SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

(Mark one)

[   ]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the Fiscal year ended June 30, 2000

or

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

For the transition period from __________ to __________Commission File Number 0-26983

DYNAMIC DIGITAL DEPTH INC.
(Exact Name of Registrant as Specified in its Charter)

Alberta, Canada
(Jurisdiction of Incorporation or Organization)

2120 Colorado Ave., Suite 100
Santa Monica, CA 90404-3504
(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Common Shares, without par value(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuers classes of capital or common
stock as of the date of this Annual Report:

22,382,492 Common Shares, without par value

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) for the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

YES  X          NO

Indicate by check mark
which financial statement item the registrant has elected to follow.

ITEM 17  X          ITEM 18

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether
the registrant has filed all documents and reports required to be filed by
Sections 12, 13 or 15(d) for the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court.

NOT APPLICABLE

EXCEPT AS OTHERWISE
INDICATED, INFORMATION IN THIS ANNUAL REPORT REGARDING NUMBERS OF COMMON SHARES AND
SHARE PRICES ARE BASED ON ADJUSTMENTS TO GIVE EFFECT TO A ONE-FOR-FIVE REVERSE
STOCK SPLIT WHICH OCCURRED IN AUGUST 1998.

### EXCHANGE RATE INFORMATION

The following table sets forth:

- the rates of exchange for the Canadian dollar, expressed in United States dollars,
in effect at the end of each of the June 30 fiscal year periods indicated;
- the average exchange rates based on the last day of each month during such periods; and
- the high and low exchange rate during such periods, in each case based on the noon
buying rate in New York City for cable transfers in Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York.

`Fiscal Year Ending June 30,            2000           1999         1998           1997          1996
---------------------------
Rate at End of Period                  $0.6758        $0.6786       $0.7303        $0.7241      $0.7325
Average Rate During Period             $0.6787        $0.6623       $0.7059        $0.7223      $0.7335
High Rate                              $0.6969        $0.6917       $0.7303        $0.7456      $0.7513
Low Rate                               $0.6607        $0.6307       $0.6819        $0.6967      $0.7238`

On January 16,  2001,  the noon buying  rate in New York City for cable  transfers  in Canadian  dollars was
$0.6650 = $1.00 Canadian.

ITEM 1     DESCRIPTION OF BUSINESS

### History and Development

We were incorporated as Mirabeau Resources Limited pursuant to the provisions of the Business
Corporations Act (Alberta) on February 4, 1987 to pursue oil and gas exploration opportunities, with a listing of
our common shares on the Alberta Stock Exchange on April 27, 1987.  In 1991 we abandoned our oil and gas
exploration activities, and began to explore business opportunities that would take advantage of our public
status.  Eventually, in 1994, we became the subject of a reverse takeover by two related Australian companies,
Xenotech Australia Pty. Ltd. (now known as Dynamic Digital Depth Australia Pty. Ltd.) and Xenotech Research Pty.
Ltd. (now known as Dynamic Digital Depth Research Pty. Ltd.).  In late 1998 we changed our name to our current
name, to better identify us with our business. We remain a reporting issuer in the Province of Alberta, Canada,
and our common shares are listed for trading on the Canadian Venture Exchange under the stock symbol "DDE."

Our
executive offices are located at 2120 Colorado Ave., Suite 100, Santa Monica,
California 90404-3504 USA. Our registered and records offices are located at
1600, 407 - 2nd Street S.W., Calgary, Alberta, Canada T2P 2Y3. We also maintain
offices at 8 Brodie Hall Drive, Bentley, Western Australia 6102.

### Organizational Structure

We have three wholly-owned subsidiaries, Dynamic Digital Depth Australia Pty. Ltd., Dynamic Digital
Depth Research Pty. Ltd. and Dynamic Digital Depth USA, Inc.  As of the date of this Annual Report, we carry on
business and hold our principal assets through our subsidiaries.

Dynamic Digital Depth Research Pty. Ltd. is the registered owner of the patent rights to 3D display
technology and subsequent inventions and improvements in the field of stereoscopic 3D.  Dynamic Digital Depth
Australia Pty. Ltd. was formed with the purpose of acquiring an exclusive worldwide marketing license to the
patented autostereoscopic 3D display technology from Dynamic Digital Depth Research Pty. Ltd.  Dynamic Digital
Depth USA, Inc. is engaged in the marketing and support of our products and services in North and South America.

### Industry Background

The
earliest functional 3D devices were developed during the 19th century. Since
that time, there have been considerable efforts to develop various 3D
applications, however these have met with limited commercial success. We believe
that the key factor limiting commercial success has been the lack of 3D content
and effective delivery systems. We have focused our research and development
efforts on addressing these requirements by developing a complete end-to-end
solution. We are addressing content issues through conversion technologies that
will permit existing 2D film and video libraries to be cost-effectively
converted to 3D. We are also addressing delivery through a range of technologies
permitting distribution through the Internet, cable, satellite and terrestrial
broadcast.

The
most common application of 3D technology has been in the entertainment industry.
During the 1950s, red and green anaglyph glasses were used for
viewing 3D black and white films. The use of glasses to view 3D
entertainment has continued in recent years, but viewers have still had to
contend with limited content.

The
application of 3D technology has attained its greatest commercial success in
giant screen IMAX® 3D films and 3D theme park rides and
attractions. These films have been made using twin camera 3D technology
manufactured by IMAX® and iWERKS Entertainment, Inc. Filming with twin
camera 3D technology carries a comparatively high cost of filming and limits the
shots that can be created by the film maker due to the physical equipment size
and calibration requirements. Accordingly, even IMAX® 3D theaters have a
limited amount of content that is both time consuming and expensive to produce.
According to reports filed by IMAX with the Securities and Exchange Commission,
as of December 31, 1999, of its installed base of 208 theatres, 83, or
approximately 40% are 3D capable. All but six of the 77 theatres in IMAX
reported backlog as of that date are listed as 3D capable theatres. According to
published industry statistics, in 1999, over 70 million people attended a
theater using the IMAX® system.

In
the television industry, broadcasters, including CBS, NBC and ABC, have
broadcast segments of their prime time television programming including
Third Rock from the Sun and Home Improvement in 3D. The
published Nielsen ratings generated from these brief 3D segments has
demonstrated that there is an interest in viewing 3D at the consumer level.

To
deliver 3D to a television viewer using present day technologies, the broadcast
signal is formatted in anaglyph for viewing in black and white using
low cost red and blue glasses. The second most popular method is field
sequential 3D where alternating left and right eye stereo color images are
broadcast to the viewer on one broadcast channel; however, this method requires
more expensive LCD viewing glasses. Finally, two broadcast channels may be used
to deliver left and right eye stereo HDTV images to the viewer in color, again
in conjunction with LCD viewing glasses. The former approach provides a black
and white image that can only be viewed in 3D while the latter two are expensive
propositions for broadcasters since the content may either only be viewed in 3D
or requires two dedicated channels to deliver a single program.

In
todays interactive software applications, the heavily marketed term 3D is
used to describe the visual appearance of the computer models that the viewer
sees on screen as the game or application is viewed. This simply means that the
objects and characters are modeled with height, width and, importantly, depth
and therefore appear more visually convincing than their two dimensional
counterparts. 3D models may potentially be viewed from multiple angles.
Importantly, even in a 3D software application, the viewer still sees a single
image on a conventional display such as a computer monitor or television screen
and therefore views in 2D.

### Strategic Partnerships

In
order to gain market acceptance in a broad variety of potential applications as
quickly as possible, we are seeking to secure a range of strategic partnerships.
We are targeting organizations with substantial market presence in key markets
including broadcasting and the Internet. The strategic partnerships are
initially intended to yield endorsements of our proprietary 2D compatible 3D
conversion and transmission/delivery technologies. Ultimately, we hope to
establish marketing partnerships with organizations of substantial market
presence and expertise with well-established sales channels. Our strategic
partnerships are divided into three categories: hardware partners, software
partners and content providers.

Hardware Partners

Our hardware partners include:

- Motorola, Inc. Broadband Communications Sector. Pursuant to stock purchase and joint
development agreements dated June 17, 1999, we entered into a strategic
partnership with Motorolas Broadband Communications Sector (then General
Instrument Corporation). Motorola is a provider of integrated and interactive
broadband access solutions. Motorola has publicly announced its desire, together
with its business partners, to be at the forefront of the widely-reported
convergence of the Internet, telecommunications and video entertainment
industries. The joint development agreement is intended to implement our 2D
compatible 3D digital broadcasting technologies on Motorolas range of
consumer television advanced set-top boxes and broadcast head-end encoder
systems. In December 1999, we teamed with Motorola at the Western Cable Show to
demonstrate advanced set-top boxes integrated with our OpticBOOM
transmission technology.
- Dimension Technologies, Inc. In July 2000, we entered into a memorandum of understanding
with Dimension Technologies to form a joint venture to develop glasses-free
displays. These displays will allow a single user, sitting directly in front of
the display, to view OpticBOOM encoded 3D content without the need for
anaglyph or shutter glasses.
- 4D-Vision GMBH. In September 2000, we entered into a memorandum of understanding with
4D-Vision to form a joint venture to develop glasses-free, multi-viewer,
flat-panel displays. These displays will allow several users, sitting at
different angles from the display, to view OpticBOOM encoded 3D content
without the need for anaglyph or shutter glasses.
- Intel Workstation Products Group, a developer of a hardware platform that converts 2D to 3D.

Software Partners

Our software partners include the following:

- Apple, Inc. We are in the developer program for Apple QuickTime, pursuant to which we
paid a nominal license fee in return for the opportunity to develop a plug-in
application for Apple QuickTime Movie Player. In fiscal 2000 we launched our
OpticBOOM Plug-in for Apple QuickTime, enabling 3D movie files to be
viewed via the Internet. In October 2000, our OpticBOOM 3D technology was
licensed by Apple for their QuickTime 5, Apples latest software for
creating, streaming and playing high-quality audio and video over the Internet.
The OpticBOOM Plug-in is QuickTimes first and only stereo 3D
plug-in. It is available through the new component download feature in QuickTime
5, which automatically recognizes our encoded 3D content and then offers the
user the option to download and install the OpticBOOM plug-in for free.
- Real Networks, Inc. In August 1999, we were admitted into the RealPartner development
program sponsored by Real Networks. In connection with this program, we are
developing an OpticBOOM Plug-in application for Real Networks
RealPlayer G2 which would permit the transmission and viewing of 2D compatible
3D streaming video over the RealPlayer G2. We are in discussions with Real
Networks regarding potential opportunities for a strategic partnership, although
as of the date of this Annual Report no such agreement has been reached.
- Microsoft Corporation. In fiscal 2000, we entered into developer agreements with Microsoft
and Windows Media Player pursuant to which we will develop an OpticBOOM
Plug-in for Windows Media Player.

Content Partners

Our content providers include:

- Wave Pictures, n.v. nWave is a producer of giant screen 3D movies. In July 2000, we
entered into a memorandum of understanding with nWave whereby nWave content
would be formatted for distribution to end users in an OpticBOOM format by
way of CD, DVD or Internet download. In fiscal 2000, we converted two of
nWaves 3D movies, Encounter in the Third Dimension and
Alien Adventure, into a format that can be downloaded over the
Internet.
- Sky High Entertainment Inc. Sky High Entertainment is a producer of giant screen 3D
movies. In June 2000, we entered into a memorandum of understanding with Sky
High Entertainment whereby Sky High Entertainment content would be formatted for
distribution to end users in an OpticBOOM format by way of CD, DVD or
Internet download.
- We are currently engaged in a broad variety of discussions regarding licensing
opportunities, co-investment and acquisitions of licenses or technologies.
Except as described above, these discussions have not resulted in agreements and
there can be no assurance that we will be able to secure the strategic
relationships required to implement our business plan. To the extent that we are
unable to obtain strategic partners to assist in the exploitation of all of the
identified applications of our technologies, we will be required to prioritize
our efforts which may delay or limit their commercialization.

### Intellectual Property

Our
intellectual property library spans proprietary hardware and software
technologies for which the patent applications are in various stages of
approval. Our issued patents and pending patent applications are described
below. We may apply for additional patents relating to other aspects of our
products. There can be no assurance as to the breadth or degree of protection
which existing or future patents, if any, may afford us, that any patent
applications will result in issued patents, that our patents will be upheld, if
challenged, or that competitors will not develop similar or superior methods or
products outside the protection of any patent issued to us.

We
believe that product recognition is an important competitive factor and,
accordingly, we promote the OpticBOOM names, among others, in connection
with our marketing activities, and have applied for trademark registration for
such names. Our use of those marks may be subject to challenge by others, which,
if successful, could have a material adverse effect on us.

We
also rely on confidentiality agreements with our directors, employees,
consultants, manufacturers and prospective licensees and employ various methods
to protect the source codes, concepts, ideas, proprietary know-how and
documentation of our proprietary technology. However, such methods may not
afford us complete protection, and there can be no assurance that others will
not independently develop similar know-how or obtain access to our know-how or
software codes, concepts, ideas and documentation. Furthermore, although we have
and expect to continue to have confidentiality agreements with our directors,
employees, consultants, manufacturers, and prospective licensees, there can be
no assurance that such arrangements will adequately protect our trade secrets.

The principal areas governed by patent applications are:

### Dynamic Depth Cueing

This
is the process that enables the assimilation of depth information from a 2D
image and the delivery of a 2D compatible 3D image to the viewer using either
analog or digital delivery mechanisms (Internet, DVD, cable, satellite and
terrestrial broadcast). We have filed a number of patents and improvement
applications encompassing techniques for assimilating depth information from
existing 2D images and also the Dynamic Depth Cueing compression,
transmission and decoding techniques necessary to generate a 3D image at the
viewpoint while maintaining 2D compatibility.

### Video Processor Hardware

We
have developed a flexible hardware platform that enables a number of different
requirements to be satisfied through a re-programmable Field Programmable Gate
Array (FPGA) based circuit board. Variations of the video processor provide a
number of functions including:

- de-multiplexing of field sequential media, the process that allows separate left and right eye
projectors to be supplied by a single media source;
- real time conversion of standard video signal to 3D based upon movement characteristics in the scene; and
- increasing the resolution of a standard video signal via line doubling and quadrupling that
allows it to be displayed in 3D or in 2D at higher resolution than it was
originated in.

Of
these, we have filed a patent application covering the Image Processing Method
& Apparatus (2D to 3D Realtime Conversion). We have also filed a patent
application covering the Image Enhancement System.

### Glasses-Free 3D Projection Display

We
have developed a glasses-free 3D Projection Display that incorporates a number
of discrete patent applications. The patents relate to the display system
itself, the unique infrared head tracking system and the use of the display
system in single and multi-viewer applications.

### 3D Viewing Glasses

In
analyzing the requirements necessary to support a successful introduction of 3D
television broadcasting to users of existing television sets, we identified the
requirement for high quality viewing glasses. We have developed glasses that
allow television viewers to view images in 3D without the flicker associated
with the present generation of shuttered 3D viewing glasses. In contrast to the
switching of light method employed by the present generation of liquid crystal
display shutter glasses, our patented approach uses the sequencing of color to
which the human eye is far less susceptible. The sequencing of color results in
a very low flicker solution when used in conjunction with existing television
display screens.

### General

During
the preparation of patent applications, international preliminary
examiners reports have identified international patents that may conflict
with our applications. For each potential conflict, we have provided a response
indicating the areas in which our applications are unique and innovative and
therefore avoid conflict with the third party patents. We believe that the
responses will be adequate to distinguish our applications from third party
patents; however, there can be no assurance that any patents will be issued
pursuant to these applications or that, if granted, such patents would survive a
legal challenge to their validity or provide significant protection for us.

### Products, Services and Markets

In
developing our products and services we have focused on the worldwide
entertainment and multimedia markets. This has resulted in product development
and marketing efforts in the following market segments:

|Market Segment            | Product Development and Marketing Efforts                       
|------------------------- | ----------------------------------------------------------------
|PC/Internet               | Provision of 2D compatible 3D media via the Internet            
|Broadcast Television      | Provision of 2D compatible 3D broadcast media                   
|DVD Movies                | 2D compatible 3D movies for DVD                                 
|Movie Films               | Conversion of 2D films to 3D for theatrical release             
|Computer Animation        | Simplifying the process of creating computer generated 3D movies
|Video Games               | Creating enhanced visual quality for DVD based video games      
|Professional Audio Visual | Professional video processor and 3D display technologies        
|Arcade Games              | 3D arcade display                                               

Our
product development strategy is designed to deliver a range of hardware and
software products that are based upon our core intellectual properties to these
principal markets. The range of hardware and software products is designed to
accommodate our strategy that includes the formation of strategic partnerships
to assist in commercializing our products and services where appropriate.

We
are developing a range of software and hardware products designed to meet the
requirements of the markets for which they are intended. The functions and
development stage of each of these products is described below within the
context of each products respective market. We have prioritized our
development efforts on the software products necessary to support the Internet
and broadband broadcast markets. The table below lists the software products
together with the intended markets and licensees. It should be noted that we
have only recently begun to market our products and services. Accordingly, the
target model, target licensees and revenue are based upon our intended business
plan and do not represent current operations. It is anticipated that the product
release dates detailed in the following sections may change over time as
features and enhancements requested by licensees and made available under
license from third parties are incorporated into the product specifications.

`=========================================================================================================================
           Product                    Target Market                   Target Licensees               Revenue Model
=========================================================================================================================
OpticBOOM(TM)Plug-in            PC Users                       Consumers                          License Purchases
                              Set-top Box Users              Internet Browser Publishers        Software Upgrades
                                                             Set-top Box Manufacturers
                                                             PC Media Player Publishers
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
OpticBOOM(TM)Photo              PC Users                       Consumers                          License Purchases
                                                             PC Peripheral Manufacturers        Software Upgrades
                                                             Digital Camera Manufacturers
                                                             Graphic Software Publishers
                                                             Photographic Image Processors
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
OpticBOOM(TM)Studio Pro         Internet Video Providers       Internet Publishers                Annual License Fee
                              Television Broadcasters        Television Content Providers       Support Fees Royalty
                                                                                                Income
                              Film Post Production           Film Content Providers
                                                             Film Library Owners
=========================================================================================================================`

### PC/Internet

The
Internet is a uniquely international visual medium where content is delivered to
users around the globe without the restrictions of country borders or regional
languages. Commercial and consumer Web sites offer both photographic and movie
images for visitors to browse and download. We believe that with significant
competition to attract and maintain visitors to high profile Web sites, the
opportunity to allow visitors to view pictures and movies in 3D or 2D from a
single download or video stream file is highly attractive to content-driven Web
sites.

Recent
Internet industry statistics indicate increased demand for streaming media and
on-line entertainment. According to Cyber Dialogue, over 70% of Internet users
seek out entertainment-related content. The demand for on-line entertainment is
also reflected in the growing user base of the market leading media players.
RealNetworks RealPlayer has more than 150 million registered users, and
the Apple QuickTime media player has more than 50 million users. Alexa Internet
estimates that there were 1 billion streaming media links in June 2000.

We
are in the process of delivering a series of tools designed to be used on
standard Intel and Apple PCs to provide clear 3D images on conventional PC
display screens. These include the OpticBOOM Photo software application
used to convert 2D images and movies to 3D and the OpticBOOM Plug-in that
allows the user to view an encoded 2D image in 3D.

Applying
our process to a typical picture or movie file increases the file size by
approximately 1% above the original 2D picture or movie file size. Consequently,
the encoded image file is highly suited to distribution via present day Internet
connection speeds and communications bandwidths.

The
market for media software applications that allow still pictures and video
movies to be digitally captured, prepared and distributed via the Internet is
occupied by a small number of companies. Real Networks, Microsoft, Apple and
Adobe all provide packaged software tools and media players that allow the user
to create and view images on PCs. We are actively targeting these companies as
potential strategic partners and/or licensees.

We
are developing the following products intended for use in the Internet/PC
market:

|OpticBOOM Plug-in    | Decoding 2D compatible 3D images using Web browser or media player
plug-in software modules.                   
|--------------------- | ---------------------------------------------------------------------------------------------------------------
|OpticBOOM Photo      | Converting 2D still photographs from digital cameras or scanners to 3D and
formatting them as 2D compatible 3D.
|OpticBOOM Studio Pro | Converting large volumes of movie and streaming video images from 2D
to 3D for professional Web master use.    

OpticBOOM(TM)Plug-in for the Internet/PC Market

OpticBOOM
Plug-in is a software application capable of decoding DDC data embedded in a 2D
image and generating a 3D version of the image dynamically at the viewpoint. The
OpticBOOM Plug-in is primarily a software-based application in
Internet/Desktop PC applications, however it may also be implemented as a
hardware application.

We
have developed OpticBOOM Plug-in software for use with Internet Explorer
and Netscape Navigator Web browsers for viewing still photographic images. In
2000, we released two plug-ins for Apples QuickTime Movie Player. In June
2000, QuickTime plug-in version 1.0 was introduced for PC and Mac operating
systems. Version 1.0 supported downloadable narrowband media and required
red/blue 3D glasses. Version 1.1 of the QuickTime plug-in was released in
November 2000 and supported electronic 3D glasses and QuickTime streaming video.
We anticipate further enhancements to the QuickTime plug-in during fiscal 2001,
including additional 3D formats such as compressed stereo 3D media and Dynamic
Depth Cueing.

We
are currently working with RealNetworks to deliver a plug-in software module for
the RealPlayer G2. In this manner, a streaming video prepared in our proprietary
2D compatible 3D format may be downloaded from a Web site. Visitors to the Web
site who wish to view the video movie in 3D may download a free copy of the
OpticBOOM Plug-in compatible with their media player and install it on
their PC. By providing limited functions of the OpticBOOM Plug-in at zero
cost to the end user, we hope to lower the barriers to entry for those users
wishing to experience 3D on their PC screens. This is intended to increase our
profile within the 3D market and help gain market share and acceptance of our
revenue-generating, 3D-image-authoring tools. Producing plug-in software modules
compatible with the most popular media players also allows us to reach a
sizeable audience of pre-existing users.

Users
who download the zero cost freeware OpticBOOM Plug-in receive
limited functions, primarily aimed at generating 3D images using the lowest cost
red/blue glasses. For those users who wish to exercise more control over aspects
of the 3D image and also use more advanced 3D image systems such as LCD shutter
glasses, an upgrade to a chargeable OpticBOOM Extreme 3D viewing system is
available on our Web site.

OpticBOOM(TM)Photo for the Internet/PC market

OpticBOOM
Photo will be a PC-based software application capable of converting PC
photographic image files from 2D to 3D and to generate physical 3D photographs
that may be viewed in 3D without glasses through a lenticular lens laminated to
the photograph or viewed through red/blue or LCD shutter glasses. The objective
of OpticBOOM Photo is to enable consumer users to enhance digitized 2D
photographs created using scanning or digital camera technology. Upon
introduction, OpticBOOM Photo will provide a number of sophisticated tools
encapsulated in an easy to use interface that make the process of converting and
editing a 3D image relatively simple. We expect that OpticBOOM Photo will
include red/blue 3D glasses as well as full color LCD shutter glasses, intended
for use in conjunction with PC monitors.

Multiview
3D generation will allow OpticBOOM Photo to create up to 30 discrete views
of a single image by using the depth cue to create up to seven degrees of visual
perspective to the 2D image. Multiview 3D is intended to open up the consumer
photographic market, allowing glasses-free 3D photographs to be created. We are
in discussions with major international supplier of photographic film and photo
refinishing equipment and services regarding the integration of OpticBOOM
Photo into the consumer photo processing market.

OpticBOOM
Photo has been developed in Java, allowing it to be deployed on a number of
target operating systems including Microsoft Windows, Apple Macintosh and UNIX.
It has been extensively tested by independent software testers and is now in
pre-release beta status.

OpticBOOM
Photo is intended to be a low cost, shrink-wrap software package that is
comparable to Adobes PhotoDeluxe product in terms of pricing and
distribution. We have a preference for third parties to distribute and support
OpticBOOM Photo and envisage licensing the global distribution to
specialist graphics software publishers. We have initiated discussions with
Adobe and MGI Software, Inc. concerning the retail and OEM distribution of
OpticBOOM Photo. Through the relationship with a major international
supplier of photographic film and photo refinishing equipment and services, we
are also seeking to participate in the revenues generated from end users who
submit images created by OpticBOOM Photo for printing as 3D photographs.

In
addition to the distribution of physical products, we also expect
OpticBOOM Photo to be sold through the Internet. Here, the user would
download an encrypted version of the product prior to undertaking a credit card
purchase transaction to install and authorize the license for the software on
their PC. We would likely contract with a third party to handle the back office
mechanics of an e-commerce offering.

We
have also made provision for a limited feature version of OpticBOOM Photo
intended for distribution with digital imaging products, including flat bed
scanners and digital cameras. This provides the opportunity for us to gain a
sizable distribution base through bundling with popular scanner and camera
systems as a freeware component of another manufacturers
product. This distribution channel is intended to create awareness leading the
end user to upgrade their freeware version to a fully functional,
chargeable version of the product.

Based
upon current resource and development planning, the development schedule for
OpticBOOM Photo includes zero cost license freeware versions
together with chargeable versions scheduled for availability in the fourth
quarter of calendar year 2001. Introduction of OpticBOOM Photo is
dependent upon the conclusion of discussions with a major international supplier
of photographic film and photo refinishing equipment and services and the
conclusion of one or more distribution agreements with a suitable software
publisher.

OpticBOOM(TM)Studio Pro for the Internet/PC market

OpticBOOM
Studio Pro is our professional media conversion and transmission application
intended for use in Internet, film, DVD, video and broadcast media applications.

OpticBOOM
Studio prepares the 2D compatible 3D media for transmission through encoding the
depth cue data in a variety of Internet video formats supported by our
OpticBOOM Plug-in.

To
meet the high volume, fast turnaround economics of the Internet video market,
OpticBOOM Studio Pro includes advanced scene identification and tracking
techniques. This allows the components of a scene and their depth to be
determined with minimal human intervention. Component and depth data forms the
basis for our depth cue data used for creating the 3D image from the 2D source.
In order to support these features, OpticBOOM Studio Pro is founded on
powerful workstation hardware technology coupled with high capacity digital
video storage devices.

OpticBOOM(TM)Studio Pro is packaged as a turn-key combination of:

- OpticBOOM(TM)Studio Pro software;
- a video processor for real-time, on-screen editing of 3D images;
- a powerful Intel Xeon or Itanium workstation capable of processing large volumes
of digitized film and video material; and
- a high capacity Pluto Technologies video storage device compatible with storing
the unaltered 2D images and the corresponding depth cue data.

OpticBOOM
Studio Pro licenses are expected to be relatively high cost, largely due to the
sophisticated underlying processor hardware and video storage devices. In all
cases, we expect to license OpticBOOM Studio Pro to principal
organizations including Internet video content providers, post-production
companies, film studios, cable broadcasters, television programmers and film
library owners. We expect to charge an annual license fee associated with the
OpticBOOM Studio Pro license, and a royalty fee based upon the media
created using OpticBOOM Studio Pro.

We
have been approached by Intel Corporations Workstation Products Group to
determine the practical implications of standardizing OpticBOOM Studio Pro
on Intels professional Xeon 32 bit Pentium 3 architecture and Itanium 64
bit workstation architectures. We have also entered into a relationship with
Pluto Technologies, Boulder, CO to standardize OpticBOOM Studio Pro on the
Pluto range of video storage devices for our film and broadcast data storage
needs.

We
may consider third parties for the distribution and support of OpticBOOM
Studio Pro. We are also investigating distributing and supporting the product
ourselves.

OpticBOOM
Studio Pro is currently a Java application and was demonstrated in alpha release
format at the Intel booth at the SIGGRAPH 99 computer graphics convention
in Los Angeles in August 1999. Based upon current resource and development
planning, the development schedule for OpticBOOM Studio Pro includes
versions scheduled for release between the fourth quarter of calendar year 2001
and the first quarter of 2002.

### Broadcast Television

We
have identified an opportunity to deliver 2D compatible 3D programming to
consumer households via terrestrial, cable or satellite television transmission.
This market is central to the convergence of consumer entertainment television
technology with digital technologies derived from the personal computing and
Internet sectors.

The
delivery infrastructure used to bring television programming to the household is
being upgraded from the existing analog technology to digital, allowing a number
of additional services to be provided to the consumer through their terrestrial,
cable or satellite television channels. These services include movies on demand,
interactive software such as games and shopping, as well as electronic mail and
simplified access to the wealth of information now available on the Internet.

A
new generation of digital set-top boxes is the focal point of this new consumer
market. A large number of leading PC hardware and software technology providers
have a stake in set-top boxes, delivering powerful processor chips, graphics
technology, memory, high speed modems and easy to use operating environments.
The companies involved in delivering such technology include, among others,
Intel, Broadcom, Motorola, 3Dfx, @Home, Microsoft and Sony. Their principal
customers are the consumer set-top box manufacturers including Scientific
Atlanta, WebTV and Motorola. We are actively targeting these companies as
potential strategic partners and/or licensees and have entered into an agreement
with Motorola.

Our
OpticBOOM Plug-in is designed for set-top box applications either as a
downloadable software module or as an Application Specific Integrated Circuit
(ASIC) chip embedded in the set-top box circuitry. Adding OpticBOOM
Plug-in technology to the set-top box enables the decoding and display of 2D
compatible 3D images on standard television sets.

The
unique nature of our 2D compatible 3D transmission process avoids the need for
two separate channels to deliver 3D content or the delivery of content only
capable of being viewed in 3D.

The
set-top box decodes the proprietary depth cue data and applies it to the 2D
image to create the 3D version as it is received in the home. This allows
standard television sets to display 3D images through the use of glasses worn by
the viewer.

We
have also focused on unlocking the wealth of existing 2D television content
allowing it to be transmitted and viewed in 3D. This is vital to the success of
3D broadcasting. It allows programming produced using conventional techniques to
be converted to 3D, and prepared for broadcast in a proprietary format that can
be viewed in 2D or 3D.

The
OpticBOOM Studio Pro software allows the TV program to be digitally
processed, using advanced proprietary algorithms, to create depth cue
information for each frame of the broadcast. The content producer may then edit
the depth cue to ensure the optimal 3D view is created. The depth data is then
highly compressed and inserted back into the analog or digital broadcast signal
along with the original, unaltered 2D picture.

We
are developing the following products intended for use in the Broadcast
Television market:

|OpticBOOM Plug-in    | Decoding 2D compatible 3D images using a set-top box either as a
software module, hardware chip or set-top box accessory.
|--------------------- | -------------------------------------------------------------------------------------------------------------------------
|OpticBOOM Studio Pro | Converting large volumes of broadcast content from 2D to 3D for
cable, satellite or terrestrial broadcasting.            

OpticBOOM(TM)Plug-in for the Broadcast Television Market

We
are presently developing a version of the OpticBOOM Plug-in to support the
generation of 3D images by the Motorola DCT5000 advanced digital set-top box.
This is part of the development agreement entered into between us and Motorola
(then General Instrument) in June 1999.

In
this manner, a digital broadcast signal prepared in our proprietary 2D
compatible 3D format may be delivered to the home. Television viewers who wish
to view the program in 3D may download the OpticBOOM Plug-in where it is
automatically activated in their set-top box. Images can be viewed in 3D on
television screens using low cost red and blue glasses or consumer-priced liquid
crystal display shutter glasses.

Based
upon current resource and development planning, the development schedule the
delivery of the first phase of the OpticBOOM Plug-in for the Motorola
set-top box is intended to be complete by December 2002.

OpticBOOM(TM)Studio Pro for the Broadcast Television Market

OpticBOOM(TM)Studio prepares the 2D compatible 3D media for transmission through encoding the depth cue
data in a variety analogue or digital broadcast signal formats supported by our OpticBOOM(TM)Plug-in set-top box
decoders.

OpticBOOM Studio Pro for broadcast use is founded on the same software techniques and hardware platform
as previously described for Internet/PC use.

We
expect to license OpticBOOM Studio Pro to principal organizations
including post-production companies, film studios, cable broadcasters,
television programmers and film library owners. We will charge an annual license
fee associated with the OpticBOOM Studio Pro license, and a royalty fee
based upon the media created using OpticBOOM Studio Pro.

### DVD Video

A
significant market determining the profitability of a feature film is the
consumer video/DVD market. Sales in this market represent a considerable
opportunity to us for converting and distributing both new and existing films in
the 2D compatible 3D format. DVD is expected to supersede videocassette over the
coming years.

DVD
players can be used to display both 2D and 3D images played from a single DVD
disc through the integration of our OpticBOOM Plug-in technologies. The
OpticBOOM Plug-in is designed with DVD applications in mind both as an
application specific integrated circuit chip embedded in the DVD player and as a
decoder accessory compatible with the present installed base of DVD players.

The
unique nature of our 2D compatible 3D DVD distribution format allows DVDs to be
produced that can be viewed in both 2D and 3D. This removes the need for
specialized 3D media only capable of being viewed in 3D.

Unlocking
existing 2D film and video content allowing it to be distributed on DVD and
viewed in 3D is vital to the success of 3D DVD. It allows content produced using
conventional 2D techniques to be converted to 3D, and prepared for distribution
in a proprietary 2D compatible 3D format. The constant stream of blockbuster
content created by Hollywood can be converted to 3D, as well as enabling the 3D
re-purposing of existing film libraries for re release on DVD.

We are developing the following products for the DVD video market:

|OpticBOOM Plug-in    | Decoding 2D compatible 3D images using a DVD player either as a hardware
chip or DVD Player accessory.   
|--------------------- | ---------------------------------------------------------------------------------------------------------
|OpticBOOM Studio Pro | Converting large volumes of film and video content from 2D to 3D for
creating 2D compatible 3D DVD Discs.

OpticBOOM(TM)Plug-in for the DVD Video Market

As
discussed above, we have developed a plug-in software module for use with
Apples Quicktime Movie Player and are currently working with RealNetworks
to deliver a plug-in software module for the RealPlayer G2. In this manner, a
DVD disc may be recorded in Apple QuickTime format and supplied to the end user
in our proprietary 2D compatible 3D format. PC users who wish to play the DVD in
3D may activate the OpticBOOM Plug-in for QuickTime on their PC.

The
second approach that we have not yet initiated is to make OpticBOOM
Plug-in compatible with the MPEG2 video format, the format in which consumer
DVDs are produced. The digital MPEG2 signal stored on the DVD is similar to the
digital broadcast signal used in television set-top boxes. No schedule has yet
been set to deliver a DVD MPEG2 OpticBOOM Plug-in.

Images can be viewed in 3D on television screens using low cost red and blue glasses or consumer-priced
liquid crystal display shutter glasses.

OpticBOOM(TM)Studio Pro for the DVD Video market

OpticBOOM
Studio prepares the 2D compatible 3D media for transmission through encoding the
depth cue data the Internet movie formats supported by our OpticBOOM
Plug-in PC media player decoders.

OpticBOOM
Studio Pro for DVD use is founded on the same software techniques and hardware
platform as previously described for Internet/PC and broadcast use.

We
expect to license OpticBOOM Studio Pro to principal organizations
including post-production companies, film studios, and film library owners. We
will charge an annual license fee associated with the OpticBOOM Studio Pro
license, and a royalty fee based upon the media created using OpticBOOM
Studio Pro.

### Movie Films

We
are active in the conversion of film and video media from 2D to 3D. The initial
markets are giant screen IMAX® theaters, digital and electronic
cinema and special events, advertising and promotion. We presently provide 2D to
3D conversion services in some movie film markets as described below.

Giant Screen "IMAX(R)" Films

The
giant screen market is mainly occupied by IMAX® Corporation, Showscan
Entertainment and iWERKS.

The
production techniques and equipment required to produce a 3D giant screen film
are substantially different from those of a comparable 2D film. Special cameras
with dual lenses are required. Due to the weight of the extra film drums and the
additional camera hardware, 3D cameras are large and bulky, making certain
conventional shots impossible to film, and reducing the number of takes possible
during a day on location. This makes the process of producing a 3D giant screen
film expensive, with production budgets almost double that of a conventional 2D
film. These constraints lead to a surfeit of conventional films and few 3D
films.

By
processing digitized giant screen 2D film with OpticBOOM Studio Pro, it is
possible to create a 3D IMAX® movie in post production. This reduces
production costs on-set and provides for a wider range of shot types for 3D film
makers. Post production 3D conversion allows film makers to expand the nature of
3D films to include mainstream consumer story lines and plots.

The
advanced 3D editing capabilities of OpticBOOM Studio Pro permit extensive
artistic control over the 3D effects in each scene. Applying OpticBOOM
Studio Pro to incorrectly filmed 3D shots allows them to be manipulated
digitally and thus rescued. This combination of features makes OpticBOOM
Studio Pro a significant tool for 3D film makers.

We
completed several conversion projects for IMAGICA USA, a giant screen
post-production company, including conversion projects for the film
Sigfried & Roy and test conversions for the film Ocean of
Light. We have converted test sequences from the Showscan Entertainment
ridefilms Cosmic Pinball and Street Luge and the trailer
of the IMAX® blockbuster film Everest.

We are actively targeting companies as potential strategic partners and/or licensees of OpticBOOM(TM)
Studio Pro in the giant screen film market.

35mm Theatrical Films and Professional Video

The
OpticBOOM Studio Pro toolkit has also been used to convert 35mm film and
professional video media with equal success. We have a relationship with IMAGICA
Corporation of Japan (the parent company of IMAGICA USA) to provide conversion
services for 35mm film and professional video media.

We have undertaken test conversion work for IMAGICA Corporation of Japan as a prelude to anticipated
commercial conversion contracts.

We have also converted "Natures Symphony," a VHS video production designed for sale with Ilixco Inc.'s
LCD shutter glasses in North America.

Digital & Electronic Cinema

This
is an emerging market intended to provide a successor to 35mm celluloid
projection and distribution systems in the theatrical film market. Companies
including Texas Instruments, Hughes-JVC and Cinecomm are focused on introducing
advanced alternatives to present 35mm film projection and theatrical film
distribution. In June 1999, Star Wars Episode 1  The Phantom
Menace was screened in Los Angeles and New York using Hughes-JVC
electronic projectors.

Digitally
stored film ensures that each screening is of equal quality since there is no
film degradation or accumulation of dust and dirt particles detracting from the
viewer experience. The advanced digital distribution system allows movies to be
distributed instantaneously to theaters via satellite, substantially reducing
the processing and delivery costs of conventional 35mm film stock.

Digital
projection equipment and distribution is ideally suited to our 2D compatible 3D
transmission technologies, providing the opportunity to convert 35mm films to 3D
using OpticBOOM Studio Pro and to distribute these in 2D format with
embedded 3D depth cue data.

The
theater owner may then decide whether to offer screenings of 3D versions of
encoded films by projecting the decoded 3D version. The same film can be viewed
in conventional 2D since the depth cue process leaves the 2D image unaltered.

Special Events, Advertising & Promotion

We
are introducing our products and services to the niche market of special events,
advertising and promotion. In this market, a temporary 3D theater is constructed
for use in trade shows, product launches, sports events or music concerts.

3D
video theaters utilize low cost video projectors such as those manufactured by
Hughes-JVC, Barco and Sony. The ease of video resolution production and
distribution on laser disc, videocassette tape or DVD is more cost effective
than conventional 35mm film. The more sophisticated large screen installations
are powered by the latest generation of digital and electronic projection
systems including those made by Hughes-JVC.

Temporary
installations have widespread use in advertising and promotions and at special
events such as trade shows, and conferences and concerts. We believe this offers
a potentially lucrative revenue stream through the conversion of short 3D video
movies designed to support product launches or promotional campaigns.

OpticBOOM
Studio Pro is used to convert 2D video material to 3D. The resulting 3D film is
then either mastered onto DVD disc using the 2D compatible 3D format or is
recorded onto video cassette tape or a video storage device for subsequent
playback.

OpticBOOM(TM)Studio Pro for the Movie Film Market

OpticBOOM
Studio Pro is capable of providing output suitable for physical film processing
as required in the large format or IMAX® film market as well creating 2D
compatible 3D films suitable for digital distribution to electronic cinemas.

In
the 35m and 70mm film applications, the amount of detail in each frame of film
requires highly accurate scene identification and tracking techniques. This
allows the components of a scene and their depth to be determined with minimal
human intervention. Component and depth data forms the basis for our depth cue
data used for creating the 3D image from the 2D source. The accuracy of the
algorithms that form the basis of OpticBOOM Studio Pro allow it to be
applied to the largest of all films, those screened in IMAX® theaters, on
3D screens as large as 100 wide and 80 high.

OpticBOOM
Studio Pro for film use is founded on the same software techniques and hardware
platform as previously described for Internet/PC, broadcast and DVD use.

We
expect to license OpticBOOM Studio Pro to principal organizations
including post-production companies and film studios and film library owners. We
will charge an annual license fee associated with the OpticBOOM Studio Pro
license, and a royalty fee based upon the media created using OpticBOOM
Studio Pro. We are presently in negotiations with IMAGICA USA relating to the
licensing of OpticBOOM Studio Pro to IMAGICA USA for use in the large
format film industry. The negotiations are based on a licensing and royalty
model. We anticipate delivering an alpha release of OpticBOOM Studio Pro
suitable for use in the large format film market in the last quarter of 2001.

### Computer Animation

A
growing number of productions, from IMAX® movies to theatrical films and
television programs are now being originated entirely from computer graphics
with no live action or filmed components. Examples include Pixars
Toy Story, Dreamworks Antz and Disneys
A Bugs Life. IMAX® recently concluded an agreement with
Mainframe Entertainment Inc. to bring computer animated 2D productions to the
IMAX® screen.

Computer
animated productions are built from detailed models of the characters and
scenery that appears on-screen. Sophisticated animation tools create wire frame
representations of the characters and objects onto which highly detailed graphic
texture maps are rendered. This method creates increasingly realistic scenes to
the point where the difference between footage shot with a film camera and
footage created in the memory of a computer is difficult for the viewer to
discern.

To
create 3D animation, present day techniques require the graphic artist to
recreate a second stereo 3D frame by re-rendering each scene from
the computer a second time. This more than doubles the time taken to create the
3D production compared with the original 2D version.

In
a back-to-back comparison of the process, a conventional render of a 3D computer
animated scene took almost 20 hours whereas the OpticBOOM Studio Pro
toolkit required 2.5 hours to produce the same results. Due to the largely
automated performance efficiencies of creating 3D computer animation with
OpticBOOM Studio Pro, we have identified this as a rapid route to market
for the delivery of 2D compatible 3D media. The converted 3D productions will be
supplied for film, broadcast and Internet use delivered via our proprietary 3D
transmission technologies.

We
have recently undertaken animated 3D conversion projects on behalf of Showscan
Entertainment, Hasbro Interactive and Intel Corporation. We were paid US$10,000
to complete a 20 second test clip of a Showscan theme park ride film. We
converted computer animated material supplied by Blur and Threshold
Entertainment on behalf of Intel for inclusion in a 3D theater presentation at
the SIGGRAPH 99 tradeshow held in Los Angeles in August 1999. Intel
provided computer hardware technology to us in consideration for the work
undertaken to deliver the SIGGRAPH 99 presentation.

OpticBOOM(TM)Studio Pro for the Computer Animation Market

OpticBOOM
Studio Pro is capable of converting computer animated content to 3D and
providing the resultant material in formats suitable for physical output to 35mm
and 70mm film as well as the proprietary 2D compatible 3D formats for broadcast,
Internet and DVD distribution.

OpticBOOM
Studio Pro is capable of creating highly accurate 3D depth cue data directly
from animation source files, with minimal operator involvement. Once the data is
created, the second stereo 3D frame of animation can be generated much more
efficiently. By combining the depth cue with the existing 2D image, the graphic
artist may refine the 3D effect of each scene without the need to render two
frames. This significantly reduces the time taken to create the stereo 3D
version.

We
have already created a OpticBOOM Studio Pro automated depth extraction software
module compatible with the Lightwave computer animation software package.

OpticBOOM
Studio Pro for computer animation use is founded on the same software techniques
and hardware platform as previously described for Internet/PC, broadcast and DVD
use.

We
expect to license OpticBOOM Studio Pro to principal organizations
including post-production companies, animation companies, film studios and film
library owners. We will charge an annual license fee associated with the
OpticBOOM Studio Pro license, and a royalty fee based upon the media
created using OpticBOOM Studio Pro.

### Video Games

Since
the mid 1990s, the visual quality of computer graphics available on the
consumer PC and games console platforms has increased dramatically with graphics
processor capabilities doubling annually. There has been substantial growth in
the market for high quality interactive computer games. The DVD-ROM has emerged
as the alternative to distributing games on CD-ROM. The DVD stores enough video
and audio material to play back a feature length movie. This is significant
since blockbuster Hollywood films are often licensed as video games where the
game play takes place in scenes from the film.

The
latest generation of consumer PCs from Compaq, Gateway, Hewlett Packard and
others are equipped with DVD-ROM drives that can read data from both CD-ROM and
DVD-ROM discs. Peripheral suppliers such as Creative Labs are already delivering
low priced DVD-ROM drives as add-ons to existing PCs.

OpticBOOM
Studio Pro allows video from blockbuster films to be digitally processed using
advanced proprietary algorithms, and to create depth cue information for each
frame of the background scenery. The games developer may then edit the depth cue
to ensure that the optimal depth cue is created. The depth data is then highly
compressed and inserted back into the DVD video signal along with the original,
unaltered 2D version of the background scenery.

The
solution offers a scaleable benefit to the games software publishers. The games
application reads the depth cue data from the DVD providing the game with
knowledge about the passive background scenery. The games application may
generate correctly scaled and positioned characters and objects with which the
player is interacting and insert them into a 2D live action background
dynamically. The same depth data can optionally be used to generate a 3D version
of the game.

This
allows the game player to experience a visually richer game than can currently
be played in 2D or 3D. Game characters appear in 2D live action backgrounds
played directly from the DVD, freeing up the graphics processor to generate more
compelling game characters and objects. We are presently in discussion with
Hasbro Interactive regarding use of our technologies in the interactive computer
games market.

We are developing the following products intended for use in the video games market

|OpticBOOM Plug-in    | Decoding depth cue data from DVD using a PC software application. 
|--------------------- | ------------------------------------------------------------------
|OpticBOOM Studio Pro | Processing video content for creating depth cue encoded DVD discs.

OpticBOOM(TM)Plug-in for the Video Game Market

The
features of OpticBOOM Plug-in required for use with the Internet and the
DVD markets may be applied to the computer games market. The software module
that undertakes decoding of the depth data and the generation of the 3D image
may be activated from within the computer game software application. Any games
publisher who creates a game based on this format would ship a version of our
OpticBOOM Plug-in as part of the game itself.

Images can be viewed in 3D on television screens using low cost red and blue glasses or consumer-priced
liquid crystal display shutter glasses.

OpticBOOM(TM)Studio Pro for the Video Game Market

OpticBOOM
Studio prepares the 2D compatible 3D media for transmission through encoding the
depth cue data the video formats supported by our OpticBOOM Plug-in PC
media player decoders.

OpticBOOM
Studio Pro for video game use is founded on the same software techniques and
hardware platform as previously described for DVD and Internet/PC use.

We
expect to license OpticBOOM Studio Pro to principal organizations
including post-production companies, film studios, and film library owners. We
will charge an annual license fee associated with the OpticBOOM Studio Pro
license, and a royalty fee based upon the media created using OpticBOOM
Studio Pro.

### Professional Audio/Visual

In
conjunction with the software products previously described, we are developing a
range of hardware products designed to meet the requirements of the markets for
which they are intended. These hardware products are primarily aimed at the
professional audio/visual market as described in this section. The table below
lists the hardware products together with the intended target markets and
licensees. The functions and stages of introduction for each of these products
together with discussions with prospective licensees and users are discussed
within the context of the market in the following sections. It is anticipated
that the product release dates detailed in the following sections may change
over time as features and enhancements requested by licensees and made available
under license from third parties are incorporated into the product
specifications.

`============================================================================================================================
          Product                  Target Market                    Target Licensees                   Revenue Model
============================================================================================================================
Depth Cue Decoder           OpticBOOM Studio Pro        OpticBOOM Studio Pro Licensees           Unit Sales
                            Set-top Boxes               DVD Player Manufacturers                 Manufacture Royalties
                            DVD Players                 Set-top Box Manufacturers
----------------------------------------------------------------------------------------------------------------------------
3D Demultiplexer            Professional A/V            Professional A/V Users                   Unit Sales
                            3D Projection/Display       3D theater installations                 Manufacture Royalties
----------------------------------------------------------------------------------------------------------------------------
Real Time Converter          PC Users                   Consumers                                Manufacture Royalties
                            Consumer A/V                PC Peripheral Manufacturers
                                                        Consumer Electronic Manufacturers
----------------------------------------------------------------------------------------------------------------------------
Line Doubler                PC Video Players            PC Peripheral Manufacturers              Manufacture Royalties
                            PC Television               PC Manufacturers
                            Home Theater                Consumer Electronic Manufacturers
                            Set-top Boxes                Set-top Box Manufacturers
============================================================================================================================`

We
intend to introduce the video processor hardware technologies in 2D and 3D
applications for professional audio/visual use. The professional audio/visual
markets include 3D projection systems, home theater, video played on personal
computer screens and depth cue decoder accessories for use with DVD players and
broadcast set-top boxes.

We
have engineered a digitally reprogrammable platform based upon a Field
Programmable Gate Array (FPGA). This provides a flexible platform with the added
advantage that any functionality created by programming the FPGA can be easily
transferred to create a highly customized Application Specific Integrated
Circuit (ASIC) chipset.

Depth Cue Decoder for Set-top Boxes, DVD Players and Accessories

Certain
implementations of OpticBOOM Plug-in restrict the ability to use a
software application to decode depth cue data. These include adding decoder
capabilities to existing set-top boxes, DVD players and MPEG cards used to play
video from DVD discs on PCs. To address this requirement, we have developed a
hardware-based depth cue decoder. This allows the decoding of our proprietary
depth cue data from depth cue encoded media via hardware alone.

This
hardware based depth cue decoder may be embedded in chip sets of digital and
analog set-top boxes, set-top box accessories, DVD players, DVD player
accessories and PC MPEG cards.

Accessories for the current users of set-top boxes and DVD players may be manufactured, ensuring
consumers do not have to replace existing technologies to obtain the benefits of 2D compatible 3D DVD movies and
television broadcasts.

The
system processes an incoming analog or digital video signal for DVD, PC and
set-top box applications. The 3D depth data is extracted from the video signal
and applied to the 2D image within the video processor. A second stereo 3D image
is then constructed dynamically in real time prior to display.

A
second important use for this feature is within OpticBOOM Studio Pro.
OpticBOOM Studio Pro stores the unaltered 2D image and the corresponding
depth cue data on a video storage device. Through combining the video processor
hardware with OpticBOOM Studio Pro software, the 2D image and 3D depth
data may be combined in real time and displayed on a monitor. This allows the
user to dynamically refine and edit the 3D effect to obtain the optimal 3D
version of a scene. This configuration provides real time, on-screen editing of
a 3D image.

A
prototype is due for completion in the third quarter of 2001. We intend to
license the hardware chip to broadcast set-top box, DVD player and PC MPEG card
manufacturers and will demonstrate the hardware-based depth cue decoding to
prospective licensees in these markets once the prototype is available.

3D Demultiplexer for 3D Projection systems

For
3D projection systems there is the requirement to provide a separate video feed
of a left image and right image to each projector in order to create stereo 3D.
Under normal circumstances this requires two accurately synchronized video
cassette players or DVD players.

In
order for a single media player to be used, alternate left and right eye images
of each successive frame are recorded onto the videocassette or DVD in
field sequential format. The video processor simply uses the
synchronization signal found between each field on the videotape or DVD to
demultiplex or redirect the successive fields to two output
channels. The output channels can be in Composite Video PAL or NTSC formats,
S-Video or Red Green Blue (RGB). One projector is then connected to each output
channel to create a 3D projection system.

This enables us to provide a cost-effective solution in the special events, promotions and advertising
market as well as to specialist 3D theaters.

A
prototype was completed in the third quarter of 1998, able to accept input
signals from media players in Composite Video PAL or NTSC formats, S-Video or
RGB. We have already sold a limited number of video processors to organizations
in the 3D video projection system market who are seeking competitively priced 3D
signal demultiplexers. The more popular S-VHS version has a retail price of
US$2,500. The prototype was approved for use in North America after receiving
FCC and UL authorization.

Real Time Converter for 3D

Real
time 3D conversion can be achieved through analyzing the motion characteristics
in a scene. An incoming video signal played from a VCR, DVD, television
broadcast or games console can therefore be viewed in 3D without the need to
pre-process the signal with depth cue information. Real time 3D can only be
created in a rudimentary manner based upon certain types of movement in a scene
and is therefore of a substantially lower quality than the post production depth
cue based 3D created with OpticBOOM Studio Pro.

We
have embedded some of the basic 2D to 3D conversion algorithms into a hardware
based real time 3D converter. This allows any conventional video signal from
videocassette, DVD, broadcast or video game console to be converted to a simple
form of 3D in real time.

We
may license the manufacturing of this solution as an accessory or add-on PC card
in markets where the OpticBOOM Studio Pro professional off-line conversion
and transmission technologies for broadcast and DVD use do not gain widespread
acceptance.

A
prototype was completed in the first quarter of 1999 capable of undertaking
basic real time 2D to 3D conversion through a combination of field delay and
pixel shifting processes. The result is a 3D image which is acceptable on a PC
screen or TV display, but which is not continuously provided in 3D, reverting to
regular 2D in circumstances where the content does not permit the processor to
assimilate 3D images. We have yet to provide a solution that would allow
continuous display of a 3D image since the engineering challenge of generating
3D automatically from a single, non-moving image is substantial. We are not
actively pursuing licensing relationships for the system at this time.
Modifications to the prototype may be required in order to permit license and
sale of the product in volume.

Line Doubling for Video Signals

With
the ever present advances in PC graphics processors and the recent convergence
of broadcast and Internet technologies, a number of PC manufacturers now offer
the ability to play back digital video, video cassette, DVD and broadcast
signals via the PC.

Many
PC monitors are capable of displaying images of 800 x 600 lines of resolution,
considerably higher than that of a television set. Traditionally, PAL and NTSC
video signals are designed for television display screens. This results in a
videocassette tape producing images that are between 200 and 250 lines in
resolution. As the tape is played, the first field builds up the odd lines of an
image, and the second field builds up the even lines of the image on the TV
screen. The viewer then sees an image comprising between 400 and 500 lines of
resolution. Consequently, when videocassette tapes or DVDs are played on a PC
monitor, the image quality is consequently that of a television set and
therefore well below the display capability of the PC monitor.

We
have created a video processor capable of line doubling an incoming
video signal and displaying it on a PC monitor at a higher resolution and with
greater clarity. The video processor uses digital line interpolation algorithms
to create additional lines in the output signal based upon the comparison of
input line pairs to double the output resolution. This digitally synthesizes the
image to a higher resolution, approaching that of high definition television
(HDTV).

We
intend to license the line doubler hardware to broadcast set-top box, PC monitor
manufacturers and suppliers of electronic and digital projection systems.

A
prototype was completed in the first quarter of 1999, able to accept input
signals from media players in Composite Video PAL or NTSC formats or S-Video. We
have already sold a limited number of video processors to organizations who are
seeking line doubler technologies, particularly for medical endoscopy.
Modifications to the prototype may be required in order to permit sale of the
product in volume.

### Arcade Games

The
origins of our 3D Projection Display lie in the design and manufacture of a
prototype glasses-free stereo autostereoscopic 3D display system
targeted for use in the arcade video games industry. The system uses a patented
combination of an infra-red head tracking system and a twin LCD projection
system that provides a life-like eight foot 3D image on a large display screen
without the need for the viewer to wear glasses or a headset.

The
international arcade market is dominated by a small number of companies
including SEGA Enterprises, NAMCO, WMS Industries, Atari Games Corporation and
Konami. In this market, popular consumer games debut in out-of-home
entertainment complexes and theme parks prior to their release in the consumer
channel.

Today,
consumers can acquire the latest generation of powerful PC graphics processors
where the visual differential between what a player can experience in the family
entertainment center and at home is considerably reduced. In order for the
operators of family entertainment centers to offer a differentiating experience
from the home, we offer the 3D Projection Display under license to arcade game
manufacturers.

The
3D Projection Display provides a video game in true life-like 3D, without
requiring the player to put on or take off any viewing accessory, which would
reduce the number of plays per hour and the earning capacity of the game. This
is seen as a considerable advantage by owners of family entertainment centers
and theme parks when compared to similar 3D game experiences such as virtual
reality, which require the player to wear a headset. The eight foot 3D display
yields an experience that is not presently available at home.

The 3D Projection Display was launched at the 1998 International Association of Amusement Parks and
Attractions Show (IAAPA) in Dallas, TX.

Following
the IAAPA Show, Atari Games Corporation of Milpitas, CA undertook a field trial
of the system at a family entertainment center in northern California. The field
trial went well and we are now in the process of providing solutions to the
requirements identified by Atari in the field trials. This includes a redesign
of the eye tracking and projection system to reduce the number of components and
moving parts. Also required is a projection system capable of delivering higher
resolution images. We intend to undertake a value engineering exercise to reduce
the cost of the system to licensees to yield a viable volume market.

Management
has focused our limited engineering resources on the high volume opportunities
in priority consumer broadcasting Internet/PC markets rather than on the arcade
game display.

### Sales and Marketing

We
utilize a number of tools and services in support of the promotion of our
products and services within our chosen target markets. These tools and services
assist us in attaining the appropriate profile both as a market leading 3D
technology provider and also as a public company listed on the CDNX.

We
have already implemented a range of initiatives designed to enable effective
communication with prospective customers and licensees, investors and press.
These include a comprehensive web site, the retained services of a major
international public relations company and participation in a number of industry
trade shows and seminars targeted at specific application areas for our
technologies.

Our Web Site (http://www.DDD.com)

In
early 1999, we undertook a project to revise the corporate web site; however,
the information found on the website is not part of this Annual Report. The
objectives of the web site are:

- to communicate products and services to prospective customers;
- to communicate the core technologies to prospective licensees;
- to provide background and reference material for current and prospective investors;
- to enable visitors to download samples of 2D compatible 3D images;
- to be an electronic store front for the sale of software and hardware products; and
- to assist in building a brand for us in the 3D marketplace.

We
presently receive approximately 34,000 hits or user visits per
month. This generates an average of 500 inquires per month for information on us
and our products. The OpticBOOM plug-in has been downloaded approximately
4,600 times during the two months since the plug-in was launched.

Public Relations

We
have retained the services of Daniel J. Edelman Public Relations, an
international public relations company. The relationship is managed by the
Dallas, TX office of Edelman Public Relations.

The
public relations campaign has been focused on raising our profile in industry
and trade press. This has resulted in articles concerning our technologies being
published in a variety of industry publications.

We
previously retained the services of a giant screen IMAX® film media
specialist in conjunction with IMAGICA USA, which resulted in further industry
and trade press exposure.

The
primary focus of the public relations activities is centered upon creating
presence in the North American market. We also undertake international public
relations, particularly in Australia and Canada.

Trade Shows and Exhibitions

We attend and exhibit at trade shows in key markets. Company representatives attend industry seminars
and participate as guest speakers.

Where
appropriate, we partner with potential licensees and strategic partners in
presenting our technologies and solutions at trade shows and exhibitions.

DDD
recently participated or is scheduled to participate in the following
conferences and exhibitions:

`============================================== ======================== ================================================
         Conferences and Exhibition                     Dates                              Activity
============================================== ======================== ================================================
Giant Screen Theater Association, New York,    September 15, 1999       Attended as guest speaker
New York
---------------------------------------------- ------------------------ ------------------------------------------------
Internet World, Los Angeles, California        April 5-7, 2000          Exhibited
---------------------------------------------- ------------------------ ------------------------------------------------
3D Film Interest Group                         May 16, 2000             Attended as guest speaker
---------------------------------------------- ------------------------ ------------------------------------------------
Ziff-Davis Broadband Media Conferences, San    May 17, 2000             Attended as guest speaker
Francisco, California
----------------------------------------------
---------------------------------------------- ------------------------ ------------------------------------------------
TNTY                                           August 30, 2000          Exhibited
----------------------------------------------
---------------------------------------------- ------------------------ ------------------------------------------------
Digital Hollywood                              September 25-28, 2000    Attended as guest speaker and exhibited
----------------------------------------------
---------------------------------------------- ------------------------ ------------------------------------------------
QuickTime Live                                 October 9-12, 2000       Attended as guest speaker and exhibited
----------------------------------------------
---------------------------------------------- ------------------------ ------------------------------------------------
Internet World, New York, New York             October 25-27, 2000      Attended as guest speaker and exhibited
----------------------------------------------
---------------------------------------------- ------------------------ ------------------------------------------------
Western Cable Show                             November 28-December     Exhibited in conjunction with Motorola, Inc.
                                               1, 2000

---------------------------------------------- ------------------------ ------------------------------------------------
Streaming Media West                           December 12-14, 2000     Attended as guest speaker

---------------------------------------------- ------------------------ ------------------------------------------------
Digital Hollywood CES, Las Vegas, Nevada       January 6-9, 2001        Attended as guest speaker

---------------------------------------------- ------------------------ ------------------------------------------------
Stereoscopic Displays and Applications         January 22-24, 2001      Scheduled to attend as guest speaker

---------------------------------------------- ------------------------ ------------------------------------------------
Digital Hollywood, San Jose, California        March 5-8, 2001          Scheduled to attend as guest speaker

---------------------------------------------- ------------------------ ------------------------------------------------
Internet World, Los Angeles, California        March 14-16, 2001        Scheduled to attend as exhibitor

============================================== ======================== ================================================`

Marketing Materials

We have created brochures and literature to support the sales and marketing activities and corporate
promotion.

We
have focused on the web site as the primary mechanism for disseminating
information concerning our products and services since it is a highly effective
international marketing medium. As both hardware and software products are
released, marketing materials including brochures and data specification sheets
will be introduced to support the sales and marketing initiatives.

We
will advertise and promote the availability of the products in appropriate
publications.

International Marketing Activities

In
certain countries where we do not maintain a local office, we intend to enter
into representation agreements with local organizations to provide licensee
support and assist in marketing the technologies. Representative partners will
be selected based upon their local contacts and their prior knowledge and
involvement in 3D projects and activities.

On June 14, 1999, we entered into an agreement with AiCube Co. Ltd. of Tokyo, Japan to provide local
sales support and marketing activities for our products and services in Japan.

### Research And Development

Our
development efforts during fiscal 2000, 1999 and 1998 were devoted to the design
and development of our products and technologies. Research and development
costs, including those development costs capitalized as deferred in fiscal 1998,
were approximately $1,981,000 for fiscal 2000, $1,203,000 for fiscal 1999 and
$930,025 for fiscal 1998.

### Government Regulation

The
hardware products designed and intended for manufacture by us and our licensees
are subject to government regulation concerning electromagnetic interference and
electrical safety standards that will impose compliance burdens on us. In the
United States for example, non-prototype products may be required to conform
with Federal Communications Commission regulations governing electromagnetic
radiation suppression and Underwriters Laboratory approval for electrical safety
standards. Facilities are available in Australia to test hardware to the
standards required globally. We have submitted several of our products for
testing and have received verbal confirmation of compliance on the submitted
hardware. We are unaware of any issues that would prevent compliance of any of
our planned hardware product, although there can be no assurance that all of our
products will be able to comply with such regulations.

In
many countries where our products may be sold, similar equivalents to these
standards exist such as CE in Europe and Canadian Standards Authority (CSA) in
Canada. We will submit products for testing to appropriate local specifications
in each case where this is a prerequisite to marketing the product in the
country concerned. There can be no assurance that our products will be able to
comply with such regulations.

The
technology contained in our products may be subject to United States export
restrictions. While we do not believe that any of our current products are
subject to the restrictions, there can be no assurance that such export
controls, either in their current form or as may be subsequently enacted, will
not delay introduction of new products or limit our ability to distribute
products outside of the United States. Further, various countries may regulate
the import of certain technologies contained in our products. Any such export or
import restrictions, new legislation or regulation or government enforcement of
existing regulations could have a material adverse effect on our business,
operating results and/or financial condition. There can be no assurance that we
will be able to comply with additional applicable laws and regulations without
excessive cost or business interruption, if at all, and failure to comply could
have a material adverse effect on us.

Under
the Australian Customs Act 1901 part VI the exportation of goods division
1 - prohibited exports the Governor General may by regulation prohibit the
exportation of goods from Australia absolutely, in specified circumstances, to a
specified place or unless specified conditions or restrictions are complied
with. Without limiting the generality of that power of prohibition the
regulations may provide that the exportation of the goods is prohibited unless a
license, permission, consent or approval has been granted. The Customs
(Prohibited Exports) Regulations by regulation 13E provide that an officer of
Customs or the Department of Defense may grant a license or permission to export
from Australia goods listed in the Defense and Strategic Goods List. The
exportation from Australia of goods specified in this list is prohibited unless
a license or permission in writing has been granted by an authorized person. The
only categories of goods listed in the Defense and Strategic Goods List which
appear to have any potential relevance to the technology of our Australian
subsidiaries are goods having a dual use (military/civilian) being certain types
of software as listed. None of our technology falls into any of the categories
of software currently listed.

### Competition

The
market for digital media manipulation and stereoscopic 3D display technology is
rapidly evolving, highly competitive and recently characterized by the frequent
introduction of new products based upon rapidly developing technologies.

In
order to understand where we believe competition will occur, it is first
necessary to differentiate stereoscopic 3D from the heavily marketed
term 3D used extensively in the present-day video game and PC
software markets. Enhanced or stereoscopic 3D, as created by our
Dynamic Depth Cueing process, allows the viewer to see the images in
lifelike 3D by adding the appearance of depth to the image. Stereoscopic 3D
involves displaying two or more slightly different left and right eye views of
the image which the viewer then perceives to be a real 3D image with
enhanced depth. The benefit of stereoscopic 3D is that it provides a visually
richer image to the viewer, allowing objects and characters to appear behind the
surface of the display screen and also, importantly, to appear to move off the
screen towards the viewer under certain circumstances.

The
term 3D as it is used in todays video game and PC software
markets simply implies that a three dimensional computer graphics model of a
character or object is created by the computer. This allows the viewer to see
the object from a number of viewpoints as they navigate around it or manipulate
it on screen. The object is generally viewed in 2D however. In light of this
difference, we do not believe that our products and services compete with the
majority of 3D based products.

A
number of the organizations with which we may compete are well-established
manufacturers and developers of video hardware and software publishers. Some of
our competitors possess substantially greater financial, marketing, personnel
and other resources than us, have established reputations relating to product
design, development, manufacture, marketing and service of digital media
manipulation and stereoscopic 3D display products and have significant budgets
to permit them to implement extensive advertising and promotional campaigns to
market new products in response to competitors.

Competition
to our 2D to 3D OpticBOOM conversion technologies also comes from the
origination of 3D film, videos and live broadcasts using 3D cameras. A number of
films and movies have been created using conventional 3D camera equipment,
however it is the complex equipment and time consuming techniques that deter
most film makers from creating 3D productions.

Our
objective is to deliver content that can be viewed in 2D or 3D. We anticipate
that the unique 2D compatible 3D nature of the transmission process will allow
3D films to be processed and delivered in 2D compatible 3D format. We therefore
view the 3D origination of content as complementary to providing a solution to
creating 3D content.

We
expect that competition to our proprietary hardware and software solutions may
come from a number of existing and emerging sources that vary between the
following markets:

|PC/Internet               | Provision of 2D compatible 3D media via the Internet            
|------------------------- | ----------------------------------------------------------------
|Broadcast Television      | Provision of 2D compatible 3D broadcast media                   
|DVD Movies                | 2D compatible 3D movies for Digital Versatile Disc (DVD)        
|Movie Films               | Conversion of 2D films to 3D for theatrical release             
|Computer Animation        | Simplifying the process of creating computer generated 3D movies
|Video Games               | Creating enhanced visual quality for DVD based video games      
|Professional Audio Visual | Professional video processor and 3D display technologies        
|Arcade Games              | 3D arcade display                                               

### Competition in the PC/Internet market

Competition to our products and solutions in the PC/Internet market may come in any of the following
areas:

- conversion of photographic images from 2D to 3D for display in 3D on PCs;
- conversion of streaming video and movies from 2D to 3D for display in 3D on PCs; or
- low bandwidth encoding of 3D images to allow display in 2D or 3D.

### Photographic Images

We
are aware of a small number of organizations based in the United States and Asia
who offer technologies capable of converting photographic images to 3D. These
companies include Wooboo and APEC, based in Korea and Taiwan, respectively, and
VREX, based in the United States. These competitive products presently suffer
from a number of drawbacks that deliver images of lower quality than those
created by OpticBOOM. APEC and Wooboo use rudimentary pixel shifting
techniques that can produce distorted 3D versions of 2D images while VREX
appears to only be able to create 3D from pictures captured with a 3D camera or
originated using computer graphics modeling packages. Our OpticBOOM
software conversion products are capable of manipulating existing 2D images with
a high degree of accuracy. This delivers high quality, low distortion 3D images
that may be created from 2D photographs or 3D computer models.

### Streaming Video and Movies

We
are only presently aware of one organization, Synthonics Inc., a United States
company, whose technology could be applied to converting streaming video and
movie files to 3D. The Synthonics technique involves constructing a computer
wire frame model from a 2D image and utilizing this to create a stereo 3D image.
This technology requires a minimum of two images from which to create the 3D
image therefore allowing it to be used on successive frames of a movie or video.
We believe that the requirement to create a wire frame model from a comparison
of two images makes the Synthonics process less efficient than the depth cueing
process employed in OpticBOOM.

### 2D Compatible 3D Transmission and Delivery

We
have seen demonstrations of a number of compression and encoding techniques for
the delivery of 3D broadcast programming. None of these have taken the approach
of delivering 2D compatible 3D media by compressing the 3D data and reinserting
it into the original unaltered 2D image for subsequent distribution. This
technique is subject of a number of patents applied for by us covering use in
both the analog and digital broadcasting markets. The majority of techniques
used to deliver 3D media involve the delivery of 3D-only images such as those
used by 3D broadcasting company C3D Digital, of Salt Lake City, UT, and 3D
display manufacturer Visualabs of Calgary, Canada. The 3D-only field sequential
transmissions offered by C3D Digital can only be viewed with a proprietary
decoder box and are not viewable in 2D on standard television sets. The 3D
signal used by the Visualabs 3D display is 2D compatible; however it is
proprietary to the decoder in the Visualabs display and may not be viewed in 3D
on a conventional television set. Alternative techniques produce 3D-only images
that are at best 15% larger than their 2D equivalents whereas the compression
techniques used in OpticBOOM typically deliver images that are 1% larger
than their 2D counterpart and may be viewed in 2D or 3D.

### Competition in the Broadcast Market

Competition
to our products and solutions in the Broadcast market may come in any of the
following areas:

- conversion of broadcast quality video and movies from 2D to 3D for display in 3D on televisions;
- low bandwidth encoding of 3D images to allow broadcast transmission and display in 2D or 3D; or
- real time conversion of broadcast video signals to 3D at the viewpoint.  (See Professional Audio Visual: Real
Time Converter.)

### Converting 2D Broadcast Content into 3D

As described above, Synthonics Inc. can convert certain material from 2D to 3D.  This technology could
be applied to conversion of 3D-only broadcast content.

### 2D Compatible 3D Transmission and Delivery

We
have seen demonstrations of a number of compression and encoding techniques for
the delivery of 3D broadcast programming. None of these have taken the approach
of delivering 2D compatible 3D media by compressing the 3D data and reinserting
it into the original unaltered 2D image for subsequent distribution. This
technique is subject of a number of patents applied for by us covering use in
both the analog and digital broadcasting markets. The majority of techniques
used to deliver 3D media involve the delivery of 3D-only images such as those
used by C3D Digital and Visualabs. As described above, these 3D-only
transmissions can only be viewed with a proprietary decoder box and are not
viewable in 2D on standard television sets. Alternative techniques produce
3D-only images that are at best 15% larger than their 2D equivalents whereas the
compression techniques used in OpticBOOM typically deliver images that are
1% larger than their 2D counterpart and may be viewed in 2D or 3D.

### Real Time 3D Conversion at the Viewpoint

A
small number of companies offer devices capable of providing rudimentary 3D
images on television sets. They use techniques including motion analysis of the
incoming video signal or a single depth cue template to give the appearance of
3D depth to a scene. Consequently the 3D effect produced is inconsistent and
potentially non-existent for scenes with no movement characteristics present.
C3D Digital also uses a real time converter to create 3D-only broadcast material
for distribution to their 3D channel subscribers. Due to the inherent drawbacks
of real time 3D generation (the limited 3D depth and the fact that 3D cannot
presently be automatically generated for scenes containing no motion), the
off-line 3D conversion process offered by OpticBOOM provides a more
comprehensive 3D result and allows the content owner to exercise full control
over the 3D effect in each scene, including those with no movement
characteristics present.

### Competition in the DVD Movie Market

Competition
to our products and solutions in the DVD market may come in any of the following
areas:

- conversion of broadcast quality video and movies from 2D to 3D for display in 3D on televisions;
- low bandwidth encoding of 3D images to allow delivery on DVD and display in 2D or 3D; or
- real time conversion of broadcast video signals to 3D at the viewpoint.

Converting 2D DVD Video Content to 3D

As described above, Synthonics Inc. can convert certain material from 2D to 3D. This technology could be
applied to conversion of 3D-only DVD video content.

2D Compatible 3D DVD Delivery

We
are not aware of any organization that is presently endeavoring to deliver 2D
compatible 3D DVD discs. This technique is subject of a number of patents
applied for by us. We are aware of a number of encoding techniques for the
delivery of 3D-only DVD movies. None of these have taken the approach of
delivering 2D compatible 3D media by compressing the 3D data and reinserting it
into the original unaltered 2D image for subsequent distribution. These 3D-only
DVDs can only be viewed with a proprietary decoder box and are not viewable in
2D on standard television sets.

Real Time 3D Conversion at the Viewpoint

As
described above, a small number of companies provide real time 3D converters
capable of providing rudimentary 3D images from video signals. These can be used
with DVD players.

### Competition in the Film Market

Competition to our products and solutions in the film market may come from the conversion of 35 or 70mm
movies from 2D to 3D.

We
are aware that, in addition to Synthonics, Inc., IMAX® Corporation of
Toronto, Canada is endeavoring to deliver a solution for converting 2D film to
3D. The IMAX® process, as demonstrated at a recent industry conference,
uses techniques that require certain movement characteristics in the scene to
achieve a 3D effect. The sophisticated 3D algorithms employed in OpticBOOM
Studio Pro are not limited in this manner, and therefore offer greater
capabilities to filmmakers at this time.

IMAX®
Corporation is also heavily involved in the sponsorship of 70mm 3D films for
which it provides custom 3D camera equipment, leased to filmmakers. As
previously identified, the size and technical limitations of 3D camera equipment
prevents filmmakers from capturing certain shots. The use of a 2D camera in
conjunction with the OpticBOOM process removes such restrictions from film
producers.

We are not aware of any instance
where the Synthonics process has been used to convert 35 or 70mm film to 3D.

### Competition in the Computer Animation Market

Competition
to our products and solutions in the computer animation market may come from the
present day approach of creating stereo 3D from computer graphic, wire frame
models. Animation packages are used to produce content ranging from IMAX®
movies to PC streaming video. 3D productions including T-Rex Back to the
Cretaceous and Encounter in the Third Dimension have been
created using these techniques.

Users
of many 3D, computer graphic, modeling packages may produce stereo 3D images of
an existing production. Presently, this process is time consuming, since it
requires a second image to be rendered from the wire frame models. The rendering
stage is processor intensive and time consuming, doubling the time taken to
create the 3D version in comparison to the 2D counterpart. The OpticBOOM
process allows a depth cue to be automatically created from wire frames. The
depth cues may then be used to create the stereo 3D image without requiring a
full render of a second image. This substantially reduces the time taken to
produce the stereo 3D image in comparison to the time taken using conventional
techniques.

### Competition in the Video Game Market

Competition to our products and solutions in the video game market may come from any of the following
areas:

- extraction of depth cues from streaming video and movies for compositing and display in 3D on PCs; or
- low bandwidth encoding of depth cue data on DVD disc to allow display in 2D or 3D.

We
are aware of two organizations, Synthonics Inc. and Synapix Inc., two United
States companies, whose technology could be applied to extracting depth cue
information from video material. The Synapix technique involves constructing a
depth cue from a 2D image and utilizing this to facilitate compositing. This
technology requires a minimum of two images from which to create the depth cue
therefore allowing it to be used on successive frames of a movie or video.

As described above, Synthonics Inc. can convert certain material from 2D to 3D. This technology could be
applied to conversion of 3D-only video content.

In
all the products identified as potential competitors to our media conversion
capabilities, none have taken the approach of delivering 2D compatible 3D media
by compressing the 3D data and reinserting it into the original unaltered 2D
image for subsequent distribution. This technique is subject of a number of
patents applied for by us.

### Competition in the Professional Audio/Visual Market

We
produce the following four products intended for use in the professional
audio/visual market:

Depth Cue Decoding for Set-Top Boxes, DVD Players and Accessories

Our
depth cue data format is proprietary to us and subject to patent applications
filed by us. We are aware of no other organization presently offering or
planning to offer a hardware based depth cue decoder for 3D image generation
under license or otherwise.

3D Demultiplexer to 3D Projection Systems

A
number of organizations presently supply 3D demultiplexer hardware systems.
These include VRex and QD Technologies, two United States organizations. These
hardware systems are offered in a variety of specifications that offer
equivalent performance to those offered by us.

Real Time 3D Converter

Sanyo
Corporation offers a real time converter that is marketed in the medical imaging
market in the United States. A similar product is marketed by C3D Digital as a
real time converter for use with videocassettes and DVD players in the United
States. These hardware systems are offered in a variety of specifications that
offer equivalent performance to those offered by us. Since real time 3D can only
be created in a rudimentary manner based upon certain types of movement in a
scene it is therefore of a substantially lower quality than the depth cue based
3D created with OpticBOOM Studio Pro.

Line Doubling For Video Signals

A number of organizations including Faroudja, Vidikron, DWIN, Runco and QD
Technologies manufacture and license line doubling and quadrupling technologies.
These are aimed at the professional audio visual and home theater markets. These
hardware systems are offered in a variety of specifications that offer
equivalent performance to those offered by us.

### Competition in the Arcade Game Market

Competition to our products and solutions in the arcade game market may come from any company offering
the display of 3D images.

A
number of 3D display technologies are available in the arcade game industry
including virtual reality headsets and 3D display screen lenses. Virtual reality
game participation requires the player to wear a headset. This is seen as a
deterrent to some players for health and safety reasons as well as a process
that reduces player throughput as the headset is put on and taken off between
each game. The unique, patented headset free head tracking technology used in
our 3D Projection Display is seen as a major advantage over virtual reality
headsets since it does not compromise player throughput.

3D
glasses-free display lenses have recently been previewed at video game shows
however they suffer from image distortion since they employ curved display
lenses. We are not aware of any glasses-free display lens that has been
introduced in an arcade product. None of the 3D glasses-free lenses offer a
giant display screen possible with our 3D Projection Display system.

### Employees

As
of January 15, 2001, we had 47 employees, 30 of whom
are engaged in engineering, research and development, 5 of whom are engaged in
marketing and sales activities and 12 of whom are in administration. We also
contract the services of qualified hardware and software engineers on a project
by project basis. For 2D to 3D media conversion services, we have trained eight
computer operators who work under contract to us on a project by project basis.
None of our employees is represented by a labor union. We consider our employee
relations to be satisfactory.

### Business Risks

You
should carefully consider the risks described below in evaluating our business.

### We Have A
Limited Operating History That Makes An Evaluation Of Our Business Difficult

We
concluded our reorganization and commenced our current business in May 1994. To
date, we have been engaged in product research and development and establishing
our technology development strategy. Our technologies are beginning to become
available for marketing release and licensing. In fiscal 2000, we launched our
freeware version of the OpticBOOM Plug-in software application
for Apples QuickTime Movie Player. Our limited operating history makes
evaluation of our business and prospects difficult. Companies in an early stage
of development frequently encounter heightened risks and unexpected expenses and
difficulties. For us, these risks include the following:

- limited number of customers that have deployed products and services incorporating our technology;
- limited number of manufacturers that have incorporated our technology into their products; and
- our unproven long-term business model, which depends on generating the majority of
our revenues from royalty and license fees paid by customers.

These risks, expenses and difficulties apply particularly to us because our markets are new and rapidly
evolving.

### We Have A History Of Losses And Expect To Incur Losses In The Future

We
incurred net losses of approximately $1.2 million in fiscal 1996, $1.6 million
in fiscal 1997, $2.3 million in fiscal 1998, $6.1 million in fiscal 1999, and
$7.0 million in fiscal 2000. As of the end of fiscal 2000, we had an accumulated
deficit of approximately $18.9 million. We have incurred net losses in each
quarter since our inception, and we are not likely to achieve profitability in
the next few years. We also expect to continue to incur increasing research and
development, sales and marketing and general and administrative expenses. If we
are to achieve profitability given our planned expenditure levels, we will need
to generate and sustain substantially increased license and royalty revenues;
however, we are unlikely to be able to do so for the foreseeable future. As a
result, we expect to incur significant and increasing losses and negative cash
flows for the foreseeable future.

### Our Quarterly Revenues And Operating Results Are Volatile And May Cause Our Stock Price To Fluctuate

Our
quarterly operating results have varied in the past and are likely to vary
significantly from quarter to quarter. As a result, we believe that
period-to-period comparisons of our operating results are not a good indication
of our future performance. Moreover, we expect to derive substantially all of
our revenues for the near-term from license fees and related consulting and
support services. Over the longer term, to the extent deployments increase, we
expect to derive an increasing portion of our revenues from royalties paid by
customers. If deployments do not increase or this transition otherwise does not
occur, we are unlikely to be able to generate or sustain substantially increased
revenue and our operating results will be seriously harmed.

In
the short-term, we expect our quarterly revenues to be significantly dependent
on the sale of a small number of relatively large orders for our products and
services, which generally have a long sales cycle. As a result, our quarterly
operating results may fluctuate significantly if we are unable to complete one
or more substantial sales in any given quarter. Moreover, because our expenses
are relatively fixed in the near term, any shortfall from anticipated revenues
could result in losses for the quarter.

### We Have An Immediate Need For Additional Funds Which May Cause Dilution To Existing Shareholders

We
require substantial working capital to fund our business, particularly in light
of our expected continued operating losses. Although we believe our existing
cash balances and cash flow expected to be generated from future operations
should be sufficient to meet our working capital requirements for at least five
months, there can be no assurance that such funds will be sufficient. To the
extent that such funds are insufficient to finance our working capital
requirements, we will be required to raise additional funds through private or
public equity or debt financing. Such additional financing could result in
dilution to existing stockholders. There can be no assurance that the additional
equity or debt financing, if required, will be available on acceptable terms, on
a timely basis or at all. In the event that additional financing is unavailable,
we may be required to reduce our sales and marketing efforts.

### We Expect Our Operations To Continue To Produce A Negative Cash Flow;  Consequently,  If We Cannot Raise Additional
Capital, We May Not Be Able To Fund Our Continued Operations

Since
our inception, cash used in our operations has substantially exceeded cash
received from our operations, and we expect this trend to continue for the
foreseeable future. As a result, we may need to raise additional funds, and we
cannot be certain that we will be able to obtain additional financing on
favorable terms, or at all. If we need additional capital and cannot raise it on
acceptable terms, we may not be able to, among other things:

- develop or enhance our products and services;
- hire, train and retain employees; or
- respond to competitive pressures or unanticipated requirements.

### The Market For Our Products Is New And May Not Develop As We Anticipate

Because
the market for our products is newly emerging, the potential size of this new
market opportunity and the timing of its development are uncertain. As a result,
our profit potential is unproven. We are dependent upon the commercialization
and broad acceptance by consumers and businesses of a wide variety of our
products. A key component of our business is to enable businesses to deliver a
new generation of interactive digital content and applications to users.
Accordingly, some of our success will depend upon our ability to adhere to and
adapt our products to evolving Internet, DVD and broadcast protocols and
standards so that users may obtain popular content. If the market for our
products does not develop or develops more slowly than we anticipate, our
revenues will not grow as fast as anticipated, if at all.

### Our Success Depends On Customers Introducing, Marketing And Promoting Products And Services
For 3D Applications Based On Our Technology

Our
success depends on large customers such as cable television operators, Internet
content providers, graphic software publishers, photographic image processors,
web developers, television content providers, film content providers and film
library owners introducing, marketing and promoting products and services based
on our technology. To date, our products and services have been primarily used
in connection with the conversion of 35mm and 70mm film and professional video
media and computer animations from 2D to 3D.

Moreover,
because the large-scale deployment of products and services incorporating our
technology by customers is complex, time-consuming and expensive, each
deployment of these products and services requires our expertise to tailor our
technology to the customers particular product offering. This
customization process requires a lengthy and significant commitment of resources
by our customers and us. This commitment of resources may slow deployment which
could, in turn, delay market acceptance of these products and services. Unless
customers introduce, market and promote products and services incorporating our
technology in a successful and timely manner, our software platform will not
achieve widespread acceptance, manufacturers will not use our software in their
products and our revenues will not grow as fast as anticipated, if at all.

### If Hardware  Manufacturers  Do Not Manufacture  Products That  Incorporate Our Technology,  Or If These Products Do
Not Achieve Acceptance, We May Not Be Able To Sustain Or Grow Our Business

We
do not manufacture hardware components that incorporate our technology. Rather,
we intend to license software technology to manufacturers of cable set-top
boxes, PC peripherals, DVD players, and digital cameras and camcorders.
Accordingly, our success will depend, in part, upon our ability to convince a
number of these manufacturers to manufacture products incorporating our
technology and the successful introduction and commercial acceptance of these
products. Our efforts in this regard are significantly dependent on customers
deploying services using our technology. While we have had discussions with a
variety of manufacturers, we have not entered into any agreements with any
manufacturers to produce products which incorporate our technology. Our failure
to convince these manufacturers to incorporate our software platform into their
products, or the failure of these products to achieve broad acceptance with
consumers and businesses, will result in revenues that do not grow as fast as
expected, if at all.

### Competition From Bigger, Better Capitalized Competitors Could Result In Price Reductions,
Reduced Gross Margins And Loss Of Market Share

The
market for our products is new, competitive, subject to rapid technological
change and evolving standards and significantly affected by new product
introductions and other market activities of industry participants. We believe
competition will intensify as the markets we have targeted develop and
competitors focus on additional product and service offerings. Increased
competition could result in price reductions, fewer customer orders, reduced
gross margins, longer sales cycles and loss of market share, any of which would
materially adversely affect our business, operating results and financial
condition.

Many
of our existing and potential competitors have longer operating histories,
longer customer relationships, greater name recognition and significantly
greater financial, technical, sales and marketing and other resources than we
do. Such competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or devote greater resources to
the development, promotion and sales of their products than we can. Further,
current or potential competitors may make strategic acquisitions or establish
cooperative relationships among themselves or with third parties, thereby
increasing their ability to address the needs of our current or prospective
customers. Our current or future indirect channel partners may establish
cooperative relationships with current or potential competitors, thereby
limiting our ability to sell our products through particular distribution
channels. Accordingly, it is possible that new competitors or alliances among
current competitors may emerge and rapidly gain significant market share. There
can be no assurance that existing or future competitors will not develop or
offer technologies that provide significant economic, technological, creative or
strategic advantages over those offered by us.

Our
ability to retain our existing customers and attract new customers depends on
the quality of our products and services, the speed of our technological
developments, the price of our products and services, our quality of marketing,
our reputation in the industry and our ability to maintain customer
satisfaction. To that end, we must continue to develop appropriate marketing
solutions, incorporate new technological capabilities, meet time sensitive
deadlines and devise appropriate pricing strategies. To the extent that our
competitors are perceived as providing superior products and services, or to the
extent that our customers are dissatisfied with our products and services, our
business, operating results and financial condition could be materially
adversely affected.

### Our Lengthy  Sales Cycle May Cause  Fluctuations  In Our  Operating  Results,  Which Could Cause Our Stock Price To
Decline

We
believe that the purchase of our products and services involves a significant
commitment of capital and other resources by a customer. In many cases, the
decision for our customers to use our products and services requires them to
change their established business practices and conduct their business in new
ways. As a result, we may need to educate our potential customers on the use and
benefits of our products and services. In addition, our customers generally must
consider a wide range of other issues before committing to purchase and
incorporate our technology into their offerings. As a result of these and other
factors, including the approval at a number of levels of management within a
customers organization, we expect our sales cycle to average from six to
12 months and may sometimes be significantly longer. Because of the length of
our sales cycle, we have a limited ability to forecast the timing and amount of
specific sales.

### Our Success Depends On Our Ability To Keep Pace With The Latest Technological Changes

The
market for our products is characterized by evolving industry standards, rapid
technological change and frequent new product introductions and enhancements.
Our technology enables businesses to deliver a new generation of interactive
digital content and applications to users. Accordingly, our success will depend
in large part upon our ability to adhere to and adapt our products to evolving
protocols and standards. Therefore, we will need to develop and introduce new
products that meet changing customer requirements and emerging industry
standards on a timely basis. We may encounter delays in the development and
introduction of future products as well. In addition, we may:

- fail to design our current or future products to meet customer requirements;
- fail to develop and market products and services that respond to technological
changes or evolving industry standards in a timely or cost-effective manner; and
- encounter products, capabilities or technologies developed by others that render our
products and services obsolete or noncompetitive or that shorten the life cycles
of our existing products and services.

### Our Limited Ability To Protect Our Intellectual Property And Proprietary Rights May Harm Our Competitiveness

Our
ability to compete and continue to provide technological innovation is
substantially dependent upon internally developed technology. We rely primarily
on a combination of trademark laws, copyright laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary
technology. In addition, we have 17 patent applications pending in the United
States and Australia. Patents may not be issued from these or any future
applications. Even if they are issued, these patents may not survive a legal
challenge to their validity or provide significant protection for us.

The
steps we have taken to protect our proprietary rights may not be adequate to
prevent misappropriation of our proprietary information. Further, we may not be
able to detect unauthorized use of, or take appropriate steps to enforce, our
intellectual property rights. Our competitors may also independently develop
similar technology. In addition, the laws of many countries do not protect our
proprietary rights to as great an extent as do the laws of the United States.
Any failure by us to meaningfully protect our intellectual property could result
in competitors offering products that incorporate our most technologically
advanced features, which could seriously reduce demand for our products and
services.

### We Do Not Currently Have Liability Insurance To Protect Against Third-Party Intellectual
Property Infringement Claims That Could Be Expensive To Defend

We
expect that, like other software product developers, we will increasingly be
subject to infringement claims as the number of products and competitors
developing 3D software grows and the functionality of products in different
industry segments overlaps. We cannot guarantee that:

- an infringement claim will not be asserted against us in the future;
- the assertion of such a claim will not result in litigation;
- we would prevail in such litigation; or
- we would be able to obtain a license for the use of any infringed intellectual
property from a third party on commercially reasonable terms, or at all.

We
currently do not have liability insurance to protect against the risk that
licensed third-party technology infringes the intellectual property of others.
Any claims relating to our intellectual property, regardless of their merit,
could seriously harm our ability to develop and market our products and manage
our day-to-day operations because they could:

- be time consuming and costly to defend;
- divert management's attention and resources;
- cause product shipment delays;
- require us to redesign our products; or
- require us to enter into royalty or licensing agreements.

### Failure To Manage Our Growth May  Seriously  Harm Our  Ability  To Deliver  Products  In A Timely  Manner,  Fulfill
Existing Customer Commitments And Attract And Retain New Customers

Our
rapid growth has placed, and is expected to continue to place, a significant
strain on our managerial, operational and financial resources, especially as
customers incorporate our software into their products and services. To the
extent we add several customers simultaneously or add customers whose product
needs require extensive customization, we may need to significantly expand our
operations. Moreover, we expect to significantly expand our domestic and
international operations by, among other things, expanding the number of
employees in professional services, research and development and sales and
marketing.

This
additional growth will place a significant strain on our limited personnel,
financial and other resources. Our future success will depend, in part, upon the
ability of our senior management to manage growth effectively. This will require
us to implement additional management information systems, to further develop
our operating, administrative, financial and accounting systems and controls, to
hire additional personnel, to develop additional levels of management within the
corporation, and to maintain close coordination among our development,
accounting, finance, sales and marketing, consulting services and customer
service and support organizations. Failure to accomplish any of these
requirements would seriously harm our ability to deliver products in a timely
fashion, fulfill existing customer commitments and attract and retain new
customers.

### The Loss Of Any Of Our Key Personnel Would Harm Our Competitiveness

We
believe that our success will depend on the continued employment of our senior
management team and key technical personnel. If one or more members of our
senior management team or key technical personnel were unable or unwilling to
continue in their present positions, these individuals would be very difficult
to replace and our ability to manage day-to-day operations, develop and deliver
new technologies, attract and retain customers, attract and retain other
employees and generate revenues, would be seriously harmed. We do not maintain
key-man life insurance for any of our management.

### Our Planned Expansion Of Our Distribution Channels Will Be Expensive And May Not Succeed

We
intend to reach our customers through distribution agreements and strategic
partnerships. The development of these indirect channels will require the
investment of significant company resources, which could seriously harm our
business if our efforts do not generate significant revenues. Moreover, we may
not be able to attract indirect channel partners that will be able to
effectively market our products and services. The failure to recruit indirect
channel partners that are able to successfully market our products and services
could seriously hinder the growth of our business.

### Increasing Government Regulation Could Cause Demand For Our Products And Services To Decline Significantly

We
are subject not only to regulations applicable to businesses generally, but also
laws and regulations directly applicable to the Internet. Although there are
currently few such laws and regulations, state, federal and foreign governments
may adopt a number of these laws and regulations governing any of the following
issues:

- abuser privacy;
- copyrights;
- consumer protection;
- taxation of e-commerce;
- the online distribution of specific material or content; and
- the characteristics and quality of online products and services.

The
likelihood of such regulation being enacted will increase as the Internet
becomes more pervasive and extends to more peoples daily lives. Any such
legislation or regulation could dampen the growth of the Internet and decrease
its acceptance as a communications and commercial medium. If such a reduction in
growth occurs, demand for our products and services will decline significantly.

### We Are At Risk Of Securities Class Action Litigation Due To Our Expected Stock Price Volatility

In
the past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its securities.
This risk is especially acute for us because technology companies have
experienced greater than average stock price volatility in recent years and, as
a result, have been subject to, on average, a greater number of securities class
action claims than companies in other industries. Due to the potential
volatility of our stock price, we may in the future be the target of similar
litigation. Securities litigation could result in substantial costs and divert
managements attention and resources.

### Undiscovered Defects In Our Software May Arise Which Could Cause A Loss Of Customers

Our
products are complex software products which may contain defects or failures
that may be detected at any point in the products life. We test our
products; however, errors may still be found in new products or releases of
commercial shipment, resulting in loss of or delay in revenues, loss of market
share, failure to achieve market acceptance, diversion of development resources
and harm to our reputation. We may experience delays or lost revenue to correct
such defects in the future. Any such occurrence could have a material adverse
effect on our business, operating results and financial condition.

### A Significant Portion Of Our Common Stock Is Controlled By Existing Officers And Directors

Our
executive officers and directors currently own an aggregate of 1,882,500
options, warrants and issued common shares, which represents approximately
34% of the outstanding common shares as of the date hereof. As a result
of this stock ownership, these officers and directors may be in a position to
affect corporate actions in a manner that could conflict with the interests of
our public shareholders.

### We Have Not, And Do Not Anticipate Declaring Dividends

All of our available funds will be invested to finance the growth of our business and, therefore,
investors cannot expect and should not anticipate receiving a dividend on the common shares in the foreseeable
future.

### Enforcement Of Civil Liabilities Against Us May Be Difficult

As
a substantial amount of our assets are located outside of the United States, it
may be difficult or impossible to enforce judgments granted by a court the
United States against our assets and our subsidiaries or our directors and
officers which are resident outside of the United States.

### We Are Subject To Government Regulations, Including Safety Standards, Of A Number Of Countries

We
are commercially active in a number of countries which regulate aspects of our
products. Full compliance in one jurisdiction is not a guarantee that products
do not violate regulations or exceed safety limits in other jurisdictions.
Although our licensees are generally responsible for compliance with safety and
other laws in each country to which licensed products are supplied, there can be
no absolute guarantee that product liability can be isolated to our licensees or
that our prototypes could not cause litigation in case of accidental malfunction
or breach of safety standards. There can be no assurance that the claims against
us can be successfully defended or that the consequences of such litigation may
not have a material effect on our business or financial results.

Prior
to introducing the hardware products in certain countries, we may be required to
submit products for testing to local electrical and electromagnetic interference
safety standards. Failure to be able to meet the local safety standards may
result in our not being approved to sell the products in the country concerned.
There can be no assurance that we will be able to comply with such regulations.

### Our Assets And Liabilities Are Subject To Currency Fluctuations

We
currently bill only in United States and Australian dollars with our revenues
and expenses, and our assets and liabilities recorded in our subsidiary
companys functional currency which is translated to Canadian dollars for
reporting purposes. Exchange rates for these currencies often fluctuate in
relation to the Canadian dollar and such fluctuations may effect our assets and
liabilities when they are translated to Canadian dollars. We do not currently
engage in any hedging transactions in international currencies.

### There Is No Public Market For Our Securities In The United States

Our
securities are currently only traded on the Canadian Venture Exchange. There is
no guarantee that a liquid, public market will exist for our securities.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

The
words may, will, expect,
anticipate, believe, continue,
estimate, project, intend, and similar
expressions used in this prospectus are intended to identify forward-looking
statements. You should not place undue reliance on these forward-looking
statements, which speak only as of the date made. You should also know that such
statements are not guarantees of future performance and are subject to risks,
uncertainties and assumptions. Should any of these risks or uncertainties
materialize, or should any of our assumptions prove incorrect, actual results
may differ materially from those included within the forward-looking statements.

### ITEM 2 DESCRIPTION OF PROPERTY

Dynamic  Digital Depth  Australia Pty. Ltd.  exercised an option deed on a building  comprising five units
totaling 1,711 square meters located at 6 Brodie Hall Drive,  Technology  Park,  Bentley,  Western  Australia.  The
purchase of the building was  completed on October 15, 1999.  Dynamic  Digital Depth  Australia  Pty. Ltd. has sold
two units,  including unit 1 occupied by our  subsidiaries  and us comprising  758 square  meters,  and is actively
seeking  purchasers for the remaining  units.  Upon selling unit 1, Dynamic Digital Depth Australia Pty Ltd entered
into a ten-year lease with the purchaser at an annual rental of A$121,280.

We maintain an office comprising approximately 5,000 square feet in California at an annual cost of
US$216,000.

### ITEM 3 LEGAL PROCEEDINGS

On
January 22, 1999 Angus Duncan Richards served a notice of dispute on us related
to the terms of a consulting agreement between Richards and us. Richards alleges
that we have breached the consulting agreement through the failure to make
payments to Richards out of the gross annual income receipts and capital funds
raised in connection with the exploitation of certain technologies which
Richards assisted in developing. Richards also alleges that we have failed to
use our best endeavors to commercially exploit the technology. Richards also
demands that certain intellectual property, which was assigned to Dynamic
Digital Depth Research Pty. Ltd., be returned to Richards. In the event that
Richards succeeds in his claim for payment, we would be exposed to a liability
to pay to Richards A$237,000 together with further payments not exceeding
A$200,000 per annum to a maximum of A$1,000,000.00, contingent upon the extent
to which we derive revenue and capital from commercial exploitation of certain
technologies which Richards assisted in developing. The dispute is subject to
arbitration for which no date has been set. We refute all of the allegations and
intend to rigorously defend this matter.

On
December 18, 1998, Richards commenced litigation in The Court of Queens
Bench of Alberta, Judicial District of Calgary, in Alberta, Canada seeking
monetary damages of $227,500 plus interest and court costs. Richards alleges
that we failed to permit him to exercise options to purchase 182,000 common
shares at an exercise price $1.25 per share. We refused to permit Richards to
exercise the options based upon a determination that the options had expired
prior to Richards attempt to exercise the options. We filed a Statement of
Defense on February 10, 1999. The litigation is currently at the point of
awaiting a decision on an application by Richards to amend his statement of
claim to join additional defendants and to increase the monetary damages claim
to an estimated CAN$2,402,000 plus punitive damages of CAN$100,000 plus
unqualified damages of up to CAN$1,137,500 less trading commission plus interest
and costs. We refute all of the allegations and intend to rigorously defend this
matter.

### ITEM 4   CONTROL OF REGISTRANT

The following table sets forth certain information regarding the beneficial ownership of our common
shares as of January 15, 2001 by each person who, to our knowledge, beneficially owned more than 10% of the
common shares.

`=========================================================== ================================= ===========================

               Name and Place of Residence                   Number of common shares Owned    Percentage of Outstanding
                                                                or Controlled as at the             common shares
                                                                     Effective Date
----------------------------------------------------------- --------------------------------- ---------------------------
------------------------------------------------- --------------------------------- ---------------------------

CDS & Co. (1)                                                5,317,945                        23.8%
NCI Account
25 The Esplanade
P.O. Box 1038, Station A
Toronto, Ontario
M5W 1G5
------------------------------------------------- --------------------------------- ---------------------------
------------------------------------------------- --------------------------------- ---------------------------

Westgate International, L.P. (2)                             3,375,480                        14.6%
c/o Midland bank Trust
Corporate Cayman Limited
P.O. Box 1109
Mary St.
Grand Cayman, Cayman Islands
------------------------------------------------- --------------------------------- ---------------------------

The Liverpool Limited Partnership (2)                        3,375,479                        14.6%
c/o A S & K Services Ltd.
P.O. Box HM 1179
Hamilton Bermuda, HMEX
================================================= ================================= ===========================`

(1)  CDS & Co. is a depository/intermediary.  The identity of the beneficial shareholders of these
securities is not known to us.

(2)  Information  as to beneficial  ownership has been  provided to us by these  beneficial  shareholders.
The general  partners of these  beneficial  shareholders  are  Hambledon,  Inc.  and  Liverpool  Associates,  Ltd.,
respectively.  We have no information as to the identity of the limited partners of these entities.

### ITEM 5   NATURE OF TRADING MARKET

Since
our founding in September of 1993 through the merger of the Vancouver and
Alberta Stock Exchanges in November 1999, common shares have been listed and
posted for trading on the Canadian Venture Exchange, or CDNX, and the Alberta
Stock Exchange, or ASE, under the stock symbol DDE. Prior to
November 1999, our common shares were traded on the ASE. The following table
sets forth the high and low closing bid prices on the CDNX and ASE and the
volume of common shares traded for each fiscal quarter for the period indicated.
All financial figures are expressed in Canadian dollars.

|Fiscal Period      | High   | Low   | Volume   
|------------------ | ------ | ----- | ---------
|(June 30 year-end)
|2001              
|Second Quarter     | 4.48   | 3.00  | 797,354  
|First Quarter      | 6.35   | 4.10  | 236,400  
|2000              
|Fourth Quarter     | $7.25  | $4.56 | 562,800  
|Third Quarter      | $16.50 | $6.35 | 874,565  
|Second Quarter     | $9.50  | $3.25 | 575,565  
|First Quarter      | $9.25  | $2.50 | 1,124,548
|1999              
|Fourth Quarter     | $3.80  | $1.15 | 939,164  
|Third Quarter      | $1.50  | $0.80 | 121,720  
|Second Quarter     | $2.05  | $1.10 | 223,437  
|First Quarter      | $2.20  | $1.65 | 886,478  
|1998              
|Fourth Quarter     | $2.25  | $1.20 | 1,605,107
|Third Quarter      | $1.90  | $0.75 | 421,963  
|Second Quarter     | $2.00  | $1.25 | 523,799  
|First Quarter      | $2.30  | $1.15 | 852,689  

Prices and volume for periods prior to August 1998 have been restated to give effect to a one-for-five
reverse stock split.  On January 15, 2001, the closing bid price of the common shares on the CDNX was
$3.70 per share.

As of January 15, 2001 common shares were held by 26
registered holders in the United States. We believe that there are additional
beneficial owners of our common shares who own their shares in street
name. The common shares currently are not listed for trading on any
securities exchange in the United States. The common shares are not registered
to trade in the United States in the form of American Depository Receipts or
similar certificates.

### ITEM 6 EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

There
are no governmental laws, decrees or regulations in Canada relating to
restrictions on the export or import of capital, or affecting the remittance of
interest, dividends or other payments by the Company to non-residents. Dividends
paid to United States residents, however, are subject to a 15% withholding tax
or a 5% withholding tax for dividends if the shareholder is a corporation owning
at least 10% of the outstanding voting shares of the corporation pursuant to
Article X of the reciprocal tax treaty between Canada and the United States.
(See Item 7 - Taxation)

In
addition, there are no limitations specific to the rights of non-Canadians to
hold or vote the common shares under the laws of Canada or the Province of
Alberta, or in the charter documents of the Company.

Management
of the Company believes that the Investment Canada Act (the Act)
which governs the basis on which non-Canadians may invest in Canadian
businesses, does not apply in the case of the Company, as the Company does not
(a) have a place of business in Canada; (b) employ individuals in Canada in
connection with its business; and (c) have assets in Canada which are used in
carrying on the Companys business.

### ITEM 7 TAXATION

### Canadian Taxation Issues

The
following is a summary of the principal Canadian federal income tax
considerations generally applicable in respect of the common shares. The tax
consequences to any particular holders of common shares will vary according to
the status of that holder as an individual, trust, corporation or member of a
partnership, the jurisdiction in which that holder is subject to taxation, the
place where that holder is resident and, generally, according to that
holders particular circumstances.

This
summary is applicable only to holders who are resident in the United States,
have never been resident in Canada, hold their common shares as capital assets
and will not use or hold the common shares in carrying on business in Canada.

The
following general discussion in respect of taxation is based upon our
understanding of the rules. No opinion was requested by us or provided by our
auditors and lawyers.

Generally,
dividends paid by Canadian corporations to non-resident shareholders are subject
to a withholding tax of 25% of the gross amount of such dividends. However,
Article X of the tax treaty between Canada and the United States reduces to 15%
the withholding tax on the gross amount of dividends paid to residents of the
United States. A further reduction in the withholding tax rate on the gross
amount of dividends to 5% for dividends paid in 1997 and thereafter where a
United States corporation owns at least 10% of the voting stock of the Canadian
corporation paying the dividends.

A
non-resident who holds common shares as a capital asset will not be subject to
taxes on capital gains realized on the disposition of such common shares unless
such common shares are taxable Canadian property within the meaning
of the Income Tax Act (Canada) and no relief is afforded under any applicable
tax treaty. The common shares would be taxable Canadian property of a
non-resident if, at any time during the five year period immediately preceding a
disposition by the non-resident of such common shares not less than 25% of the
issued shares of any class belonged to the non-resident, the person with whom
the non-resident did not deal at arms length, or to the non-resident and
any person with whom the non-resident did not deal at arms length. Article
XIII of the tax treaty between Canada and the United States provides relief from
Canadian tax on capital gains from the sale of common shares which are
taxable Canadian property unless the person who disposes of the
common shares:

a)   was resident in Canada for 120 months in the 20 years preceding the disposition;

b)   was resident in Canada at any time in the 10 years preceding the disposition; and

c)   the common shares were owned at the time the person ceased to be resident in Canada.

### United States Federal Income Tax Consequences

The
following is a general discussion of certain United States federal income tax
consequences that may apply to a U.S. Holder (as defined below) of
common shares. This discussion is based upon the sections of the Internal
Revenue Code of 1986, as amended (the Code), the Treasury Department
regulations promulgated thereunder (the Regulations), published
Internal Revenue Service (IRS) rulings, published administrative
positions of the IRS, and court decisions that are currently applicable, any or
all of which could materially and adversely change at any time, possibly on a
retroactive basis. In addition, the discussion does not consider the potential
effects, both adverse and beneficial, of any proposed legislation which, if
enacted, could be applied at any time, possibly on a retroactive basis. The
following discussion is not intended to be, nor should it be construed to be,
legal or tax advice to any holder or prospective holder of common shares. No
opinion was requested by us, or is provided by our lawyers and/or auditors, with
respect to the United States federal income tax consequences described in the
following discussion. Accordingly, holders and prospective holders of common
shares should consult their own tax advisors about the United States federal,
state, local and foreign tax consequences of purchasing, owning, and disposing
of common shares.

### U.S. Holders

As
used herein, a U.S. Holder includes a holder of common shares who is
a citizen or resident of the United States, a corporation or partnership created
or organized in or under the laws of the United States or of any political
subdivision thereof, certain defined trusts and estates, and any other person or
entity whose ownership of common shares is effectively connected with the
conduct of a trade or business in the United States. A U.S. Holder does not
include persons subject to special provisions of Federal income tax law, such as
tax-exempt organizations, qualified retirement plans, financial institutions,
insurance companies, real estate investment trusts, regulated investment
companies, broker-dealers, non-resident alien individuals or foreign
corporations whose ownership of common shares is not effectively connected with
the conduct of a trade or business in the United States and shareholders who
acquired their stock through the exercise of employee stock options or otherwise
as compensation.

### Distributions on common shares

U.S.
Holders receiving dividend distributions (including constructive dividends) with
respect to common shares are required to include in gross income for United
States federal income tax purposes the gross amount of such distributions to the
extent that we have current or accumulated earnings and profits, without
reduction for any Canadian income tax withheld from such distributions. Such
Canadian tax withheld may be credited, subject to certain limitations, against
the U.S. Holders United States federal income tax liability or,
alternatively, may be deducted in computing the U.S. Holders United States
federal taxable income by those who itemize deductions. (See the detailed
discussion at Foreign Tax Credit below). To the extent that
distributions exceed our current or accumulated earnings and profits, they will
be treated first as a return of capital up to the U.S. Holders adjusted
basis in the common shares (and not subject to tax) and thereafter as gain from
the sale or exchange of the common shares (which is taxable as capital gains).
Preferential tax rates for long-term capital gains may apply to certain U.S.
Holders who satisfy minimum holding period and other requirements. There are
currently no preferential tax rates for long-term capital gains for a U.S.
Holder that is a corporation.

Dividends
paid on the common shares generally will not be eligible for the
dividends-received deduction available to corporations receiving dividends from
certain United States corporations. A U.S. Holder which is a corporation may,
under certain circumstances, be entitled to a 70% deduction of the United States
source portion of dividends paid by us (unless we qualify as a foreign
personal holding company or a passive foreign investment
company, as defined below) if such U.S. Holder owns shares representing at
least 10% of our voting power and value. The availability of this deduction is
subject to several complex limitations which are beyond the scope of this
discussion.

### Foreign Tax Credit

A
U.S. Holder who pays (or has withheld from distributions) Canadian income tax
with respect to the ownership of common shares may be entitled, at the option of
the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid
or withheld. Furthermore, a US Holder which is a domestic corporation may claim
a deemed paid foreign tax credit based on the underlying income taxes paid by
us.

Generally,
it will be more advantageous to claim a credit because a credit reduces United
States federal income taxes on a dollar-for-dollar basis, while a deduction
merely reduces the taxpayers income subject to tax. This election is made
on a year-by-year basis and applies to all foreign income taxes (or taxes in
lieu of income tax) paid by (or withheld from) the U.S. Holder during the year.
There are significant and complex limitations which apply to the credit, among
which is the general limitation that the credit cannot exceed the proportionate
share of the U.S. Holders United States federal income tax liability that
the U.S. Holders foreign source income bears to his/her or our worldwide
taxable income. In the determination of the application of this limitation, the
various items of income and deduction must be allocated to foreign and domestic
sources. Complex rules govern this allocation process. There are further
limitations on the foreign tax credit for certain types of income such as
passive income, high withholding tax interest,
financial services income, shipping income, and certain
other classifications of income. The availability of the foreign tax credit, the
deemed paid foreign tax credit, and the application of the limitations on the
credit are fact-specific and holders and prospective holders of common shares
should consult their own tax advisors regarding their individual circumstances.

### Disposition of common shares

A
U.S. Holder will recognize gain or loss upon the sale of common shares equal to
the difference, if any, between (i) the amount of cash plus the fair market
value of any property received, and (ii) the shareholders tax basis in the
common shares. This gain or loss will be capital gain or loss if the common
shares are a capital asset in the hands of the U.S. Holder, which will be a
short-term or long-term capital gain or loss depending upon the holding period
of the U.S. Holder. Gains and losses are netted and combined according to
special rules in arriving at the overall capital gain or loss for a particular
tax year. Deductions for net capital losses are subject to significant
limitations. For U.S. Holders who are individuals, any unused portion of such
net capital loss may be carried over to be used in later tax years until such
net capital loss is thereby exhausted. For U.S. Holders that are corporations
(other than corporations subject to Subchapter S of the Code), an unused net
capital loss may be carried back three years from the loss year and carried
forward five years from the loss year to be offset against capital gains until
such net capital loss is thereby exhausted.

### Australian Taxation Issues

Our
shareholders are not directly subject to any Australian income taxes, however,
we are subject to the following tax laws related to our Australian subsidiaries.

Our
Australian subsidiaries will be assessed separately to Australian income tax on
all income sourced worldwide. The Australian tax year runs from July 1 to June
30, however permission can be sought for a substituted tax year to coincide with
the tax year of an overseas holding company. Trading profits and other income of
the subsidiaries is taxable at the rate of 34%. The Federal Government of
Australia is presently considering introducing a goods and services tax
(GST) which, if introduced, may coincide with a reduction in the
corporate rate of income tax, but will increase the tax expense for the
subsidiaries of goods and services consumed by them. Capital gains are taxed at
the ordinary company income tax rate. Dividends paid by our Australian
subsidiaries will be free from dividend withholding tax in Australia only to the
extent that the relevant subsidiary has paid Australian tax on profits from
which the dividends are paid (called franked dividends). Where a
dividend paid by the relevant subsidiary is not franked, a 15%
withholding tax is payable under the Canada-Australia double tax treaty provided
that we do not maintain a permanent establishment in Australia or a fixed base
for the performance of independent personal services and the holding giving rise
to the dividend is effectively connected with the permanent
establishment or fixed base.

The
trading losses of the subsidiaries incurred in the 1989/1990 financial year and
subsequent years can be carried forward indefinitely and offset against future
assessable income provided that the subsidiaries satisfy at least one of the
tests of continuity of more than 50% of shareholding and control or continuity
of carrying on the same business.

Since
we hold more than 15% of the equity, control or income of the subsidiaries any
interest bearing loans made by us to the subsidiaries must not exceed the ratio
of 2:1 debt/equity or the subsidiaries will be denied a tax deduction for
interest paid on the debt to the extent that the ratio is exceeded. Australian
withholding tax on interest is at the rate of 10%.

Intercompany
pricing rules apply to enable the Australian Commissioner of Taxation to adjust
prices, with respect to underpriced receivables from foreign associates of
Australian companies and overpriced revenue payable to such associates, back to
arms length prices.

Companies
are assessed for Australian income tax separately notwithstanding that they are
part of a group of companies however intergroup losses can be transferred where
there is 100% common ownership of the Australian resident companies by an
ultimate corporate shareholder throughout the period of the relevant year or
years of income.

### Other Considerations

In
the following four circumstances, the above sections of the discussion may not
describe the United States federal income tax consequences resulting from the
holding and disposition of common shares. However, on the basis of (a) the
number of shareholders of our common shares, (b) the majority ownership of our
shares by Canadian and other non-U.S. residents, and (c) the fact that the
majority of our assets are actively managed (not passively held), we believe
that it is neither a Foreign Personal Holding Company, Foreign
Investment Company, Passive Foreign Investment Company, nor a
Controlled Foreign Company.

### Foreign Personal Holding Company

If
at any time during a taxable year more than fifty percent (50%) of the total
combined voting power or the total value of our outstanding shares is owned,
actually or constructively, by five or fewer individuals who are citizens or
residents of the United States, and sixty percent (60%) or more of our gross
income for such year was derived from certain passive sources (e.g. from
dividends received from our subsidiaries), we would be treated as a
foreign personal holding company for United States federal income
tax purposes. In that event, U.S. Holders that hold common shares would be
required to include in gross income for such year their allowable portions of
such passive income to the extent we do not actually distribute such income.

### Foreign Investment Company

If
fifty percent (50%) or more of the combined voting power or total value of our
outstanding shares is held, actually or constructively, by citizens or residents
of the United States, United States domestic partnerships or corporations, or
estates or trusts (as defined by Code Section 7701(a)(30)), and we are found to
be engaged primarily in the business of investing, reinvesting, or trading in
securities, commodities, or any interest therein, it is possible that we might
be treated as a foreign investment company as defined in Section
1246 of the Code, causing all or part of any gain realized by a U.S. Holder
selling or exchanging common shares to be treated as ordinary income rather than
capital gains.

### Passive Foreign Investment Company

As
a foreign corporation with U.S. Holders, we could potentially be treated as a
passive foreign investment company (PFIC), as defined in Section
1297 of the Code, depending upon the percentage of our income which is passive,
or the percentage of our assets which are held for the purpose of producing
passive income.

The
rules governing PFICs can have significant tax effects on U.S. shareholders of
foreign corporations. Section 1297(a) of the Code defines a PFIC as a
corporation that is not formed in the United States and, for any taxable year,
either (i) seventy-five percent (75%) or more of our gross income is
passive income, which includes interest, dividends and certain rents
and royalties or (ii) the average percentage, by fair market value (or, if we
are a controlled foreign corporation or makes an election, by adjusted tax
basis), of our assets that produce or are held for the production of
passive income is fifty percent (50%) or more. The taxation of a
U.S. shareholder who owns stock in a PFIC is extremely complex and is therefore
beyond the scope of this discussion. U.S. persons should consult with their own
tax advisors with regard to the impact of these rules.

### Controlled Foreign Company

If
more than fifty percent (50%) of the voting power of all classes of stock or the
total value of the stock of we are owned, directly or indirectly, by citizens or
residents of the United States, United States domestic partnerships and
corporations or estates or trusts other than foreign estates or trusts, each of
whom own 10% or more of the total combined voting power of all classes of our
stock or the total value of our stock (United States shareholders),
we could be treated as a controlled foreign corporation under Subpart F of the
Code.

This
classification would trigger the application of many complex results including
the required inclusion by such United States shareholders in income of their pro
rata share of our Subpart F income (as specifically defined by the
Code) and our earnings invested in U.S. property. In addition, regardless of our
classification as a Controlled Foreign Corporation under Section 1248 of the
Code, gain from the sale or exchange of common shares by a U.S. person who is or
was a United States shareholder (as defined above) at any time during the
five-year period ending with the sale or exchange is treated as ordinary
dividend income to the extent of our earnings and profits attributable to the
stock sold or exchanged. Because of the complexity of Subpart F and Section
1248, and because it is not clear that we are a controlled foreign corporation,
a more detailed review of these rules is outside of the scope of this
discussion.

### ITEM 8 SELECTED FINANCIAL DATA

The
following selected consolidated financial data should be read in conjunction
with the financial statements and notes thereto and with Operating and
Financial Review and Prospects and other financial data included elsewhere
in this prospectus. The consolidated statements of loss and deficit for the
years ended June 30, 2000, 1999 and 1998 and the balance sheet data at June 30,
2000 and 1999, are derived from audited consolidated financial statements
included elsewhere in this prospectus. The consolidated statements of loss and
deficit for the year ended June 30, 1997 and 1996 and the balance sheet data at
June 30, 1998, 1997 and 1996 are derived from audited consolidated financial
statements not included elsewhere in this prospectus. Our audited consolidated
financial statements are prepared in Canadian GAAP which vary in certain
respects from U.S. GAAP. See Note 19 to the financial statements for a
discussion of the significant differences between Canadian GAAP and U.S. GAAP as
they apply to us for the periods presented therein. Note that historical results
are not necessarily indicative of future results.

`At June 30, 2000
                                                                          ($000's)
                                          --------------------------------------------------------------------------

                                              2000           1999           1998           1997           1996
                                              ----           ----           ----           ----           ----
Income Loss and Deficit
Total Revenue                                   438            199            368            279            912
Net Loss From Period                         (6,962)        (6,066)        (2,257)        (1,599)        (1,223)
Per Share                                     (0.37)         (0.38)         (0.21)         (0.19)         (0.18)

Balance Sheet Data (at period end)
Total Assets                                  9,127          5,706          9,203          2,274            844
Total Long-Term Debt                            159             64             88            980              0
Cash Dividends Declared
    Per Share                                  0.00           0.00           0.00           0.00           0.00

U.S. GAAP Reconciled Amounts

Net Loss For Period                          (9,095)        (4,229)        (3,026)        (2,459)           n/a
Per Share                                     (.048)         (0.26)         (0.29)         (0.28)           n/a
Total Assets                                  9,088          5,667          7,547          1,414            n/a`

### ITEM 9   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The
following discussion and analysis of financial conditions and results of
operations should be read in conjunction with Selected Financial
Data and the consolidated financial statements and notes included
elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
Actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under Risk Factors and elsewhere in this
prospectus.

### Background and Basis of Presentation

We
are a software and hardware developer engaged in the development and
commercialization of effective, affordable 3D content, services and delivery
technologies for mass-market applications. We have developed a range of patented
software and hardware applications centered upon the emerging demand and
technical feasibility of displaying still and moving images in
stereoscopic 3D. Our solutions are designed for use in a broad range
of markets including Internet, cable, satellite or terrestrial broadcasting,
film and prerecorded video and DVD markets.

To
date, we have had limited commercial revenues while our efforts have focused on
the development of our technologies and products. Since inception, we have
incurred operating losses of approximately $18.9 million related to the
development of our technologies. We anticipate significant product introductions
in March 2001 which should begin to generate revenue in fiscal 2001,
transforming us from principally a research and development company to a
technology-based marketing, licensing and distribution company. The rate at
which this transformation will occur is dependent on a number of factors, many
of which are beyond our control. These include the willingness of production
companies to make their content available in 3D, the willingness of broadcasters
and cable system operators to invest in our technologies, and the willingness of
consumers to buy and use the ancillary equipment needed to view 3D images using
our technologies, such as LCD shutter or red/blue anaglyph glasses.

The
consolidated financial statements include our accounts and the accounts of our
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Our research and development operations are
located in Perth, Australia. We are incorporated under the laws of Canada and
prepare our financial statements in Canadian dollars and in accordance with
Canadian GAAP. The notes to the consolidated financial statements include a note
which describes the principal differences between Canadian GAAP and U.S. GAAP.

In
August 1998 we effected a one-for-five reverse stock split. In this prospectus,
all references to numbers of shares and purchase or exercise prices per share
have been adjusted to give effect to the reverse stock split. In August, 2000 we
changed our fiscal year end to December 31.

### Results of Operations

Our
results of operations reflect a continuing focus on our research and development
program together with an expansion of marketing activities as our technologies
were developed to a level where they could begin to be commercialized.

Revenues

During
fiscal 2000, 1999 and 1998, our revenues were derived from the following
sources:

`Year ended June 30
                         -------------------------------------------------------
                                2000                     1999               1998
                                ----                     ----               ----
Technology revenue           274,629                   29,545            299,099
Interest income              144,489                  110,583             31,321
Other                         19,305                   58,698             37,645
                              ------                   ------             ------
Total                        438,423                  198,826            368,065
                             =======                  =======            =======`

Interest
was earned from cash balances invested in cash management accounts. The
significant increase in interest income year-to-year is a result of the
investment of funds received from our May 1998 private placement of common
shares, the exercise of options during May and June 1999, a further private
placement of common shares in January 2000 and exercise of warrants in May 2000.

Technology
revenue represents amounts received from activities performed pursuant to
agreements entered into with third parties who were, or are considered to be,
potentially long-term customers. The work involved using our technologies in
order to establish whether or not the technologies were suitable for large-scale
commercialization. The table below details revenues received from technologies
for the fiscal 2000, 1999 and 1998 years.

`Year ended June 30
                  --------------------------------------------------------------
                               2000                   1999                  1998
                               ----                   ----                  ----
License fees                 14,056                 14,340               250,014
Conversion services         185,494                 15,205                 4,309
Hardware sales               75,079                      -                     -
Sale of prototypes                -                      -                44,776
Total                       274,629                 29,545               299,099
                            =======                 ======               =======`

License
fees represent amounts received from several corporations including Video
Applications Inc., Tomen Corporation, Imagica Corporation (Japan) and Imagica
USA in relation to agreements entered into with those organizations that allowed
them to evaluate the suitability of our technologies in the context of the
customers business operations. We received the following license fees:

- during fiscal 1998, from Tomen ($65,554), Imagica Japan ($99,375) and Imagica USA ($85,085);
- during fiscal 1999, from Imagica USA; and
- during fiscal 2000, from Video Applications, Inc.

Conversion
services represent amounts received from several customers for work undertaken
in converting 2D material into 3D, using technologies and techniques developed
by us. These activities represent the initial commercialization of those
technologies and techniques.

Hardware  sales  represent  sales of  equipment  using  technologies  developed  by us.  These  activities
represent the initial commercialization of those technologies.

None
of the agreements referred to above that have generated revenues in the periods
covered by this prospectus are currently in force.

In
the overall context of our past operations, we have not consistently achieved
substantial revenues from the commercialization of our technologies. This
reflects our policy to focus on the development of our technologies in order to
bring them to the level of sophistication and marketability required for their
successful commercialization.

Operating Expenses

The
following table sets forth financial data relating to operating expenditure for
the periods indicated:

`Year ended June 30
               -----------------------------------------------------------------
                                    2000               1999                 1998
                                    ----               ----                 ----
Amortization                     468,520            137,230               42,225
General and administrative     4,112,533          2,280,180            1,510,458
Interest and borrowing costs      72,910                  -              264,633
Market development                54,577            210,023              306,324
Project and patenting costs      177,435             18,803               32,883
Salaries and wages             2,514,467          1,023,180              468,435
Development costs                      -          2,595,619                    -
                          --------------          ---------      ---------------
Total                          7,400,442          6,265,035            2,624,958
                               =========          =========            =========`

Fiscal 2000 Compared to Fiscal 1999

The
increase in amortization expense was a net result of a number of significant
developments during the period. These were:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $000's
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------
| | In November 1999 our United States subsidiary, Dynamic Digital Depth USA Inc.,
commenced fit-out works with respect to new offices which it eventually relocated to
in March 2000. This has resulted in an increase in amortization of leasehold improvements of:                                                                                                                                                                                                                                                                                                         | 101   
| | During the period under review there was increased expenditure incurred with respect to the
registering of patents to protect our intellectual property. After our review, it was
determined that there was no likely economic benefit to be derived from certain patents and
applications held by us. Accordingly, it was determined that the accumulated costs at June
30, 2000 associated with these patents would be expensed and any amortization accrued to
that date be written back. Consequently there was a slight reduction in the amortization of
patents of: | (2)   
| | As a result of funds generated from private placements and option conversions, we implemented a
program to upgrade and replace capital equipment. This increase in leased and
owned equipment has resulted in an increase in depreciation and amortization of:                                                                                                                                                                                                                                                                                                            | 151   
| | Until March 31, 1999 our practice was to capitalize research and development expenditures,
including depreciation and amortization charges attributable to such activities.  After
March 31, 1999 we decided to no longer continue with this practice, see "Change in
Accounting Practice" below. Consequently, in preparing the financial statements for fiscal
2000 there was an increase in amortization charged of:                                                                                                                                                   | 81    
| | Net comparative increase in amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $331  

The
increase in general and administrative expenses was a net result of a number of
significant developments during the period. These were:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $000's
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------
| | An increase in fees paid to
external accountants and auditors for services provided in relation to the
registration of our common shares with the SEC, including the preparation of
registrations statements on forms 20-F and F-1, resulted in an increase in
expenditure of:                                                                                                                                                                                         | 196   
| | The use of professional advisors to assist us in raising additional capital resulted in an
increase in professional fees of:                                                                                                                                                                                                                                                                                                                                           | 79    
| | The increased use in the services of legal advisors in connection with raising capital and
registering our common shares in the United States resulted in a net increase in expenditure
of:                                                                                                                                                                                                                                                                            | 136   
| | The reduction in the use of external consultants involved with the establishment of a
corporate database, preparation of marketing plans and submissions to government bodies
resulted in an net decrease in expenditure of:                                                                                                                                                                                                                                           | (42)  
| | The ongoing use of public
relations and investor relations firms to assist with the continued promotion of
our profile in the United States with potential customers and investors resulted
in an increase in expenditure of:                                                                                                                                                                                                                                          | 184   
| | Increased activity in the move towards commercialization of our technology resulted in an
increase in payments to sub-contracted personnel of:                                                                                                                                                                                                                                                                                                                         | 395   
| | The relocation of the offices of our U.S. subsidiary to larger premises and the execution of
a full year lease of new office premises in Perth, Western Australia resulted in a net
increase in rental expenditure of:                                                                                                                                                                                                                                                 | 122   
| | The increase in attendance at various exhibitions designed to promote awareness of our
technologies resulted in a net increase in expenditure of:                                                                                                                                                                                                                                                                                                                      | 46    
| | The development of a new corporate image, including our new logo, new stationery and an
upgraded annual report, resulted in a net increase in expenditure of:                                                                                                                                                                                                                                                                                                          | 96    
| | Expansion in the activities of our U.S. subsidiary and our Perth, Western Australian
operations together with an increase in fixed assets during fiscal 2000 resulted in an
increase in insurance premiums of:                                                                                                                                                                                                                                                         | 49    
| | Increased staffing levels and computing requirements led to an increase in computing support
of:                                                                                                                                                                                                                                                                                                                                                                       | 52    
| | The net result of movements
in exchange rates between the Canadian, Australian and United States dollars
coupled with activities occurring in those three countries resulted in a net
increase in foreign exchange losses of:                                                                                                                                                                                                                                          | 100   
| | The continued expansion of our activities both in the area of research and development and
the early stages of commercialization has meant a substantial growth in numbers of employees
in both the Perth, Western Australia and Los Angeles offices. This resulted in an increase
in recruitment expenditures of:                                                                                                                                                     | 252   
| | During fiscal 1999 it was
our policy to capitalize research and development expenditures, including
certain general administrative charges such as a proportion of rent paid, travel
and accommodation. In fiscal 2000, the decision was made to no longer continue
with this practice, see Change in Accounting Practice below.
Consequently, in preparing the financial statements for fiscal 2000 there was an
increase in general administrative expenditure of: | 52    
| | The consolidation of
operations in the United States, the growth in staff numbers plus the increased
operational activities in both Australia and the United States resulted in an
increase in general and other administrative expenditure of:                                                                                                                                                                                                                        | 87    
| | Increased staffing in the United States and an increased effort in marketing and capital
raising efforts resulted in an increase in travel expenses of:                                                                                                                                                                                                                                                                                                                | 54    
| | Non-payment of director's fees                                                                                                                                                                                                                                                                                                                                                                                                                                         | (25)  
| | Net comparative increase in expenditure                                                                                                                                                                                                                                                                                                                                                                                                                                | $1,833

The
increase in salary and wages expenses was a net result of a number of
significant developments during the period. These were:

|  |                                                                                                                                                                                                                                                                                      | $000's
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------
| | In fiscal 2000, the decision was made to no longer capitalize research and development
expenditures, including certain applicable salary and wages and personnel costs, see "Change in Accounting Practice"
below. Consequently, there was an increase in personnel expenditures of: | 737   
| | Significant increases in the numbers of personnel employed in the United States has resulted
in an increase in personnel costs of:                                                                                                                                                   | 639   
| | Increased activities in the
Perth, Western Australian operations, including the employment of additional
staff and sub-contractors resulted in a net increase in expenditure of:                                                                                                     | 115   
| | Net comparative increase in expenditure                                                                                                                                                                                                                                              | $1,491

Fiscal 1999 Compared to Fiscal 1998

The
increase in amortization expense is related to the acquisition of additional
leased and owned assets during the last quarter of fiscal 1998, including those
assets associated with the establishment of our United States operations. During
fiscal 1999, these additional leased and owned assets incurred a full year of
amortization compared to only a quarter of amortization in fiscal 1998.

The increase in general and administrative expenses was a net result of a number of significant
developments during the period.  These were:

|  |                                                                                                                                                                                                                                                                                     | $000's
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------
| | In May 1998, our U.S. subsidiary commenced operations, including opening an office in Los
Angeles. This has resulted in a full year increase in expenditure of:                                                                                                                     | 286   
| | The use of external consultants to assist with the establishment of a corporate database,
preparation of marketing plans and submissions to government bodies and general advice and
assistance on administrative and accounting matters resulted in an increase in expenditure
of: | 95    
| | The appointment of public relations and investor relations firms to assist with the
establishment and promotion of our profile in the United States resulted in an increase in
expenditure of:                                                                                      | 129   
| | The establishment of our U.S. offices resulted increased rental expenditure of:                                                                                                                                                                                                     | 113   
| | The lease of new office premises in Perth, Western Australia (including a period of time
during which an extensive fit-out was undertaken and the new premises were unoccupied)
resulted in an increase in expenditure of:                                                          | 135   
| | The commencement of operations by the U.S. subsidiary created additional travel and
accommodation costs which resulted in a net increase in expenditure of:                                                                                                                         | 58    
| | The net result of movements
in exchange rates between the Canadian, Australian and United States dollars
coupled with activities occurring in those three countries resulted in a net
increase in foreign exchange gains of:                                                        | (340) 
| | As a result of production projects undertaken in the latter half of fiscal 1999 there was an
increase in sub-contractor costs (not related to research and development) of:                                                                                                         | 191   
| | Our increased activities, including the activities of our newly-established United States
office, resulted in increased telecommunications expenditures of:                                                                                                                         | 78    
| | Payment of director's fees                                                                                                                                                                                                                                                          | 25    
| | Net comparative increase in expenditure                                                                                                                                                                                                                                             | $770  

No
interest expense was incurred during fiscal 1999 as the promissory notes,
together with accrued interest were converted into common shares and warrants in
May 1998 in connection with a private placement.

The
commencement of operations in the United States and the employment of full time
staff has resulted in a reduction in comparative marketing expenditure of
$77,000 as much of what was previously done by external parties is now done
in-house.

Project
costs have reduced as those projects requiring outsourced materials have been
reduced and other projects that are more labor intensive have developed.

In
addition to other increases in operating expenses outlined above, the
commencement of our operations in the United States also resulted in an increase
in salaries and wages of approximately $361,000. The balance of the increase
($193,000) in this expenditure gained resulted from salary increases awarded to
staff employed by the Australian subsidiaries, together with the employment of
additional personnel in those subsidiaries.

Change
in Accounting Practice. Commencing on July 1, 1996, we began a program of
identification of development expenditure incurred during each of the subsequent
fiscal years for which it was considered appropriate within Canadian GAAP
guidelines to be capitalized as deferred. This practice was continued up to and
including the interim period ended March 31, 1999. Since June 30, 1999 we have
reviewed this policy and are now of the opinion that it is no longer appropriate
to continue to carry such deferred costs. This decision was arrived after taking
into account the nature of such expenditures, the status of the various projects
for which expenditure had been deferred and the future directions we are taking
with regard to the marketing and commercialization of our technologies. Having
undertaken this evaluation and determining that previously capitalized
development costs of $2,595,619 (including those amounts capitalized during the
interim period to March 31, 1999 of $987,399) no longer met the criteria for
deferment it was decided to write back that amount as a charge against fiscal
1999.

### LIQUIDITY AND CAPITAL RESOURCES

For
fiscal 2000 we incurred a net loss of approximately $7 million, with an
operating cash flow deficit averaging approximately $559,000 per month. The
operating cash flow deficit does not include the effects of the net funds raised
of $10,049,000 from private placements of common shares and conversion of
options, nor $2,771,000 principally outlaid on the fit-out of new office
premises and acquisition of furniture, fittings and office equipment for our
premises in Los Angeles. The net losses principally reflect the pre-commercial
operations of our business and corporate overhead. As of June 30, 2000, we had
net working capital of approximately $3.2 million, including a cash balance of
$4.1 million. Through June 30, 2000, we had an accumulated deficit of
approximately $18.9 million.

During
the latter half of fiscal 2000 we made significant progress towards full
commercial operation. Product introductions and expanded marketing will require
significant additional expenditures in fiscal 2001. As a result, it can be
expected that short-term operating losses could accelerate from those
experienced over the past year. In addition, we expect to require approximately
1.5 million in capital expenditures during fiscal 2001.

Historically,
we have met our working capital requirements through financing transactions
involving the private placement of equity securities or equity equivalents.

During
fiscal 2000, we completed private placements of common shares, that yielded net
proceeds of approximately $4.9 million, warrant exercises that yielded net
proceeds of approximately $5.0 million and option exercises that yielded net
proceeds of approximately $160,000.

On
September 30, 1999, we exercised our option to purchase an office building
located at 6 Brodie Hall Drive, Technology Park, Bentley, Western Australia at
A$2,000,000. The purchase of the building was completed on October 15, 1999 and
was financed by a short term loan facility for A$2,000,000 to Dynamic Digital
Depth Australia Pty. Ltd. from the Bank of Western Australia Ltd. secured over
the property and guaranteed by us. Partial repayments of the loan amounting to
A$1,450,000 have been financed from sales of two units in the building,
including that occupied by us and our subsidiaries. Dynamic Digital Depth
Australia Pty. Ltd. entered into two separate contracts of sale that generated
A$1,600,000 in gross sales and expects to achieve sales of the remaining units
prior to the expiration of the current fiscal year. In the event that sales have
not been finalized by that date the short-term loan facility will be
renegotiated to cover the outstanding loan balance.

Our two Australian
subsidiaries,  Dynamic  Digital Depth  Australia  Pty. Ltd. and Dynamic  Digital
Depth Research Pty. Ltd.,  currently  occupy one unit of the building.  Prior to
exercising the option and acquiring  ownership of the building the  subsidiaries
were paying rent of  A$20,000  per month  pursuant to a lease with the owner and
option holder,  Boston Tower Pty Ltd. Upon selling unit 1, Dynamic Digital Depth
Australia  Pty.  Ltd.  entered  into a ten-year  lease with the  purchaser at an
annual  rental of  A$121,280.  The  remaining  three units in the  building  not
already sold will be disposed of on a unit by unit basis.  Dynamic Digital Depth
Australia Pty. Ltd. has leased two of the unsold units out on a three-year lease
at an annual  rental of A$78,720 per annum.  The other unsold unit remains unlet
at this time, although tenants are being actively sought.

For
the fiscal year ended June 30, 1999, we incurred a net loss of approximately
$6.1 million, with an operating cash flow deficit averaging approximately
$419,000 per month. The operating cash flow deficit does not include the effects
of the net funds raised of $2,682,000 from private placements of common stock,
nor the outlay of $509,000 in connection with the acquisition of the new
building in Perth, Western Australia. With the exception of the write back of
the accumulated deferred development expenditure of $2,596,000 the net losses
principally reflect the pre-commercial operations of our business and corporate
overhead. As of June 30, 1999, we had net working capital of approximately $4.2
million, including a cash balance of $3,769,000. Through June 30, 1999, we had
an accumulated deficit of approximately $11.9 million.

In
June 1999, we entered into a development agreement with General Instrument
Corporation (now known as Motorola, Inc. Broadband Communications Sector), a
major manufacturer of cable headend equipment and television set-top boxes. In
connection with this agreement, General Instrument purchased 1.5 million common
shares and 1.0 million common share purchase warrants for net proceeds of
approximately $2.8 million. At the same time, we received a co-investment from a
third party with net proceeds of $930,000, in exchange for 500,000 common shares
and 500,000 common share purchase warrants. The common share purchase warrants
issued to General Instrument and the co-investor are exercisable over a three
year term with increasing exercise prices ranging from $3.50 to $5.50 per share.
Under the development agreement, US$250,000 will be used to pay General
Instrument for equipment and engineering services to integrate our 2D-compatible
3D technology and General Instruments digital set-top terminals.

During
1998, we completed private placements of convertible notes, common shares and
common share purchase warrants, yielding net proceeds of approximately $8.6
million.

During
fiscal 1998, we used $2.0 million in cash for operating activities, reflecting
primarily the net loss for the year of $2.3 million adjusted for net non-cash
expenses that were approximately $258,000.

Investing
activities used $2.1 million in fiscal 1999, primarily for development and
patent costs (approximately $1.2 million), purchase of capital assets
(approximately $400,000) and the payment of a non-refundable option fee of
$500,000 in respect of the building occupied by our Australian subsidiaries in
Perth, Australia.

Investing
activities used net cash of $1.2 million during fiscal 1998. These funds were
again primarily used for development and patent costs (approximately $840,000)
and the purchase of capital assets of approximately $340,000.

During
fiscal 1999 financing activities used approximately $1.5 million of the proceeds
of the May 1998 private placement to repurchase 741,174 common shares. The
repurchase of shares was recommended and financed by the investors in the
private placement to provide liquidity in the market for our shares reducing the
impact of sales by smaller investors which had depressed our share price. We
believed that it was in the best interests our shareholders to enhance liquidity
in the common shares and to acquire the shares available at a price below
managements view of the fair market price of the common shares. Such
repurchases were completed in November 1998. Also during fiscal 1999, we raised
approximately $3.7 million in financing from General Instrument and a
co-investor together with another $494,000 from the exercise of options and
warrants.

Financing
activities provided net cash to us of $7.0 million during fiscal 1998. These
funds were generated primarily by the sale of the convertible notes, common
shares and common share purchase warrants as previously described above.

We
do not believe that our available cash resources and cash flow from operations
will be sufficient to meet our liquidity needs through fiscal 2001. We expect
that we will require additional financing which may take the form of private
placements of debt or equity securities with financing sources or from
development partners. We are in discussions with a number of potential financing
sources, including investment banking firms and strategic partners, regarding
transactions which would provide us with sufficient resources to meet our
working capital requirements for the next twelve months. However, these
discussions have not resulted in any definitive agreements. Accordingly, there
can be no assurance that such financing will be available on attractive terms to
us, if at all. If we are unsuccessful in obtaining financing we may be required
to seek to license our technologies to third parties who are financially better
able to exploit the technologies or we may be required to curtail operations.

### Impact of Recently Issued Accounting Standards

In
June 1998 (effectiveness date revised in June 1999), the Financial Accounting
Standards Board issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is required to be adopted in years
beginning after June 15, 2000. The Statement will require us to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivatives change in fair value will be
immediately recognized in earnings. We have not yet determined what the effect
of Statement 133 will be on our earnings and financial position.

### ITEM 9A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not engage
in any hedging or currency trading activities although the Company bills in U.S.
and Australian dollars, with its revenues and expenses, and its assets and
liabilities recorded in Canadian dollars.

### ITEM 10
DIRECTORS AND OFFICERS OF REGISTRANT

The
following sets forth certain information regarding our directors and officers:

|Name                                                                                                                 | Age | Position(s)                          | Date elected or appointed                                            
|-------------------------------------------------------------------------------------------------------------------- | --- | ------------------------------------ | ---------------------------------------------------------------------
|Neil W. Speakman8 Brodie Hall Drive, Bentley,Western Australia 6102                                                  | 58  | Chairman of the Boardof Directors    | March 1994                                                           
|Chris Yewdall2120 Colorado Ave., Suite 100Santa Monica, CA 90404-3504                                                | 35  | President and ChiefExecutive Officer | President as ofOctober 1995 andChief ExecutiveOfficer as of July 2000
|Paul KristensenCapital Technologies Pty LtdCentral Park,Level 18
152-158 St George's TerracePerth, WA  6000Australia | 57  | Non-executive Director               | May 1996                                                             
|Paul G. Jeffrey#901 - 160 Frederick StreetToronto, OntarioM5A 4H9Canada                                              | 74  | Non-executive Director               | March 1994                                                           
|Ian Macintosh63 Lonsdale RoadToronto, ON M4V 1W4Canada                                                               | 73  | Non-executive Director               | April 1994                                                           
|Geoff Roman140 Brownsburg Road ENew Hope, PA  18938                                                                  | 48  | Non-executive Director               | September 2000                                                       
|Eric DillonGeneral PartnerDillon/Flaherty Partners, L.P.425 Pike StreetSuite 600
Seattle, WA  9810                   | 43  | Non-executive Director               | June 2000                                                            
|Phil Harman8 Brodie Hall Drive, Bentley,Western Australia 6102                                                       | 49  | Chief Technology Officer             | June 1999                                                            
|Mark Schwartz2120 Colorado Ave., Suite 100Santa Monica, CA 90404-3504                                                | 43  | Chief Financial Officer              | November 1999                                                        
|Sara Lane Sirey1600 407 2ND Street S.W.Calgary, AB  T2P 2Y3                                                          | 32  | Secretary                            | September 1997                                                       

The following
is a brief summary of the business experience of each of the above-named
individuals:

### Neil W. Speakman - Chairman of the Board of Directors

Mr.
Speakman was appointed a director in March 1994 and has served as Chairman since
that date. He provided financial consulting services to us until May 1, 1998,
when he undertook full-time employment as Chairman. Prior to becoming a
director, Mr. Speakman worked primarily with small technology companies guiding
the development of their global applications to the stage of public acceptance
and commercialization. In 1989, Mr. Speakman founded the company now known as
Advanced Material Technologies Inc., a leading company in the provision of rare
earth materials from China. The company is listed on the Toronto Stock Exchange.
In 1995, Mr. Speakman was a founding director of Turbo Genset Inc. and Compact
Power Holdings Limited, two public companies in Canada. In 1997, Mr. Speakman
was also a director of FAS International Holdings Limited, a public company
listed on the Canadian Venture Exchange. Due to his full-time involvement with
us, Mr. Speakman has relinquished these directorships. After graduating from the
University of Melbourne in Australia, Mr. Speakman qualified as a chartered
accountant with Price Waterhouse in 1967. Mr. Speakman held various positions
with Morgan Grenfell and Co. in London between 1969 and 1972 and Ord Minnett in
Hong Kong between 1972 and 1975, before founding his own practice in Hong Kong
in 1975.

### Chris Yewdall - President and Chief Executive Officer

Mr.
Yewdall was appointed President in October 1995 and Chief Executive Officer in
July 2000. Prior to being appointed President, Mr. Yewdall served as our Vice
President of Sales and Marketing. Prior to joining us, Mr. Yewdall held the
position of Vice President, Business Development of C-Dilla Limited, an
anti-piracy software provider servicing entertainment software developers. From
February 1991 through March 1997, Mr. Yewdall was the General Manager and Vice
President of Sales of Virtuality, Inc., an immersive, virtual reality 3D
technologies company with offices in Europe and North America. Prior to this,
Mr. Yewdall worked as a technical consultant and sales executive with Manager
Software Products, a systems development software provider for IBM mainframe
computers. Mr. Yewdall also worked at Jaguar Cars, Coventry, UK where he was
responsible for installing computer-aided design systems. Mr. Yewdall graduated
from North Staffordshire University, Stafford, England with an Honors Degree in
Information Systems.

### Paul Kristensen - Director

Mr. Kristensen was appointed non-executive director in May 1996.  He is the President of Capital
Technologies Pty. Ltd., a seed capital investment company that actively assists selected inventions and business
ventures from the idea stage to the international marketing of products or technology licenses.  Mr. Kristensen
has been a founding director of a number of technology companies originating in Western Australia, including
E.R.G. Limited, Arbortech Pty. Ltd. and Kinetic Limited, as well as the following technology companies where he
remains on the board of directors, Xenotech Australia Pty. Ltd. (later renamed DDD Australia Pty. Ltd.), IQ
Investments Ltd., Structural Monitoring Systems Ltd., Add Venture Capital Ltd. and Data-Cast.Net Ltd.

### Paul G. Jeffrey - Director

Mr. Jeffrey was appointed a non-executive director in August 1994. He is currently a non-executive
director of a number of other Canadian public companies, including Azcar Technologies, Wild Horse Resources Ltd.
and Turbo Genset Inc.  Mr. Jeffrey was a principal shareholder and non-executive director of FH Deacon Hodgson
Inc. which later merged with Nesbitt Thompson and was subsequently controlled by the Bank of Montreal.  In
addition, he has served as an officer in the Young Presidents Organization, University Club of Toronto, Council
of the Ontario College of Art and the Investment Advisory Committee of Bloorview Children's Hospital.

### Ian Macintosh - Director

Mr. Macintosh was appointed a non-executive director in August 1994.  He is also currently a
non-executive director of Turbo Genset Inc.  Mr. Macintosh was an insurance broker since 1950 and has since
retired.  He is currently an investor and director of St. Andrew's Valley Golf Club Limited. His community
involvement includes 30 years of service as a member of the board of The Arthritis Society of Canada and over 20
years of service as a member of the Board of Governors of North York General Hospital.

### Geoff Roman - Director

Mr. Roman was appointed a non-executive director in September 2000.  Mr. Roman is the Corporate Vice
President and Director, Advanced Technology and Chief Technology Officer for Motorola's Broadband Communications
Sector, Communications Enterprise (formerly known as General Instrument Corporation).  He has been an officer of
General Instrument since September 1996.  Mr. Roman is responsible for the strategic business and technology
direction for Motorola's Broadband Communications Sector.

### Eric Dillon - Director

Mr. Dillon was appointed a non-executive director in June 2000.  Mr. Dillon is one of the original
investors and advisory board members for Amazon.com.  Mr. Dillon also serves as a board member or advisor to
several other Internet companies, including AvenueA.com, UGO.com, Gear.com, and iStart Ventures.

### Phil Harman - Chief Technology Officer

Mr.
Harman was appointed our Chief Technology Officer in July 1999. Mr. Harman
joined our Perth, Australia operations in May 1996 and primarily manages the
research and development process. He has been the primary technology innovator
and a major contributor to the development of our portfolio of technologies and
products. Additionally, he manages our intellectual property portfolio to ensure
patent protection. Mr. Harman also reviews new ideas, patents and concepts
presented to the company and recommends appropriate action. From 1989 to 1996,
Mr. Harman held the position of Information Technology Manager for the Water
Authority of Western Australia where he was responsible for developing and
managing their state-wide computer and communications network. Prior to this
position, Mr. Harman was a self-employed communications and information
technology consultant. He also co-founded an electronics and communications
company that became a leader in the provision of fire monitoring and general
telemetry systems. Upon immigrating to Australia from the UK in 1980, Mr. Harman
was employed as a communications engineer by the Western Australian Fire
Brigades Board, where he developed a number of new fire monitoring systems and
communications networks. In the UK, Mr. Harman worked as a research scientist
for the Government Communications Centre in Milton Keynes. Mr. Harman holds a BS
(Hons 1) in electrical and electronic engineering from the University of Bath in
the UK.

### Mark Schwartz - Chief Financial Officer

Mr. Schwartz was appointed Chief Financial Officer in November 1999.  Mr. Schwartz, Mark oversees our
global financial operations.  Working out of the Santa Monica office, he is responsible for the developing and
implementing the company's financing strategy, financial reporting, compliance with securities regulations, and
managing relationships with the investment community.  Mr. Schwartz has closed more than 25 merger and
acquisitions transactions valued in excess of $10 billion and has arranged more than  $500 million in public and
private financing including mezzanine financing, IPOs and secondary equity and debt offerings.  Previously, Mr.
Schwartz was CFO and co-founder of Bodega Latina Corporation, a grocery retailer focused on the Latino market.
In addition, he was an investment banker with Donaldson, Lufkin & Jenrette, C.S. First Boston and Schroders.
While working at DLJ, Mr. Schwartz secured, structured and negotiated the first round of institutional financing
for Starbucks Coffee.  He also served on Starbucks' board of directors.  Mr. Schwartz holds an MBA from Harvard
Business School and a BA from Claremont McKenna College.

### Sara-Lane Sirey - Corporate Secretary

Ms.  Sirey  has  served as the  Corporate  Secretary  since  September  1997.  Ms.  Sirey is a partner  of
Armstrong  Perkins  Hudson LLP,  focusing on  corporate  and  securities  law.  She has acted for  issuers,  in all
industry segments, in Canada, the U.S. and internationally,  in connection with corporate reorganizations,  mergers
and  acquisitions,  debt  financings,  commercial  transactions  and initial public  offerings.  She is a member of
management of a number of public  companies  located in Canada,  the U.S.,  the U.K.,  Australia and South America.
Ms. Sirey obtained her Bachelor of Laws degree at the University of Saskatchewan in 1992.

### ITEM 11 COMPENSATION OF DIRECTORS AND OFFICERS

### Executive Compensation

We
have six (6) directors, none of whom are executive officers. We also have a
corporate secretary. The total cash remuneration paid or accrued during fiscal
2000 to all directors and officers was $755,000. No directors received any fees
for providing services as directors during our 2000 fiscal year.

We
have in place a stock option plan, which was approved by our shareholders at the
annual general meeting of shareholders held on December 18, 1998. The plan has
been established to provide incentives to qualified parties to increase their
proprietary interest and thereby encourage their continuing association with us.
Our directors administer the plan. The plan provides that options will be issued
to our directors, officers, employees and consultants or our subsidiaries
pursuant to option agreements in substantially the form appended to the plan.
The option agreements provide for the expiration of such options on a date not
later than five years after the issuance of such option.

Options
issued pursuant to the plan have an exercise price as determined by the board of
directors, provided that the exercise price shall not be less than the price
permitted by any stock exchange on which the common shares are then listed.

In
the 2000 fiscal year, options were granted to directors and officers to acquire
up to an aggregate of 1,520,000 common shares.

We do not have a pension, retirement, or similar plan.

### ITEM 12 OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

### Stock Option Grants

The  following  table sets forth  details  with  respect to the  outstanding  options  and  warrants as of
January 15, 2001.

`Market Value of
                                                                                                   Securities
                                                                   Number of Common                Underlying
                                                                    Shares Reserved                Options/Warrants on
Optionee/Warrant                                                                                   Date of Grant(1)
Holder Category                                                                                    -------------------
----------------
                                                                    Under Option/       Exercise
                            Effective Date                            Warrant(1)        Price(1)
                            --------------                            -------           -----
                                               Expiration Date
                                               ---------------
Directors                   Nov. 27, 1996      Nov. 27, 2001         60,000              $1.35              $1.40

                            Dec. 20, 1997      Dec. 20, 2002         40,000              $1.30              $1.50

                            Mar. 24, 2000      Mar. 24, 2005        660,000             $11.48             $13.50

                            July 26, 2000      July 26, 2005        100,000              $3.91              $4.00
Executive Officers          Sept. 7, 1998      Sept. 7, 2003        200,000              $1.50              $1.75

                            June 7, 1999       June 7, 2004         200,000              $2.80              $3.18

                            Jan. 14, 2000      Jan. 14, 2005        400,000              $5.85              $5.92

                            Feb. 1, 2000       Feb. 1, 2002          22,500              $5.50              $6.47

                            July 26, 2000      July 26, 2005        200,000              $3.91              $4.00
Employees                   May 10, 1996       May 10, 2001          28,000              $1.25              $1.10

                            Dec. 20, 1997      Dec. 20, 2002        100,000              $1.30              $1.50

                            July 7, 1999       July 7, 2004          34,000              $2.47              $2.91

                            Oct. 28, 1999      Oct. 28, 2004        174,000              $5.66              $6.66

                            Feb. 8, 2000       Feb. 8, 2005         130,000              $7.11              $8.36

                            Mar. 22, 2000      Mar. 22, 2005         48,000              $4.55              $5.35

                            Mar. 24, 2000      Mar. 24, 2005         40,000             $11.48             $13.51

                            Mar. 30, 2000      Mar. 30, 2005         80,000             $12.58             $14.80

                            July 26, 2000      July 26, 2005        136,000              $3.91              $4.00

Strategic Partnerships      June 15, 1999      June 15, 2002      1,000,000              $3.85 to           $4.12
                                                                                            $5.50
Investors                   May 10, 1996       Dec. 20, 2000         80,000              $1.25              $1.10

                            Nov. 27, 1996      Nov. 27, 2001         20,000              $1.35              $1.40

                            Dec. 20, 1997      Dec. 20, 2002        255,000              $1.30              $1.50

                            June 15, 1999      June 15, 2002        500,000              $3.50 to           $4.12
                                                                                            $5.50

                                                                                         $5.50              $6.47
                            Dec. 21, 1999      Dec. 21, 2002        140,000
                                                                                         $5.50              $6.47
                            Feb. 1, 2000       Feb. 1, 2002         857,000
                                                                    -------
Total                                                             5,504,500
                                                                  =========`

(1)        These have been restated to give effect to a one-for-five reverse stock split.

As
of January 15, 2001, our directors and officers collectively held stock options
and warrants to acquire an aggregate of 1,882,500 common shares.

### Other Rights to Purchase Securities

Effective
May 19, 1998, we closed a transaction with The Liverpool Limited Partnership and
Westgate International, L.P. (collectively, the Investors) pursuant
to the terms of an investment agreement. The investment agreement provided for
the purchase by the Investors of 5,000,000 units for cash equal to the US dollar
equivalent of CAD$7,500,000. Each unit was comprised of one common share and one
warrant to purchase one-half of a common share at a price of $2.00 per common
share for a period of two years from the date of issuance.

Pursuant
to the investment agreement, we granted the Investors a right of first refusal
with respect to any capital raising transaction or series of transactions
involving us or any subsidiary, other than any Permitted Equity Investment (as
hereinafter defined), for so long as the Investors hold at least 50% of the
common shares acquired as a result of the transactions contemplated by the
investment agreement. We are required to provide to the Investors written notice
of the terms of any transaction that is subject to the right of first refusal
promptly after the receipt thereof. The Investors may exercise the right of
first refusal by issuing a written counternotice of their intention to exercise
the right of first refusal within 30 days of receipt of our notice, and by
consummating the transaction by the later of (a) the time provided in the
original bona fide third party offer to us, and (b) 30 days after receipt by us
of the Investors counternotice. For purposes of the investment agreement,
a Permitted Equity Investment means (a) a sale of common shares to
an individual or group of individuals, which sale shall not, when aggregated
with any other such sales, exceed 9.9% of the common shares outstanding on the
date of the investment agreement, (b) a sale of equity of a newly created
subsidiary to an individual or group of individuals in an amount not to exceed
50% of the equity of such newly created subsidiary, or 50% of our ownership
interest in such newly created subsidiary if it is a joint venture, or (c) a
public sale of common shares.

On
May 15, 2000, the 5,000,000 warrants, entitling the holder to purchase 2,500,000
common shares at an exercise price of CAD$2.00 (as described above), were
exercised resulting in gross proceeds to us of CAD$5,000,000.

### ITEM 13 INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

### Transactions with the Investors

On
June 30, 1997, each of The Liverpool Limited Partnership and Westgate
International, L.P. loaned us US$500,000 in exchange for executed convertible
promissory notes. The notes carried an interest rate of five percent (5%) per
annum. The outstanding principal balance and all accrued interest on the notes
was convertible at any time and from time to time by the Investors for common
shares at an initial conversion price of US$1.00 per share (as adjusted to
reflect the 5-1 stock split). In connection with the loans, we issued to the
Investors warrants to purchase 200,000 shares of our common shares at a purchase
price of $1.00. These notes were converted into common shares in May 1998 as
described below.

The
notes were executed and delivered by us pursuant to a certain convertible note
purchase agreement, dated as of June 30, 1997, with the Investors. Our
obligations under the notes were secured by a pledge of the capital stock of our
subsidiaries pursuant to a pledge agreement, dated as of the same date, with the
Investors. In addition, the common shares issued upon conversion of the notes
are entitled to the benefits of the registration rights set forth in a
registration rights and qualification rights agreement, dated as of the date of
the notes, with the Investors.

On
February 9, 1998, we received a second loan of U.S.$250,000 each from the
Investors, and executed additional convertible promissory notes with the
Investors. The second notes carried an interest rate of five percent (5%) per
annum. The outstanding principal balance and accrued interest on the Second
notes was convertible at any time and from time to time by the Investors for
common shares at an initial conversion price of U.S. $1.00 per share. The second
notes were converted into common shares in May 1998 as described below.

Effective
May 19, 1998, we closed a transaction with the Investors pursuant to the terms
of the investment agreement. The investment agreement provided for the purchase
by the Investors of 5,000,000 units.

The
investment agreement provided that each Investor would convert the outstanding
principal balance and all accrued and unpaid interest under the notes into
1,550,959 common shares effective as of the Closing Date, and that the notes,
the existing registration rights agreement and the pledge agreement would be
canceled.

Pursuant
to the investment agreement, we granted the Investors a right of first refusal
with respect to any capital raising transaction or series of transactions
involving us or any subsidiary, other than any Permitted Equity Investment. See
- Options to Purchase Securities from Registrant or Subsidiaries - Other Rights
to Purchase Securities.

Pursuant
to the investment agreement, the Investors entered into a Voting and Disposition
Agreement. The voting agreement provided that at any time on or after the
closing date, the Investors had the right to nominate two individuals to the
board of directors, subject only to regulatory approval, and we would take all
necessary action to effect the appointment of such individuals to our board of
directors. The Investors also entered into a second registration rights
agreement covering the units.

### Option to Acquire Shares and Warrants issued to the Investors

Red
Reef Limited, a British Virgin Islands company, has been granted an option by
the Investors to acquire up to 1,000,000 common shares (the Share
Option) and up to 1,000,000 Warrants (the Warrant Option)
issued as units in conjunction with the May 1998 private placement under certain
conditions. These conditions include an effective registration under the united
States Securities Act of 1933 for the resale of the securities and the common
shares being listed for trading on The NASDAQ National Market System or SmallCap
System.

The
Share Option is exercisable at $6.00 as to 500,000 common shares and $9.00 as to
500,000 common shares on or before May 19, 2001 and May 19, 2002, respectively,
or such earlier date as may be determined under the Share Option. The Warrant
Option was exercisable as to 900,000 Warrants at $0.05, 800,000 Warrants at
$1.00 and 800,000 Warrants at $2.00. The Warrants issuable upon exercise of the
Warrant Option were exercisable at a price of $2.00 per common share.

Red
Reef subsequently granted options over the common shares underlying the Warrants
to approximately thirteen members of our management and staff including Messrs.
Speakman, Harman and Yewdall.

### Exercise of Warrants Option and Warrants

As
described above under Other Rights to Purchase Securities, the
5,000,000 outstanding warrants were exercised on May 15, 2000, resulting in the
issuance by us of 2,500,000 common shares and receipt by us of proceeds of CAD
$5,000,000.

The
exercise of the warrants was completed pursuant to the terms of an agreement
among the Investors, Red Reef and us, whereby the warrant option was exercised
on a cash-less basis, simultaneously with the exercise of the warrants. As a
result, a total of 1,569,375 common shares were issued to Red Reef and a total
of 930,625 common shares were issued to the Investors.

The
agreement also provides that we shall use our best efforts to obtain a listing
of its shares on The NASDAQ National Market System or SmallCap Exchange, and
file a registration statement and register the securities held by the Investors
with the Securities and Exchange Commission. We are required to pay to the
Investors certain penalties in the event that these securities held by the
Investors have not been registered on or before August 31, 2000.  The parties are
in discussions regarding a waiver of these penalties.

The
parties to the agreement agreed to the vote their shares and to do such things,
in the manner necessary to affect the election and/or appointment of two
nominees of the Investors to our board of directors.

We
believe that the terms of these transactions were completed on terms no less
favorable than those available from unrelated parties.

### Corporate Governance

Pursuant
to the Business Corporations Act (Alberta), any of our directors or
officers who is party to a material contract or proposed material contract with
us, or is a director or an officer of or has a material interest in any person
who is a party to a material contract or proposed material contract with us,
must disclose in writing to the board or request to have entered in the minutes
of meetings of directors, the nature and extent of his interest.

Any
director having such a material interest shall not vote on any resolution to
approve the contract, unless the contract is:

- an arrangement by way of security for money lent to or obligations undertaken by
him, or by a body corporate in which he has an interest, for our benefit.
- a contract relating primarily to his remuneration as a director, officer, employee or agent;
- a contract for indemnity or insurance, or a contract with an affiliate.

If
a director or officer fails to disclose his interest in a material contract, the
Court of Queens Bench of Alberta may, on our application or a shareholder, set
aside the contract on any terms it deems fit.

We
believe that we have implemented internal corporate governance procedures which
adequately protect shareholders against our entering into transactions with
affiliated parties on less than commercially acceptable terms. In addition to
adhering to the provisions of the Business Corporations Act(Alberta),
which apply in respect of conflicts of and the Policies of The Canadian Venture
Exchange, as they pertain to non-arms length transactions, the board of
directors has been organized such that the majority of our members are outside
directors to ensure that all matters brought before the board receive
consideration independent of inside directors. All proposed transactions with an
affiliated party, regardless of the size of the transaction, must be brought
before the board for consideration and approval. Members of the board, as a
matter of corporate policy, are entitled to engage independent professional
advisors in respect of any such matter brought before the board of directors.

### PART II

### ITEM 14 DESCRIPTION OF SECURITIES TO BE REGISTERED

We
have an authorized capital consisting of an unlimited number of common shares of
which 22,382,492are issued and outstanding as of the date of this
registration statement.

The
holders of common shares are entitled to one vote for each share held of record
on all matters to be voted on by stockholders. There is no cumulative voting
with respect to the election of directors, with the result that the holders of
more than 50% of the shares voting for the election of directors can elect all
of the directors. Holders of common shares are entitled to receive dividends
when, as and if declared by the board of directors in its discretion, out of
funds legally available therefor. In the event of our liquidation, dissolution,
or winding up, the holders of common shares are entitled to share ratably in our
assets, if any, legally available for distribution to them after payment of our
debts and liabilities after provision has been made for each class of stock, if
any, having liquidation preference over the common shares. Holders of common
shares have no conversion, preemptive or other subscription rights, and there
are no redemption or sinking fund provisions applicable to the common shares.
All of the outstanding common shares are fully paid and non-assessable.

We
are also authorized to issue an unlimited number of non-voting First Preferred
Shares and non-voting Second Preferred Shares (the Preferred
Shares). The Preferred Shares are issuable with such rights, preferences,
maturity dates and similar matters as our board of directors may from time to
time determine without any further vote or action by the our shareholders. No
Preferred Shares are currently outstanding.

### ITEM 15 DEFAULTS UPON SENIOR SECURITIES

Not Applicable

### ITEM 16 CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES

Not Applicable

### ITEM 17 FINANCIAL STATEMENTS

See financial statements following the signature page hereof.

### ITEM 19 FINANCIAL STATEMENTS AND EXHIBITS

(a)   Index to Financial Statements of Dynamic Digital Depth, Inc.

Audited Financial Statements

|Report of Independent Auditors                                                             | 
|------------------------------------------------------------------------------------------ | 
|Consolidated Balance Sheets at 30 June 1999 and 2000                                       | 
|Consolidated Statement of Loss and Deficit for the years ended 30 June 2000, 1999 and 1998 | 
|Consolidated Statement of Cash Flows for the years ended 30 June 2000, 1999 and 1998       | 
|Notes to and forming part of the Financial Statements                                      | 

(b)   Exhibits

`1(1)        Articles of Incorporation - Mirabeau Resources Limited                                   (1)
  1(2)        Articles of Incorporation - Mirabeau Resources Limited                                   (1)
  1(3)        Certificate of Amendment - Mirabeau 88 Limited                                           (1)
  1(4)        Certificate of Amendment - name change to Xenotech, Inc.                                 (1)
  1(5)        Name Change Xenotech to Dynamic Digital Depth Incorporated                               (1)
  1(6)        Application for Release of Escrowed Shares                                               (1)
  1(7)        Bylaws                                                                                   (1)
  2(1)        Voting Trust Agreement - Xenotech Inc./Trustee/Red Reef Ltd.                             (1)
  2(2)        Escrow Agreement -  Mirabeau/Montreal Trust Co. of Canada                                (1)
  2(3)        Escrow Agreement - Mirabeau/Montreal Trust Co. of Canada/ Salamander Resources Ltd.      (1)
  2(4)        Investment Agreement - Xenotech, Inc./Westgate Int'l., L.P. and Liverpool Limited        (1)
              Partnership
  2(5)        Common Share Purchase Warrant - Liverpool Limited Partnership                            (1)
  2(6)        Common Share Purchase Warrant - Westgate Int'l., L.P.                                    (1)
  2(7)        Warrant Option Agreement between Westgate Int'l., L.P. and Liverpool Limited             (1)
              Partnership and Red Reef Limited
  2(8)        Share Option Agreement between Westgate Int'l., L.P. and Liverpool Limited               (1)
              Partnership and Red Reef Limited
  2(9)        Voting and Disposition Agreement between Westgate Int'l., L.P. and Liverpool Limited     (1)
              Partnership and Neil W. Speakman, Robert Baker and Red Reef Limited
  2(10)       Registration Rights Agreement                                                            (1)
  2(11)       Stock Option Plan                                                                        (1)
  2(12)       Form of Stock Option Agreement                                                           (1)
  3(1)        Memorandum of Understanding between Dynamic Digital Depth USA Inc.  and  Video           (1)
              Applications Inc.
  3(2)*       Development Agreement by and between Dynamic Digital Depth Research Pty. Ltd. and        (1)
              General Instrument Corporation
  3(3)*       Statement of Work by and between Dynamic Digital Depth Research Pty. Ltd. and            (1)
              General Instrument Corporation
  3(4)        Consultancy Agreement with Angus Ducan Richards                                          (1)
  3(5)        Deed of Compromise and Release with Angus Duncan Richards                                (1)
  3(6)        Deed of Assignment with Angus Duncan Richards                                            (1)
  3(7)        License Agreement with Angus Duncan Richards                                             (1)
  3(8)        Deed between Dynamic Digital Depth Australia Pyt. Ltd. and Boston Tower Pty. Ltd.        (1)
              regarding 6-8 Brodie Hall Drive Technology Park
  3(9)        Lease between Dynamic Digital Depth Australia Pyt. Ltd. and Boston Tower Pty. Ltd.       (1)
              regarding 6-8 Brodie Hall Drive Technology Park
  3(10)       Lease Agreement with Barrister Executive Suites, Inc. regarding Suite 550, MOM           (1)
              Plaza, 2450 Broadway, Santa Monica, California, 90404
  3(11)       Employment Agreement with Neil W. Speakman                                               (1)
  3(12)       Employment Agreement with Robert G. Baker                                                (1)
  3(13)       Employment Agreement with Chris Yewdall                                                  (1)
  3(14)       Employment Agreement with Phil Harman                                                    (1)
  3(15)       Consultancy Agreement with AiCube Co. Ltd.                                               (2)
  3(16)       Memorandum of Understanding by and between Dynamic Digital Depth USA Inc. and             *
              Dimension Technologies, Inc.
  3(17)       Memorandum of Understanding by and between Dynamic Digital Depth USA Inc and              *
              YD-Vision GMBH
  3(18)       Component License Agreement by and between Dynamic Digital Depth USA Inc. and Apple,      *
              Inc.
  3(19)       Development Agreement by and between Dynamic Digital Depth USA Inc. and Microsoft         *
              Corporation
  3(20)       Memorandum of Understanding by and between Dynamic Digital Depth USA Inc. and Wave        *
              Pictures, N.V.
  3(21)       Memorandum of Understanding by and between Dynamic Digital Depth USA Inc. and Sky         *
              High Entertainment, Inc.
  3(22)       Memorandum of Understanding by and between Dynamic Digital Depth USA Inc. and Pluto       *
              Technologies, Inc.`

*   Filed herewith

(1)   Previously filed on August 9, 1999 with our Registration Statement on Form 20-F.

(2)   Previously filed on November 5, 1999 with our Amendment No. 1 to Registration Statement on Form 20-F.

### SIGNATURE

In accordance with Section 12 of the Securities Exchange Act of 1934, as amended, the Registrant certifies
that it meets all of the requirements for filing on Form 20-F and has duly
caused this annual report to be signed on its behalf by the undersigned, thereto
duly authorized.

|                        | DYNAMIC DIGITAL DEPTH, INC.                                            
|----------------------- | -----------------------------------------------------------------------
|Date:  January 16, 2001 | By:/s/ Chris Yewdall
Chris YewdallPresident and Chief Executive Officer

DYNAMIC DIGITAL DEPTH INC.

INDEX TO FINANCIAL STATEMENTS

Independent Auditors Report

Consolidated Balance Sheets at June 30, 2000 and 1999

Consolidated Statements of Loss and Deficit for the years ended June 30, 2000, 1999 and 1998

Consolidated Statements of Cash Flow for the years ended June 30, 2000, 1999 and 1998

Notes to Consolidated Financial Statements

Auditors Report

To the Shareholders ofDynamic Digital Depth Inc.

We have audited the
consolidated balance sheets of Dynamic Digital Depth Inc. as at June 30, 2000
and 1999 and the consolidated statements of loss and deficit and cash flows for
each of the three years in the period ended June 30, 2000. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, these
consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Company as at June 30, 2000 and 1999 and
the consolidated results of its operations and its cash flows for each of the
years in the three year period ended December 31, 2000 in accordance with
accounting principles generally accepted in Canada.

Accounting principles
generally accepted Canada vary in certain significant respects from generally
accepted accounting principles in the United States of America. Application of
generally accepted accounting principles in the United States of America would
have affected consolidated shareholders equity as at December 31, 2000 and
1999, and the consolidated results of operations for each of the three years in
the period ended June 30, 2000, to the extent summarized in note 19 to the
consolidated financial statements.

Perth, Australia
Ernst & Young
November 16, 2000
Chartered Accountants

Comments by Auditor for U.S. Readers on Canada-U.S. Reporting Difference

In the United States,
reporting standards for auditors require the addition of an explanatory
paragraph (following the opinion paragraph) when the financial statements are
affected by conditions and events that cast substantial doubt on the
Companys ability to continue as a going concern, such as those described
in Note 1 to the financial statements. Our report to the shareholders dated
November 16, 2000 is expressed in accordance with Canadian reporting standards
which do not permit a reference to such events and conditions in the
auditors report when these are adequately disclosed in the financial
statements.

|Perth, Australia | Ernst & Young        
|---------------- | ---------------------
|January 11, 2001 | Chartered Accountants

Dynamic Digital Depth Inc.
(Incorporated under the laws of Alberta)

CONSOLIDATED BALANCE SHEETS
(See Nature of Business and Basis of Presentation - Note 1)

As at June 30

`2000           1999
                                                                          $CAD           $CAD
ASSETS
Current

Cash                                                                    4,092,627      3,768,936
Accounts receivable                                                       134,552         72,626
Security deposits and prepayments                                          66,369        199,017
                                                                     -------------------------------
                                                                     -------------------------------

                                                                        4,293,548      4,040,579
Deposits                                                                    -            508,508
Building units held for sale (note 3)                                   1,122,920              -
Capital assets  (note 4)                                                2,533,303        684,527
Patents (note 5)                                                          666,090        472,358
Restricted Cash (note 7)                                                  511,508              -
                                                                     -------------------------------

                                                                        9,127,369      5,705,972
                                                                     -------------------------------
LIABILITIES AND SHAREHOLDERS EQUITY
Current

Accounts payable and accrued liabilities                                  571,051        330,478
Current portion of obligation under capital leases (note 10)               64,173         43,655
Short-term debt  (note 8)                                                 490,435              -
                                                                     -------------------------------

                                                                        1,125,659        374,133
                                                                     -------------------------------
Obligation under capital leases (note 10)                                 158,501         63,594
                                                                     -------------------------------
Commitments and Contingencies (note 10)
Shareholders equity

Share capital (notes 11, 13 and 18)                                    27,532,331     17,483,622
Deficit (notes 13 and 18)                                             (19,337,156)   (12,375,137)
Cumulative translation adjustment                                        (351,966)       159,760
                                                                     -------------------------------
                                                                        7,843,209      5,268,245
                                                                     -------------------------------
                                                                     -------------------------------
                                                                        9,127,369      5,705,972
                                                                     -------------------------------`

See accompanying notes
On behalf of the Board:

|N SpeakmanDirector | P KristensenDirector
|------------------ | --------------------

Dynamic Digital Depth Inc.

CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

Year ended June 30

`2000           1999           1998
                                                                          $CAD           $CAD           $CAD
                                                                     ----------------------------------------------
Revenue
                                                                     274,629        29,545         299,099
Technology revenue
Grant Income                                                         -              -              31,114
Interest income                                                      144,489        110,583        31,321
Other                                                                19,305         58,698         6,531
                                                                     ----------------------------------------------
                                                                     438,423        198,826        368,065
                                                                     ----------------------------------------------
Expenses
Amortisation - capital assets                                        448,473        115,667        34,100
Amortisation - patent costs                                          20,047         21,563         8,125
General and administrative (note 12)                                 4,112,533      2,280,180      1,510,458
Interest - promissory notes                                          -              -              264,633
Interest - borrowings                                                72,910          -             -
Market development                                                   54,577         210,023        306,324
Project costs                                                        177,435        18,803         32,883
Salaries and wages                                                   2,514,467      1,023,180      468,435
Development costs                                                    -              2,595,619      -
                                                                     ----------------------------------------------
                                                                     ----------------------------------------------
                                                                     7,400,442      6,265,035      2,624,958
                                                                     ----------------------------------------------
                                                                     ----------------------------------------------
Loss before income taxes (note 15)(6,962,019)                        (6,066,209)    (2,256,893)
                                                                     -              -              -
Provision for income taxes (note 15)
                                                                     ----------------------------------------------
                                                                     (6,962,019)    (6,066,209)    (2,256,893)
Net loss
                                                                     ----------------------------------------------
                                                                     (12,375,137)   (5,830,182)    (3,573,289)
Deficit, beginning of year
Prior period adjustment (note 13)                                    -              (478,746)      -
                                                                     ----------------------------------------------
                                                                     ----------------------------------------------
Adjusted deficit, beginning of year                                  (12,375,137)   (6,308,928)    (3,573,289)
                                                                     ----------------------------------------------
Deficit, end of year                                                 (19,337,156)   (12,375,137)   (5,830,182)
                                                                     ----------------------------------------------

Loss per share (note 11)                                             (0.37)         (0.38)         (0.21)
                                                                     ----------------------------------------------
Weighted average number of shares outstanding                         18,825,133    15,846,239     10,608,563
                                                                     ----------------------------------------------`

See accompanying notes

Dynamic Digital Depth Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended June 30

`2000           1999           1998
                                                                          $CAD           $CAD           $CAD
                                                                     ----------------------------------------------
Operating Activities
Net loss                                                            (6,962,019)    (6,066,209)    (2,256,893)
Add item not requiring a cash payment
Amortisation                                                           468,520         95,790         42,225
Loss on disposal of building                                            22,967              -              -
Write off patent costs capitalised in prior years                       92,697              -              -
Development costs written off                                                -      2,595,619         27,411
Interest imputed on promissory notes                                         -              -        215,350
Net change in non-cash working capital (note 9)                        311,295       (413,095)        67,047
                                                                     ----------------------------------------------
                                                                    (6,066,540)    (3,787,895)    (1,904,860)
                                                                     ----------------------------------------------
Investing Activities
Purchase of capital assets (note 9)                                 (2,771,121)      (340,559)      (164,188)
Proceeds of sale of capital assets                                           -              -          8,209
Application of deposit (note 9)                                              -       (508,508)             -
Patent costs                                                          (365,195)      (192,882)      (122,033)
Development costs incurred                                                   -       (780,562)      (486,450)
                                                                     ----------------------------------------------
                                                                     ----------------------------------------------
                                                                    (3,136,316)    (1,822,511)      (764,462)
                                                                     ----------------------------------------------
Financing Activities
Proceeds from issuance of share capital for cash                    10,048,709      2,681,837      7,753,638
Proceeds from short-term borrowings (note 9)                           141,510              -              -
Proceeds from issuance of promissory notes                                   -              -        698,679
Capital lease principal reductions (note 9)                           (109,184)       (51,442)       (66,815)
Restricted cash                                                       (511,508)     1,727,660     (1,727,660)
                                                                     ----------------------------------------------
                                                                     9,569,527      4,358,055      6,657,842
                                                                     ----------------------------------------------
                                                                       (42,980)        15,114        (16,465)
Foreign exchange (loss)/gain on cash held in foreign currency
                                                                     ----------------------------------------------
Net increase/(decrease) in cash                                        323,691     (1,237,237)    (3,972,055)
Cash, beginning of year                                              3,768,936      5,006,173      1,034,118
                                                                     ----------------------------------------------
                                                                     ----------------------------------------------
Cash, end of year                                                    4,092,627      3,768,936      5,006,173
                                                                     ----------------------------------------------`

See accompanying notes

Development costs incurred during the year include $nil depreciation (1999:
$41,440, 1998: $75,388) which is a non-cash movement.

Included in the net loss is interest paid on short-term debt during the year
of $43,491 (1999 and 1998: $nil).

Dynamic Digital Depth Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

The  Company,  through its wholly owned  subsidiaries,  Dynamic Digital Depth
Australia Pty Ltd, Dynamic Digital Depth Research Pty Ltd, Dynamic Digital Depth
USA Inc. and Dynamic  Digital Depth TV Inc.,  specializes  in the business of 3D
technology.  Its patented technologies enable the creation and development of 2D
compatible  3D  content;  mass  distribution  through  the  internet,   personal
computer,  television  and  movies;  and  the  integration  of 3D  content  with
glasses-free displays.

The consolidated  financial  statements  include the accounts of Dynamic Digital Depth Inc.  ("DDD") and its wholly owned  subsidiaries
Dynamic Digital Depth Australia Pty. Ltd.  ("Australia"),  Dynamic Digital Depth
Research Pty. Ltd.  ("Research") and Dynamic Digital Depth USA Inc. ("USA"). The
consolidated  financial  statements  are  presented in Canadian  dollars  ($CAD)
unless otherwise specified.

The accompanying  financial  statements have been prepared on a going concern
basis  which  contemplates  the  realisation  of  assets  and the  discharge  of
liabilities  in the normal course of business for the  foreseeable  future.  The
Company has not attained  commercial  production  and has incurred a significant
deficit to June 30,  2000.  The  ability of the  Company to  continue as a going
concern is  dependent  on obtaining  additional  capital to support  development
activities and ultimately on obtaining satisfactory commercial production levels
in order to produce a positive cash flow and/or raise future share capital.

The  outcome  of these  matters  cannot  be  predicted  at this  time.  These
financial statements do not give effect to any adjustment to the classifications
and amounts of assets and liabilities that might be necessary should the Company
be unable to continue as a going concern

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in Canada. Because a precise determination of many assets and
liabilities is dependent upon future events, the preparation of financial
statements for a period necessarily involves the use of estimates and
approximations that have been made using careful judgment. The financial
statements have, in managements opinion, been properly prepared within
reasonable limits of materiality and within the framework of the accounting
policies summarised below.

Revenue recognition

Technology revenue from the
granting of licenses under license agreements in specific geographical areas is
recognised in full in the year in which the license is granted.

Technology revenue from
conversion services is recognised in full in the period in which the service or
goods are provided.

Revenue from government
research and development grants is recognised in full in the period in which it
is received.

Management does not anticipate an impact of SAB 101 on their financial statements.

BUILDING

The building is carried in
the accounts at the lower of cost and fair market value. No amortisation is
taken due to the intention to sell the building within one year.

Capital assets

Capital assets are carried
in the accounts at cost less amortisation. Amortisation is calculated on a
straight-line basis over their estimated useful lives as follows:

|Furniture and fixtures        | 4 to 7 years                          
|----------------------------- | --------------------------------------
|Office equipment              | 3 to 7 years                          
|Equipment under capital lease | 3 to 7 years                          
|Technical equipment           | 3 to 7 years                          
|Automotive equipment          | 7 years                               
|Leasehold improvements        | Over the term of the underlying leases
|Website                       | 20 years                              

Leased assets that transfer
substantially all of the benefits and risks of ownership related to the leased
asset from the lessor to the lessee are accounted for as a capital lease. Under
a capital lease, the asset is capitalized and the present value of the related
lease payments is recorded as a liability. Amortization of capitalized leased
assets is computed using the straight- line method over the lesser of the
remaining lease term and economic life. The lease agreements have an implicit
interest rate varying between 5.75% and 11.68%.

Patents, research and development costs

Costs relating to acquiring
and establishing patents in 3D television and related areas, such as the
conversion to 3D of existing 2D film and video material, auto-stereoscopic 3D
computer displays, 3D video arcade game displays, 3D viewing glasses, 3D special
effects software and 3D camera adaptor are recorded at cost and are being
amortised over twenty years.

Research costs are expensed
as incurred. Development costs that meet specific criteria related to technical,
market and financial feasibility are capitalised. Amortisation of development
costs will start upon commencement of commercial production. The costs will be
amortised on a straight-line basis over a period of three years.

In the event the above
costs are determined not to be of continuing benefit to the Company, these
amounts will be written off.

Financial instruments

Financial instruments of
the Company consist mainly of cash, accounts receivable, accounts payable and
accrued liabilities, capital lease obligations and short - term debt. As at June
30, 2000 and 1999, there are no significant differences between the carrying
amounts of these instruments, and their estimated fair values.

Measurement uncertainty

The amounts recorded for
patents represent accumulated costs and are not intended to reflect present or
future values. The recoverability of these amounts is dependent upon the ability
of the Company to successfully complete their development and upon future
profitable operations and hence are subject to measurement uncertainty and the
impact of any adjustment to carrying values on the financial statements of
future periods could be material.

Foreign exchange

The Companys
Australian and USA subsidiaries are deemed self-sustaining foreign operations
for foreign currency translation purposes. Accordingly, assets and liabilities
of the subsidiaries are translated at the year-end exchange rate and revenues
and expenses are translated at average exchange rates. Gains and losses arising
from the translation of the financial statements of the subsidiaries are
recorded in a Cumulative Translation Adjustment account in
shareholders equity.

Taxation

Income taxes are accounted
for using the deferral method whereby taxes relating to timing differences
between accounting income and taxable income are recorded as deferred income
taxes.

Concentrations of credit risk

The Companys
financial instruments that are exposed to concentrations of credit risk consist
primarily of cash and cash equivalents, security deposits and receivables. The
Companys cash and cash equivalents and security deposits are placed with
high quality major Australian, Canadian and American banking institutions,
limiting its exposure to credit risk. At 30 June 2000, the receivables balance
disclosed on the balance sheet consists of a number of sundry debtors.

Loss per share

Basic loss per share is
determined by dividing the operating loss after tax by the weighted average
number of common shares outstanding during the financial year.

Stock options

The Company has a stock
option plan which is described in Note 11. No compensation expense is recognized
for this plan when stock options are issued to employees. Any consideration paid
by employees on exercise of stock options is credited to share capital. If stock
options are repurchased from employees, the excess of the consideration paid
over the carrying amount of the stock options cancelled is charged to retained
earnings.

3. BUILDING UNITS HELD FOR SALE

In order to facilitate a
long-term tenure of the base for the Australian operations, one of the
Companys subsidiaries, Dynamic Digital Depth Australia Pty. Ltd.
(DDDA) exercised an option deed on a building comprising five
separately titled Units totalling 1,711 square meters located at 6 Brodie Hall
Drive, Technology Park, Bentley, Western Australia. The purchase of the building
was completed on October 15, 1999. As ownership of real estate is not considered
to be a part of the Companys core business it was always the intention to
resell the property, and so, DDDA has sold two Units, including that occupied by
the Australian subsidiaries, and is actively seeking purchasers for the
remaining Units. Upon selling the Unit occupied by the Australian subsidiaries,
DDDA entered into a ten-year lease with the purchaser at an annual rental of
A$121,280. It is the intention of the Company to sell the remaining unsold Units
as soon as appropriate buyers can be found and it is expected that this will
occur prior to December 31, 2001.

4. CAPITAL ASSETS

`2000

                                                           Accumulated        Net Book Value
                                               Cost       Amortisation
                                               $CAD           $CAD                 $CAD


Furniture and fixtures                         136,984        31,517              105,467
Office equipment                               144,394        55,445              88,949
Equipment under capital lease                  257,261        38,140              219,121
Technical equipment                            1,336,914      507,857             829,057
Automotive equipment                           78,250         26,924              51,326
Leasehold improvements                         1,327,040      109,872             1,217,168
Website                                        22,215         -                   22,215
                                               ---------------------------------------------------
                                               3,303,058      769,755             2,533,303
                                               ---------------------------------------------------


                                                              1999

                                                           Accumulated        Net Book Value
                                               Cost       Amortisation
                                               $CAD           $CAD                 $CAD


Furniture and fixtures                         68,430         22,647              45,783
Office equipment                               29,508         14,909              14,599
Equipment under capital lease                  271,662        155,792             115,870
Technical equipment                            467,994        174,387             293,607
Automotive equipment                           79,205         30,204              49,001
Leasehold improvements                         174,386        8,719               165,667
                                               ---------------------------------------------------
                                               1,091,185      406,658             684,527
                                               ---------------------------------------------------`

5. PATENTS

`2000                                1999
                                     ----------------------------------  ----------------------------------
                                                   Accumulated                          Accumulated
                                     Cost         Amortisation           Cost          Amortisation
                                     $CAD             $CAD               $CAD            $CAD
                                     ----------------------------------  ----------------------------------
Patents                              718,243       52,153                507,534       35,176
                                     ----------------------------------  ----------------------------------
Net book value                                    666,090                             472,358
                                     ----------------------------------  ----------------------------------`

Total research and development costs incurred during the year were $1,981,710 (1999: $1,203,224 and 1998: $930,025).

6. PROMISSORY NOTES

In February 1998, the
Company issued promissory notes to a value of $US500,000, convertible at the
holders option into common shares on the basis of $US1.00 per share. The notes
bore interest at 5% per annum.

The Company has calculated
the debt component of the note issue as the present value of the required
interest and principal payments discounted at a rate approximating the interest
rate that would have been applicable to non-convertible debt at the time of its
issuance. The difference between the face amount of the loan and the calculated
debt component has been recorded as contributed surplus.

In May 1998, the $US500,000
of promissory notes together with $US1,000,000 of notes (issued on June 30,
1997) and interest unpaid on the notes were converted to common shares. The
notes were converted on the basis of $US1.00 per share.

7. RESTRICTED CASH

This represents cash held in
a deposit account by way of security in association with the lease of Dynamic
Digital Depth USA Incs office premises as per an agreement dated September
17, 1999. Interest is being earned on the amount deposited at the prevailing
bank rate over the term of the lease.

8. SHORT-TERM DEBT

The Short-term debt is
secured by a first mortgage over the building and registered fixed and floating
charge over the assets of Dynamic Digital Depth Australia Pty Ltd. The debt is
fully repayable on demand upon the sale of the building units. Interest is
charged at the Bank Bill Discount Rate plus 1.50 per cent per annum. The
carrying value of the short-term debt approximates the market value.

9. STATEMENT OF CASH FLOWS

During the financial year
the net change in non-cash working capital was determined as follows:

|                                                                | 2000$CAD | 1999$CAD  | 1998$CAD 
|--------------------------------------------------------------- | -------- | --------- | ---------
|Increase in accounts receivable                                 | (61,926) | (49,112)  | (202,655)
|Decrease (increase) in security deposits and prepayments        | 132,648  | (62,767)  | -        
|Increase (decrease) in accounts payable and accrued liabilities | 240,573  | (301,216) | 269,702  
|                                                                | 311,295  | (413,095) | 67,047   

During the financial year the following non-cash transactions occurred:

`2000          1999        1998

                                                                 $CAD          $CAD        $CAD
                                                          -----------------------------------------

Acquisition  of plant  and  equipment  by way of  capital
lease financing
                                                                  214,179      15,114     136,712

Acquisition  of building  units  purchased  for resale by                           -           -
way of deposit paid during fiscal 1999
                                                                  508,482

Acquisition  of building  units  purchased  for resale by                           -           -
way of short-term borrowings
                                                                1,944,924

Proceeds   from  sale  of  building   units   applied  in                           -           -
reduction of short-term borrowings
                                                              (1,354,020)

Deferred development costs capitalized                                  -           -      46,688`

10. COMMITMENTS AND CONTINGENCIES

The following is a schedule of future minimum lease payments under the capital leases:

`2000          1999
                                                        $CAD          $CAD
                                                   -----------------------------

2000                                                       -        51,864

2001                                                  84,376        48,828

2002                                                 111,630        19,032

2003                                                  59,820             -
                                                   -----------------------------

Total minimum lease payments                         255,826       119,724

less amount representing interest                    (33,152)      (12,475)
                                                   -----------------------------


Present value of minimum lease payments              222,674       107,249

Less: current portion                                (64,173)      (43,655)
                                                   -----------------------------
                                                   -----------------------------

Long term portion                                    158,501        63,594
                                                   -----------------------------`

The following is a schedule of future minimum lease payments under the operating leases:

`2000          1999
                                                        $CAD          $CAD
                                                   -----------------------------

2000                                                       -       212,698
2001                                                 501,530             -
2002                                                 522,965             -
2003                                                 564,400             -
2004                                                 561,568             -
2005                                                 234,798             -
2006                                                 142,625             -
2007                                                 149,756             -
2008                                                 157,244             -
2009                                                 165,106             -
                                                   -----------------------------
Total minimum lease payments                       2,999,992       212,698
                                                   -----------------------------`

Total rental expense on operating leases for fiscal 2000 approximated
$CAD411,000 (1999: $CAD289,000, 1998: $CAD90,000).

Litigation

a) In January 1999 Angus
Duncan Richards (Richards) served a notice of dispute on the Company
relating to the terms of a Consulting Agreement between the Company and
Richards. The dispute is subject to arbitration for which no date has been set.
The Company refutes all of the allegations and intends to vigorously defend this
matter.

b)  In December 1998 Angus
Duncan Richards (Richards) commenced litigation in Alberta, Canada
seeking monetary damages for $CAD227,500 plus interest and court costs. Richards
alleges the Company failed to permit him to exercise options to purchase 182,000
common shares at an exercise price of $1.25 per share based upon the
determination that the options had expired (amounts based on post reverse stock
split). The Company filed a Statement of Defence in February 1999. The Company
refutes all of the allegations and intends to vigorously defend this matter.
Richards is now seeking leave of the Court to amend his statement of claim to
increase the monetary damages claim to an estimated $CAD2,402,000 plus punitive
damages of $CAD100,000 plus unqualified additional damages of up to
$CAD1,137,500 less trading commissions plus interest and costs. The court
application to make the amendments is set for January 10, 2001, and the lawyers
for both parties will be required to file written briefs outlining their
positions by mid-December.

11. SHARE CAPITAL

Authorised

Unlimited number of voting common shares

Unlimited number of non-voting first and second preferred shares, issuable in series

Issued - Common Shares

`Number of
                                                                       Shares           $CAD

Balance at June 30, 1998 - common voting shares (notes 13 and 18)     16,348,696     13,934,992
Issued for cash through private placements, net of issuance costs      2,000,000      3,684,327
Issued on exercise of stock options                                      159,470        200,532
Issued on exercise of warrants                                           200,000        293,771
Shares acquired through normal course issuer bid (notes 13 and 18)      (741,174)      (630,000)
Balance at June 30, 1999 - common voting shares                       17,966,992     17,483,622
Issued for cash through private placements, net of issuance costs      1,000,000      4,900,067
Issued on exercise of stock options                                      117,770        160,475
Issued on exercise of warrants                                         2,500,000      4,988,167
Balance at June 30, 2000 - common voting shares                       21,584,762     27,532,331`

Stock Options

On November 13, 1998 the
Company established a stock option plan for its directors, management, employees
and consultants. This plan replaced all earlier plans and allows the Company to
grant options for up to ten per cent of the issued and outstanding shares of the
Company to a maximum of 3,180,000 common shares. Under the plan the exercise
price of each option shall be not less than the price permitted by the stock
exchange on which the common shares are then listed. No participant shall be
granted an option which exceeds five per cent of the issued and outstanding
shares of the Company. The option period is not to exceed five years from the
date the option is granted.

`2000                                        1999
                                    ----------------------------------------------------------------------------------------
                                                               Weighted-Average                         Weighted-Average
                                         Stock options          Exercise Price        Stock options      Exercise Price
                                                                     $CAD                                     $CAD
                                    ----------------------------------------------------------------------------------------

Outstanding at beginning of year           1,100,770                 1.60                885,540              1.29

Granted                                    1,568,000                 8.45                400,000              2.15

Exercised                                  (117,770)                 1.36               (159,470)             1.27

Forfeited                                      -                       -                (25,300)              1.30
                                    -------------------------                      --------------------
                                    -------------------------                      --------------------

Outstanding at end of year                 2,551,000                 5.82               1,100,770             1.60
                                    -------------------------                      --------------------
                                    -------------------------                      --------------------

Options exercisable at end of year         1,084,230                                        -
                                    -------------------------                      --------------------`

The following table summarises information about stock options outstanding at June 30, 2000:

`Options Outstanding                              Options Exercisable
                                                Weighted-Average   Weighted-Average  Number Exercisable  Weighted-Average
Range of Exercise Prices Number Outstanding at  Remaining Life -    Exercise Price    at June 30, 2000    Exercise Price
          $CAD               June 30, 2000           years               $CAD                                  $CAD

 1.00 to 3.00                  1,027,000              1.93               1.67              174,230             2.38

4.00 to 6.00                    614,000               4.54               5.16              205,000             5.11

7.00 to 9.00                    130,000               4.61               7.11              25,000              7.11

10.00 to 13.00                  780,000               4.74              11.59              680,000             11.51
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------

1.00 to 13.00                  2,551,000              3.01               5.82             1,084,230            8.73
----------------------------------------------------------------------------------------------------------------------------`

Warrants

In connection with private
placements during fiscal 2000, the Company issued 1,000,000 share purchase
warrants with options to purchase common shares on a 1:1 basis at a price of
$CAD5.50 per share. 140,000 of these warrants expire on December 21, 2001 and
the balance expires on February 1, 2002.

In connection with the
private placement referred to above the Company by way of a financial
advisors fee issued 20,000 share purchase warrants with options to
purchase common shares on a 1:1 basis at a price of $CAD5.50 per share. These
warrants expire on February 1, 2002.

In connection with private
placements during fiscal 1999, the Company issued 1,500,000 share purchase
warrants with options to purchase common shares on a 1:1 basis at a price of
$CAD3.50 from June 17, 1999 to June 17, 2000, or $CAD4.50 from June 17, 2000 to
June 17, 2001, or $CAD 5.50 from June 17, 2001 to June 17, 2002.

In connection with private
placements during fiscal 1998, the Company issued 5,000,000 share purchase
warrants with options to purchase common shares on a 2:1 basis at a price of
$CAD2.00 per share. On May 18, 2000, these share purchase warrants with options
to purchase common shares on a 2:1 basis were exercised.

12. RELATED PARTY TRANSACTIONS

Consulting and legal fees
of $149,842 (1999 - $35,436, 1998: $145,147) were paid by the Company to
entities whose directors are also directors of the Company or of one of its
subsidiaries.

13. PRIOR PERIOD ADJUSTMENT

During 1998 and 1999 the
Company re-purchased shares in a share buy-back and subsequently cancelled these
shares by reducing share capital by the total cost of the buy-back. The effect
of this error in 1998 and 1999 was an over-reduction of the share capital
balance as the excess of the buy-back costs over the original cost of those
shares should have been charged against the contributed surplus balance and any
further excess charged against the accumulated deficit as required under
Canadian GAAP.

In 1998, this results in a
$103,424 adjustment to increase share capital and reduce the contributed
surplus. In 1999, the result is an $866,793 adjustment to increase share
capital, a $388,047 adjustment to eliminate the remaining contributed surplus,
and a $478,746 adjustment to increase the accumulated deficit.

The prior period balances presented in these financial statements have been restated.

14. SUBSEQUENT EVENTS

On October 12, 2000 the
Company completed a private placement of 581,230 Units at a price of CAD$5.00
per Unit for total gross proceeds of CAD$2,906,150. Each Unit consists of one
Common Share and one Warrant, with each Warrant exercisable into one additional
Common Share at a price of CDN$5.50 over a two year period from the date of
issue. The Common Shares and Warrants comprising the Units are restricted from
transfer for a minimum period of four months from the date of issue.

The company has issued
40,000 common shares based on the conversion of options issued prior to June 30,
2000. The date and number of options converted are detailed below.

|October 17, 2000 | 20,000
|---------------- | ------
|October 24, 2000 | 20,000

The company has issued
436,000 options over common shares, exercisable on or before July 26, 2005 at an
exercise price of $CAD 3.91.

15. INCOME TAX

The subsidiaries in all
geographical regions are governed by the respective local income tax laws with
statutory tax rates ranging from 0% to 44%. No current or deferred tax expenses
for operations in all geographical locations were recognized in any periods.

A reconciliation of income
taxes computed at the statutory rate to the effective income tax provision of
nil is as follows:

`2000            1999            1998

                                                               $CAD            $CAD            $CAD
                                                         -------------------------------------------------

Income tax benefit computed at the statutory rate             (2,709,656)     ((1,807,775)   ((1,015,545)

Non-deductible items                                                    -                -              -

Benefit from operating losses not recorded                      2,709,656        1,807,775      1,015,545
                                                         -------------------------------------------------
                                                         -------------------------------------------------

                                                                        -                -              -
                                                         -------------------------------------------------`

Significant components of the Company deferred tax assets and liabilities
consist of the following:

`2000            1999            1998

                                                               $CAD            $CAD            $CAD
                                                         -------------------------------------------------

Deferred tax assets:

Net operating tax loss carryforwards                     18,276,92511,446,936    6,805,186

Valuation allowance                                          (18,276,925)     (11,446,936)    (6,805,186)
                                                         -------------------------------------------------
                                                         -------------------------------------------------

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

Deferred tax liabilities                                                -                -              -
                                                         -------------------------------------------------
                                                         -------------------------------------------------


Net deferred taxes                                                      -                -              -
                                                         -------------------------------------------------`

Due to its history of
losses, the Company does not believe that sufficient objective, positive
evidence currently exists to conclude that recoverability of its net deferred
tax assets is more likely than not. Consequently, the Company has provided a
valuation allowance covering 100% of its net deferred tax assets.

The Company has non-capital
accumulated losses carried forward for income tax purposes amounting to $18,
276,925, the benefit of which has not been reflected in the accounts. The losses
of the Canadian subsidiary of $127,878, $199,320, $371,867, $446,852, $625,758
and $1,100,000 must be utilised by June 30, 2002, 2003, 2004, 2005, 2006 and
2007 respectively. The carried forward losses of the United States subsidiary of
$191,449, $1,238,349 and $2,326,571 must be utilised by 2013, 2014 and 2015
respectively. The remaining losses carried forward of $11,648,881 from the
Australian subsidiaries can be carried forward indefinitely subject to certain
tests being met.

16. GEOGRAPHIC SEGMENTS

`Australia         USA          Canada       Eliminations      Consolidated
              2000                   $CAD           $CAD           $CAD            $CAD              $CAD
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

Revenue                         327,812        109,362        1,249          -                438,423
                                ----------------------------------------------                -------------------

Loss                            (3,190,024)    (2,580,049)    (1,191,946)    -                (6,962,019)
                                ----------------------------------------------                -------------------

Identifiable assets             2,749,982      6,299,648      23,792,553     (23,714,814)     9,127,369
                                ---------------------------------------------------------------------------------



              1999                 Australia         USA          Canada       Eliminations      Consolidated
                                     $CAD           $CAD           $CAD            $CAD              $CAD
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

Revenue                         97,369         79,273         22,184         -                198,826
                                ----------------------------------------------                -------------------

Loss                            (4,378,295)    (1,388,208)    (299,706)      -                (6,066,209)
                                ----------------------------------------------                -------------------

Identifiable assets              2,470,530     3,159,523      14,669,737     (14,593,818)     5,705,972
                                ---------------------------------------------------------------------------------



              1998                 Australia         USA          Canada       Eliminations      Consolidated
                                      $CAD          $CAD           $CAD            $CAD              $CAD
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

Revenue                         339,656         22,117        6,292          -                368,065
                                ----------------------------------------------                -------------------

Loss                            (1,061,985)    (186,824)      (1,008,084)    -                (2,256,893)
                                ----------------------------------------------                -------------------

Identifiable assets             2,542,062      4,617,020      12,753,017     (10,709,581)     9,202,518
                                ---------------------------------------------------------------------------------`

The Company operates in one
industry segment, that being the research and development of 2D - 3D
technologies. The segments are determined based on the three geographical areas
that the entity operates in.

17. COMPARATIVES

Certain prior year figures
have been reclassified to conform with the financial statement presentation of
the current year.

18. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY

`Common Shares            Contributed       Cumulative       Deficit            Total
                                         -------------
                                                                    Surplus        Translation                      Shareholders'
                                                                                    Adjustment                         Equity
                                    Shares           $CAD             $CAD             $CAD            $CAD             $CAD
                                ----------------------------------------------------------------------------------------------------
                                ----------------------------------------------------------------------------------------------------
Balance at June 30, 1997              9,308,976       4,018,531           442,188        (36,312)     (3,573,289)           851,118
Issue   of   5,311,791    shares
through private  placement,  net
of issuance costs...............      5,311,791       7,813,135                 -              -               -          7,813,135
Issue of  48,000  shares in lieu
of amount payable to a director          48,000          60,000                 -              -               -             60,000
Issue  of  1,550,959  shares  on
conversion     of     promissory
notes...........................      1,550,959       1,894,029                 -              -               -          1,894,029
Issue  of   109,770   shares  on
exercise of stock options....           109,770         143,213                 -              -               -            143,213
Issue  of   100,000   shares  on
exercise of warrants..........          100,000          75,000                 -              -               -             75,000
Repurchase  of  shares   through
normal course issuer bid.
(share buy-back)................        (80,800)       (172,340)                -              -               -           (172,340)
Correction   on   repurchase  of
shares   through  normal  course
issuer bid (note 13)                          -         103,424          (103,424)             -               -                  -
Loss on  translation  of foreign
controlled entities............               -               -                 -        (36,874)              -            (36,874)
Adjustment    to     contributed
surplus.........................              -                                 -              -          49,283
                                         49,283
Net loss after tax...............             -               -                 -              -      (2,256,893)        (2,256,893)
                                ----------------------------------------------------------------------------------------------------
Balance at June 30, 1998             16,348,696      13,934,992           388,047        (73,186)     (5,830,182)         8,419,671
Issue   of   2,000,000    shares
through private  placement,  net
of issuance costs........             2,000,000       3,684,327                 -              -               -          3,684,327
Issue  of   159,470   shares  on
exercise of stock options....           159,470         200,532                 -              -               -            200,532
Issue  of   200,000   shares  on
exercise of warrants..........          200,000         293,771                 -              -               -            293,771
Repurchase  of  shares   through
normal course issuer bid.
(share buy-back)..............         (741,174)     (1,496,793)                -              -               -         (1,496,793)
Correction   on   repurchase  of
shares   through  normal  course
issuer bid (note 13)                          -         866,793          (388,047)             -        (478,746)                 -
Gain on  translation  of foreign
controlled entities...........                -               -                 -        232,946               -            232,946
Net loss after tax............                -               -                 -              -      (6,066,209)        (6,066,209)
                                -----------------------------------------------------------------------------------------------------
                                -----------------------------------------------------------------------------------------------------
Balance at 30 June 1999              17,966,992      17,483,622                 -         159,760    (12,375,137)         5,268,245
Issue of 1,000,000 shares
through private placements, net
of issuance costs..............               -               -         1,000,000       4,900,067              -          4,900,067

Issue  of   117,770   shares  on
exercise of stock options.....                -               -           117,770               -        160,475            160,475

Issue of  2,500,000  on exercise
of warrants..............                     -               -         2,500,000               -      4,988,167          4,988,167

Loss on translation of foreign
controlled entities...........                -               -                 -        (511,726)             -           (511,726)
Net loss after tax............                -               -                 -               -     (6,962,019)        (6,962,019)
                                -----------------------------------------------------------------------------------------------------
Balance at June 30, 2000             21,584,762      27,532,331                 -       (351,966)    (19,337,156)         7,843,209
                                -----------------------------------------------------------------------------------------------------`

Note : The figure for the  number of shares have been adjusted for the effect of a one for five reverse stock split which occurred in
August 1998.

19. SUMMARY OF DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("US GAAP")

The Companys
financial statements are prepared in accordance with Canadian GAAP, which differ
in certain significant respects from US GAAP. The significant differences relate
principally to the following items and the adjustments necessary to reconcile
the consolidated net loss, shareholders equity, and certain balance sheet
accounts in accordance with US GAAP are shown in the schedules below.

a) Development Costs

Under Canadian GAAP
development costs that meet specific criteria related to technical, market and
financial feasibility are capitalised. Amortisation of development costs will
start upon commencement of commercial production. For US GAAP purposes,
development costs are expensed in the period incurred. The Canadian GAAP and US
GAAP reconciliation includes an adjustment to expense the capitalised
development costs in the relevant year those costs were incurred. In fiscal year
ended June 30, 2000 - nil (1999 : reversal of prior years adjustments
$CAD(1,615,945), 1998 : $CAD756,060 expensed) of development costs have been
expensed in the reconciliation to net loss under US GAAP, representing
expenditure incurred in that year. Refer to note 19 (g) for the effect of the
write off.

b) Income Taxes

Under US GAAP income taxes
are computed using the asset and liability method. Under the asset and liability
method, deferred income tax assets and liabilities are determined based on the
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax rates and laws.

Under Canadian GAAP certain
differences between the book and tax basis of assets and liabilities are treated
as permanent differences because their reversal is not considered probable in
the foreseeable future. Under US GAAP, Statement of Financial  Accounting  Standards
No. 109, "Accounting  for Income  Taxes,"  these  differences  would be  accounted  for as temporary
differences.

Under Canadian GAAP, the
deferred tax asset in respect of income tax losses carried forward are not
recognised unless the benefit is virtually certain of realisation. Under US
GAAP, the benefit is not recognised unless realisation is more likely than not.
Based on the present circumstances, the deferred income tax assets have not been
recognised as it is more likely than not that the benefit will not be realised.

No tax benefit has been
recognized under either concept to date as the company has incurred losses. The
company has significant carry forward tax losses as disclosed in note 15.

c) Promissory Notes

Under Canadian GAAP the
debt component of the note issue is the present value of the required interest
and principal payments discounted at a rate approximating the interest rate that
would have been applicable to non-convertible debt at the time of its issuance.
The difference between the face amount of the loan and the calculated debt
component has been recorded as contributed surplus.

Under US GAAP only the
warrant component is reflected in shareholders equity. Refer to note 19 (g) for
the effect of the change in GAAP.

For the purposes of this
reconciliation, the company accounts for debt issued with stock purchase
warrants in accordance with APB Opinion No. 14, Accounting for Convertible
Debt and Debt Issued with Stock Purchase Warrants. The interest expense is
calculated based on the percentage attached to the convertible debt. Refer to
note 19 (g) for the effect of the change in GAAP.

d) Patent Costs

Under Canadian GAAP patent
costs capitalised included both internal and external costs. Under US GAAP only
external costs are capitalised. Refer note 19 (g) for the effect of the
difference in GAAP.

e) Employee Stock Options

For the purposes of this
reconciliation, the Company accounts for stock options granted to employees and
directors in accordance with APB Opinion No. 25, Accounting for Stock
Issued to Employees, and intends to continue to do so. Under Canadian
GAAP, stock options are only recognized when converted and the exercise price
paid is treated as issued capital. Net income has been adjusted for the
compensation expense which would be recorded under US GAAP. This difference is
disclosed in note 19(g).

e) Employee Stock Options (continued)

A summary of the status of
the Companys stock option plan as of June 30, 2000, 1999 and 1998, and the
changes during the years ending on those dates is presented below:

`-------------------------------------------------------------------------------------------
                                                                 Year ended 30 June
                                          2000                          1999                          1998
                              Number of  Weighted Average   Number of  Weighted Average   Number of  Weighted Average
                               Options    Exercise Price     Options    Exercise Price     Options    Exercise Price
                                               $CAD                          $CAD                          $CAD
                             -------------------------------------------------------------------------------------------
Outstanding - beginning
of year                       1,100,770        1.60            885,540       1.29            512,310       1.28
Granted                       1,568,000        8.45            400,000       2.15            485,000       1.30
Exercised                     (117,770)        1.36          (159,470)       1.27          (109,770)       1.30
Forfeited                         -              -            (25,300)       1.30            (2,000)       1.25

Outstanding - end of year     2,551,000        5.82          1,100,770       1.60            885,540       1.29

Exercisable at end of year     1,084,230       8.73            139,230       2.47            189,230       1.29

Weighted average fair
value of options granted
during the year                 $1.76                         $1.62                         $0.72`

For the purposes of this
reconciliation, below is the pro forma disclosure under US GAAP in accordance
with FAS 123. Under FAS 123 the compensation cost is measured at the grant date
based on the fair value of the award of options and is recognized over the
vesting period. The fair value is determined using an option pricing model that
takes into account the stock price at the date of grant, the exercise price, the
expected life of the option, the volatility of the underlying stock and the
expected dividends on it, and the risk free interest rate over the expected life
of the option. The fair value of each option granted was estimated on the date
of grant using the Black-Scholes option pricing model with the following
assumptions for 2000, 1999 and 1998, respectively: risk free interest rates of
6.8, 6.3 and 6.0 per cent; dividend yield of 0 per cent for all years; expected
lives of 5 years and volatility of 100, 70 and 70 per cent.

|                              | Year ended 30 June
|----------------------------- | ------------------
|                              | 2000$CAD          
|Net loss - as reported        | (6,962,019)       
|Net loss - pro forma          | (8,624,819)       
|Pro forma earnings per share:
|Basic                         | (0.46)            

f) Earnings Per Share

Under Canadian GAAP,
diluted earnings per share is determined by dividing the net income adjusted to
include the assumed income, net of tax, from investing the proceeds from the
exercise of outstanding share options and warrants in 180 day bank bills, by the
weighted average number of ordinary shares, both on issue and potentially
dilutive options, outstanding during the financial year.

Under US GAAP, the treasury stock method would be used to compute diluted earnings per share.

In the reconciliation below
no effect has been given in the US GAAP computation of earnings per share to
potential dilutive securities as their effect is anti-dilutive.

g) The following tables
summarize the effect on Net Loss of the differences between Canadian and US
GAAP.

`-------------------------------------------

                                                                   Year ended 30 June

                                                            2000          1999          1998
                                                            $CAD          $CAD          $CAD
                                                       --------------------------------------------

Net loss after income tax under Canadian GAAP          6,962,019     (6,066,209)   (2,256,893)
  Reversal(write-off)       development       costs    -             1,615,945     (756,060)
             19(a)
  Promissory                                           -             -             103,370
notes                                    19 (c)
  Internal                                   patent    -             -             (39,262)
costs                               19 (d)
  Employee               stock              options    (1,621,410)   (11,334)      (77,620)
19 (e)
                                                       -------------------------------------------
Net loss under US GAAP                                 (8,583,429)   (4,461,598)   (3,026,465)
  Foreign currency translation adjustment              (511,726)     232,946       (36,874)

                                                       -------------------------------------------
Comprehensive loss                                     (9,095,155)   (4,228,652)   (3,063,339)
                                                       -------------------------------------------


Basic  Earnings  and  Diluted  Earnings  per  share
under Canadian GAAP                                            (0.37)        (0.38)        (0.21)
Basic  Earnings  and  Diluted  Earnings  per  share
under US GAAP                                                  (0.48)        (0.26)        (0.29)`

The following table summarises the effect on the shareholders' equity of the differences between Canadian and US GAAP

|                                         |       | Year ended 30 June
|---------------------------------------- | ----- | ------------------
|                                         |       | 2000$CAD          
|Shareholders' equity under Canadian GAAP |       | 7,843,209         
|Development Costs                        | 19(a) | -                 
|Internal patent costs                    | 19(d) | (39,262)          
|Shareholders' equity under US GAAP       |       | 67,843,209        

The following table summarizes the effect on the balance sheet of the differences between Canadian
and US GAAP

|Total assets under Canadian GAAP |       | 9,127,369 | 5,705,972
|-------------------------------- | ----- | --------- | ---------
|Development costs                | 19(a) | -         | -        
|Internal patent costs            | 19(d) | (39,262)  | (39,262) 
|Total assets under US GAAP       |       | 9,088,107 | 5,666,710

h) Impact of Recently Issued Accounting Standards

US GAAP - Derivatives

In June 1998 (effectiveness
date revised in June 1999), the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, which is required to be adopted in years beginning after June
15, 2000. The Statement will require the Company to recognize all derivatives on
the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives will either
be offset against the change in fair value of the hedged assets, liabilities, or
firm commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of a
derivatives change in fair value will be immediately recognized in
earnings. The Company has not yet determined what the effect of Statement 133
will be on the earnings and financial position of the Company.

Revenue Recognition

In
December 1999,the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No.101,Revenue Recognition in
Financial Statements.The SAB provides the SECs views in applying US GAAP
to selected revenue recognition issues.The Company is required to adopt the
provisions of this SAB no later than the fourth quarter of fiscal 2001.The SEC
issued additional guidance on this SAB in October 2000.The Company is in the
process of evaluating this SAB along with the additional guidance and has not
yet determined the future impact on its consolidated financial statements.

i) Prior Period Adjustments

The 1999 reconciliation of
the net loss after income tax under Canadian GAAP to US GAAP has been corrected
for the omission of the $1,615,945 effect of the reversal of the development
costs written-off in note 19(g) above. This represents the cumulative amount
previously recognized in 1998 ($756,060) and 1997 ($859,885) as a reduction of
the net loss under Canadian GAAP for development costs capitalized, which is not
permitted under US GAAP. These amounts were written-off in 1999 under Canadian
GAAP but incurred prior to 1999 and had been expensed under US GAAP prior to
1999. In 1999 the company changed its accounting policy to conform to the US
policy requiring expensing development costs. The basic and fully diluted
earnings per share under US GAAP have been recalculated to reflect this
correction.