreign cash and cash equivalents is
reported as a separate element of the statement of cash flows, if
significant.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.

Impact of New Financial Accounting Standards

In June 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS No.
141 addresses the financial accounting and reporting for business
combinations and requires the use of a single method to account for
business combinations, the purchase method of accounting. In addition, SFAS
No. 141 requires that intangible assets be recognized as assets apart from
goodwill if they meet one of two criteria, the contractual-legal criterion
or the separability criterion. SFAS No. 141 applies to all business
combinations for which the date of acquisition is July 1, 2001 or later.

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. Pursuant to SFAS No. 142, goodwill and other intangible assets that
have indefinite useful lives will be evaluated periodically for impairment
rather than amortized. The provisions of this statement apply to financial
statements for fiscal years beginning after December 15, 2001, except for
goodwill or other intangible assets acquired after June 30, 2001 for which
SFAS No. 142 is immediately effective. Management does not believe the
adoption of SFAS No. 141 and SFAS No. 142 will have a significant impact on
the Company's current financial position or results of operations.

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which replaces SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. The accounting model for long-lived assets to be
disposed of by sale applies to all long-lived assets, including
discontinued operations, and replaces the provision of Accounting
Principles Board Opinion No. 30, Reporting Results of Operations-Reporting
the Effects of Disposal of a Segment of a Business, for the disposal of
segments of a business. SFAS No. 144 requires that those long-lived assets
be measured at the lower of carrying amount or fair value less costs to
sell, whether reported in continuing operations or in discontinued
operations. Therefore, discontinued operations will no longer be measured
at net realizable value or include amounts for operating losses that have
not yet occurred. The provisions of SFAS No. 144 are effective for
financial statements issued for fiscal years beginning after December 15,
2001, and, generally, are to be applied prospectively. Management does not
believe the adoption of this statement will have a significant impact on
the Company's current financial position or results of operations.

Reclassifications

Certain amounts in the prior year's financial statements have been
reclassified to conform to the presentation used in the current year.

4. INVENTORY

Inventories consisted of the following (in thousands):

October 31, December 30,
2001 2000
----------------- -------------------
Finished goods $ 326 $ 636
Work-in-process 126 299
Raw Materials 1,455 1,637
Less: reserve for obsolete inventory (585) (503)
----------------- -------------------
Total inventories, net $ 1,322 $ 2,069
================= ===================

5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following (in thousands):

October 31, December 30,
2001 2000
------------------ ----------------------
Building and improvements $ 3,020 $ 2,286
Plant, equipment, furniture and
fixtures 5,108 5,809
------------------ ----------------------
8,128 8,095

Less: accumulated depreciation (1,739) (798)
------------------ ----------------------
Property and equipment, net $ 6,389 $ 7,297
================== ======================

Depreciation expense totaled $941,000, $1,912,000 and $671,000 for the
periods ended October 31, 2001, December 30, 2000 and January 1, 2000,
respectively.

6. ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):

October 31, December 30,
2001 2000
-------------------------------------------------------
Accrued commissions $ 97 $ 62
Accrued payroll and related liabilities 583 -
Accrued inventory purchases - 325
Other accrued liabilities 578 1,064
-------------------------------------------------------
$ 1,258 $ 1,451

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

7. NOTES PAYABLE

Notes payable consisted of the following (in thousands):

October 31, December 30,
2001 2000
----------------- ------------------
Notes payable, interest only payments due in monthly installments of
$3,993 at 12% interest; principal balance due and payable in full April
15, 2002, collateralized by all shares of the Company's common stock, and
the accounts receivable, inventory, equipment and other tangible assets
of the Company $399 $499

Notes payable, interest only payments due in monthly installments of
$1,585 at 12.68% interest; principal balance due and payable in full
October 26, 2001, collateralized by all shares of the Company's common
stock, and the accounts receivable, inventory, equipment and other
tangible assets of the Company (See Note 17). 150 -

Notes payable, interest only payments due in monthly installments of
$2,642 at 12.68% interest; principal balance due and payable in full
April 1, 2002, collateralized by all shares of the Company's common
stock, and the accounts receivable, inventory, equipment and other
tangible assets of the Company 250 -

Notes payable, interest only payments due in monthly installments of
$2,906 at 12.68% interest; principal balance due and payable in full
April 15, 2002, collateralized by all shares of the Company's common
stock, and the accounts receivable, inventory, equipment and other
tangible assets of the Company 275 -

37

October 31, December 30,
2001 2000
----------------- ------------------
Notes payable, interest only payments due in monthly installments of
$1,057 at 12.68% interest; principal balance due and payable in full
October 15, 2002, collateralized by all shares of the Company's common
stock, and the accounts receivable, inventory, equipment and other
tangible assets of the Company 100 -

Factoring line, at 2.25% over Hong Kong Dollar prime
collateralized by accounts receivable. (Approximately 9.25% at October
31, 2001). 488 -

Credit line at 3% (12% at October 31, 2001)over U.S. prime (12% at
October 31, 2001) collateralized by the accounts receivable, inventory,
equipment and other tangible assets of the Company with minimum interest
charge of $12,500 per month. 588 -

Mortgage Loan, at 8.3% interest, to be repaid in three annual
installments, collateralized by the three factory buildings in 1,210 -
Shenzhen, PRC

Note payable, unsecured short-term at 6% interest per annum;
payable on demand; due for purchase of the PRC Companies - 821
retired; in fiscal 2001.
------------------ ----------------
3,460 1,320
Less: due within one year 2,653 1,320
------------------ ----------------
Due after one year $ 807 $ -
================== ================

Notes Payable
Due in fiscal year October 31, 2002 $ 2,653
Due in fiscal year October 31, 2003 404
Due in fiscal year October 31, 2004 403
--------
$ 3,460
========

During the fiscal year ended October 31, 2001, the Company issued
approximately $1,100,000 of collateralized notes to a key employee, board
members and other individual investors. The related parties received
warrants to purchase 185,000 shares of the Company's Common Stock at prices
ranging from $.36 to $.75 per share. The proceeds were used for general
working capital, capital expenditures, and to retire maturing debt.

In the quarter ended December 30, 2000, the Company issued approximately
$499,000 of collateralized notes payable due December 15, 2001 to a key
employee, board members and other individual investors. The due dates were
extended to April 15, 2002. The related parties received warrants to
purchase 99,861 shares of the Company's Common Stock at $.75 per share. The
proceeds were used for general working capital.

On March 23, 2001 the Company entered into an asset based lending program
with BFI Business Finance granting the Company a $3,000,000 line of credit
secured by the assets of the Company including accounts receivable,
inventory, and intangibles. The agreement is for twelve months at an
interest rate of 3% above the "basic rate" at Comerica Bank-California with
a minimum monthly charge of $12,500. The Company has been incurring the
minimum interest charge since inception of the agreement. Borrowings at
October 31, 2001 were approximately $588,000.

38

In August of 2001, the Company, through its wholly owned subsidiary,
International DisplayWorks (Hong Kong) Ltd., entered into a factoring
agreement with East Asia Heller Limited collateralized by accounts
receivable and inventory of IDWHK. The facility was for approximately
$600,000 with an interest rate of 2.25% above the Hong Kong Dollar prime
quoted by the Hong Kong and Shanghai Banking Corporation. The prevailing
rate was approximately 9.25% at October 31, 2001.

In June of 2001, the Company, through its wholly owned subsidiary, IDW
Technology (Shenzhen) Co., Ltd., entered into a mortgage on the three
buildings located at its manufacturing facility in Shenzhen, PRC. The
amount borrowed was approximately $1,200,000 for three years at an interest
rate of .693% per month. The loan is scheduled to be repaid in three annual
installments, the first being due in June of 2002.

8. COMMITMENTS AND CONTINGENCIES

Commitments

The Company is obligated under a single operating lease for office space at
$106,000 per year plus the cost of common area maintenance, commencing
March 1, 2000 for the first thirty-two months, then for $111,000 per year
through April 2005. This lease was amended by surrendering 4,600 square
feet back to the landlord, as of February 1, 2002 reducing the rent to
$69,000 per year through month thirty two, then for $73,000 per year
through April 2005.

Legal Matters

The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability with respect to such actions, will not materially affect
the financial position or results of the operations of the Company.

9. SHAREHOLDERS' EQUITY

Changes in Securities

In September 2001, in settlement of a Put Option entered into September 30,
2000, the Company issued 125,000 shares of the Company's Common Stock
valued at $.34 per share. The share price was determined by the selling
price of the Company's Common Stock on the date of issue, September 4,
2001.

In October 2001, the Company issued 45,706 shares of the Company's common
stock under the Granite Bay Technologies 2000 Equity Incentive Plan for
consulting services. The shares were valued at $.36, the fair market value
on the date of the grant.

Stock Option Plans

The Company has a stock option plan (the "Plan") for selected executives,
employees, and directors for which 1,102,500 shares of common stock have
been reserved for issuance under the Plan. The Plan permits the granting of
options for terms not to exceed ten years from the date of grant. The
options generally vest ratably over a four-year period and are exercisable
subject to terms established in the Plan document. The exercise price of
the options granted under the Plan must be equal to or greater than the
fair market value of the shares on the date of grant for incentive stock
options and not less than 85 percent of the fair market value for
nonqualified stock options. The exercise price of the options granted by
the Company has been equal to or greater than fair market

39

value at the date of grant. Fair market value for periods prior to the
Company's initial public offering was determined by the Board of Directors
without an independent valuation.

In September 2000, the Company established the Granite Bay Technologies
2000 Equity Incentive Plan for certain key employees of the Company. The
plan also permits the grant of stock options, restricted stock awards,
stock appreciation rights, stock units and other stock grants to certain
persons with a relationship with the Company, including agents,
consultants, advisors, independent contractors, sales representatives,
distributors, principals and retail distribution outlets for the Company's
products. The Plan provides for up to 882,000 shares of stock that are
authorized for issue. The price of each share of stock covered by an option
shall not be less than 100% of the fair value of the Company's Common Stock
on the date of grant. Each option certificate shall have an exercise period
of six months to ten years.

In October 1999, the Board of Directors adopted the Morrow Snowboards, Inc.
1999 Stock Option Plan for non-employee directors. This plan provides for
the issuance of up to 300,000 shares for the Company's common stock to
existing directors and in the case of extra services or duties, past
directors. Unless otherwise provided in the option grant, the options vest
over the year following the date of grant and expire after the later of
five years after the date of grant or five years after termination as a
director.

The summary of the activity within the plans follows:

Number Weighted Aggregate
Of Shares Average Price
Exercise Price
---------------- ---------------- ----------------
Options outstanding at
December 26, 1998 398,998 $3.78 $ 1,508,000

Options granted 280,000 .25 70,000
Options lapsed/canceled (128,550) 4.41 (566,819)
---------------- ---------------- ----------------
Options outstanding at
January 1, 2000 550,448 1.84 1,011,181

Options exercised (42,350) .43 (18,401)
Options granted 858,500 1.64 1,409,230
Options lapsed/canceled (231,250) 3.69 (852,501)
---------------- ---------------- ----------------
Options outstanding at
December 30, 2000 1,135,348 1.34 1,549,510

Options granted 405,000 .58 236,550
Options lapsed/canceled (302,500) .95 (290,535)
---------------- ---------------- ----------------
Options outstanding
October 31, 2001 1,237,848 $1.21 $ 1,495,525
================ ================ ================

40

The following table summarizes information about stock options outstanding
at October 31, 2001:

The total options exercisable at October 31, 2001, December 30, 2000, and
January 1, 2000 were 806,852, 665,707, and 538,882, respectively at a
weighted average exercise price per share of $.87, $.79, and $1.87
respectively.

Number of Weighted Weighted Number of Weighted
Range of Shares out- Average Average Shares Average exercise
Exercise standing at Remaining Exercise Exercisable at Price per
Prices per October 31, Contractual Price October 31, share
Share 2001 Life (years) Per share 2001
-------------- -------------- ---------------- ------------- ------------------ -----------------
$ .01 - $ 5.00 1,197,848 3.91 $ 1.04 806,852 $ .87
$5.01 - $10.00 40,000 3.82 6.20
-------------- ---------------- ------------- ----------------- -----------------
Total/average 1,237,848 3.91 $ 1.21 806,852 $ .87
============== ================ ============= ================= =================

In 1995, the shareholders approved the Stock Option Plan for Non-Employee
Directors (the "Directors Plan"), which reserved 122,500 shares of the
Company's Common Stock for the future grants to eligible Directors (as
defined in the Directors Plan). Options granted pursuant to the Directors
Plan reduced the number of underlying shares available under the Plan on a
one-to-one basis. The Directors Plan provided for an annual grant of 2,450
shares of Common Stock to each eligible Director immediately following each
annual meeting of shareholders commencing with the 1996 annual meeting.
Grants were made at the fair market value of the Common Stock on the date
of grant and were fully vested after six months. The Directors Plan was
discontinued in October 1999.

Pro forma Results of Operations

The Company has computed, for pro forma disclosure purposes, the value of
all options granted during fiscal 2001, 2000, and 1999 using the
Black-Scholes option pricing model, and the following weighted average
assumptions for grants for the years ended:

October 31, December 30, January 1,
2001 2000 2000
----------------------- ------------------- --------------
Risk-free interest rate 6.0% 6.0% 5.7%
Expected dividend value 0.0% 0.0% 0.0%
Expected lives (years) 5 5 6
Expected volatility 82.8% 90.0% 53.8%

Statement of Financial Accounting Standards No. 123

Using the Black-Scholes methodology, the total value of options granted
during fiscal 2001, 2000, and 1999 was $199,635, $777,374, and $34,000
respectively, which would be amortized on a proforma basis over the vesting
period of the options (typically four years). The weighted average fair
value per share of options granted during fiscal 2001, 2000, and 1999 was
$.49, $.91, and $.14 respectively.

41
Had the measurement provisions of SFAS No. 123 been adopted, results of
operations computed on a proforma basis would have been as follows (in
thousands, except for share information):

Periods Ended
-------------------------------------------------------------------------------------

October 31, 2001 December 30, 2000 January 1, 2000
------------------------ -------------------------- ----------------------

As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
Net loss $(2,571) $(2,636) $(4,080) $(4,726) $(3,650) $(3,893)
Net loss per share:
Basic $(.14) $(.14) $(.23) $(.27) $(.57) $(.61)
Diluted $(.14) $(.14) $(.23) $(.27) $(.61) $(.61)

The effects of applying the measurement provision of SFAS No. 123 in this
pro forma disclosure are not indicative of future amounts. SFAS No. 123
does not apply to awards prior to January 1, 1995, and additional awards
are anticipated in future years.

Stock Warrants

The Company, from time to time, has issued stock warrants as payment for
fees, interest and services rendered. At fiscal periods ended October 31,
2001, December 30, 2000, and January 1, 2000, the Company had outstanding
warrants to purchase 1,291,861, 780,161, and 34,300 shares of Common Stock,
respectively. The warrants are exercisable at a weighted average price per
share of $.76. In fiscal 2001, 2000, and 1999, no warrants to purchase
common stock were exercised. During fiscal 2001, 460,000 warrants were
granted and not lapsed. During fiscal 2000 and 1999, no warrants were
granted or lapsed.

10. RELATED PARTY TRANSACTIONS

Related party transactions not previously disclosed in other sections of
this report include the following:

A member of the Company's Board of Directors was issued 100,000 warrants to
purchase the Company's Common Stock at an exercise price of $.36 per share
(fair market value at the date of issue) as compensation for consulting
services to the Company.

42

11. INCOME TAXES

The provisions for income taxes consist of taxes currently due plus
deferred taxes for the net change in items with different bases for
financial and income tax reporting purposes. The items with different bases
are primarily fixed assets; allowance for doubtful accounts; and accrued
liabilities for employee vacation and inventory reserves. The deferred tax
assets and liabilities represent the future tax consequences of those
differences, which will either be recovered or settled, using enacted
marginal income tax rates in effect when the differences are expected to
reverse. Deferred tax assets are recognized for operating losses and tax
credits that are available to offset future federal income taxes. Net
deferred taxes consist of the following tax effects relating to temporary
differences and carry-forwards (in thousands):

October 31, December 30, January 1,
2001 2000 2000
--------------- ---------------- ---------------
Deferred tax assets:
Accrued expenses and reserves $ 497 $ 105 $ 494
Depreciation 145
Net operating loss and tax credit carry-forwards 2,961 10,970 8,827
--------------- ---------------- ---------------
Deferred tax assets before valuation allowance 3,458 11,075 9,466
Valuation allowance (3,450) (11,067) (9,466)
----------------- ----------------- ---------------
Total deferred taxes 8 8 -
Deferred tax liabilities:
Depreciation and amortization (8) (8) -

----------------- ----------------- ---------------
Net deferred tax assets $ - $ - $ -

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

October 31, December 30,
2001 2000 Change
----------------- ------------------ ---------------
Federal net operating loss carry-forward - expiring thru 7,711 28,128 20,417
2021
Valuation allowance (3,450) (11,067) (7,617)

At October 31, 2001 and December 30, 2000, the Company had an estimated
federal net operating loss carryforward of approximately $7,711 and
$28,128, respectively, expiring through 2020. Due to the discontinuation of
its snowboard and apparel operations (Note 16) and the purchase of IDW and
the PRC Companies (Note 2), the Company does not meet the continuity of
operations requirement of Internal Revenue Code Section 382. Accordingly,
approximately $22,636,000 in net operating losses will not be available to
offset future Federal income taxes, if any. For the years ended October 31,
2001 and December 30, 2000, the Company decreased its valuation allowance
by $7,617,000 and increased its valuation allowance to $3,450,000,
respectively. A valuation allowance has been established due to the
uncertainty of realizing deferred tax assets.

The components of income tax (benefit) expense for both continuing and
discontinued operations are as follows (in thousands):

Periods Ended
--------------------------------------------------------------------

October 31, December 30, January 1,
2001 2000 2000
--------------------- --------------------- ------------------
(Benefit) expense for income taxes:
Current:
Federal
Foreign --------------------- --------------------- ------------------

Total --------------------- --------------------- ------------------

Deferred (3,430) $ (1,601) $ (1,337)
Valuation allowance 3,430 1,601 1,337
--------------------- --------------------- ------------------
Total benefit for income taxes $ $ - $ -
===================== ===================== ==================

Tax (benefit) expense recorded in:
Continued operations $ - $ - $ -

A reconciliation of the income tax at the federal statutory income tax rate
to the income tax benefit as reported is as follows:

Periods Ended
--------------------------------------------------------------------

October 31, December 30, January 1,
2001 2000 2000
--------------------- --------------------- ------------------
Benefit computed at statutory rates (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit ( 4.4) ( 4.4) ( 4.4)
Chanage in valuation allowance (38.4) 38.4 35.2
Other 3.2
--------------------- --------------------- ------------------

Income tax benefit as reported -% -% -%
===================== ===================== ==================

12. CASH FLOW DISCLOSURES

Supplemental cash flow disclosures are as follows (in thousands):

Periods Ended
--------------------------------------------------------------------

October 31, December 30, January 1,
2001 2000 2000
--------------------- --------------------- ------------------
Supplemental disclosure:
Cash paid for interest $ 531 $ 442 $ 100

Non-cash investing transactions:
Assets acquired under capital
lease $ 4,272

43

In fiscal year 2000, IDWHK purchased all of the outstanding securities of
MULCD and IDWT for cash. In conjunction with the acquisition, liabilities
were assumed as follows (in thousands):

Fair market value of assets acquired $ 12,017
Liabilities assumed (2,213)
Deposit paid in 1999 by IDWHK (1,000)
Payment due to complete acquisition (Note 2) (4,532)
Less: cash acquired (64)
--------------------
Cash paid to acquire PRC Companies $ 4,208
====================

13. CONCENTRATIONS

Credit Risks

Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of temporary cash
investments, short-term investments and trade receivables. The Company
places its temporary cash investments and short-term investments with high
quality financial institutions.

Major Customer

Sales to one customer for the fiscal period ended October 31, 2001
accounted for approximately 35% of total sales. Sales to one customer for
the fiscal year ended December 30, 2000 accounted for approximately 28% of
total sales.

14. EMPLOYEE SAVINGS PLAN

The Company created an employee savings plan (the "Plan") on July 1, 1996,
under the provisions of Section 401(k) of the Internal Revenue Code. The
plan covered substantially all full-time employees. The Company's matching
contributions took two forms; a basic matching contribution of 30% of
employee contributions, and a discretionary supplemental matching
contribution based upon parameters set by management on an annual basis.

The Company terminated the Plan in December 2000. Participants are fully
vested in their 401(k) contributions and matching contribution accounts.
Company matching contributions in 1999 were $11,000.

15. SEGMENT AND GEOGRAPHIC INFORMATION

Under Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of Enterprise and Related Information (SFAS 131), public
companies are required to disclose certain information about the
enterprise's reportable segments. The Company produces on displays or
display modules for end products of original equipment manufacturers.

44
However, the Company has two major geographic territories where it sells
and distributes essentially the same products. The geographic territories
are the United States and Asia. The following represents continuing
operations geographical data for the fiscal period ended October 31, 2001
and December 30, 2000 (in thousands):

Fiscal Period Ended October 31, 2001
---------------------------------------------------------
Asia USA Total
----------------- ---------------- ------------------
Revenue $6,562 $8,096 $14,658
Cash 434 548 982
Fixed assets, net of accumulated depreciation 6,206 183 6,389
Total assets 10,087 7,972 18,058
-------------------- ---------------- ------------------

Fiscal Period Ended December 30, 2000
---------------------------------------------------------
Asia USA Total

----------------- ---------------- ------------------
Revenue $10,479 $7,325 $17,804
Cash 766 119 885
Fixed assets, net of accumulated depreciation 7,104 193 7,297
Total assets 11,810 7,757 19,567
-------------------------------------------------------- ----------------- ---------------- ------------------

16. DISCONTINUED OPERATIONS

On March 26, 1999, the Company sold all if its rights, title and interest
in and to the "Morrow" and "Morrow Snowboards" names and the other
trademarks, trade names and service marks to K2 Acquisitions, Inc (K2). In
addition, K2 purchased all of the machinery, equipment and tooling used for
manufacture of snowboards and bindings; all rights to the machinery,
equipment and tooling that is leased by the Company; all of the Company's
snowboard inventory for the 1999/2000 season; purchase orders reflecting
sales orders received and accepted by the Company prior to the date of
sale; trademark licensing agreement and international distribution
agreement and all of the Company's rights, claims, credits, causes of
action or rights of set-off against third parties relating to the assets.
In consideration of the sale, conveyance, assignments, transfer and
delivery of the assets, the Company received $3.2 million dollars.

In October 1999, Westbeach's Bellevue, Washington retail store lease,
inventory and trade fixtures were sold for approximately $196,000. The
payment included the assumption of accounts payable related to that store's
inventory, assumption of the retail store lease (including a release of
Westbeach from any further obligation) and approximately $48,000 in cash,
based on subsequent sales, payable in interest-free installments on January
5, 2000 and December 30, 2000.

On November 12, 1999, Westbeach sold substantially all of its assets,
including its remaining two retail stores in Vancouver and Whistler,
British Columbia, and its apparel line, together with the Westbeach
trademarks, to Westbeach Sports, Inc., a British Columbia corporation, not
affiliated with either the Company or Westbeach. The assets were sold for
$2,680,000 pursuant to an Asset Purchase Agreement that contained certain
representations and warranties by Westbeach to the buyer and

45

indemnification of the Buyer by Westbeach in certain events for certain
liabilities or any inaccuracies in such representations and warranties. The
sales price was subject to adjustment based on any final inventory and
accounts receivable verifications. A $100,000 holdback to fund certain
adjustments has since been refunded to the Company.

As a result of these transactions, the following net book values of assets
purchased and liabilities assumed at October 31, 2001 and December 30, 2000
have been shown as net current and non-current assets of discontinued
operations in the Consolidated Balance Sheet (in thousands):

October 31, December 30,
2001 2000
-------------------------- -----------------------
Accounts receivable, net $12 $24
Inventory
Other assets
-------------------------- ----------------------
Total net assets from discontinued operations $12 $24
========================== =======================

Operating results of the snowboard and apparel operations for fiscal
periods 2001, 2000, and 1999 are shown separately in the consolidated
statement of operations as loss from discontinued operations, net of taxes.
The net loss on the sale of the apparel operations has been reflected in
the 1999 consolidated statement of operations as a loss from discontinued
apparel operations, as has the accrued operating loss of the apparel
segment for the period from year-end to the date of sale. The discontinued
snowboard operating results include an allocation of consolidated net
interest expense based on net assets. The allocated net interest expense
was $96,000 in fiscal period 1999. Sales from discontinued snowboard
operations of $86,000 in fiscal period 1999 was excluded from revenues and
included in loss from discontinued snowboard and apparel operations. The
net interest expense allocated for discontinued apparel operations was
$27,000 in 1999. Sales from discontinued apparel operations of $9,022,000
in 1999 were excluded from revenues and included in loss from discontinued
snowboard and apparel operations. The consolidated statement of cash flows
has not been restated to reflect the discontinued operations presentation.

17. SUBSEQUENT EVENTS

On November 15, 2001 and January 7, 2002 $50,000 and $100,000 respectively
was paid in full satisfaction of a note payable due October 26, 2001 (See
Note 7).
46

SUPPLEMENTAL SCHEDULE

SUPPLEMENTARY INFORMAITON REQUIRED

UNDER THE SECUTITIES AND EXCHANGE

ACT OF 1934

AS OF OCTOBER 31, 2001, DECEMBER 30, 2000,

AND JANUARY 1, 2000

INTERNATIONAL DISPLAYWORKS, INC. AND SUBSIDIARIES

SUPPLEMENTAL SCHEDULE

VALUATION AND QUALIFYING ACCOUNTS

As of and for the years ended
October 31, 2001, December
30, 2000, and January 1, 2000

47

The following schedule has been restated to confirm to continuing
operations presentation (see Item 7. Managements Discussion and Analysis of
Financial Condition and Results) (in thousands):

Balance at Charged to Balance
Beginning costs, At End
Of Period expenses or Of Period
Description restated Deductions*
------------------------------------ ---------------- -------------- ---------------- ---------------
January 1, 2000

Allowances deducted from asset accounts:
Allowance for doubtful
accounts $1,066 $220 $(280) $1,006
Obsolete inventory
allowance $2,792 $(2,750) $42

December 30, 2000

Allowances deducted from asset accounts:
Allowance for doubtful
accounts $1,006 $(1,006) $127 $127
Obsolete inventory
allowance $42 $(42) $482 $482

October 31, 2001

Allowances deducted from asset accounts:
Allowance for doubtful
accounts $127 $69 $196
Obsolete inventory
allowance $482 $104 $586

* Balances written off, net of recoveries

48

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

NAME AGE SINCE POSITION WITH THE COMPANY
- ------------------------ ---------- ---------- ---------------------------------------------
Stephen C. Kircher 48 1999 Chairman and Chief Executive Officer

William H. Hedden 49 1999 Director

Anthony G. Genovese 59 2000 Vice-Chairman, Chief Technology Officer and
Assistant Secretary

Timothy Nyman 51 2000 Director

Ronald A. Cohan 61 2000 Director

Ian Bebbington 46 2001 Chief Financial Officer and Secretary

Key Employees
- -----------------
Philip Gregory 64 1999 Vice President, Manufacturing

Richard T. Seery 55 2001 Vice President of Sales and Marketing

(a) Corporate Directors

The following is the business background for the Directors of the Company:

Stephen C. Kircher, age 48, has served as Chairman of the Board of
Directors of the Company since February 2000 and as a director since
October 1999. Mr. Kircher was appointed as the Chief Executive Officer of
the Company in July 2001. Since 1993, he served as Chairman and majority
owner of Capitol Bay Group, Inc., and as Chairman of Capitol Bay
Securities, Inc. (securities and investment banking) and Capitol Bay
Management, Inc. (Investment Company). Both Capitol Bay Securities, Inc.
and Capitol Bay Management, Inc. are wholly owned subsidiaries of Capitol
Bay Group, Inc. Mr. Kircher closed Capital Bay Securities in February of
2001. Mr. Kircher was also a founding Director of Burlingame Bancorp and
served on its Board from 1984 to 1991. Prior to 1993, Mr. Kircher formed
and managed Spinner Corporation, which engaged in leveraged buyouts of
troubled companies. Mr. Kircher has extensive experience as a principal in
equity private placements, sale and leaseback financing, and multiple forms
of debt financing and initial public offerings. Mr. Kircher began his
career with Dean Witter in 1975 before joining Bateman, Eichler, Hill &
Richards, a regional investment-banking firm in 1978. Mr. Kircher has a
Bachelor of Arts degree from the University of California, San Diego.

49

William H. Hedden, age 47, has served as a Director of the Company
since 1999. Mr. Hedden has served as President and Chief Executive Officer
of Consolidated Adjusting, Inc. (construction insurance adjusting) since
1992. From 1985 to 1992, Mr. Hedden served as a Director of Burlingame
Bancorp and its subsidiary, Burlingame Bank & Trust Co. In 1984, Mr. Hedden
served as Chairman of the Board of Bayhill Service Corporation, a
mortgage-banking subsidiary of Delta Federal Savings & Loan. From 1983 to
1987, Mr. Hedden served as Chairman of the Board and majority stockholder
of Delta Federal Savings & Loan. Mr. Hedden received his Juris Doctor
degree from Hastings College of the Law, San Francisco in 1979 and a
Bachelor of Arts degree from Stanford University, Palo Alto in 1975. He has
been a director of the Company since October 1999.

Anthony G. Genovese, 59, has been a Director of the Company since
September 2000, Chief Technology Officer since 2000 and Assistant Secretary
since July 2001. He founded IDW in June 1999 to purchase the shares of
MULCD and Vikay Industrial (Shenzhen) Limited ("IDWT"). IDW operated MULCD
and IDWT under a management contract with Vikay Industrial (Singapore)
Limited ("Vikay"), MULCD's and IDWT's parent company, from August 1, 1999.
From 1997 to 1999, Mr. Genovese was President, joint member of the Office
of the Chief Executive and Director of Vikay. Vikay entered Judicial
Management, a form of bankruptcy proceeding in Singapore, in December 1997.
The Judicial Managers of Vikay selected Mr. Genovese to oversee continuing
operations. In 1986, Mr. Genovese founded VGI, Inc, a joint venture company
with Vikay to market Vikay LCD's and to help Vikay enter the LCD module
business in the United States. He introduced custom products to major
companies such as ADEMCO, GE, Honeywell, Schlumberger, AT&T, Milton
Bradley, Lifescan and White-Rogers. In 1992, VGI became a subsidiary of
Vikay and was renamed Vikay America, Inc. Mr. Genovese continued as
President and CEO of Vikay America from 1992 to 1997. Prior to Vikay, Mr.
Genovese was a technologist and Marketing Executive for PCI Displays (1977
to1986), and founded the LCD operations at Beckman Instruments (1972
to1976) and Rockwell International (1966 to 1969). Mr. Genovese received a
Bachelor of Science in Physics from Manhattan College in 1964, a Master of
Science in Physics & Mathematics from NYU & Courant Institute of
Mathematical Sciences in 1966 and attended USC for 18 graduate credits
towards a Master Degree in Systems Management in 1975 and 1976.

Timothy B. Nyman, 50, has served as a Director of the Company since
October 2000. Mr. Nyman is the Vice President of Global Services at GTECH
Corporation, the world's largest supplier of online lottery systems and
services. In 1979, Mr. Nyman went to work with the predecessor company of
GTECH Corporation, which was the gaming division of Datatrol, Inc. In his
twenty-one years with GTECH and its predecessors, Mr. Nyman has held
various positions in operations and marketing. He has directed a full range
of corporate marketing activities and participated in the planning and
installation of new online lottery systems domestically and
internationally. Mr. Nyman received a Bachelor of Science degree in
Marketing, Accounting and Finance from Michigan State University in 1973.

Ronald A. Cohan, 60, has served as a Director of the Company since
October 2000. Since 1995, Mr. Cohan has served as a consultant to High
Integrity Systems, Inc., a subsidiary of Equifax Inc. Prior to that, Mr.
Cohan joined the San Francisco law firm of Pettit & Martin as an Associate
in 1968 and was admitted as a Partner in 1972. He opened the Los Angeles
office of Pettit & Martin in October of 1972 and was partner in charge

50

until March of 1983. Mr. Cohan left Pettit & Martin in February of 1992 and
became principal of his own law firm. Mr. Cohan has specialized in
government procurement matters for various institutional clients such as
Honeywell, 3M, Mitsui, Centex and Equifax. Mr. Cohan received a Bachelor of
Arts degree from Occidental College in 1963 and a Juris Doctor degree from
the University of California, Berkeley (Boalt Hall) Law School in 1966.

(b) Corporate Officers

The following table sets fourth certain information with respect to
executive officers of the Company. There is no family relationship between
any of the officers and directors.

Ian Bebbington, age 46, is a chartered accountant and has been the
Company's Chief Financial Officer since July 2001. Mr. Bebbington founded
Findatsys Worldwide Ltd., an internet start-up company where he worked from
1995 to 2001. He was the Chief Financial Officer from 1991 to 1995 and the
Chief Executive Officer from 1994 to 1995 of Contimach Ltd., a subsidiary
of Fenner PLC, a U.K. public company. Mr. Bebbington earned a Bachelor of
Science degree in Economics and Commerce from the University of
Southampton. He is a member of the Institute of Chartered Account of
England and Wales.

(c) Key Employees

Philip Gregory, age 64, Vice President, Manufacturing, joined IDW in
November 1999. Mr. Gregory has over 30 years' experience in the electronics
industry in areas of product and process development, equipment design,
equipment maintenance, installation and automation, in both high and low
volume, manufacturing environments. From 1996 to 1999, Mr. Gregory served
as a manufacturing consultant to Three-Five Systems, Micro Display Corp.,
Accudyne and Villa Precision International. From 1994 to 1995, he was
Product Development Manager for Villa Precision International, responsible
for product development, customer process improvements and sales support.
Mr. Gregory's experience also includes CEO of Dove Communications, General
Manager of the telecom division of Elec & Elteck, VP of Operations for
Printed Circuit International, Operations Manager of National
Semiconductor, and various positions with Texas Instruments. Mr. Gregory
attended North Texas State University, majoring in business.

Richard T. Seery, age 55, has been the Vice President of Sales and
Marketing of IDW since May 2001. He was the Senior Sales Engineer for
Unaxis Optics from 2000 to April 2001 and was the Director of International
Sales of Villa Precision Inc. from 1995 to 2000. Mr. Seery earned his
Bachelor of Science in Business Administration and Electrical Engineering
from Marquette University.

(d) Compliance with Section 16 of the Securities Exchange Act of 1934

Based solely upon a review of Forms 3, 4 and 5 delivered to the
Company as filed with the Securities and Exchange Commission
("Commission"), directors and officers of the Company and persons who own
more than 10% of the Company's common stock timely filed all required

51

reports pursuant to Section 16(a) of the Securities Exchange Act of 1934,
except Ian Bebbington, who was six days late filing his Form 3 and Anthony
Genovese who was late on one Form 4 reporting two transactions and one Form
4 reporting one transaction.

ITEM. 11. EXECUTIVE COMPENSATION.

Compensation Summary

The following table summarizes all compensation earned by or paid to
the Companies former President, Chief Financial Officer, Chief Executive
Officer and other executive officers, whose total compensation exceeded
$100,000 for services rendered in all capacities for fiscal years 2001,
2000, and 1999.

Summary Compensation Table
----------------------------

Annual Salary Long-Term Compensation
Securities
Name and Underlying Other
Principal Position Year $ Bonus Options (#) Compensation
------------------ ---- - ----- ----------- ------------

Stephen C. Kircher, 2001 $ 61,417 --- 100,000 ---
Chief Executive Officer

P. Blair Mullin(1) 2001 $124,247 ---- 150,000 ----
Former President, Chief Financial 2000 $124,224 -- 80,000 --
Officer, and Secretary of GBAY and Chief 1999 $121,774 -- 70,000 $ 117(2)
Operating Officer of IDW

Anthony Genovese, 2001 $145,833 ---- 30,000 $7,500(3)
Chief Technology Officer 2000 $200,833 -- 260,000 $9,000(3)
1999 -- -- -- ---

Philip Gregory, 2001 $141,583 ---- 30,000 ----
Vice President of Manufacturing 2000 $114,583 -- 60,000 $5,000(4)
1999 -- -- -- --

Alan Lefko, 2001 $112,280 ---- ---- $ 5,000(3)
Former Chief Financial Officer of IDW 2000 $109,375 -- 50,000 $13,250(5)
-- -- -- --

Ian Bebbington, 2001 $33,848 ---- 50,000 $17,436(7)
Chief Financial Officer

- --------------------------
Footnotes:

(1) Mr. Mullin was President of the Company from May 18, 1998 to August 2001.
He was also serving as Chief Financial Officer and Secretary/Treasurer of
the Company and served as Chairman of the Board from April 1, 1999 to
February 2000.
(2) Represents medical insurance reimbursement
(3) Represents vehicle allowance.
(4) Represents moving allowance.
(5) Represents $8,000 moving allowance and $5,250 vehicle allowance.
(6) Represents vehicle allowance.
(7) Housing allowance
52

Option Grants in 2001

The following table provides information relating to stock options granted
during the year ended October 31, 2001.

Individual Grants

Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Number of Securities Percent of Total Appreciation
Underlying Warrants Options Granted to Exercise For Option Terms
and Employees Price Expiration ------------------------
Options Granted (#) In Fiscal Year Per Share Date 5% 10%
------------------- -------------- --------- ---------- ----- -----
Name
Date
Stephen Kircher 100,000 18.7 $0.36 10/06/06 $9,900 $21,900
P. Blair Mullin 150,000 28.0 $0.50 10/11/06 $20,700 $45,750
Anthony Genovese 30,000 5.6 $0.36 08/29/06 $2,970 $6,570
Phil Gregory 30,000 5.6 $0.36 10/11/06 $2,970 $6,570
Alan Lefko ---- ---- ---- ----
Ian Bebbington 50,000 9.3 $0.56 07/11/06 $7,750 $17,100

The exercise price of each option was equal to the fair market value of our
Common Stock on the date of the grant. Percentages shown under "Percent of Total
Options Granted to Employees in the Last Fiscal Year" are based on an aggregate
of 535,000 options granted to our employees under the 1998 Stock Option Plan,
2000 Equity Incentive Plan and outside of this plan during the year ended
October 31, 2001.

Potential realizable value is based on the assumption that our Common Stock
appreciates at the annual rate shown, compounded annually, from the date of
grant until the expiration of the five-year term. These numbers are calculated
based on Securities and Exchange Commission requirements and do not reflect our
projection or estimate of future stock price growth. Potential realizable values
are computed by:

o Multiplying the number of shares of Common Stock subject to a given
option by the exercise price;

o Assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table for the
entire five-year term of the option; and

o Subtracting from that result the aggregate option exercise price.

Ten-Year Options/SAR Repricings

There was no repricing of options for the fiscal year ended October 31, 2001.
53

Fiscal Year End Option Values

The following table sets forth for each of the executive officers named in
the Summary Compensation Table the number and value of exercisable and
unexercisable options for the year ended October 31, 2001.

Number of Securities
Shares Underlying Unsecured Options Value of Unexercised
Acquired Value and Warrants In-The-Money Options
on at October 31, 2001 at October 31, 2001
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Stephen Kircher 595,861 0

P. Blair Mullin 150,000 0

Anthony Genovese
105,000 185,000
Phil Gregory 40,000 50,000
Alan Lefko 25,000 25,000
Ian Bebbington 12,500 37,500

Compensation of Directors

Board members are currently not compensated for participation in Board
meetings. This policy may change in the future. All Directors are reimbursed for
expenses incurred in attending Board and committee meetings. Additionally, the
Board may grant stock options to its members for service as directors. During
the fiscal year ended October 31, 2001, non-employee directors were not granted
options.

54

Performance Measurement Comparison

COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT

(Graph Ommitted)

There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The market price of the Company's common stock in recent years has
fluctuated significantly and it is likely that the price of the stock will
fluctuate in the future. The Company does not endorse any predictions of future
stock performance. Furthermore, the stock performance chart is not considered by
the Company to be (i) soliciting material, (ii) deemed filed with the Securities
and Exchange Commission, and (iii) to be incorporated by reference in any
filings by the Company under the Securities Act of 1933, or the Securities
Exchange Act of 1934.

Compensation Committee Report on Executive Compensation

The executive compensation policies and programs developed by the Company
are designed to retain and motivate executive officers and to ensure that their
interests are aligned with the interests of the Company's stockholders. The
Company's policy is to offer competitive compensation opportunities for its
employees based on a combination of factors, including Company growth, corporate
performance and the individual's personal contribution to the business.

The Company's compensation programs are implemented by the Compensation
Committee of the Board of Directors ("Board"). Such programs consist of base
salary, annual incentives and long-term incentives. Executive officers who are
also directors do not participate in decisions affecting their own compensation.

55

Base Salary

The Compensation Committee considered its own assessment of the individual
performances of each executive officer and its own subjective assessment of the
Company's overall financial performance. There is no fixed relationship between
base salary and corporate performance or between base salary and the competitive
range of salaries that may be offered by competitive companies. The Compensation
Committee members considered their business judgment in light of their
experience to be an important factor in establishing executive compensation.

Annual Incentives

On an annual basis, the Compensation Committee considers the grant of
annual incentive bonuses to each executive officer. Incentive bonuses are
discretionary and are determined subjectively, with the Compensation Committee
taking into consideration the individual's performance, contribution and
accomplishments during the past fiscal year and the Company's financial
performance. Neither the decision to award a bonus, nor the specific size of the
incentive bonus, is based on any specific measure of corporate performance. In
fiscal 2000, no incentive bonuses were awarded to any executive officer.

Stock Incentive Compensation

The Board believes that stock ownership by executive officers and key
employees provides valuable incentives for those persons to benefit as the
Company's Common Stock price increases, and that stock option-based incentive
compensation arrangements help align the interests of executives, employees and
stockholders. To facilitate these objectives, the Board has granted stock
options to executives and key employees through the Company's Employee Equity
Incentive Plan (formerly, the 1990 Amended and Restated Stock Option Plan) (the
"Plan"), approved by the stockholders in 1991. The Plan was amended by the Board
in 1995 to increase the number of shares available under the Plan to 1,102,500,
which amendment was approved by the Company's stockholders. The Plan was again
amended by the Board in 1997 to change the name of the Plan, add certain
additional types of equity grants, provide for acceleration of vesting on
certain changes in control or sale of substantially all the Company's assets and
a number of immaterial changes to update, modernize and reorganize the Plan,
which amendment was also approved by the Company's stockholders. This Plan has
now expired.

Effective October 12, 1999, the Board adopted the 1999 Stock Option Plan
for Non-Employee Directors (the "Directors' Plan"). The Plan provides for the
issuance of up to 300,000 shares of the Company's Common Stock (as presently
constituted) to existing directors and, in the case of extra service or duties,
to prior directors. Options may be awarded in such amounts, at such times, at
such exercise prices and on such other terms as the Board determines, subject to
any limitations in the Plan. Unless otherwise designated, options vest uniformly
over the year following the date of grant. The options, subject to earlier
termination under the Plan or option grant, expire after the later of (i) five
years after the date of grant or (ii) five years after termination as a
director. In 2001, the Board did not grant any options to directors.

56

Effective September 28, 2000, the Board and the stockholders of the Company
approved the 2000 Employee Equity Incentive Plan ("Equity Incentive Plan"). A
total of 882,800 shares of Common Stock were reserved for issuance under the
Equity Incentive Plan. The purpose of the Equity Incentive Plan is to attract
and retain the services of key employees, directors, officers and consultants
and to help such individuals realize a direct proprietary interest in the
Company. A total of 882,800 shares of Common Stock were reserved for issuance
under the Equity Incentive Plan. In 2001, the Board issued options to purchase
405,000 shares at exercise prices ranging from $0.36 to $0.75.

In determining the number of options granted to executive officers and key
employees, the Board considered the person's opportunity to affect the share
price of the Company's Common Stock, the level of the person's performance based
on past performance, future contribution to the Company and the anticipated
incentive effect of the number of options granted.

The Board believes that the policies and plans described above provide
competitive levels of compensation and effectively link executives and
stockholder interests. Moreover, the Board believes such policies and plans are
consistent with the long-term investment objectives appropriate to the business
in which the Company is engaged.

Respectfully Submitted,
Compensation Committee of
International DisplayWorks, Inc.

Stephen C. Kircher
William H. Hedden
Ronald Cohan
Timothy Nyman

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

Principal Stockholders

The following table sets forth certain information as of January 15, 2002,
with respect to the beneficial ownership of our common stock for (i) each
director, (ii) all of our directors and officers as a group, and (iii) each
person known to us to own beneficially five percent (5%) or more of the
outstanding shares of our Common Stock.

Unless otherwise indicated, the address for each listed stockholder is:
International DisplayWorks, Inc., 599 Menlo Drive, Suite 200, Rocklin,
California 95765. To our knowledge, except as indicated in the footnotes to this
table or pursuant to applicable community property laws, the persons named in
the table have sole voting and investment power with respect to the shares of
common stock indicated.

57

Number of
Name of Beneficial Owner Shares(1) Percent(2)
------------------------- ---------- ----------
Stephen C. Kircher 2,630,861(3) 13.5%
William H. Hedden 65,000(4) *
Anthony Genovese 1,559,353(5) 8.0%
Ronald Cohan 154,000(6) *
Timothy Nyman 336,664(7) 1.7%
All directors and executive officers as a group 4,774,260(8) 24.5%
(six persons)

- -------------------
Footnotes:

* Does not exceed 1% of the class.

(1) "Beneficial Ownership" is defined pursuant to Rule 13d-3 of the Exchange
Act, and generally means any person who directly or indirectly has or
shares voting or investment power with respect to a security. A person
shall be deemed to be the beneficial owner of a security if that person has
the right to acquire beneficial ownership of the security within 60 days,
including, but not limited to, any right to acquire the security through
the exercise of any option or warrant or through the conversion of a
security. Any securities not outstanding that are subject to options or
warrants shall be deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by that person, but
shall not be deemed to be outstanding for the purpose of computing the
percentage of the class owned by any other person.

(2) Based on 19,129,491 shares of the Company's Common Stock outstanding at
January 15, 2002, plus that number of shares subject to options exercisable
within 60 days of January 15, 2002, owned by each individual or group of
individuals.

(3)
Includes 2,000,000 shares, options to purchase 85,000 shares and warrants
to purchase 435,861 shares in Mr. Kircher's name and 35,000 shares held by
Capital Bay Securities, Inc. ("CBS") and warrants to purchase 75,000. CBS
is a wholly owned subsidiary of Capital Bay Group ("CBG") and Mr. Kircher
is a majority shareholder in CBG.

(4) Includes 65,000 shares subject to options exercisable within 60 days after
January 15, 2002.

(5) Includes 670,000 shares held in joint tenancy with Mr. Genovese's wife,
Mrs. Sharon Genovese, 694,353 shares held by an individual retirement
account for Anthony Genovese and 135,000 shares subject to options and
60,000 shares subject to warrants exercisable within 60 days after January
15, 2002.

58

(6) Includes 134,000 shares and options to purchase 20,000 shares exercisable
within 60 days after January 15, 2002.

(7) Includes 316,664 shares and options to purchase 20,000 shares exercisable
within 60 days after June 30, 2001.

(8) Includes 3,940,899 shares, options to purchase 325,000 shares and warrants
to purchase 495,861 shares exercisable within 60 days after January 15,
2002 owned by the Directors and options to purchase 12,500 shares
exercisable within 60 days after January 15, 2002 owned by Mr. Bebbington.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On February 23, 2001, Mr. and Mrs. Cohan, one of the Company's Directors
and his wife, loaned the Company $200,000 pursuant to a secured promissory note.
Under the secured promissory note, the total amount borrowed together with an
interest payment at a rate of 12.68 percent per year was due on April 2, 2001.
As security for the loan, the Company pledged the shares of Common Stock of IDW
and Mr. and Mrs. Kircher, the Company's Chairman and his wife, guaranteed the
loan. On April 4, 2001, the Company repaid the secured promissory note in full.

In Fiscal 2001, the Company paid Capitol Bay Securities, Inc. ("CBS"), a
company owned by the Company's Chairman, Mr. Kircher, 28,000 in cash and
warrants to purchase 100,000 shares of the Company's Common stock at $0.36,
expiring October 10, 2006 as final settlement for its role as Private Placement
Agent. The Company also granted 45,706 shares of the Company's Common Stock to
two former employees of CBS.

During the fiscal year 2001, the Company closed various unit offering
consisting of debt instruments and warrants to purchase shares of Common Stock
of the Company equal 20% of the investment amount. Under the debt instruments,
the Company will pay interest only payments each month at a rate of 12.68
percent per year with the total amount borrowed due one year from the date of
issue. The Company's net proceeds from the offering were $875,000.

On August 30, 2001, Mr. Genovese, the Company's Vice-Chairman and Chief
Technology Officer, invested $150,000 and was granted warrants to purchase
30,000 shares of common stock at $.36 per share.

On October 15, 2001, the parents of the Company's Chairman, Mr. Kircher
agreed to assume the loan to the Company of $100,000 from a former Director of
the Company and to extend the repayment date until October 15, 2001. For the
extension, the Company granted Mr. Kircher's parents a warrant to purchase
20,000 shares of common stock at $0.36 per share expiring November 1, 2006.

59
PART IV

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

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

1. Financial Statements (see Item 8.)

o Report of Independent Public Accountants (Perry-Smith LLP) o Report of
Independent Public Accountants (Arthur Andersen LLP)

o Consolidated Balance Sheets - October 31, 2001 and December 30, 2000

o Consolidated Statements of Operations - Years Ended October 31, 2001,
December 30, 2000 and January 1, 2000

o Consolidated Statements of Stockholders' Equity - Years Ended October
31, 2001, December 30, 2000 and January 1, 2000

o Consolidated Statements of Cash Flows - Years Ended October 31, 2001,
December 30, 2000 and January 1, 2000

o Notes to Consolidated Financial Statements

2. Financial Statement Schedules

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

3. Exhibits

See Exhibit Index.

(b) Reports on Form 8-K

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

Date of Event Reported Item Reported
---------------------- -------------

September 19, 2002 Change in Fiscal Year End to October 31

60
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rocklin, State of California, on ________ ___, 2002.

INTERNATIONAL DISPLAYWORKS, INC.,
A Delaware corporation

Dated: ______________ By: _________________________________________
Stephen C. Kircher,
Chairman and Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.

Dated: ______________ By: _________________________________________
Stephen C. Kircher,
Chairman and Chief Executive Officer
(Principal Executive Officer)

Dated: ______________ By: _________________________________________
Anthony Genovese,
Vice-Chairman and Chief Technology Officer

Dated: ______________ By: _________________________________________
William H. Hedden, Director

Dated: ______________ By: _________________________________________
Ronald Cohan, Director

Dated: ______________ By: _________________________________________
Tim Nyman, Director

Dated: ______________ By: _________________________________________
Ian Bebbington,
Chief Financial Officer
(Principal Financial Officer)

61

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
--------------------------

EXHIBITS

Filed with the

ANNUAL REPORT ON

FORM 10-K

FOR THE FISCAL YEAR ENDED OCTOBER 31, 2001

UNDER

THE SECURITIES EXCHANGE ACT OF 1934
------------------------

INTERNATIONAL DISPLAYWORKS, INC.

62

EXHIBIT INDEX

Exhibit No. Description
- ----------- -----------

2.1 Agreement and Plan of Merger merging Morrow Snowboards, Inc. into Granite
Bay Technologies, Inc. (1)

2.2 Agreement and Plan of Merger merging Granite Bay Technologies, Inc. into
International DisplayWorks, Inc.(2)

3.1 Certificate of Incorporation (2)

3.2 Bylaws

4 Registration Rights Agreement dated April 20, 1994 among the Registrant and
the investors named therein (3)

4.2 Securities Purchase Agreement dated October 31, 1997 among the Registrant,
Morrow, LLC, Morrow Snowboards ULC, Westbeach Snowboard Canada Ltd. and the
security holders of Westbeach Snowboard Canada Ltd. listed therein (6)

10.1 Lease and Option Agreement among PR Investors Limited Liability Company,
the Registrant, Ray E. Morrow, Jr. and Sharon Morrow dated July 25, 1994,
as amended by Amendment to Lease and Option Agreement dated August 1, 1995
(3)

10.2 Forms of Warrant (3)

10.3 Employment Agreement between Ray E. Morrow, Jr. and the Registrant dated
April 20, 1994, as amended (3-4)

10.4 Noncompete Agreement between Ray E. Morrow, Jr. and Nicollett Limited
Partners Partnership dated April 20, 1994 (3)

10.5 Assignment Agreement by and among the Registrant, Nicollett Limited
Partners, James V. Zaccaro, Gregory M. Eide, Dennis R. Shelton and Erik J.
Krieger dated December 19, 1995 (5)

10.6 Morrow Snowboards, Inc. Employee Equity Incentive Plan as amended and
restated February 13, 1997 (4)

10.7 Form of Nonqualified Stock Option Agreement (3-4)

10.8 Form of Incentive Stock Option Agreement (3-4)

10.9 Manufacturing Agreement between the Registrant and Plasticos Duramas, S.A.,
dated July 20, 1995 (3)

10.10 Form of Sales Representative Agreement (3)

63

10.11 Letter Agreements between the Registrant and Pacific Crest Securities
Inc.dated February 22, 1994, January 27, 1995, August 4, 1995 and
October 4,1995 (3)

10.12 Form of Indemnification Agreement (3-4)

10.13 Stock Option Plan for Non-Employee Directors (3-4)

10.14 Purchase and Sales Agreement dated February 29, 1996 (5)

10.15 Securities Purchase Agreement dated October 31, 1997 among the
Registrant,Morrow, LLC, Morrow Snowboards ULC, Westbeach Snowboard Canada
Ltd. and the Security holders of Westbeach Snowboard Canada Ltd. listed
therein (6)

10.16 Loan and Security Agreement dated as of May 7, 1998 among the
Registrant and Westbeach Snowboard U.S.A., Inc., as Borrower, and
Foothill Capital Corporation as Lender (as assigned to Capitol Bay
Management, Inc.) (9)

10.17 Guarantee and Postponement of Claim by Morrow Westbeach Canada ULC
in favor of Foothill Capital Corporation dated as of May 7, 1998
(as assigned to Capitol Bay Management, Inc.) (19)

10.18 Intellectual Property and Security Agreement dated as of May 7,
1998, between Morrow Snowboards, Inc. and Foothill Capital
Corporation (as assigned to Capitol Bay Management, Inc.)(19)

10.19 General Security Agreement dated as of May 7, 1998, between
Morrow Westbeach Canada ULC and Foothill Capital Corporation (as
assigned to Capitol Bay Management, Inc.)(19)

10.20 Security Agreement-Stock Pledge dated as of May 7, 1998, between
Morrow Snowboards, Inc. and Foothill Capital Corporation (as assigned
to Capitol Management, Inc.)(19)

10.21 Assignment and Acknowledgment Agreement dated May 7, 1999, between
Capitol Bay Management, Inc. and Foothill Capital Corporation, the
Registrant and Westbeach Snowboard U.S.A. Inc.(19)

10.22 Apparel Design and Manufacturing Agreement dated December 31,
1996, between the Registrant and Marmot Mountain Ltd. (7)

10.23 "Terms of Instrument - Part 2", dated April 1, 1994, as amended by
"Terms of Instrument - Part 2", Modification Agreement, dated October
17, 1997, between Westbeach Snowboard Canada Ltd. (now Morrow Westbeach
Canada ULC)and Western IMMO Holdings Inc. (8)

10.24 International Distribution Agreement dated as of January 1, 1998,
between the Registrant and K.K. Morrow Japan (8)

10.25 Acquisition Agreement dated as of March 26, 1999, by and between
K2 Acquisitions, Inc. and the Registrant (10)

10.26 Memorandum of Understanding between Capitol Bay Management, Inc. and
the Company (11)

64

10.27 Payment Agreement effective June 17, 1999 among Morrow Snowboards,
Inc., certain Petitioning Creditors named therein and Robert K. Morrow,
Inc., a Disbursing Agent for the Petitioning Creditors (12)

10.28 Promissory Note dated August 25, 1999, given by Morrow Snowboards, Inc.
to Dennis and Carol Pekkola (12)

10.29 Trust Deed dated August 25, 1999, given by Morrow Snowboards, Inc.
to Robert Smejkel, as Trustee, with Dennis and Carol Pekkola as
beneficiaries (13)

10.30 Subordination Agreement dated August 25, 1999, among Morrow
Snowboards, Inc., Robert K. Morrow, as Escrow Agent for certain
creditors of the Company and the Pekkolas (13)

10.31 Morrow Snowboards, Inc. 1999 Stock Option Plan for
Non-Employee Directors(14)

10.32 Asset Purchase Agreement dated as of November 12, 1999, among
Westbeach Canada ULC and Westbeach Sports Inc.(15)

10.33 General Assignment dated as of November 12, 1999, among Westbeach
Canada ULC and Westbeach Sports Inc.(15)

10.34 Assignment of Lease and Consent among Westbeach Canada ULC,
Westbeach Sports Inc. and Western Immo Holdings, Inc. dated as of
November 12, 1999 (15)

10.35 Assignment of Lease and Consent among Westbeach Canada ULC,
Westbeach Sports Inc. and Welf Arne Von Dehn dated as of November 12,
1999 (15)

10.36 Bill of Sale between Westbeach Canada ULC and Westbeach Sports Inc.
dated as of November 12, 1999 (15)

10.37 Letter from Arthur Andersen, LLP dated January 24, 2000 (16)

10.38 Placement Agent Agreement dated January 13, 2000, between
Morrow Snowboards, Inc. and Capitol Bay Securities, Inc (17)

10.39 Securities Purchase Agreement effective as of January 31, 2000,
among Morrow Snowboards, Inc. and the Sellers (18)

10.40 Sale and Purchase Agreement February 1, 2000 among Vikay Industrial
(Hong Kong) Ltd. and International DisplayWorks, Inc. (19)

10.41 Supplemental Deed and Charge dated February 1, 2000, between
International DisplayWorks (Hong Kong) Ltd. and International
DisplayWorks, Inc., as Chargors, and Vikay Industrial Ltd.
(in Judicial Management) and Vikay Industrial (Hong Kong) Ltd. as
Chargees (18)

21 Subsidiaries of the Registrant

27 Financial Data Schedule

65

(1) Incorporated herein by reference from the Company's Current Report on Form
8-K dated November 6, 2000 (File No. 0-753683).

(2) Incorporated by reference from the Company's Current Report on Form 8-K
dated October 31, 2001 (File No. 0-27002).

(3) Incorporated herein by reference from the Company's Registration Statement
on Form S-1 (File No. 33-97800).

(4) Management contract or compensatory plan or arrangement.

(5) Incorporated herein by reference from the Company's 1995 Annual Report on
Form 10-K (File No. 0-27002).

(6) Incorporated by reference from the Company's Current Report on Form 8-K
dated October 31, 1997 (File No. 0-27002).

(7) Incorporated by reference from the Company's Current Report on Form 8-K
dated November 11,1997 (File No. 0-27002).

(8) Incorporated by reference from the Company's 1997 Annual Report on Form
10-K (File No. 0-27002).

(9) Incorporated by reference from the Company's Current Report on Form 8-K
dated May 8, 1998 (File No. 0-27002).

(10) Incorporated by reference from the Company's Current Report on Form 8-K
dated March 26, 1999 (File No. 0-27002).

(11) Incorporated by reference from the Company's Current Report on Form 8-K
dated April 27, 1999 (File No. 0-27002).

(12) Incorporated by reference from the Company's Current Report on Form 8-K
dated June 28, 1999 (File No. 0-27002).

(13) Incorporated by reference from the Company's Current Report on Form 8-K
dated August 25, 1999 (File No. 0-27002).

(14) Incorporated by reference from the Company's Current Report on Form 8-K
dated September 30, 1999 (File No. 0-27002).

(15) Incorporated by reference from the Company's Current Report on Form 8-K
dated November 12, 1999 (File No. 0-27002).

(16) Incorporated by reference from the Company's Current Report on Form 8-K
dated January 14, 2000 (File No. 0-27002).

(17) Incorporated by reference from the Company's Current Report on Form 8-K
dated January 31, 2000 (File No. 0-27002).

(18) Incorporated by reference from the Company's Current Report on Form 8-K
dated January 31, 2000 (File No. 0-27002).

(19) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended January 1, 2000 (File No.0-27002).

66

Exhibit 3.2