**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-QSB**





[X]
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934


For
      the
      quarterly period ended April 30, 2006





OR





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


For
      the
      transition period from _______ to _______








Commission
      file number: None





**PureDepth,
      Inc.**


(Exact
      Name of Registrant as Specified in Its Charter)





Delaware
              (State
                or other jurisdiction of
              incorporation
                or organization)
            20-4831825
              (I.R.S.
                Employer Identification No.)




255
      Shoreline Drive, Suite 610, Redwood City, California 94065


(Address
      of principal executive offices)





(650)
      632-0800


(Issuer’s
      telephone number)




(Former
      name, former address and former fiscal year, if changed since last
      report)








Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
      (or
      for such shorter period that the issuer was required to file such reports),
      and
      (2) has been subject to such filing requirements for the past 90 days. Yes
      [X]
      No [  ]





Indicate
      by check mark whether the registrant is a shell company (as defined by Rule
      12b-2 of the Exchange Act). Yes [  ] No [X]





As
      of
      June 14, 2006 there were 58,644,445 shares of the issuer’s common stock, $.001
      par value, outstanding.





Traditional
      Small Business Disclosure Format (check one): Yes [  ] No [X]







1


**INDEX**




Page**PART
                I**
            **FINANCIAL
                INFORMATION**Item
                1.
            Unaudited
                Condensed Consolidated Balance Sheet
            
            3Unaudited
                Condensed Consolidated Statements of Operations and Comprehensive
                Income
                (Loss)
            
            4Unaudited
                Condensed Consolidated Statements of Cash Flows
            
            5Notes
                to Unaudited Condensed Consolidated Financial Statements
            
            6Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            11Item
                3.
            Controls
                and Procedures
            
            18**PART
                II**
            **OTHER
                INFORMATION**Item
                1.
            Legal
                Proceedings
            
            19Item
                1A
            Risk
                Factors
            
            19Item
                2
            Unregistered
                Sales of Equity Securities
            
            26Item
                3
            Defaults
                on Senior Securities
            
            26Item
                4
            Submission
                of Matters to a Vote of Security Holders
            
            26Item
                5.
            Other
                Information
            
            26Item
                6.
            Exhibits
                and Reports on Form 8-K
            
            27Signatures
            
            28







2
 
 **PART
          I - FINANCIAL INFORMATION**
 
 **Item
          1. Unaudited Condensed Consolidated Financial Statements**
 
 **PUREDEPTH,
          INC. AND SUBSIDIARIES**
 **(A
          Development Stage Company)**
 **CONDENSED
          CONSOLIDATED BALANCE SHEET**
 
 **April
                    30,**
                  **2006****Unaudited****ASSETS**Current
                    assets:Cash
                    and cash equivalents
                
                $
                4,002,205Other
                    current assets
                
                
                122,942Assets
                    held for sale
                
                
                145,564**Total
                    current assets**
                
                
                **4,270,711****Property
                    & Equipment (net)**
                
                
                **254,563**Other
                    Assets:Intellectual
                    Property (net)
                
                
                2,549,987Other
                    Assets held for sale
                
                
                21,002**Total
                    intangible assets**
                
                
                **2,570,989****Total
                    assets**
                
                **$**
                **7,096,263****LIABILITIES
                    AND SHAREHOLDERS' EQUITY**Current
                    liabilities:Current
                    portion - notes payable
                
                
                180,765Accounts
                    payable
                
                
                496,704Accrued
                    expenses
                
                
                62,862Liabilities
                    held for sale
                
                
                156,597**Total
                    current liabilities**
                
                
                **896,928**Note
                    payable
                
                
                499,139**Total
                    liabilities**
                
                
                **1,396.067**Shareholders'
                    equityPreferred
                    stock series A, $0.01 par value, 1,000,000 shares authorized,
                    233,118.55
                    shares issued & outstanding
                
                
                2,331Common
                    stock, $0.001 par value 60,000,000 shares authorized, 6,255,400
                    shares
                    issued & outstanding
                
                
                6,255Subscriptions
                    received
                
                
                50,000Additional
                    paid-in-capital
                
                
                20,418,396Additional
                    paid-in-capital options & warrants
                
                
                5,128,590Accumulated
                    deficit
                
                
                (19,194,475
                )Accumulated
                    other comprehensive income (loss)
                
                
                (710,901
                )**Total
                    shareholders' equity**
                
                
                **5,700,196****Total
                    liabilities and shareholders' equity**
                
                **$**
                **7,096,263**
 
 The
          accompanying notes are an integral part of these unaudited financial
          statements
 3
 **PUREDEPTH,
          INC. AND SUBSIDIARIES**
 **(A
          Development Stage Company)**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF OPERATIONS and COMPREHENSIVE INCOME /
          (LOSS)**
 **(Unaudited)**
 **Three
                    months ended April 30,**
                
                **Inception
                    to****2006**
                
                **2005**
                
                **April
                    30, 2006**Net
                    sales
                
                $
                -
                
                $
                -
                
                $
                -**Costs
                    and expenses**Depreciation
                    and amortization
                
                
                137,396
                
                
                120,247
                
                
                2,487,477Sales
                    and marketing
                
                
                924,757
                
                
                182,251
                
                
                1,940,004Professional
                    fees
                
                
                317,939
                
                
                102,075
                
                
                1,922,891Loss
                    on fixed asset disposal
                
                
                -
                
                
                5,444
                
                
                111,194General
                    and administrative
                
                
                1,956,951
                
                
                330,267
                
                
                12,613,343Research
                    and development
                
                
                1,161,547
                
                
                433,150
                
                
                2,993,158**Total
                    operating expenses**
                
                
                **4,498,590**
                
                
                **1,173,434**
                
                
                **22,068,067****Operating
                    loss**
                
                
                **(4,498,590**
                **)**
                
                **(1,173,434**
                **)**
                
                **(22,068,067**
                **)****Other
                    income (expense)**Interest,
                    net
                
                
                19,624
                
                
                (49,828
                )
                
                (932,788
                )Grant
                    receipts
                
                
                1,850
                
                
                7,324
                
                
                682,625Foreign
                    exchange gain
                
                
                24,760
                
                
                83,494
                
                
                423,618Other
                    Income
                
                
                89,899
                
                
                90,796
                
                
                2,682,490**Total
                    other income**
                
                
                **136,133**
                
                
                **131,786**
                
                
                **2,855,945****Loss
                    before income tax**
                
                
                **(4,362,457**
                **)**
                
                **(1,041,648**
                **)**
                
                **(19,212,122**
                **)**Income
                    tax provision
                
                
                -
                
                
                -
                
                
                -**Loss
                    from continuing operations**
                
                
                **(4,362,457**
                **)**
                
                **(1,041,648**
                **)**
                
                **(19,212,122**
                **)**Income
                    from discontinued operations, net of income tax
                
                
                17,647
                
                
                -
                
                
                17,647**Net loss**
                
                
                **(4,344,810**
                **)**
                
                **(1,041,648**
                **)**
                
                **(19,194,475**
                **)**Other
                    comprehensive income (loss)Net
                    loss per statement of operations
                
                
                (4,344,810
                )
                
                (1,041,648
                )
                
                (19,194,475
                )Foreign
                    currency translation adjustments
                
                
                33,132
                
                
                (96,399
                )
                
                (710,901
                )**Comprehensive
                    income (loss)**
                
                $
                (4,311,678
                )
                $
                (1,138,047
                )
                $
                (19,905,376
                )**Basic
                    and diluted earnings (loss) per share:**Loss
                    from continuing operations
                
                $
                (0.09
                )
                $
                (0.09
                )
                $
                (1.34
                )Income
                    from discontinued operations, net of income tax
                
                
                -
                
                
                -
                
                
                -Net
                    income (loss)
                
                $
                (0.09
                )
                $
                (0.09
                )
                $
                (1.34
                )Weighted
                    average shares outstanding, basic and diluted
                
                
                46,194,409
                
                
                11,336,118
                
                
                14,382,618
 
 The
          accompanying notes are an integral part of these unaudited financial
          statements
 4
 **PUREDEPTH,
          INC. AND SUBSIDIARIES**
 **(A
          Development Stage Company)**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(Unaudited)**
 **Three
                    months ended April 30,**
                
                **Inception
                    to****2006**
                
                **2005**
                
                **April
                    30, 2006****Cash
                    flows from operating activities:**Net loss
                
                
                (4,344,810
                )
                
                (1,041,648
                )
                
                (19,194,475
                )Adjustments
                    to reconcile net loss to net cash provided by
                  operating
                    activities:Depreciation
                    and amortization
                
                
                137,396
                
                
                120,247
                
                
                2,487,477Non-cash
                    compensation expense
                
                
                3,141,538
                
                
                271,586
                
                
                5,751,994Non-cash
                    interest expense
                
                
                3,579
                
                
                68,978
                
                
                148,669Loss
                    on disposal of fixed assets
                
                
                -
                
                
                5,444
                
                
                111,194Foreign
                    exchange (gain)
                
                
                (24,760
                )
                
                (83,494
                )
                
                (423,618
                )Changes
                    in operating assets and liabilities:(Increase)
                    decrease in accounts receivable, trade
                
                
                46,436
                
                
                21,886
                
                
                (25,559
                )(Increase)
                    decrease in prepayments
                
                
                (43,894
                )
                
                34,460
                
                
                (97,378
                )Increase
                    (decrease) in payables to other creditors and accruals
                
                
                (36,066
                )
                
                200,752
                
                
                48,704Increase in
                    accounts payable
                
                
                204,328
                
                
                113,209
                
                
                496,704Increase in
                    accrued interest
                
                
                5,441
                
                
                24,693
                
                
                10,579**Net
                    cash used in operating activities**
                
                
                **(910,812**
                **)**
                
                **(263,890**
                **)**
                
                **(10,685,709**
                **)****Cash
                    flows from investing activities:**Payments
                    for purchases of fixed assets
                
                
                (159,081
                )
                
                (107,824
                )
                
                (1,179,880
                )Expenditures
                    - intellectual property
                
                
                (67,429
                )
                
                (81,692
                )
                
                (2,954,878
                )**Net
                    cash used in investing activities**
                
                
                **(226,510**
                **)**
                
                **(189,516**
                **)**
                
                **(4,134,758**
                **)****Cash
                    flows from financing activities:**Proceeds
                    from issuance of Common Stock, net
                
                
                -
                
                
                -
                
                
                9,660,690Proceeds
                    from issuance of Series A preferred stock
                
                
                4,227,472
                
                
                -
                
                
                4,577,472Proceeds
                    from short term financing
                
                
                -
                
                
                -
                
                
                29,585Principal
                    payments on short term financing
                
                
                (23,136
                )
                
                -
                
                
                (23,136
                )Issuance
                    of related party note payable
                
                
                -
                
                
                745,212
                
                
                5,221,768Principal
                    payments on short term financing
                
                
                -
                
                
                -
                
                
                (594,441
                )Stock
                    subscriptions received
                
                
                50,000
                
                
                -
                
                
                50,000**Net
                    cash provided by financing activities**
                
                
                **4,524,336**
                
                
                **745,212**
                
                
                **18,921,938**Effect
                    of exchange rate changes on cash and cash equivalents
                
                
                (27,193)
                
                
                138,626
                
                
                (99,266
                )**Net
                    increase in cash and cash equivalents**
                
                
                **3,144,207**
                
                
                **430,432**
                
                
                **4,002,205**Cash
                    and cash equivalents at beginning of period
                
                
                857,998
                
                
                114,817
                
                
                -**Cash
                    and cash equivalents at end of period**
                
                **$**
                **4,002,205**
                
                **$**
                **545,249**
                
                **$**
                **4,002,205****Supplemental
                    cash information:**Notes
                    and accrued interest converted to stock
                
                $
                774,330
                
                $
                2,704,784
                
                $
                5,598,620Cash
                    paid for interest
                
                
                1,169
                
                
                20
                
                $
                849,749Cash
                    paid for income taxes
                
                
                -
                
                
                -
                
                
                -Purchase
                    of intellectual property via issuance of note payable
                
                
                -
                
                
                -
                
                $
                1,257,929
 
 The
          accompanying notes are an integral part of these unaudited financial
          statements
 5
 **PUREDEPTH,
          INC. AND SUBSIDIARIES**
 **(A
          Development Stage Company)**
 **NOTES
          TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
          STATEMENTS**
 
 **Note
          1 - Basis of Presentation**
 
 The
          accompanying unaudited financial statements of PureDepth, Inc. (“the Company")
          are presented in accordance with the requirements for Form 10-QSB and Article
          10
          of Regulation S-X and Regulation S-B. Accordingly, they do not include
          all of
          the disclosures required by generally accepted accounting principles. In
          the
          opinion of management, all adjustments (all of which were of a normal recurring
          nature) considered necessary to fairly present the financial position,
          results
          of operations, and cash flows of the Company on a consistent basis, have
          been
          made.
 
 These
          results have been determined on the basis of generally accepted accounting
          principles and practices applied consistently with those used in the preparation
          of the Company's Annual Financial Statements for the ten months ended January
          31, 2006 and year ended March 31, 2005. Operating results for the three
          months
          ended April 30, 2006 are not necessarily indicative of the results that
          may be
          expected for the fiscal year ending January 31, 2007.
 
 The
          accompanying condensed financial statements for the interim period should
          be
          read in conjunction with the audited financial statements contained in
          the Form
          10-KSB for the period ended January 31, 2006 included in the Company's
          Current
          Report on Form 8-K/A filed with the Commission on June 16, 2006.  Those
          statements contain a summary of significant accounting policies.
 
 **Note
          2 -Description of Business**
 
 *The
          Company - Description of Business*
  PureDepth,
          Inc., along with our wholly owned subsidiaries, PureDepth Limited (PDL)
          and
          PureDepth Incorporated Limited (PDIL), and our predecessor parent entity,
          Deep
          Video Imaging Limited (DVIL), (collectively, the Company) develops,
          manufactures, markets and supports multi-layer display technology (MLDTM). The
          Company’s technology has gaming, military, automotive and handheld video display
          applications.
 
 The
          Company is deemed a development stage company as defined by Statement of
          Financial Accounting Standards (SFAS) No. 7 *Accounting
          and Reporting by Development Stage Enterprises* due to
          its continuing research and development activities related to making its
          multi-layer display technology (MLDTM) economically viable for its targeted
          applications.
 
 **Note
          3 - Forward Triangular Merger**
 
 On
          March
          31, 2006 and pursuant to an Agreement and Plan of Merger and Reorganization
          dated March 16, 2006, the Company entered into a forward triangular merger
          with
          PureDepth Technologies, Inc., a Delaware corporation and wholly owned subsidiary
          of Diamond One, Inc., a Colorado corporation quoted on the Over the Counter
          Bulletin Board. As a result of the merger, PureDepth Technologies, Inc.
          succeeded to the business of PureDepth, Inc. and survived as a wholly owned
          operating subsidiary of Diamond One, Inc. The merger was effected by the
          filing
          of a certificate of merger with the Delaware Secretary of State on March
          31,
          2006.
  At
          the
          effective time of the merger, the legal existence of the Company ceased
          and all
          of the approximately 23,311,855 shares of the Company’s common stock that were
          outstanding immediately prior to the merger were cancelled. Simultaneously,
          the
          Company’s former shareholders received an aggregate of 233,118.55 shares of
          Diamond One, Inc’s Series A Preferred Stock, representing approximately 89% of
          the registrant’s outstanding voting power after the merger. In addition, all
          securities convertible into and exercisable for shares of the Company’s common
          stock (e.g., options and warrants) that were outstanding immediately prior
          to
          the merger were cancelled, and their holders received similar securities
          for the
          purchase of Diamond One, Inc. common stock. In total, immediately following
          the
          merger, former holders of Company securities held approximately 93% of
          the
          outstanding common stock of Diamond One, Inc. on a fully diluted
          basis.
  Prior
          to
          the merger and pursuant to authority granted to it by the registrant’s articles
          of incorporation, as amended, Diamond One, Inc’s board of directors approved and
          adopted a Certificate of Designation relating to a new class of preferred
          stock
          denominated *“Series
          A Preferred Stock.”* On
          May 9,
          2006, upon the effectiveness of the amended Diamond One, Inc’s articles of
          incorporation increasing the number of shares of authorized common stock,
          all
          outstanding shares of Series A Preferred Stock automatically converted
          into
          shares of common stock on a 229.021-for-1 basis.
 
 6
  The
          merger represented a change in control of Diamond One, Inc. inasmuch as
          greater
          than 50% of the issued and outstanding voting stock of the registrant on
          a
          post-merger basis was held by the former holders of the Company‘s capital stock.
          In addition, and simultaneously with the effectiveness of the merger, the
          board
          of directors of Diamond One appointed Messrs. David Hancock, Fred Angelopoulos
          and Mark Kalow to its board of directors, and directors Troy Fullmer and
          Robert
          Chramosta thereupon resigned. Moreover, Messrs. Fullmer and Chramosta resigned
          their positions as officers of Diamond One, Inc. In their place, Fred
          Angelopoulos was appointed as its Chief Executive Officer and President,
          and
          Kristin Bowman was appointed as Chief Operating Officer, Secretary and
          Acting
          Chief Financial Officer, subsequently replaced as Acting Chief Financial
          Officer
          by Fred Angelopoulos on June 13, 2006.
 
 For
          a
          full description of the forward triangular merger transaction refer to
          the Form
          8-K and Form 8-K/A filed with the Securities and Exchange Commission on
          April 6,
          2006 and June 16, 2006, respectively.
 
 The
          following is pro-forma condensed operating data which portrays the results
          of
          operations as if the transaction had occurred at the beginning of each
          period
          presented:
 
 Three
                    months ended April 30,2006
                
                2005Net
                    Sales
                
                $
                -
                
                $
                -Operating
                    loss
                
                
                (4,498,590
                )
                
                (1,173,434
                )Other
                    income (expense)
                
                
                136,133
                
                
                131,786Income
                    from discontinued operations
                
                
                17,647
                
                
                2,598Pro-forma
                    net loss
                
                
                (4,334,719
                )
                
                (1,039,050
                )Pro-forma
                    net loss per share *
                
                $
                (0.09
                )
                $
                (0.06
                )Pro-forma
                    Weighted average shares outstanding
                
                
                50,340,947
                
                
                17,591,518
 
 *
          Pro-forma net loss per share is computed as if all preferred shares are
          converted as of the beginning of the period.
 
 
 **Note
          4 - Stockholder’s Equity**
 On
            January 31, 2006, PureDepth, Inc. (CA) had 16,712,769 shares outstanding,
            including 1,071,158 shares issued in a private placement offering. In
            March
            2006, it issued  31,800 shares pursuant to the exercise of an
            option and 6,567,286 shares as a continuation of the private placement
            offering. PureDepth, Inc. (CA) thus had 23,311,855 common shares outstanding
            immediately prior to the merger on March 31, 2006.
  On
            March
            31, 2006, all then-existing PureDepth, Inc. (CA) shares were converted
            into
            233,118.55 Preferred A shares in PureDepth, Inc. (Delaware).
  Diamond
            One, Inc. had 6,255,400 common shares outstanding immediately prior to
            the
            merger, which became 6,255,400 common shares in the surviving entity
            PureDepth,
            Inc. (Delaware).
  Following
            the balance sheet date, on May 9, 2006, the 233,118.55 Preferred A shares
            converted into 53,389,045 PureDepth, Inc. (Delaware) common
            shares.
 
 7
  **Note
          5 - Stock Option Plan**
 
 Prior
          to
          the merger, and effective March 31, 2006, the Board of Directors of PureDepth,
          Inc. (California) approved and authorized an amendment and restatement
          of its
          Second Amended and Restated Executive Share Option Plan No. 3 (the “Prior Plan”)
          into the 2006 Stock Incentive Plan (the “Plan”) and entered into agreements with
          each of the existing option holders whereby such option holders agreed
          that the
          Plan would thereafter govern their respective options. The amendment had
          no
          effect upon the number of options or the strike prices.
 
 Prior
          to
          the merger, a former employee of PureDepth, Inc. (California), exercised
          31,800
          options (as adjusted for the merger, 72,829 options) in the Company at
          a strike
          price of $0.65 per share. These shares were paid for and issued in full
          during
          the quarter.
 
 As
          a
          result of the forward triangular merger, all unvested stock options issued
          under
          the Plan vested upon the effective date of the merger, March 31,
          2006.
 
 Options
          issued under the Company’s Prior Plan, except those issued to David Hancock and
          Keith Phillips, carried certain anti-dilution rights with respect of company
          securities issued prior to the merger transaction. Upon closing of the
          private
          placement offering of PureDepth, Inc. (California) on March 1, 2006, further
          options were deemed to be issued to various holders under the Plan holding
          anti-dilution rights with subsequent vesting of those options occurring
          under
          the accelerated vesting provisions on the reverse acquisition date, being
          March
          31, 2006. These anti-dilution rights terminated at the effective time of
          the
          merger, and were not carried forward under the Plan.
 
 A
          summary
          of option activity under the Prior Plan (on or prior to March 31, 2006)
          and the
          Plan (after March 31, 2006) as of April 30, 2006, and changes during the
          quarter
          then ended is presented below.
  8
  **Options**
                
                **Shares
                    (1)**
                
                **Weighted-**
                  **Average**
                  **Exercise**
                  **Price
                    (1)**
                
                **Weighted-**
                  **Average**
                  **Remaining**
                  **Contractual**
                  **Term
                    (months)**
                
                **Aggregate**
                  **Intrinsic**
                  **Value**
                  **($000)**Outstanding
                    at Jan. 31, 2006
                
                
                9,576,046
                
                $
                0.28
                
                
                8
                
                $
                17,428Granted
                
                
                2,947,533
                
                $
                0.29
                
                
                14
                
                $
                5,327Exercised
                
                
                (72,829
                )
                $
                0.28
                
                
                8
                
                $
                (132
                )Forfeited
                    or expired
                
                
                (
                    -
                )
                
                -
                
                
                -
                
                
                -Outstanding
                    at April 30, 2006
                
                
                12,450,570
                
                $
                0.28
                
                
                12
                
                $
                22,623Exercisable
                    at April 30, 2006
                
                
                12,450,570
                
                $
                0.28
                
                
                12
                
                $
                22,623
  (1) Outstanding
          options of Pure Depth, Inc. were adjusted effective upon the date of the
          merger
          in the same ratio as the share exchange (2.29021), thereby increasing the
          number
          of option shares and reducing the previous exercise price from $0.65 to
          $0.28
          per share or $1.00 to $0.44 per share, as applicable.
  The
          weighted-average grant-date fair value of options granted during the quarter
          ended April 30, 2006 was $0.72, as adjusted $0.32, per share. No new
          options were granted in the corresponding quarter of the previous
          year.
  As
          of
          March 31, 2006, all previously unvested options became immediately exercisable
          as a result of the merger with Diamond One, and all remaining deferred
          option
          cost was charged to expense.
 
 
 **Note
          6 - Income Taxes**
 
 For
          the
          quarter ended April 30, 2006, the Company incurred net operating losses
          of
          $4,344,810 and, accordingly, no provision for income taxes has been recorded.
          In
          addition, no benefit for income taxes has been recorded due to the uncertainty
          of the realization of any tax assets.
 
 At
          January 31, 2006, PureDepth, Inc. (California) had both a federal and state
          net
          operating loss carry-forward of $1,016,582. Further, there were foreign
          net
          operating loss carry-forwards of $3,102,917 in respect of PureDepth, Inc’s.
          foreign subsidiaries.
 
 In
          addition, at January 31, 2006, Diamond One, Inc. reported approximately
          $43,000
          of federal and state net operating losses, but has not assessed the current
          status of net operating loss carry-forwards following reorganization.
 
 Net
          operating loss carry-forwards, if not utilized, will begin to expire within
          twenty years for federal purposes and within ten years for California purposes.
          The foreign net operating tax loss carry-forward can be carried forward
          indefinitely unless a change in ultimate control of the loss companies
          results.
 
 For
          financial reporting purposes, the Company has incurred a loss in each period
          since its inception. Based on the available objective evidence, including
          the
          Company's history of losses, management believes it is currently more likely
          than not that the net deferred tax assets will not be fully realizable.
          Accordingly, the Company provided a full valuation allowance against its
          net
          deferred tax assets.
 
 
 **Note
          7 - Related Party Transactions**
 
 During
          the quarter ended April 30, 2006 the Company entered into the following
          related
          party transactions:
 
 ·
                On
                    February 23, 2006 the Company’s majority shareholder, K1W1, converted
                    loans in the aggregate amount of $774,330 as part of the Company’s private
                    placement offering into 386,143 units consisting of 772,286 shares
                    of
                    common stock, warrants to purchase an aggregate of 386,143 additional
                    shares of common stock at an exercise price of $2.75 per share
                    (A Warrant)
                    (merger adjusted - $1.20 per share), and warrants to purchase
                    an aggregate
                    of 386,143 additional shares of common stock in the Company at
                    an exercise
                    price of $2.00 per share (B Warrant) (merger adjusted - $0.87
                    per share).
                    The outstanding interest in relation to the loan was forgiven
                    by the
                    shareholder effective at this date.
 
 9
  ·
                Prior
                    to the merger, on March 31, 2006 the Company issued options to
                    purchase
                    232,933 shares of common stock at an exercise price of $0.43664
                    (as
                    adjusted for the merger) to Mark Kalow pursuant to his agreement
                    to serve
                    as a director.
 
 
 **Note
          8 - Subsequent Events**
 
 *Reincorporation
          Merger*
 
 On
          May 5,
          2006, Diamond One, Inc., (the parent of the Company after completion of
          the
          forward triangular merger) held a special meeting of the shareholders to
          consider and act upon the following corporate actions:
 
 (a)
                
                a
                    proposal to adopt amended and restated articles of incorporation
                    for
                    Diamond One, Inc.; and
 
 (b)
                
                a
                    proposal to reincorporate Diamond One, Inc. in the State of Delaware
                    by
                    merging Diamond One, Inc. with and into PureDepth Technologies,
                    Inc., the
                    wholly owned subsidiary of Diamond One, Inc. with PureDepth Technologies,
                    Inc. surviving the merger.
 
 On
          May 8,
          2006 the name of PureDepth Technologies, Inc., (Delaware) was changed to
          PureDepth, Inc. On May 9, 2006, Diamond One, Inc. filed its Amended and
          Restated
          Articles of Incorporation with the Secretary of State of Colorado, changing
          its
          name to “PureDepth, Inc.”
 
 The
          short-form merger and reincorporation was consummated on May 30, 2006,
          with
          PureDepth, Inc. (formerly known as PureDepth Technologies, Inc.) surviving
          the
          merger. The charter documents of PureDepth, Inc. (formerly known as PureDepth
          Technologies, Inc.) became the effective charter documents of the Company.
          These
          proposals were both approved at the meeting by approximately 72% of the
          shareholders entitled to vote on the proposals.
 
 *Conversion
          of Preferred Stock*
 
 On
          May 9,
          2006 all 233,118.55 shares of the registrant’s Series A Preferred Stock issued
          in the acquisition of Diamond One were converted into an aggregate of 53,389,045
          shares of common stock, giving the registrant a total of 58,644,445 shares
          of
          common stock and no shares of preferred stock (also taking into account
          a
          transfer to the Company of 1,000,000 shares of its outstanding common stock
          on
          the same date as disclosed below under "Divestiture of Former Business").
 
 The
          conversion was effected pursuant to the terms of the Certificate of Designation
          for the registrant’s Series A Preferred Stock, which provided that all
          outstanding preferred shares of that series would automatically convert,
          on a
          229.021 for 1 basis, upon an increase in the number of shares of common
          stock
          authorized for issuance under the registrant’s articles of
          incorporation.
  *Summary
          of Capitalization Including Subsequent
          Events*
  As
            of
            June 29, 2006 there are outstanding securities convertible into or exercisable
            for an aggregate of 31,714,097 shares of common stock. This is comprised
            of
            12,450,569 options and 19,263,527 warrants. The common stock is quoted for
            trading on the OTC Bulletin Board under the symbol “PDEP.”
 
 *Divestiture
          of Former Business*
 
 On
          May 9,
          2006, pursuant to the exercise of an Option Agreement dated March 16, 2006
          by
          and among Diamond One, Inc. and Robert Chramosta and Troy Fullmer, the
          former
          officers and directors of the Company, the Company transferred all of the
          outstanding membership interests in its wholly owned subsidiary, Numismatic
          Capital Group, LLC (a Colorado limited liability company) to Messrs. Chramosta
          and Fullmer in consideration of their transfer to the Company of 1,000,000
          shares of our common stock held by them.
 
 Prior
          to
          the forward triangular merger, Diamond One had assigned all of its assets
          and
          liabilities, specifically including the coin and exchange business owned
          operated by Diamond One, to Numismatic Capital Group. The exercise of the
          Option
          Agreement effectively divested the Company of the entire coin and exchange
          business.
 
 10


**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**





The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with the condensed consolidated
      financial statements and related notes contained herein and the information
      included in our financial reports and in our other filings with the Securities
      and Exchange Commission. This discussion includes “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended
      (the
“Securities Act”) and Section 21E of the Securities and Exchange Act of 1934, as
      amended (the “Exchange Act”).





All
      statements in this Quarterly Report on Form 10-QSB, other than statements of
      historical fact, are forward-looking statements for purposes of these
      provisions, including any statements of the plans and objectives for future
      operations and any statement of assumptions underlying any of the foregoing.
      Statements that include the use of terminology such as “may,” “will,” “expects,”
“believes,” “plans,” “estimates,” “potential,” or “continue,” or the negative
      thereof or other comparable terminology are forward-looking statements.





All
      forward-looking statements and risk factors included in this document are made
      as of the date of this report, based on information available to us as of such
      date. We assume no obligation to update any forward-looking statement or risk
      factor.








***Overview***




We
      are a
      development stage technology company whose business is the commercialization
      of
      innovative technology incorporating a third dimension of “depth” into a smart,
      compact video display device. Multi-Layer Display (MLDTM). MLDTM builds upon
      existing Single-Layer Display (SLD) technology to potentially redefine the
      way
      the user interacts with his or her screen by providing two or more display
      layers in a stacked arrangement. Each layer is physically separated by real
      depth (as opposed to perceived or simulated depth), which allows for distinct
      new ways in which to view, monitor and interact with displays. Moreover, the
      physical separation and real depth of the display layers results in a perception
      that natural and convincing to the user.




Our
      technology was originally invented and developed
      in New Zealand. As part of our program to commercialize our technology,
      PureDepth, Inc. was formed as a California corporation as the
      successor-in-interest to a New Zealand corporation, Deep Video Imaging Limited
      (founded in 1999), as part of an effort to reorganize Deep Video Imaging Limited
      and its affiliates “PureDepth Limited” and “PureDepth Incorporated Limited.”
Through two merger transactions completed on March 31, 2006 and May 30,
      2006, respectively, this California company and subsidiaries reorganized in
      a
      transaction with a Colorado corporation formerly known as Diamond One, Inc.
      The
      company surviving the merger transactions was PureDepth, Inc. (Delaware) which
      is the registrant.




11





***Plan
      of Operations***





We
      will
      continue to manage our operations and cash resources in a manner consistent
      with
      our expectation that we should be able to satisfy cash requirements through
      the
      end of fiscal 2007.





Our
      main
      operating costs include compensation for employees; ongoing research and
      development of our technology; rental for premises in both Redwood City, CA
      and
      Auckland, New Zealand; and potential stock option expense.





Our
      research and development plans closely track our business plan, focusing on
      four
      categories of expenses:





·
            “pure
                research” (such as improved and alternative display backlight
                solutions)





·
            patent
                development around its pure research gains, as well as support to
                existing
                core patents





·
            prototype
                development for partner/customer applications,
                and





·
            design
                development, once again, specifically tailored to
                partners/customers.





Currently
      we estimate that we will spend up to $2,000,000 on research and development
      activities over the next 12 months.





Other
      than our research and development expenditures, there are no significant capital
      equipment purchases expected during the next 12 months.





We
      currently anticipate increasing the number of employees from 20 to 21. This
      may
      be increased to 26, but is subject, however, to our cash resources and
      operational requirements at the relevant time.





Although
      we do not believe that we will need to raise cash to operate through fiscal
      year
      2007, we may consider undertaking further capital raising within such period,
      possibly in the form of either debt or equity, or a strategic partnership.
      In
      addition, we may consider utilizing currently outstanding derivative securities,
      such as warrants or options, as a means for providing cost-efficient financing
      in the future.




12




***Financial
      Results***





During
      the quarter ended April 30, 2006 we had a net loss of $4,344,810, which includes
      income of $17,647 from discontinued operations held for sale and $3,141,538
      in
      non-cash compensation. There was no revenue recorded for licensing or other
      exploitation of the intellectual property.





For
      the
      quarter ended April 30, 2006, our general and administrative expenses increased
      $1,626,684 to $1,956,951 from $330,267 recorded in the corresponding period
      of
      the preceding fiscal year. We incurred additional personnel, contracting and
      facilities costs in the three months ended April 30, 2006 as compared with
      the
      same period in 2005 (including the non-recurring costs associated with the
      capital raising, merger and related activities, including advisory, finders,
      legal, accounting and audit costs) as a result of increased product development
      and the establishment of our US headquarters in mid-year 2005.




In
      addition, we expensed the previously deferred value of stock options, which
      became fully vested during the quarter, for a total of $1,797,503, recorded
      non-cash compensation of $493,663 for a placement agent warrant granted in
      connection with our private placement, and recorded $850,372 to fulfill
      anti-dilution provisions of pre-existing options. In total, non-cash
      compensation represented $3,141,538, or 70% of our total operating expenses,
      during the quarter ended April 30, 2006, as compared with $271,536, or 23%
      of
      expenses in the comparative quarter of 2005.





Research
      and development increased $728,397 from $433,150 for the quarter ended April
      30,
      2005 to $1,161,547 for the quarter ended April 30, 2006, due to additional
      salaries and contract labor supporting enhancements to our existing
      products . This
      increase included capital equipment costs and costs associated with delivering
      on our contractual undertakings, as well as non-cash compensation of
      $568,246. ****





In
      addition, professional fees increased $215,864 from the quarter ended April
      30,
      2005 to $317,939 for the quarter ended April 30, 2006 as compared to $102,075
      for the same period in 2005. This is largely due to increased legal, accounting
      and auditing services undertaken by the Company as a direct result of financial
      reporting requirements arising from the merger with Diamond One, Inc. and
      trading on a public market.





Sales
      and
      marketing expenses increased $742,506 from $182,251 in the quarter ended April
      30, 2005 to $924,757 in the quarter ended April 30, 2006, as expenses remained
      flat, with current higher non-cash compensation of $715,927.




Of
      the
      non-cash compensation, 81% or $2,551,082 was due to adjustments of the prior
      stock option plan enabling prior grantees to maintain similar rights after
      the
      merger event.  This is expected to be non-recurring.







***Liquidity
      and Capital Resources***





During
      the quarter ended April 30, 2006 our operations used $910,812 in cash, we spent
      $159,081 on fixed assets, and paid $67,429 on our intellectual property.
      Operating capital was provided by the receipt of $4,277,472 net from stock
      subscriptions received during the quarter under our private placement offering
      closing on March 1, 2006.





T he
      above
      level of working capital includes the conversion of $774,330 of working capital
      loans received from K1W1 prior to the end of fiscal year 2006 to common stock.
      This loan accrued interest at 10% per annum and was, together with such accrued
      interest, to be repayable on demand. Interest accrued at the time of conversion
      was, however, forgiven by the majority shareholder.





During
      the quarter we have continued to develop our technology to support of two
      development and sales contracts executed with Sanyo and DRS Electronic Systems,
      Inc. prior to the end of fiscal year 2006. No additional development or sales
      contracts were secured during the quarter ended April 30, 2006.





13


Our
      cash
      requirements and potential capital raises are discussed above under the heading *Plan
      of Operations* **.**





In
      May
      2006, we leased additional premises in Redwood City, California which beginning
      in June will require future minimum lease payments of $4,910 per month from
      June
      2006 through May 2008.





We
      have
      issued options to various persons pursuant to the predecessor plans of our
      current 2006 Stock Incentive Plan. At April 30, 2006 we had vested options
      of
      12,450,570 outstanding under the current Stock Option Plan 2006 (the Plan).
      As
      part of our recruitment program for critical personnel, we expect to issue
      at
      least 500,000 or more stock options over the coming months.





Subject
      to approval of our board of directors, the 2006 Stock Incentive Plan allows
      option holders to exercise options using a “cashless exercise,” whereby the
      Company uses entitled shares as payment for the exercised options. While the
      exercise of stock options will generally increase immediate working capital,
      the
      approval of a cashless exercise by our board of directors would impact directly
      on the extent of this working capital and our ability to use existing options
      as
      a capital resource.





Costs
      associated with the grant of stock options are expensed over the projected
      service period of the options, which approximates the vesting period. At April
      30, 2006, the Company has recognized a total of $5,751,994 of stock option
      expense, of which $3,141,538 relates to the current quarter.  With respect
      to currently issued stock options, the Company has no further option costs
      to be
      recognized in fiscal 2007.








***Provision
      for State and Federal Income Taxes***





From
      inception through April 30, 2006, we have incurred net losses for federal and
      state tax purposes. We have also incurred foreign net losses in respect of
      our
      predecessor entity and two foreign subsidiaries.





We
      have
      not recorded a tax benefit for domestic tax losses because of the uncertainty
      of
      realization. We adhere to SFAS No. 109, Accounting for Income Taxes, which
      requires an asset and liability approach to financial accounting and reporting
      for income taxes. Valuation allowances are established when necessary to reduce
      deferred tax assets to the amount expected to be realized. We have recorded
      a
      full valuation allowance as the realizeability of our net operating loss
      carry-forwards is not determinable.








***Critical
      Accounting Policies***





In
      accordance with SEC guidance, those material accounting policies that we believe
      are the most critical to an investor’s understanding of our financial results
      and condition have been expanded and are discussed below. Certain of these
      policies are particularly important to the portrayal of our financial position
      and results of operations and require the application of significant judgment
      by
      our management to determine the appropriate assumptions to be used in the
      determination of certain estimates.





*Amortization*




Our
      intellectual property such as patents are classified as a definite-lived
      identifiable intangible asset and amortized over their useful lives. The expense
      shown reflects management’s judgments of the period that the assets will
      generate revenues and the expected residual value, if any. Management must
      also
      periodically evaluate the remaining useful life of an intangible asset that
      is
      being amortized to determine whether events and circumstances warrant a revision
      to the remaining period of amortization.





*Stock-Based
      Compensation Expense*





Determining
      the appropriate fair value model and calculating the fair value of share-based
      payment awards require the input of subjective assumptions, including the
      expected life of the share-based payment awards and stock price volatility.
      The
      assumptions used in calculating the fair value of share-based payment awards
      represent management's best estimates, but these estimates involve inherent
      uncertainties and the application of management judgment.





14





***Factors
      Affecting Future Results***





*Development
      & Sales Contracts*





Our
      ability to deliver on our existing customer contracts for the development and
      sale of our multi-layered technology, in addition with our ability to negotiate
      and secure additional development and sales contracts at both a domestic and
      international level, will materially impact on our future financial position,
      cash flows and results of operations.





*Development
      of New Technology*





If
      we are
      unable to innovate and develop attractive new products, our business will likely
      be adversely affected. We expect to derive a substantial portion of our
      estimated revenues from the incorporation of the MLDTM technology into innovative
      new products for sale. The process of developing and marketing new products
      is
      generally complex and uncertain, and involves a number of risks including the
      following:




·
            We
                may be unable to obtain adequate funding and resources necessary
                for
                investments in new products and technologies;




·
            Our
                investment and commitment of significant resources may not result
                in
                successful new products or
                technologies;




·
            We
                may misunderstand our customers’ perceived product needs and
                desires;




·
            We
                may not be able to anticipate successfully the new products and
                technologies which will gain market acceptance, especially since
                the
                industry in which we operate is characterized by rapid changes, including
                technological changes;





·
            We
                may not be able to protect the proprietary intellectual-property
                rights
                associated with the technologies we may use in any newly developed
                products;





·
            Our
                products may become obsolete earlier than expected due to rapid
                advancements in technology and changes in consumer preferences; and





·
            Delays
                in being first to market with new technologies and products may prevent
                us
                from successfully competing with our
                rivals.




If
      we
      fail to develop and market innovative new products, or if any of the risks
      described above materialize, our business may be negatively and adversely
      affected.





*Economic
      Factors & Competition*





We
      operate in a highly competitive environment and we may not be able to sustain
      our current market position. Our ability to compete successfully depends on
      factors both within and outside our control, including product pricing,
      performance and reliability, successful and timely investment and product
      development, success or failure of our end-brand customers in marketing their
      brands and products, component and raw material supply costs, and general
      economic and industry conditions.





Currently,
      we believe that our MLDTM technology has a number of competitive advantages over
      competing technologies. Nevertheless, our competitors from time to time may
      have
      greater financial, sales and marketing, manufacturing, research and development
      or technological resources than us. In particular, competitors with greater
      resources may be able to manufacture competitive products on a larger scale
      or
      with greater cost efficiencies than us.





15


Alternatively,
      because innovation in our industry often creates wide scale change in
      technologies and resulting products, our competitors may develop superior
      technologies or even replacement technology and obtain exclusive rights to
      those
      technologies. In sum, we may not be able to sustain any perceived current market
      advantages.





*Dependence
      on Manufacturing & Key Supply Contracts*





Our
      customers will be dependent on our/their respective manufacturing arrangements
      and key supply contracts for consumables with both domestic and international
      businesses. To the extent that these contracts are unsuccessful we may not
      be
      able to satisfy the needs of our customers both now and in the future. Due
      to
      the current contracts with Sanyo and DRS Electronic Systems any impairment
      would
      materially impact our future financial position, cash flows and results of
      operations.





*Dependence
      on Key Personnel*





We
      are
      heavily dependent on key personnel in engineering, development, sales and
      finance. The ability to recruit and retain qualified personnel is dependent
      on
      our ability to pay competitive salaries and to offer a safe and stable work
      environment. To the extent we cannot retain the key personnel currently employed
      or any failure by us to attract and retain qualified personnel in the future
      could have a material effect on our financial position, cash flows and results
      of operations.








***Foreign
      Operations & Foreign Currency***





We
      have
      two subsidiaries incorporated in New Zealand. The Company’s direct subsidiary,
      PureDepth Ltd, is the holding entity for the Group's intellectual property
      portfolio, which is subject to an exclusive license with the Company, for its
      use, exploitation and future development.





The
      Company’s indirect subsidiary, PureDepth Incorporated Ltd, undertakes the
      operations in respect of any future research and development of the intellectual
      property portfolio on the Company's behalf. This activity is governed by a
      development agreement with the Company, upon which an annual development fee
      of
      $1,000,000, calculated at the end of each quarter, is paid.




Income
      and expenditure relating to the license and future development of the
      intellectual property is an inter-company transaction eliminated on
      consolidation. Therefore, these amounts are not shown in the financial
      statements.





The
      company and its direct subsidiary use the US dollar as their functional
      currency. The indirect subsidiary currently utilizes the New Zealand dollar
      as
      its functional currency. The translation of the financial statements from New
      Zealand dollars into United States dollars is performed to facilitate
      consolidation. Balance sheet accounts are translated using closing exchange
      rates in effect at the balance sheet date and income and expense accounts are
      translated using an average exchange rate for each reporting period. Adjustments
      resulting from translation are included in accumulated other comprehensive
      income in stockholder's equity.








***Market
      Risk Disclosure***





We
      record
      the majority of our foreign operating transactions in the New Zealand dollar.
      We
      also record all of our US operating transactions, including cash inflows and
      outflows, in the local currency, the US dollar. We expect that international
      activity will continue to represent a significant portion of our operations.
      Transactions with our New Zealand research facility and with our contract
      manufacturers in Asia will be directly affected by fluctuations in various
      currency rates.





The
      significant percentage of our operating activity derived from New Zealand
      operations makes us vulnerable to future fluctuations in the exchange rate,
      resulting in a potentially unfavorable translation impact on our consolidated
      financial statements. We are prepared to hedge against any fluctuations in
      foreign currencies should such fluctuations have a material economic impact
      on
      us, although we have not engaged in hedging activities to date.





16





***Off-Balance-Sheet
      Arrangements***





As
      of
      April 30, 2006, there were no off-balance-sheet arrangements.





17


**Item
      3. Controls and Procedures**





As
      of
      April 30, 2006, we carried out an evaluation, under the supervision and with
      the
      participation of our Chief Executive Officer and Acting Chief Financial Officer,
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
      Exchange Act of 1934, as amended). Based upon that evaluation, our Chief
      Executive Officer and Acting Chief Financial Officer concluded that our
      disclosure controls and procedures as of that date are effective to ensure
      that
      information required to be disclosed in the reports we file under the Securities
      and Exchange Act is recorded, processed, summarized and reported on an accurate
      and timely basis. Additionally, the Chief Executive Officer and Acting Chief
      Financial Officer concluded that the Company's disclosure controls and
      procedures are effective to ensure that information required to be disclosed
      by
      the Company in the reports that it files or submits under the Exchange Act
      is
      communicated to the Chief Executive Officer and Acting Chief Financial Officer,
      as appropriate to allow timely decisions regarding disclosure.  During
      the first quarter of fiscal 2006, there were no changes in our internal controls
      over financial reporting that have materially affected or are reasonably likely
      to materially affect our internal controls over financial reporting subsequent
      to the date of such evaluation.










18


**PART
      II**


**OTHER
      INFORMATION**








**Item
      1. Legal Proceedings**





None











**Item
      1A. Risk Factors**





**Risks
      Relating to our Business and Industry**





***We
      are not currently profitable and may never become
      profitable.*** We have
      a history of losses and expect to incur substantial losses and negative
      operating cash flow for the foreseeable future. In fact, we expect that our
      expenses will increase substantially in the near future. As a result, we will
      need to generate significant revenue in order to achieve and maintain
      profitability. Currently, we have limited sources of revenue. Even if we succeed
      in developing and commercializing additional products, we expect that we will
      thereafter incur substantial losses for the foreseeable future. In sum, we
      may
      never achieve or maintain profitability. Our failure to achieve or maintain
      profitability will likely negatively impact the value of our
      securities.




***We
      have a limited operating history upon which to base an investment decision.*** We
      are an
      early-stage company with a limited operating history upon which to evaluate
      the
      viability of our business and long-term prospects for success. Accordingly,
      potential investors should carefully consider the risk, expenses and unforeseen
      difficulties generally encountered in the operation and development of an
      early-stage business, including the risks and uncertainties frequently
      encountered by companies whose business and viability is dependent upon new
      technologies.




***If
      we are unable to innovate and develop attractive new products, our business
      will
      likely be adversely affected.*** We
      expect to derive a substantial portion of our estimated revenues from the
      incorporation of the MLDTM technology into innovative new products for sale. The
      process of developing and marketing new products is generally complex and
      uncertain, and involves a number of risks including the following:




·
            we
                may be unable to obtain adequate funding and resources necessary
                for
                investments in new products and
                technologies




·
            our
                investment and commitment of significant resources may not result
                in
                successful new products or
                technologies




·
            we
                may misunderstand our customers’ perceived product needs and
                desires




·
            we
                may not be able to anticipate successfully the new products and
                technologies which will gain market acceptance, especially since
                the
                industry in which we operate is characterized by rapid changes, including
                technological changes




·
            we
                may not be able to protect the proprietary intellectual-property
                rights
                associated with the technologies we may use in any newly developed
                products




·
            our
                products may become obsolete earlier than expected due to rapid
                advancements in technology and changes in consumer preferences,
                and




19


·
            delays
                in being first to market with new technologies and products may prevent
                us
                from successfully competing with our
                rivals.




If
      we
      fail to develop and market innovative new products, or if any of the risks
      described above materialize, our business may be negatively and adversely
      affected.




***Even
      with significant capital spending in the future to keep pace with technological
      changes, we may not be able to develop new technologies and products that are
      accepted by the market.*** Advances
      in technology typically lead to rapid declines in sales volumes for products
      made with older technologies and may even lead to those products becoming
      obsolete. As a result, we will likely be required to make significant
      expenditures to develop or acquire new technologies, including alternative
      display panel technologies that may cause our MLDTM technology to obsolesce.
      Nevertheless, we may not be able to successfully develop new products that
      keep
      pace with technological changes through our own research and development efforts
      or through our acquisition of technology licenses. This may be true even after
      we have spent significant amounts of capital in pursuit of a particular
      technology. Furthermore, even if we are successful in developing or acquiring
      any particular technology, we may not be able to effectively commercialize
      or
      market the resulting product.




***Our
      need to spend significant amounts of capital in developing new technologies
      and
      products may require us to seek additional financing that could dilute our
      shareholders or restrict our operations.*** Expenses
      for research and development activities for new products, especially those
      that
      involve innovative technology, are generally extremely difficult to forecast.
      If
      our actual expenditures far exceed our forecasted expenditures, or in the event
      of adverse market conditions, we may need to seek additional
      financing.




Additional
      financing could be sought from a number of sources, including but not limited
      to
      additional sales of equity or debt securities, or loans from banks, other
      financial institutions or affiliates of the Company. We cannot, however, be
      certain that any such financing will be available on terms favorable to us,
      if
      at all. If additional funds are raised by the issuance of our equity securities,
      such as through the issuance of stock, convertible securities, or the issuance
      and exercise of warrants, then the ownership interest of our existing
      stockholders would likely be diluted. If additional funds are raised by the
      issuance of debt or other equity instruments, we may become subject to certain
      operational limitations, and such securities may have liquidation rights senior
      to those of the then existing holders of common stock. Ultimately, if no
      additional financing is obtained as and when needed, we may be required to
      slow
      our growth, abandon certain product candidates (including candidates on which
      we
      have already spent considerable resources), or cease operations
      altogether.




***Our
      business may be adversely affected if alternative display panel technologies
      erode future sales of products based on our proprietary MLDTM
technology.*** The
      introduction of alternative display panel technologies, including those
      currently under development by our competitors and us, may erode future sales
      of
      MLDTM panels, which may have a material adverse effect on our
      business.




***The
      average selling prices of our MLDTMs may decline over time and negatively affect
      our operating results.*** The
      average selling prices of our MLDTMs are expected to continually decline over
      time as a result of, among other factors, technology advances, cost reductions
      and increased competition. Although we may be able to take advantage of the
      higher selling prices typically associated with new products and technologies
      we
      may bring to market, we cannot provide assurance that we can maintain these
      prices in the face of market competition. If we are unable to effectively
      anticipate and counter the price erosion that accompanies our products, or
      if we
      are unable to reduce our manufacturing costs, our profit margins will be
      negatively affected.




***If
      we cannot maintain high capacity-utilization rates, our profitability will
      be
      adversely affected.*** The
      production of panels incorporating our MLDTM technology entails high fixed costs
      resulting from considerable expenditures for the construction of complex
      fabrication and assembly facilities and the purchase of costly equipment. We
      aim
      to maintain high capacity-utilization rates so that we can allocate these fixed
      costs over a greater number of panels produced, thereby realizing higher gross
      margins. Nevertheless, we may not be able to meet or sustain our targeted
      capacity-utilization rates in the future.




20


***We
      operate in a highly competitive environment and we may not be able to sustain
      our current market position.*** Our
      ability to compete successfully depends on factors both within and outside
      our
      control, including product pricing, performance and reliability, successful
      and
      timely investment and product development, success or failure of our end-brand
      customers in marketing their brands and products, component and raw material
      supply costs, and general economic and industry conditions. Currently, we
      believe that our MLDTM technology has a number of competitive advantages over
      competing technologies. Nevertheless, our competitors from time to time may
      have
      greater financial, sales and marketing, manufacturing, research and development
      or technological resources than us. In particular, competitors with greater
      resources may be able to manufacture competitive products on a larger scale
      or
      with greater cost efficiencies than us. Alternatively, because innovation in
      our
      industry often creates wide scale change in technologies and resulting products,
      our competitors may develop superior technologies and obtain exclusive rights
      to
      those technologies. In sum, we may not be able to sustain our perceived current
      market advantages.




***Governmental
      regulation may limit our activities or increase our costs of
      operations.*** Our
      business and operations are subject to various forms of government regulation
      in
      countries in which we do business, including required business/investment
      approvals, export regulations based on national security or other reasons,
      and
      other export/import regulations such as tariffs. In addition, environment and
      recycling laws and regulations relating to the disposal of electronics are
      likely to be revised and tightened in the near future. If we cannot comply
      with
      these regulations without great cost, our financial performance may
      suffer.




***Our
      MLDTM manufacturing processes are complex and periodic improvements to increase
      efficiency can expose us to potential disruptions in
      operations.*** The
      manufacturing process for MLDTM products is highly complex, requiring
      sophisticated and costly equipment that is periodically modified and updated
      to
      improve manufacturing yields and product performance, and reduce manufacturing
      costs. These updates expose us to the risk that from time to time production
      difficulties will arise that could cause delivery delays, reduced output or
      both. Any such delays or reductions would likely adversely affect our operating
      results.




***General
      economic conditions may adversely affect our sales and
      profitability.*** For the
      most part, purchases of our products are discretionary. As a result, demand
      for
      consumer electronics products, which we believe will account for a significant
      proportion of our worldwide operating revenue, will likely be affected by
      general economic trends in the countries or regions in which our products are
      sold. Similarly, demand for business use products and for components we may
      manufacture that go into products of third parties will likely be affected
      by
      general economic trends in the various markets in which we sell our products.
      In
      sum, economic downturns and resulting declines of demand in our major markets,
      including Australia, North America, Europe and Asia, may thus adversely affect
      our sales and operating results.




***We
      materially rely on a limited number of third-party suppliers for key raw
      materials, components and manufacturing equipment, and any disruption in their
      supply will negatively affect our business.*** Our
      production operations depend on obtaining adequate supplies of quality raw
      materials and components on a timely basis. In general, we source most of our
      raw materials as well as key components of MLDTM products from two or three
      suppliers for each key component. We may experience shortages in the supply
      of
      these and other components or raw materials as a result of, among other things,
      anticipated capacity expansion in the MLDTM and competitive industries. Our
      results of operations would be adversely affected if we were unable to obtain
      adequate supplies of high quality raw materials or components in a timely manner
      or make alternative arrangements for such supplies.




***Our
      business materially relies on patent rights that may be narrowed in scope or
      found to be invalid or otherwise unenforceable.*** Our
      success will materially depend on our ability to obtain, defend and enforce
      our
      patent rights worldwide. The coverage claimed in a patent application can be
      significantly reduced before a patent is issued. Consequently, our pending
      or
      future patent applications may not result in the issuance of patents. Patents
      issued to us may be subjected to further proceedings limiting their scope and
      may not provide significant proprietary protection or a competitive advantage.
      Our patents also may be challenged, circumvented, invalidated or deemed
      unenforceable. In addition, because (i) patent applications in various countries
      publish at different times, (ii) it is difficult to monitor patent applications
      that may be filed in other countries by third parties, and (iii) the publication
      of discoveries in scientific or patent literature often lags behind actual
      discoveries, we generally cannot be certain that we were the first creator
      of
      inventions covered by our pending patent applications, that we or any of our
      licensors will be entitled to any rights in purported inventions claimed in
      pending or future patent applications, or that we were the first to file patent
      applications on such inventions.




21


***Failure
      to protect our intellectual property rights could impair our competitiveness
      and
      harm our business and future prospects.*** We
      believe that developing new products and technologies that can be differentiated
      from those of our competitors is critical to the success of our business. We
      intend to take active measures to obtain international protection of our
      intellectual property by obtaining patents and undertaking monitoring activities
      in our major markets. Nevertheless, we may not be able to effectively deter
      competitors from improper use of our proprietary technologies. For instance,
      our
      competitors may misappropriate our intellectual property, disputes as to
      ownership of intellectual property may arise, and certain of our intellectual
      property may otherwise become known or independently developed by our
      competitors. As a result, we may have to litigate to enforce and protect our
      intellectual-property rights to determine their scope, validity or
      enforceability. Intellectual-property litigation is particularly expensive,
      could cause a diversion of resources, and may not prove successful. The loss
      of
      intellectual-property protection or the inability to secure or enforce
      intellectual property protection could materially harm our business and ability
      to compete.




***If
      we infringe the rights of third parties we could be prevented from selling
      products, forced to pay damages, and defend against litigation.*** If
      our
      products, methods, processes or other technologies infringe the proprietary
      rights of other parties, we could incur substantial costs and we may have
      to:




·
            obtain
                licenses, which may not be available on commercially reasonable terms,
                if
                at all




·
            abandon
                an infringing implementation or
                product




·
            redesign
                our products or processes to avoid
                infringement




·
            stop
                using the subject matter claimed in the patents held by
                others




·
            pay
                damages, or




·
            defend
                litigation or administrative proceedings which may be costly whether
                we
                win or lose, and which could result in a substantial diversion of
                our
                valuable management resources.




***We
      rely upon trade secrets and other unpatented proprietary know-how to maintain
      our competitive position in our industry, and any loss of our rights to, or
      unauthorized disclosure of, our trade secrets or other unpatented proprietary
      know-how could negatively affect our business.*** We also
      rely upon trade secrets, unpatented proprietary know-how and continuing
      technological innovation in our business. We typically enter into
      confidentiality agreements with each of our employees and consultants upon
      the
      commencement of an employment or consulting relationship, whereby each employee
      or consultant agrees to maintain the confidentiality of trade secrets and
      certain other Company information on a perpetual basis. However, these
      agreements may be breached and in certain circumstances we may not be able
      to
      enforce them. Moreover, even if we can enforce such an agreement, we may not
      have an adequate remedy for any such breach. The mere disclosure of our trade
      secrets or other know-how as a result of such a breach could adversely and
      irreparably affect our business.




***Our
      business will subject us to potential product-liability claims that could
      adversely affect our operating results, financial condition and business
      reputation.*** We are
      able and may in the future manufacture various products in accordance with
      internationally accepted quality-control standards. We cannot be certain,
      however, that all of our products are defect-free and may not be recalled at
      some later date. Furthermore, although we maintain insurance against
      product-liability claims, we cannot be certain that such insurance can
      adequately satisfy the liabilities ultimately incurred. In addition, insurance
      may not continue to be available on terms acceptable to us. A large-scale
      product recall or a successful product-liability claim against us could result
      in significant costs or have a negative impact on our reputation, which may
      in
      turn lead to a decrease in sales, adversely affecting our results of
      operations.




22


***We
      rely on key engineers, senior management and other personnel, and the loss
      of
      the services of any such personnel or the inability to attract and retain
      suitable replacements may negatively affect our
      business.*** Our
      success depends to a significant extent upon the continued service of our
      research and development and engineering personnel, and on our ability to
      continue to attract, retain and motivate qualified researchers and engineers,
      especially during periods of rapid growth. The loss of the services of any
      of
      our key research and development and engineering personnel or senior management,
      without adequate and timely replacement, could result in delays in product
      development, loss of customers, partners and sales, and a diversion of
      management resources, each of which could have a material adverse effect on
      our
      business.




***If
      we are unable to hire additional qualified personnel, our ability to grow our
      business may be harmed.*** As we
      attempt to grow our business, we will need to hire additional qualified
      personnel with expertise in software development, testing, research, technology
      development and manufacturing, as well as sales and marketing. We believe that
      attracting and retaining qualified personnel will be critical to our success.
      In
      this regard, we compete for qualified individuals with numerous other
      enterprises. Competition for such individuals is intense, and we may not be
      able
      to attract and retain qualified personnel.




***We
      expect to have significant international operations, which will pose unique
      risks to our business.*** We
      expect that a substantial portion of our operational activity will be conducted
      outside of the United States and New Zealand, including in Asia. There are
      a
      number of risks inherent in doing business in overseas markets, including the
      following:




·
            unexpected
                legal or regulatory changes




·
            unfavorable
                political or economic factors




·
            difficulties
                in recruiting and retaining
                personnel




·
            labor
                disputes, including strikes




·
            less
                developed technological infrastructure, which can affect our production
                or
                other activities or result in lower customer acceptance of our products
                and services




·
            potentially
                adverse tax consequences, and




·
            social,
                political or economic turmoil due to terrorism, war, or other
                factors.




***We
      may be unable to successfully manage and sustain our growth, which could harm
      our business.*** Since
      the founding of our predecessor in interest (Deep Video Imaging Limited) in
      1999, we have experienced, and expect to continue to experience, rapid growth
      in
      the scope and complexity of our operations. This growth may strain our
      managerial, financial, manufacturing and other resources, impairing our ability
      to effectively execute our business plans. In addition, we may experience
      manufacturing difficulties with our partners in starting new production lines.
      The materialization of these risks could adversely affect our operating
      results.




**Risks
      Relating to our Securities**





***Trading
      of our common stock on an illiquid market may result in lower market
      prices.*** ****** Trading
      of our common stock is conducted on the Over-the-Counter Bulletin Board. This
      has an adverse effect on the liquidity of our common stock, not only in terms
      of
      the number of shares that can be bought and sold at a given price, but also
      through delays in the timing of transactions and reduction in security analysts’
and the media’s coverage of our Company and its common stock. This may result in
      lower prices for our common stock than might otherwise be obtained and could
      also result in a larger spread between the bid and asked prices for our common
      stock.




23


***There
      is currently little trading volume in our common stock, which will make it
      difficult to sell shares of our common stock.*** In
      general, there has been very little trading activity in shares of the Company’s
      common stock. The small trading volume will likely make it difficult for our
      stockholders to sell their shares as and when they choose. Furthermore, small
      trading volumes generally depress market prices. As a result, our shareholders
      may not always be able to resell shares of our common stock publicly at the
      time
      and prices that they feel are fair or appropriate.




***We
      may not succeed in efforts to have our common stock listed on NASDAQ or a
      securities exchange.*** We
      plan
      to seek listing of our common stock on a national securities exchange or on
      NASDAQ. However, we cannot assure you that we will be able to meet Nasdaq’s
      initial listing standards or those of any stock exchange such as NYSE or
      AMEX.




***Because
      it is a “penny stock,” owners may have difficulty selling shares of our common
      stock.*** Our
      common stock is a “penny stock” and is therefore subject to the requirements of
      Rule 15g-9 under the Securities and Exchange Act of 1934. Under this rule,
      broker-dealers who sell penny stocks must provide purchasers of these stocks
      with a standardized risk-disclosure document prepared by the SEC. Under
      applicable regulations, our common stock will generally remain a “penny stock”
until and for such time as its per-share price is $5.00 or more (as determined
      in accordance with SEC regulations), or until we meet certain net asset or
      revenue thresholds. These thresholds include the possession of net tangible
      assets (i.e., total assets less intangible assets and liabilities) in excess
      of
      $2,000,000 in the event we have been operating for at least three years or
      $5,000,000 in the event we have been operating for fewer than three years,
      and
      the recognition of average revenues equal to at least $6,000,000 for each of
      the
      last three years. We do not anticipate meeting any of the foregoing thresholds
      in the foreseeable future.




The
      penny-stock rules severely limit the liquidity of securities in the secondary
      market, and many brokers choose not to participate in penny-stock transactions.
      As a result, there is generally less trading in penny stocks. In sum, our
      shareholders may not always be able to resell shares of our common stock
      publicly at the time and prices that they feel are fair or
      appropriate.




***Because
      we became public by means of a forward triangular merger, we may not be able
      to
      attract the attention of major brokerage firms*** **.** Additional
      risks may exist as a result of our becoming a public reporting company through
      a
      forward triangular merger transaction, as opposed to a traditional initial
      public offering. Because we did not engage in a more traditional and publicized
      initial public offering, security analysts of major brokerage firms may not
      provide coverage of the Company. In addition, there is no incentive to brokerage
      firms to recommend the purchase of our common stock. The failure of brokerage
      firms to provide analyst coverage will likely slow the dissemination of
      awareness and knowledge of our Company. As a result, the trading price of our
      common stock may be adversely affected.




***Our
      majority stockholder possesses a controlling portion of the voting power of
      our
      common stock, which could adversely affect the market price of our common
      stock.*** As of
      May 30, 2006, K One W One Ltd., our majority stockholder, possessed beneficial
      ownership of approximately 37,548,704 shares of our common stock (including
      1,768,648 shares issuable upon exercise of warrants), which represents
      approximately 62% of our common stock. This represents a significant and
      controlling portion of the voting power of the Company’s stockholders, and
      enables K One W One Ltd. to control our management and affairs through the
      election and removal of our entire board of directors, and all other matters
      requiring stockholder approval, including the future merger, consolidation
      or
      sale of all or substantially all of our assets. This concentrated control could
      discourage others from initiating any potential merger, takeover or other
      change-of-control transaction that may otherwise be beneficial to our
      stockholders. As a result, the return on an investment in our common stock
      through the market price of our common stock or ultimate sale of our business
      could be adversely affected.




24




***Our
      certificate of incorporation grants the Company’s board of directors with the
      power to designate and issue additional shares of common and/or preferred
      stock.*** Our
      authorized capital consists of 200,000,000 shares, of which 190,000,000 shares
      are designated as common stock, par value $.001 per share, and 10,000,000 shares
      are designated as preferred stock, par value $.001 per share. Pursuant to
      authority granted by the Company’s certificate of incorporation, our board of
      directors, without any action by the stockholders, may designate and issue
      shares in such classes or series (including classes or series of common stock
      and/or preferred stock) as it deems appropriate and establish the rights,
      preferences, and privileges of such shares, including dividends, liquidation
      and
      voting rights. The rights of holders of classes or series of common stock or
      preferred stock that may be issued could be superior to the rights of the common
      stock offered hereby. Our board of directors’ ability to designate and issue
      shares could impede or deter an unsolicited tender offer or takeover proposal.
      Further, the issuance of additional shares having preferential rights could
      adversely affect other rights appurtenant to the shares of common stock offered
      hereby. Any such issuances will dilute the percentage of ownership interest
      of
      our shareholders and may dilute the book value of the Company.




***We
      are subject to the Sarbanes-Oxley Act and the reporting requirements of federal
      securities laws, which can be expensive.*** As
      a
      public reporting company, we are subject to the Sarbanes-Oxley Act of 2002,
      as
      well as the information and reporting requirements of the Securities Exchange
      Act of 1934 and other federal securities laws. The costs of compliance with
      the
      Sarbanes-Oxley Act and of preparing and filing annual and quarterly reports
      and
      other information with the SEC, will cause our expenses to be higher than they
      would be had we remained privately held. In addition, because we only recently
      become subject to these laws and regulations, we cannot accurately estimate
      their cost to us from a general and administrative standpoint.




***We
      have never paid dividends on our capital stock and do not intend to do so for
      the foreseeable future*** .
      We have
      never paid dividends on our capital stock and we do not anticipate that we
      will
      cause the Company to pay any dividends after the merger, for the foreseeable
      future. Accordingly, any return on an investment in our Company will be
      realized, if at all, only when an investor sells shares of our common
      stock.








25




**Item
      2. Unregistered Sales of Equity Securities**





Pursuant
      to the exercise of an Option Agreement dated March 16, 2006 by and among the
      Company, Robert Chramosta and Troy Fullmer, each of whom was a former officer
      and director of the Company prior to the merger with Diamond One, Inc., Inc.,
      the Company transferred all of the outstanding membership interests in its
      wholly owned subsidiary, Numismatic Capital Group, LLC, a Colorado limited
      liability company, to Messrs. Chramosta and Fullmer in consideration of their
      transfer to us of 1,000,000 shares of our common stock held by them. Prior
      to
      the merger, Diamond One had assigned all of its assets and liabilities,
      specifically including the coin and exchange business owned operated by Diamond
      One prior to the merger, to Numismatic Capital Group. The exercise of the Option
      Agreement effectively divested the Company of the entire coin and exchange
      business.





**Item
      3. Defaults on Senior Securities**





None





**Item
      4. Submission of Matters to a Vote of Security Holders**





On
      May 5,
      2006, the Company held a special meeting of its shareholders to vote upon two
      proposals:





(1)
            the
                adoption of amended and restated articles of incorporation for the
                Company
                which would have the effect of: (a) changing the name of the Company
                to
                “PureDepth, Inc.”; (b) increasing the authorized capital stock of the
                Company to 200,000,000 shares, with 190,000,000 designated as common
                stock
                and 10,000,000 designated as preferred stock, such preferred stock
                to be
                issued by the board of directors with such rights and preferences
                as
                determined by the board of directors without further shareholder
                approval
                required; (c) allowing the shareholders to take action in writing
                without
                a meeting by the approval of the number of shareholders as would
                otherwise
                be required to approve such an action; and (d) other non-substantive
                changes to clarify the articles;
                and




(2)
            a
                proposal to reincorporate the Company in the State of Delaware by
                merging
                the Company with and into its wholly owned Delaware subsidiary, PureDepth
                Technologies, Inc., with PureDepth Technologies, Inc. surviving the
                merger
                with the name “PureDepth, Inc.”





Holders
      of capital stock of the Company on April 24, 2006 were entitled to vote at
      the
      special meeting; 6,255,400 shares of common stock and 230,869 shares of
      preferred stock were entitled to vote at the meeting, with each share of common
      stock entitled to one vote and each share of preferred stock entitled to
      approximately 229.021 votes. Accordingly, the total outstanding voting power
      at
      the special meeting was approximately 59,129,249 votes. Both of the proposals
      were passed, with each receiving 42,430,079 votes for, which constitutes
      approximately 72% approval, and none against. There were no abstentions.








**Item
      5. Other Information**





None.





26




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





(a)
      Exhibits





Exhibit
              No.
            Description




31.1
            Certification
                of Chief Executive Officer and Acting Chief Financial
                Officer




32.1
            Certification
                of Chief Executive Officer and Acting Chief Financial Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002.









27




**SIGNATURES**





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




PUREDEPTH,
              INC.Date: June
              29, 2006
            By:
            /s/ Fred
              AngelopoulosFred
                Angelopoulos
              *President
                and Chief Executive Officer and Acting*
              *Chief
                Financial Officer*






28




**Index
      to Exhibits Filed with this Report**





Exhibit
              No.
            Description




31.1
            Certification
                of Chief Executive Officer and Acting Chief Financial
                Officer




32.1
            Certifications
                of Chief Executive Officer and Acting Chief Financial Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002.













29