UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, 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

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

or

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

For the transition period from June 30, 2000 to December 31, 2000.

Commission File Number 000-26983

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

Not Applicable
(Translation of Registrant's name into English)

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:

22,430,492 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 ____

TABLE OF CONTENTS

|                                                  |                                                                             |                                                         |  | PAGE
|------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------- |  | ----
|Special Note Regarding Looking Forward Statements |                                                                             |                                                        
|Glossary of Terms                                 |                                                                             |                                                        
|Item 1.                                           | Identity of Directors, Senior Management and Advisors                       |                                                        
|Item 2.                                           | Offer Statistics and Expected Timetable                                     |                                                        
|Item 3.                                           | Key Information                                                             |                                                        
|                                                  | A.                                                                          | Selected Consolidated Financial Data                    | 
|                                                  | B.                                                                          | Capitalization and Indebtedness                         | 
|                                                  | C.                                                                          | Reasons for the Offer and Use of Proceeds               | 
|                                                  | D.                                                                          | Risk Factors                                            | 
|Item 4.                                           | Information on the Company                                                  |                                                        
|                                                  | A.                                                                          | History and Development of the Company                  | 
|                                                  | B.                                                                          | Business Overview                                       | 
|                                                  | C.                                                                          | Organizational Structure                                | 
|                                                  | D.                                                                          | Property, Plants and Equipment                          | 
|Item 5.                                           | Operating and Financial Review and Prospects                                |                                                        
|Item 6.                                           | Directors, Senior Management and Employees                                  |                                                        
|                                                  | A.                                                                          | Directors and Officers of the Company                   | 
|                                                  | B.                                                                          | Compensation of Directors                               | 
|                                                  | C.                                                                          | Board Practices                                         | 
|                                                  | D.                                                                          | Employees                                               | 
|                                                  | E.                                                                          | Share Ownership                                         | 
|Item 7.                                           | Major Shareholders and Related Party Transactions                           |                                                        
|                                                  | A.                                                                          | Major Shareholders                                      | 
|                                                  | B.                                                                          | Related Party Transactions                              | 
|                                                  | C.                                                                          | Interests of Experts and Counsel                        | 
|Item 8.                                           | Financial Information                                                       |                                                        
|                                                  | A.                                                                          | Consolidated Statements and Other Financial Information | 
|                                                  | B.                                                                          | Significant Changes                                     | 
|Item 9.                                           | The Offering and Listing                                                    |                                                        
|                                                  | A.                                                                          | Nature of Trading Markets                               | 
|                                                  | B.                                                                          | Plan of Distribution                                    | 
|                                                  | C.                                                                          | Markets                                                 | 
|                                                  | D.                                                                          | Selling Shareholders                                    | 
|                                                  | E.                                                                          | Dilution                                                | 
|                                                  | F.                                                                          | Expenses of the Issue                                   | 
|Item 10.                                          | Additional Information                                                      |                                                        
|                                                  | A.                                                                          | Share Capital                                           | 
|                                                  | B.                                                                          | Memorandum and Articles of Association                  | 
|                                                  | C.                                                                          | Material Contracts                                      | 
|                                                  | D.                                                                          | Exchange Controls                                       | 
|                                                  | E.                                                                          | Taxation                                                | 
|                                                  | F.                                                                          | Dividends and Paying Agents                             | 
|                                                  | G.                                                                          | Statements by Experts                                   | 
|                                                  | H.                                                                          | Documents on Display                                    | 
|                                                  | I.                                                                          | Subsidiary Information                                  | 
|Item 11.                                          | Quantitative and Qualitative Disclosures About Market Risk                  |                                                        
|Item 12.                                          | Description of Securities Other Than Equity Securities                      |                                                        
|PART II                                          
|Item 13.                                          | Defaults, Dividend Arrearages and Delinquencies                             |                                                        
|Item 14.                                          | Material Modification to the Rights of Security Holders and Use of Proceeds |                                                        
|Item 15.                                          | [RESERVED]                                                                  |                                                        
|Item 16.                                          | [RESERVED]                                                                  |                                                        
|PART III                                         
|Item 17.                                          | Financial Statements                                                        |                                                        
|Item 18.                                          | Financial Statements                                                        |                                                        
|Item 19.                                          | Exhibits                                                                    |                                                        
|                                                  | Signatures                                                                  |                                                        

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Statements contained in
this Transition Report on Form 20-F that are not historical facts are
forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from estimated results. Such risks and uncertainties are more fully described in
Item 1. Key Information - Risk Factors. Any forward looking
statements speaks only as of the date of this Transition Report.

Investors are cautioned not
to put undue reliance on forward-looking statements, and should not infer that
there has been no change in the affairs of DDD since the date of this report
that would warrant any modification of any forward-looking statement made in
this document or other documents filed periodically with securities regulators.
All subsequent written and oral forward- looking statements attributable to DDD
or persons acting on its behalf are expressly qualified in their entirety by
this notice. Except as required by law, DDD disclaims any intent or obligation
to update publicly these forward-looking statements, whether as a result of new
information, future events or otherwise.

GLOSSARY OF TERMS

The following are certain definitions of terms used herein:

2D compatible 3D

3D images that may be viewed in either 2D or 3D.  Viewing in 3D is possible with only a
marginal increase in 2D image file size.

Anaglyph

A method of viewing
stereoscopic images using glasses with red and blue lenses.

Autostereoscopic

A method of viewing stereoscopic
images without the need to wear special glasses or head gear.

Broadband

A high speed connection to the internet (e.g. cable modem or T1).

Content Owner

A party that controls the
intellectual property rights of a piece of content.

Conversion

A process whereby 2D images are converted to 3D.

DeepSee

The former brand name of a range of DDD's 3D technologies and products, now named
OpticBOOM(TM)to better reflect consumer benefits.

De-Multiplexer or Demux

DDDs DM1020 decodes
alternating left and right eye field sequential images which have been recorded
on a video tape or DVD and separates them into two distinct left and right eye
output signals for viewing on a stereo pair of polarized projectors.

Depth Map or Z Axis

Process by which using
shades of gray, determines the distance between objects or points (depth) in a
2D image for recording or playback in 3D. Lighter images are closer while darker
images are farther away from the point of view.

Digital Imaging

A means of representing an image on a computer - e.g. digital photographs.

Download

The transfer of a computer file from one location to another.

Downloadable

A computer file that is available to be transferred between two locations.

DVD

Digital Versatile Disk - a storage disk for video images that can be displayed on a TV or PC
screen.

Freeware

Software that is given to the consumer without charge.

Geometric 3D

Geometric 3D, like an artist's picture, is a 2D representation of a 3D world.  Light, shading,
textures and vanishing points are used to create the appearance of depth, but the image remains
2D.

Giant screen

Large screens that display 65mm or 70mm film, e.g. IMAX.

Glasses-free display

A computer or television screen
that shows 3D without the need to wear glasses.

Head Tracking System

A patented headset free hardware technology developed by DDD for use in the arcade game
market.  DDD is no longer pursuing this market.

In-screen

A stereoscopic effect whereby objects appear to be located behind the viewer's screen, giving the
appearance of depth.

Large format film

65mm or 70mm film that is shown on giant screens, e.g. IMAX.

Narrowband

A slow connection speed to the internet (e.g. using a 56K modem or less).

Off-screen

A stereoscopic effect
whereby objects appear to be in front of the viewers screen.

OpticBOOM

The brand name of a range of DDD's 3D technologies and products.

OpticBOOM Plug-in

A plug-in that works with
Apple QuickTime to enable the viewing of 3D images via the internet. Available
as a free download at www.ddd.com.

Polarized glasses

Glasses that are fitted
with polarizing lenses, enabling the viewing of polarized 3D images.

Progressive download

A method of transferring
computer files between two locations that enables a viewer to watch a video file
while the remainder is being downloaded.

QuickTime Movie Player

Software developed by Apple Computer Inc. that enables the user to view and listen to
multimedia computer.

RealPlayer

Software developed by RealNetworks, Inc. that enables the used to listen to and view multimedia
content from the Internet.

Set-top box

A cable or satellite
decoder box intended for use with a home television.

Scan Converter

In its generic terminology,
a Scan Converter is any device that takes in one signal format and outputs
another signal format that is compatible with the display device, the broadcast
device or the recording device (i.e. converting PAL or SECAM to NTSC for
recording onto VHS for playback in the U.S.). Using 3D field sequential video
(Composite Video, S-Video or Component RGB) as the input, DDDs SC1050
doubles the vertical refresh rate of 60 Hz to 120Hz for NTSC or 50 Hz to 100Hz
for PAL, thus a flicker-free 3D image is displayed on a monitor or
projector.

Scan Doubler

This is a special case of a
Scan Converter. When used in 3D mode, DDDs SD1050 outputs a video format
that is running at twice the horizontal frequency (effectively, double
resolution) and twice the vertical refresh rate as the incoming signal. When
used in the 2D mode, the SD1050 outputs a video format that runs at twice the
horizontal frequency as the incoming signal (effectively, double resolution)
while the vertical refresh rate remains the same. Results in either case are
clearer, sharper images.

Shutter glasses

Electronic glasses that
enable viewers to see high quality, full-color 3D images.

Software
Algorithms

A software program designed
to solve a recurrent problem, procedure or mathematical formula.

Stereo 3D

A process that enables a
viewer to see images that appear to have natural depth and perspective as if the
images were real. Separate left and right eye views recreate the images as they
are viewed in the real world.

Stereoscopic

A method of viewing images
that provides a left and right eye view of each image, making it appear to the
viewer the same way that it would appear in real life.

Streaming

A method of transferring
computer files (usually video images) between two locations whereby the files
are sent in real time. With a narrowband connection, the images often appear
choppy.

Upload

A process of transferring computer files to a central site for subsequent Downloading or
Streaming

PART I

Item 1.   Identity of Directors, Senior Management and Advisers

Not Applicable.

Item 2.   Offer Statistics and Expected Timetable

Not Applicable.

Item 3.   Key Information

A.  Selected financial data.

The following selected
consolidated financial data for the transition period ended December 31, 2000
and the years ended June 30, 2000, 1999, 1998 and 1997 are derived from the
Audited Consolidated Financial Statements for the periods indicated and should
be read in conjunction therewith.

Reference should also be
made to Note 19 to the Audited Consolidated Financial Statements included herein
for a discussion of the material differences between Canadian GAAP and U.S.
GAAP, and their effect on the financial statements.

All monetary references
contained in this Item 3 are in Canadian dollars.

Note that historical
results are not necessarily indicative of future results.

SELECTED FINANCIAL INFORMATION TABLE

`Six Month Period Ended              Twelve Months Ended June 30,
                                             December 31,
                                      ---------------------------  ------------------------------------------------
                                         2000           1999          2000          1999         1998       1997
                                                    (Unaudited)
                                      ------------  -------------  ------------  ------------  ---------  ---------
  CANADIAN GAAP(1)                                          (thousands of Canadian dollars)

  Total Revenue                               399            102           438           199        368        279

  Expenses                                  5,340          3,183         7,400         6,265      2,625      1,878

  Net Loss From Period(2)                  (4,941)         3,081        (6,962)       (6,066)    (2,257)    (1,599)

  Basic Earnings and Diluted                (0.23)         (0.17)        (0.37)        (0.38)     (0.21)     (0.19)
  Earnings per share(3)

  Total Assets                              7,181          5,748         9,127         5,706      9,203      2,274

  Total Long Term Debt and Capital             94            140           159            64         88        980
  Lease Obligations

  Shareholders' Equity                      5,930          4,283         7,843         5,268      8,651        851

  Weighted Average Number of Shares        21,917         18,025        18,825        15,846     10,609      8,638
  Outstanding(5)

  US GAAP(6)                                                (thousands of Canadian dollars)

  Total Revenue                               399            102           438           199        368        279

  Expenses                                  5,794          3,248         9,022         4,661      3,394      2,738

  Net Loss From Period(2)                  (5,395)        (3,146)       (8,583)       (4,462)    (3,026)    (2,459)

  Basic Earnings and Diluted                (0.24)         (0.18)        (0.48)        (0.26)     (0.29)     (.028)
  Earnings per share(4)

  Total Assets                              7,142          5,709         9,088         5,667      7,547      1,414

  Total Long Term Debt and Capital             94            140           159            64         88        980
  Lease Obligations

  Shareholders' Equity                      5,891          4,243         7,804         5,229      6,764       (319)

  Weighted Average Number of Shares        21,917         18,025        18,825        15,846     10,609      8,638
  Outstanding(5)`

Notes:

|(1) | Refers to Canadian Generally Accepted Accounting Principles.                                                                                                                                                                                                                                                                                                                                          
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | After taxes.                                                                                                                                                                                                                                                                                                                                                                                          
|(3) | 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.
|(4) | Under US GAAP, the
treasury stock method would be used to compute diluted earnings per share.                                                                                                                                                                                                                                                                                                         
|(5) | End of period.  Excludes stock options and any other outstanding convertible securities.                                                                                                                                                                                                                                                                                                              
|(6) | Refers to US Generally Accepted Accounting Principles.                                                                                                                                                                                                                                                                                                                                                

Dividend Policy and Record

We have not paid any cash dividends to date, and have no intention to pay any cash
dividends on our common shares in the foreseeable future.  The timing, amount and form of
dividends, if any, will depend, among other things, on our results of operations, financial
condition, cash requirements and other factors deemed relevant by our board of directors.

Exchange Rates

Financial information in this Transition Report is expressed in Canadian dollars, unless otherwise
noted.  References to "Cdn$" or "$" are to Canadian dollars.  The following tables sets forth, for the
period indicated, the high and low exchange rates, the average of the month-end exchange rates and the
period-end exchange rate of the Canadian dollar in exchange for United States dollars, based upon the
inverse of exchange rates reported by the Federal Reserve Bank of New York at the noon buying rates in
New York City for cable transfers payable in Canadian dollars as certified for customs purposes.  On
July 13, 2001 the noon buying rate was Cdn$1.00 = US$.6494.

|Year EndedDecember 31,      | High   | Low    | Average | Period End
|--------------------------- | ------ | ------ | ------- | ----------
|1996                        | 0.7515 | 0.7215 | 0.7334  | 0.7301    
|1997                        | 0.7489 | 0.6948 | 0.7223  | 0.6997    
|1998                        | 0.7105 | 0.6343 | 0.6743  | 0.6534    
|1999                        | 0.6929 | 0.6537 | 0.6730  | 0.6929    
|2000                        | 0.6973 | 0.6413 | 0.6733  | 0.6666    
|Six MonthsendedDecember 31, | High   | Low    | Average | Period End
|1999                        | 0.6925 | 0.6607 | 0.6759  | 0.6925    
|2000                        | 0.6831 | 0.6410 | 0.6649  | 0.6669    

|Month         | High   | Low   
|------------- | ------ | ------
|June 2001     | 0.6604 | 0.6516
|May 2001      | 0.6532 | 0.6435
|April 2001    | 0.6512 | 0.6333
|March 2001    | 0.6502 | 0.6340
|February 2001 | 0.6695 | 0.6497
|January 2001  | 0.6690 | 0.6596
|December 2000 | 0.6666 | 0.6496

B.     Capitalization and indebtedness.

Not Applicable.

C.     Reasons for the offer and use of proceeds.

Not Applicable.

D.     Risk Factors.

The following offers a
brief overview of some of the risk factors to be considered in relation to the
Companys business. Specific risk factors to be considered include, but are
not limited to, the following:

Going Concern Qualification to Financial Statements

Our auditors have
raised the issue that we may not be able to continue as a going concern as a
result of a lack of profits. We have used substantial amounts of working capital
in our operations and have sustained significant operating losses. Since
January 1, 2000, we raised approximately $10,000,000 from private placements
and exercises of warrants and options. While this capital may allow us to
operate in the short term, we may not be able to continue as a going concern
thereafter if we do not generate profits or secure additional financing.

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. During 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 and $4.9 million during the six month transition period ended December 31,
2000. As of December 31, 2000, we had an accumulated deficit of
approximately $24.3 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.

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. 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.

The Complexity And Expense Of The Large-Scale Deployment of Our Products
and Services May Slow Deployment And Delay Market Acceptance

The large-scale
deployment of products and services incorporating our technology by customers is
complex, time-consuming and expensive, and therefore each deployment of these
products and services requires our expertise to tailor our technology to the
customers particular product offering. This conversion 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.

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

Our principle activity
and main focus does not include the manufacturer of hardware. 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.

The following companies are
our significant competitors:

| | - C3D Digital Inc. operates a 3D TV channel. Subscribers to the channel are required to
purchase set-top hardware and to wear electronic 3D glasses to view the 3D content.  The
company also streams 3D media entertainment over the Internet. C3D Digital Inc. is
publicly traded on the American Stock Exchange.                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | - Isee3D Inc. is a developer of 3D imaging software and hardware for use in the medical
and defense industries.  The company has adapted its 3D technology for use in the
streaming of 3D stereoscopic entertainment over the Internet.  Isee3D Inc. is publicly
traded company listed on the Canadian Venture Exchange.                                                                                                                                                                                                                                                                                                                       
| | - VRex, Inc. is a
manufacturer and marketer of 3D stereoscopic imaging products and services. It
sells a bundled hardware and software application for viewing 3D streaming media
files, and sells 3D cameras and projectors. VRex also provides 3D productions
services to the theme park industry, and builds custom 3D entertainment modules
for theme parks and trade shows. VRex, Inc. is a wholly-owned subsidiary of
Reveo, Inc., a privately held company.                                                                                                                                                                             
| | - 3DV Systems, Inc. markets an end-to-end solution for the creation, distribution and
display of stereoscopic 3D video content. Their core technology is a 3D camera
attachment that captures depth information during filming. In addition, 3DV
Systems also markets a software product that encodes, compresses and transmits a
3D video signal over broadband and low-band infrastructures which is similar to
our OpticBoom 3D technology. The company also targets the 2D special
effects industry with 2D applications of their 3D technologies. 3DV Systems,
Inc. is a privately held company founded in Israel.                       
| | - VisuaLABS Inc.
develops image display technologies including glasses-free 3D display technology
which competes with our technology. The company has announced that it plans to
license its glasses-free technology to a builder of a network of shopping mall
based 3D billboards. The company also licenses its technology for electronic
projectors, computer workstations, arcade video games, and training simulators.
VisuaLabs announced a Grout-Free tiling technology that enables
seamless tiling of small LCD displays into larger displays. VisuaLabs Inc. is a
publicly traded company listed on the Canadian Venture Exchange.

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 ten
patent applications pending in the United States and seven patent application
pending in Australia. Patents may not be issued from these or any future
applications. To date, four of the Australian and two of the U.S. patents have
been issued. Even if a patent application is 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:

| | user 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.

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 Can Be No Assurance That Our International Patent Applications Will
Be Granted Or, If Granted, Will Survive Legal Challenges To Their Validity

During the preparation
of patent applications, international preliminary examiners reports have
identified international patents that may conflict with our patent 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.

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

Our securities are
currently only traded on the Canadian Venture Exchange, a relatively
recently-formed securities exchange which is in the process of being acquired by
the Toronto Stock Exchange. There is no guarantee that a liquid, public market
would exist for our securities. Accordingly, you may not be able to liquidate an
investment in our securities and, therefore, should be prepared to bear the
economic risk of such an investment for an indefinite period and to withstand a
total loss of the investment.

Item 4.   Information on the Company.

A.   History and development of the company.

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.

B.   Business overview.

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 to satisfy the emerging demand of displaying still and moving images in
"stereoscopic 3D."  This year we launched a "freeware" version of our OpticBOOM(TM)Plug-in
for Apple, Inc.'s QuickTime Movie Player, enabling 3D movie files to be viewed via the
Internet, CD or DVD.  The OpticBOOM(TM)Plug-in can be downloaded from our web site at
http://www.ddd.com.

Stereoscopic 3D

Stereoscopic 3D differs 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(TM)process, allows the viewer to see the images in lifelike 3D through
polarized or LCD shutter glasses 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.

Stage of Development

Our activities have been focused on developing the technological feasibility of displaying
and transmitting still and moving images in stereoscopic 3D.  To date, we have generated limited
revenues from the commercial sale of our hardware and software products.  In 2000, we launched
the "freeware" version of our Optic BOOM(TM)Plug-in for Apple, Inc.'s QuickTime Movie
Player, enabling 3D movie files to be viewed via the Internet, CD or DVD.  We anticipate
launching a second generation Optic BOOM(TM)Plug-in in late July, 2001.  However, our current
focus is on the development of glasses-free video and computer monitors which are anticipated
to be available for public space markets such as trade shows and high traffic areas principally for
advertising markets later in 2001.  These monitors, due to their high cost, are not expected to be
available for the consumer market for several years.

The Markets

Our focus is now the commercialization of our technologies within the worldwide
entertainment and multimedia industries.  A number of key applications have been identified
which fall into the following broad categories:

| | 2D compatible 3D images for Internet distribution;
| | --------------------------------------------------
| | 2D compatible 3D broadcast programming;           
| | 2D compatible 3D movies for DVD;                  
| | 3D movies for theatrical release;                 
| | interactive games software applications; and      
| | video processor and display technologies.         

Software

We have developed a software-based solution allowing images created using
conventional 2D techniques, including video, film and computer generated media formats, to be
manipulated digitally and converted to 3D.  Significantly, the data used to create the 3D version
of a 2D image may be subsequently embedded in the original 2D image allowing the viewer to
choose whether to view in 2D or 3D using a single piece of media.  The additional 3D data adds
a minimal increase in size to the original 2D image.

Hardware

We have engineered digital video processing hardware.  The video processor provides a
series of features including the control of 3D projection and display systems, real time
conversion of standard video and DVD material to 3D, and image enhancement allowing PC
monitors to display video and television images at higher definition resolution than conventional
television sets.

The company's immediate focus
is on bringing glasses-free 3D television to the public space consumer marketplace.
DDD's 3D display solutions are ideal for high-traffic public spaces, location based
entertainment, trade shows, and 3D visualization applications.  We are targeting
retail deployment in shopping centers and airports as well as deployment for corporate
presentations, promotional and trade show use.

Products and Services

Our key product is a software application called OpticBOOM(TM)(formerly DeepSee(TM)).
We changed the brand name in fiscal 2000 to better reflect the consumer benefits of our 3D
technologies and products.  Customers using the OpticBOOM(TM)family of software products will
be able to digitally manipulate and enhance existing 2D and 3D still and moving images for
Internet, television, film and video/DVD to create a rich 3D stereoscopic image.  The key to our
solution lies in the generation of depth cue data based upon the original 2D image.  Our Dynamic
Depth Cueing(TM)process uses a series of sophisticated software algorithms to identify each object
in a scene along with its distance or depth away from the viewer.  The compressed depth cue data
is reinserted into the original 2D image and distributed to the viewer in 2D-compatible 3D
formats.  At the viewer's discretion, the depth cue data may be decoded by a software or
hardware-based OpticBOOM(TM)decoder allowing the images to be viewed in 3D with available
glasses on conventional display hardware including PC monitors or television sets.

OpticBOOM(TM)will consist of
a range of easy to use semi-automated software tools for the consumer or the
content owner.  The content owner, using an OpticBOOM(TM)software toolkit
licensed from us, will be able to create the appropriately formatted 3D version of their 2D
production for distribution over the Internet, analog or digital broadcast channels or DVD.

We also provide a 2D to 3D conversion
service, allowing us to selectively offer 3D capabilities to professional markets such
as film and television.

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 our greatest commercial success in giant
screen "IMAX(R)" 3D films and 3D theme park rides and attractions. These films have been made
using twin camera 3D technology manufactured by IMAX(R)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(R)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.

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.
| |  | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 transition 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:

| |  | · | nWave 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(TM)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(TM)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(TM)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.

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   | Professional video processor and 3D display technologies        
|Visual              

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 UsersSet-top Box Users                                           | ConsumersInternet Browser PublishersSet-top Box ManufacturersPC Media Player Publishers                                  | LicenseSoftware           
|OpticBOOM(TM)Photo      | PC Users                                                            | ConsumersPC Peripheral ManufacturersDigital Camera ManufacturersGraphic Software PublishersPhotographic Image Processors | LicenseSoftware           
|OpticBOOM(TM)Studio Pro | Internet Video ProvidersTelevision BroadcastersFilm Post Production | Internet PublishersTelevision Content ProvidersFilm Content ProvidersFilm Library Owners                                 | Annual LicenseSupport Fees

PC/Internet

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.

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(TM)Photo software application used to convert 2D images and movies to 3D and
the OpticBOOM(TM)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(TM)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(TM)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(TM)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(TM)Plug-in compatible with
their media player and install it on their PC.  By providing limited functions of the
OpticBOOM(TM)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(TM)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(TM)Extreme 3D viewing system is available on our Web site.

OpticBOOM(TM)Photo for the Internet/PC market

OpticBOOM(TM)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(TM)Photo is to enable
consumer users to enhance digitized 2D photographs created using scanning or digital camera
technology.  Upon introduction, OpticBOOM(TM)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(TM)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(TM)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(TM)Photo into the consumer photo processing market.

OpticBOOM(TM)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(TM)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(TM)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(TM)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(TM)Photo for printing as 3D photographs.

In addition to the distribution of physical products, we also expect OpticBOOM(TM)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(TM)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(TM)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(TM)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(TM)Studio Pro is our professional media conversion and transmission
application intended for use in Internet, film, DVD, video and broadcast media applications.

OpticBOOM(TM)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(TM)Plug-in.

To meet the high volume, fast turnaround economics of the Internet video market,
OpticBOOM(TM)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(TM)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(TM)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(TM)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(TM)Studio
Pro   license,   and  a  royalty  fee  based  upon  the  media   created   using
OpticBOOM(TM)Studio Pro.

We  have been  approached  by
Intel  Corporation's  Workstation  Products  Group to  determine  the  practical
implications of standardizing  OpticBOOM(TM)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(TM)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(TM)Studio  Pro.  We are  also
investigating distributing and supporting the product ourselves.

OpticBOOM(TM)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(TM)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(TM)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(TM)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(TM)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(TM)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(TM)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(TM)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(TM)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(TM)Studio  Pro license, and a royalty fee based upon the media created
using OpticBOOM(TM)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(TM)Plug-in  technologies. The OpticBOOM(TM) 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  | Converting large volumes of film and video content from Pro 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(TM)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(TM)
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(TM)Studio prepares the 2D compatible 3D media for transmission through
encoding the depth cue data the Internet movie formats supported by our OpticBOOM(TM)Plug-in
PC media player decoders.

OpticBOOM(TM)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(TM)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(TM)Studio Pro license, and a royalty fee based upon the
media created using OpticBOOM(TM)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(R)" 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(R)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(TM)Studio Pro, it is
possible to create a 3D IMAX(R)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(TM)Studio Pro permit extensive
artistic control over the 3D effects in each scene. Applying OpticBOOM(TM)Studio Pro to
incorrectly filmed 3D shots allows them to be manipulated digitally and thus rescued.  This
combination of features makes OpticBOOM(TM)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(R)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(TM)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(TM)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(TM)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(TM)Studio Pro is capable of providing output suitable for physical film
processing as required in the large format or IMAX(R)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(TM)Studio
Pro allow it to be applied to the largest of all films, those screened in IMAX(R)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(TM)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(TM)Studio Pro license, and a royalty fee based upon the
media created using OpticBOOM(TM)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(R)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(R)recently concluded an agreement with Mainframe Entertainment Inc. to
bring computer animated 2D productions to the IMAX(R)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(TM)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(TM)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 trade show 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(TM)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(TM)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(TM)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(TM)Studio Pro license, and a royalty
fee based upon the media created using OpticBOOM(TM)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(TM)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(TM)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(TM)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(TM)Studio prepares the 2D compatible 3D media for transmission through
encoding the depth cue data the video formats supported by our OpticBOOM(TM)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(TM)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(TM)Studio Pro license, and a royalty fee based upon the
media created using OpticBOOM(TM)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 ProSet-top BoxesDVD Players           | OpticBOOM Studio Pro LicenseesDVD Player ManufacturersSet-top Box Manufacturers                       | Unit SalesManufacture         
|3D Demultiplexer    | Professional A/V3D Projection/Display                  | Professional A/V Users3D theater installations                                                        | Unit SalesManufactureRoyalties
|Real Time Converter | PC UsersConsumer A/V                                   | ConsumersPC Peripheral ManufacturersConsumer Electronic Manufacturers                                 | Manufacture                   
|Line Doubler        | PC Video PlayersPC TelevisionHome TheaterSet-top Boxes | PC Peripheral ManufacturersPC ManufacturersConsumer Electronic ManufacturersSet-top Box Manufacturers | Manufacture                   

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(TM)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(TM)Studio Pro.
OpticBOOM(TM)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(TM)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 de-multiplexers. 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(TM)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(TM)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.

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.  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 54,000 "hits" or user visits per month.  This
generates an average of 1,300 inquires per month for information on us and our products.  The
OpticBOOM(TM)plug-in has been downloaded approximately 25,000 times since the plug-in was
launched in October, 2000.

Public Relations

Our 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(R)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 in the following conferences and exhibitions:

|Conferences and Exhibition                                      | Dates                        | Activity                                    
|--------------------------------------------------------------- | ---------------------------- | --------------------------------------------
|Giant Screen Theater Association,New York, New York             | September 15, 1999           | Attended as guest speaker                   
|Internet World, Los Angeles,California                          | April 5-7, 2000              | Exhibited                                   
|3D Film Interest Group                                          | May 16, 2000                 | Attended as guest speaker                   
|Ziff-Davis Broadband MediaConferences, San Francisco,California | May 17, 2000                 | Attended as guest speaker                   
|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 1, 2000 | Exhibited in conjunction with Motorola, Inc.
|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          | Attended as guest speaker                   
|Digital Hollywood, San Jose, California                         | March 5-8, 2001              | Attended as guest speaker                   
|Internet World, Los Angeles, California                         | March 14-16, 2001            | Attended as exhibitor                       
|National Association ofBroadcasters, Las Vegas, Nevada          | April 23-26, 2001            | Attended as exhibitor                       
|Infocomm, Las Vegas, Nevada                                     | June 13-15, 2001             | Attended as exhibitor                       
|Digital Entertainment Box Forum,Long Beach, California          | June 20-21, 2001             | Attended as guest speaker                   

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.

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(TM)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
we do; 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(TM)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(TM).  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(TM)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(TM).

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(TM)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(TM)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(R)Corporation  of  Toronto,  Canada  is
endeavoring   to  deliver  a  solution  for   converting  2D  film  to  3D.  The
IMAX(R)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(TM)Studio  Pro are
not  limited  in this  manner,  and  therefore  offer  greater  capabilities  to
filmmakers at this time.

IMAX(R)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(TM)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(R)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(TM)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(TM)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.

C. 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 Transitional 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.

D. Property, plants and equipment.

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 $121,280.

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

Item 5. Operating and Financial Review and Prospectus.

The following Operating and Financial Review and Prospects should be read in
conjunction with Selected Financial Data and the consolidated
financial statements and notes included elsewhere in this Transition Report. 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 Transition Report.

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 $24.3 million related to the development of our technologies.  We
anticipate significant product introductions in July 2001 which should begin to generate
revenue, 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 transition report, 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 to report our financial results concurrently with most other companies in our
industry.

A. 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, and the six month transition period ended December 31,
2000 and 1999 our revenues were derived from the following sources:

|                   | Year ended June 30, | Six Months endedDecember 31,
|------------------ | ------------------- | ----------------------------
|                   | 2000                | 1999                        
|Technology revenue | 274,629             | 29,545                      
|Interest income    | 144,489             | 110,583                     
|Other              | 19,305              | 58,698                      
|Total              | 438,423             | 198,826                     

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 is undertaken 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 and the six months
ended December 31, 2000 and 1999.

|                    | Year ended June 30, | Six Months endedDecember 31,
|------------------- | ------------------- | ----------------------------
|                    | 2000                | 1999                        
|License fees        | 14,056              | 14,340                      
|Conversion services | 185,494             | 15,205                      
|Hardware sales      | 75,079              | -                           
|Sale of prototypes  | -                   | -                           
|Total               | 274,629             | 29,545                      

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                Six Months ended
                                                                                     December 31

                                             2000         1999         1998         2000        1999
                                             ----         ----         ----         ----        ----
Amortization                              468,520      137,230       42,225      524,989     127,390
General and administrative              4,112,533    2,280,180    1,510,458    2,341,673   1,928,852
Interest and borrowing costs               72,910            -      264,633       31,865      40,980
Market development                         54,577      210,023      306,324      274,778      30,935
Project and patenting costs               177,435       18,803       32,883      391,192      28,665
Salaries and wages                      2,514,467    1,023,180      468,435    1,775,706   1,025,997
Development costs                               -    2,595,619            -            -           -
                                        ---------    ---------    ---------    ---------   ---------
Total                                   7,400,442    6,265,035    2,624,958    5,340,203   3,182,819
                                        =========    =========    =========    =========   =========`

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 it was our policy 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. 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:                                                                                                                                                                                                | 196   
| |  | 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. 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. 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.

As discussed elsewhere in this prospectus, 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.

Six Months ended December 31, 2000 Compared to Six Months ended December 31, 1999

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

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | $000's
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------
| |  | As a result of funds generated from private placements and option conversions, we
implemented a program to upgrade and replace capital equipment. In addition, in
November 1999 our United States subsidiary, Dynamic Digital Depth USA Inc., commenced
fit-out work with respect to new offices which it eventually relocated to in March
2000. These factors resulted in increases in depreciation of capital equipment and
amortization of leasehold improvements of: | 340   
| |  | Since July 1, 2000, the Company has prospectively changed the period over which its
patents are amortized from 20 years to five years resulting in an increase in patent
amortization of:                                                                                                                                                                                                                                                                                | 58    
| |  | Net comparative increase in amortization expenditure                                                                                                                                                                                                                                                                                                                                                                                                                     | 398   

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

| |   |                                                                                                                                                                                                                                                                                                                      | $000's
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------
| |  | The conversion of some
sub-contractors to full-time employees coupled simply with the use of less
sub-contractors resulted in a decrease in expenditure of:                                                                                                                                                          | (277) 
| |  | 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:                                                                                                              | 124   
| |  | The use of external
accountants and auditors and other legal and professional advisors in
connection with our capital raising efforts and the registration of our common
shares with the SEC, including the preparation of registration statements on
Forms 20-F and F-1, resulted in an increase in expenditure of: | 299   
| |  | We developed a new website
in line with our future marketing related focus that is also e-commerce
capable resulting in an increase in expenditure of:                                                                                                                                                               | 111   
| |  | Increased staffing levels
and computing requirements led to an increase in computing support of:                                                                                                                                                                                                                     | 66    
| |  | The increase in attendance
at various exhibitions designed to promote awareness of our technologies
resulted in a net increase in expenditure of:                                                                                                                                                                    | 62    
| |  | 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:                                                                                               | 28    
| |  | Net
comparative increase in general and administrative expenditure                                                                                                                                                                                                                                                   | 413   

The expansion of our
operations in the United States of America have resulted in an increase in
marketing expenditures in the six months ended December 31, 2000 when compared
to the six months ended December 31, 1999 of approximately $244,000.

At December 31, 2000, we
undertook a review of our patent portfolio in light of a new policy that we
adopted to write off the costs incurred in applying for and registering such
patents where there is no reasonable prospect that the technology represented by
the patents will be capable of producing revenues within the next succeeding
twelve months. As a result, our project and patenting costs increased by
approximately $363,000 for the six months ended December 31, 2000 wen compared
to the six months ended December 31, 1999.

In fiscal 2000, the decision
was made to no longer capitalize research and development expenditures,
including certain applicable salary and wages and personnel costs. Consequently,
there was an increase in personnel expenditures. This, coupled with the fact
that there was a significant increase in the number of personnel employed in the
United States, resulted in an increase in salary and wages of approximately
$750,000.

B. LIQUIDITY AND CAPITAL RESOURCES

For fiscal 2000 we incurred a
net loss of approximately $7 million, with an operating cash flow deficit
averaging approximately $506,000 per month. For the six months ended December
31, 2000 we incurred a net loss of approximately $5 million with an operating
cash flow deficit averaging approximately $640,000 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 December 31, 2000, we had net working
capital of approximately $1.5 million, including a cash balance of approximately
$2.5 million. Through December 31, 2000, we had an accumulated deficit of
approximately $24.3 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 $316,000 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 $3.7 million, including a cash balance of
$3.8 million.  Through June 30, 1999, we had an accumulated deficit of approximately $12.4
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 head-end 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 Banco del Gottardo, a Swiss bank, 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 $1.8 million in fiscal 1999, primarily for development and patent
costs (approximately $973,000), purchase of capital assets (approximately $341,000) and the
payment of a non-refundable option fee of $509,000 in respect of the building occupied by our
Australian subsidiaries in Perth, Australia.

Investing activities used net cash of $764,000 during fiscal 1998.  These funds were
again primarily used for development and patent costs (approximately $608,000) and the purchase
of capital assets of approximately $164,000, partially offset by $8,000 in proceeds from the sale of capital assets.

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 interest of 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.

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.  We are
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.  We are in the process of
evaluating this SAB along with the additional guidance an have not yet determined the future
impact on our consolidated financial statements.

C.  Research and development, patents and licenses, etc.

Our development efforts during fiscal 1998, 1999 and 2000 and the six month transition
period ended December 31, 2000 were devoted to the design and development of our products and
technologies.  Research and development costs were approximately $1,981,000 for fiscal 2000,
$1,203,000 for fiscal 1999 and $930,025 for fiscal 1998, and $896,000 for the transition period
ended December 31, 2000.

D. Trend Information

During the six-month period ended December 31, 2000, we began selling hardware  products such as the S-Video  Multiplexer which was not
occurring in the prior fiscal year.  In the current  financial  year, we have  broadened  our product line to include a Scan  Converter
and are in the process of finalizing the specifications for that product which we anticipate completing prior to year-end.

We are unaware of any trends in production, sales, inventory, backlog or selling prices that are reasonable likely to have a material
effect on our revenues, income from continuing operations, liquidity or capital resources that would cause the herein reported
financial information to not be indicative of our future operating results or our financial condition.

Item 6. Directors, Senior Management and Employees.

A. Directors and Senior Management.

The following sets forth certain information regarding our directors and senior management:

`Name                       Age          Position(s)                Date elected or
       ----                       ---          -----------                ---------------
                                                                             appointed
                                                                              ---------

Neil W. Speakman                   59           Chairman of                March 1994
Santa Monica, California                        the Board of
                                                Directors

Christopher M. Yewdall             36           Director,                  President as of
Santa Monica, California                        President and              October 1998, Chief
                                                Chief                      Executive Officer as
                                                Executive                  of July 2000, and
                                                Officer                    Director as of April
                                                                           2001.

Paul Kristensen                    58           Non-executive              May 1996
Perth, Western Australia                        Director

Paul G. Jeffrey                    75           Non-executive              March 1994
Toronto, Ontario                                Director
Canada

Ian Macintosh                      74           Non-executive              April 1994
Toronto, Ontario                                Director
Canada

Geoff Roman                        49           Non-executive              September 2000
New Hope, Pennsylvania                          Director

Eric Edward Dillon                 43           Non-executive              June 2000
Seattle, Washington                             Director

Phil Harman                        50           Chief                      June 1999
Perth, Western Australia                        Technology
                                                Officer

Mark N. Schwartz                   44           Chief Financial            November 1999
Santa Monica, California                        Officer

Sara Lane Sirey                    33           Secretary                  September 1997
Calgary, Alberta
Canada`

To   the   knowledge  of  the
Company,  there are no  arrangements or  understandings  between any director or
executive  officer of the  Company and any other  person  pursuant to which such
director or executive  officer was selected and there is no family  relationship
between  any  director  of  executive  officer of the Company and any other such
director or executive officer.

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.

Christopher M. Yewdall - Director, President and Chief Executive Officer

Mr.   Yewdall  was  appointed
President in October 1998,  Chief Executive  Officer in July 2000, and appointed
to the Board of Directors in April 2001. 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 N. Schwartz - Chief Financial Officer

Mr.  Schwartz  was  appointed
Chief  Financial  Officer in November  1999.  Mr.  Schwartz  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.

B. Compensation.

Compensation of Directors.

As  of the  date  hereof,  we
have seven (7)  directors.  During the last fiscal year,  none of our  directors
received any cash compensation (including salaries, directors fees, commissions,
bonuses paid for services  rendered  during the most recently  completed  fiscal
year,  bonuses paid during the most recently  completed fiscal year for services
rendered in a previous  year,  and any  compensation  other than bonuses  earned
during  the most  recently  completed  fiscal  year  the  payment  of which  was
deferred),  other than those  directors who are also  executive  officers of our
company.

Executive   officers  of  our
company who also act as directors  of the company do not receive any  additional
compensation for services rendered in such capacities, other than as paid by the
company to such executive officers in their capacity as executive officers.  See
"Executive Compensation" below.

Executive Compensation.

The   following   table  sets
forth all annual and long term  compensation  for services in all  capacities to
the company and its  subsidiaries for the fiscal year ended June 30, 1998, 1999,
and 2000, in respect of the individual(s)  who were, at such dates,  acting in a
capacity  similar  to  Chief  Executive   Officer  and  the  three  most  highly
compensated Executive Officers whose compensation was greater than CDN $100,0000
(the "Named Executive Officers").  All dollar amounts are referenced in Canadian
dollars.

`Annual Compensation                    Long Term Compensation
                            ---------------------------------------- --------------------------------------
                                                                               Awards           Payouts
                                                                     -------------------------- -----------
Name and        Year        Salary       Bonus     Other Annual      Securities    Restricted   LTIP         All Other
Principle                                          Compensation      Under         Shares or    Payouts      Compensation
Position                                                             Options       Restricted   (1)
                                                                     Granted       Share
                                                                                   Units
--------------- ----------  ------------ --------- ----------------- ------------  ------------ -----------  ----------------
Robert          2000        $ 81,484     Nil       $35,226           Nil           Nil          Nil          Nil
Baker, CEO,     1999        $183,730     Nil       $88,456           Nil           Nil          Nil          Nil
President (2)   1998        $175,503     Nil       $80,666           Nil           Nil          Nil          Nil

Neil W.         2000        $281,250     Nil       $17,000           500,000       Nil          Nil          Nil
Speakman,       1999        $281,250     Nil       Nil               Nil           Nil          Nil          Nil
Chairman,       1998        Nil          Nil       Nil               Nil           Nil          Nil          Nil
CEO, and
President (3)

Christopher     2000        $250,000     Nil       Nil               200,000       N/A          N/A          Nil
M. Yewdall,     1999        $156,250     Nil       Nil               200,000       N/A          N/A          Nil
Director,       1998        N/A          N/A       N/A               N/A           N/A          N/A          Nil
CEO,
President (4)

Mark N.         2000        $156,250     Nil       Nil               400,000       N/A          N/A          Nil
Schwartz,       1999        N/A          N/A       N/A               N/A           N/A          N/A          Nil
CFO (5)         1998        N/A          N/A       N/A               N/A           N/A          N/A          Nil`

Notes:

(1) LTIP or
long term incentive plan means any plan which provides compensation
intended to serve as an incentive for performance to occur over a period longer
than one financial year, but does not include option or stock appreciation right
plans or plans for compensation through restricted shares or restricted share
units.

(2) Mr. Baker was the President and CEO of the company from October 1995
to December 1999 when he ceased to be the President.

(3)  Mr. Speakman served as the CEO and President from December 1999 to July 18, 2000.

(4)  Mr. Yewdall became the President and CEO of the company on July 18, 2000, prior to which he was the
President and CEO of the company's subsidiary, Dynamic Digital Depth USA, Inc.  On April 23, 2001, Mr. Yewdall
was appointed to the Board of Directors at the company's Annual General Meeting.

(5)  Mr. Schwartz became the CFO of the company on November 1, 1999.

(6)  No other executive officer received compensation in excess of $100,000.

C. Board Practices.

Directors   of  the   company
currently  serve for  terms of one year,  and each  director's  current  term of
office will expire April 23,  2002.  The Company  maintains  an audit  committee
consisting of Paul G. Jeffrey,  Ian Macintosh,  and Paul  Kristensen.  The Audit
Committee  regularly  reviews internal control systems with senior management to
ensure that a high level of internal control is maintained. The Company does not
have a compensation or remuneration committee.

D. 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.

As of June 30, 2000 we had 40
employees, 26 of whom were engaged in engineering,  research and development,  4
of whom were engaged in marketing  and sales  activities  and 10 of whom were in
administration. As of June 30, 1999 we had 29 employees, 20 of whom were engaged
in engineering,  research and  development,  2 of whom were engaged in marketing
and sales activities and 7 of whom were in  administration.  As of June 30, 1998
we  had  20  employees,  15  of  whom  engaged  in  engineering,   research  and
development,  2 of whom engaged in marketing and sales  activities and 3 of whom
were in administration.

E.  Share Ownership.

Share ownership of directors
and officers of the Company as of June 14, 2001:

`Shares of the
                              Corporation             Percentage of
                              Beneficially            Common
Name                          Owned                   Shares
----                          -----                   ------
Neil Speakman                 353,104                 1.57%
Paul G. Jeffrey               20,000                  .09%
Ian Macintosh                 150,000                 .67%
Paul Kristensen               305,205                 1.36%
Eric Dillion                  293,255                 1.31%
Geoffrey Roman                nil                     nil
Christopher Yewdall           10,000                  .04%
Sara Lane Sirey               nil                     nil
Mark N. Schwartz              30,000                  .13%
Phil Harman                   nil                     nil`

Description of Stock Option Plan

Our   Company   has  a  Stock
Option Plan (the  "Existing  Plan") dated February 6, 2000 which was approved by
our  shareholders on February 1, 2000.  Pursuant to the Existing plan, the Board
of Directors may allocate  non-transferable options to purchase common shares of
the Company to directors, officers, employees and consultants of the Company and
its subsidiaries.

The    Existing    Plan    is
administered  by our Board of Directors of the  Corporation.  Under the Existing
Plan, at the time of granting the options, the aggregate number of common shares
to be delivered  upon the  exercise of all options  granted  thereunder  and the
aggregate  number of common  shares to be  delivered  upon the  exercise  of the
options to any one  individual  granted  thereunder  may not exceed the  maximum
number  permitted by any stock exchange on which the common shares may be listed
or by any other regulatory body having jurisdiction.

Options  issued  pursuant  to
the  Existing  Plan will have an exercise  price as  determined  by our Board of
Directors  provided  that the  exercise  price  can no be less  than  the  price
permitted by any stock exchange on which our common shares are then listed.

The Canadian Venture Exchange
requires that the maximum number of shares that may reserved for the issuance of
shares  pursuant to the exercise of stock options  granted by the plan is 20% of
the issued and  outstanding  shares of the listed  corporation.  To maximize the
number of shares  reserved for the issuance of options under the Existing  Plan,
on April 23,  2001 a  majority  of our  disinterested  shareholders  approved  a
resolution  amending the Existing Plan to increase the maximum  number of shares
issuable pursuant to the plan from 3,634, 952 to 4,480,498, which was 20% of the
Company's outstanding shares on that date.

Our   Company  granted  stock
1,568,000  stock options of our common  shares during the Company's  last fiscal
year ended June 30, 2000 and 484,000  during the six month period ended December
31, 2000.

Stock Options: As of June 12, 2001, our directors and executive officers
have been granted options to purchase common shares of our company as follows:

`Options      Exercise     Options
Name                   Date of Grant     Granted      Price      Exercised     Exercise Date   Expiration Date
----                   -------------     -------      -----      ---------     -------------   ---------------
Neil Speakman          Nov. 27, 1996      20,000      $1.35              0         N/A         Nov. 27, 2001
                       Mar. 24, 2000     500,000     $11.48              0         N/A         Mar. 24, 2005
                       May 18, 2001      100,000      $3.20              0         N/A         May 18, 2006

Paul G. Jeffrey        Aug. 3, 1994       40,000      $1.25         40,000     May 28, 1999    Aug. 3, 1999
                       Nov. 27, 1996      20,000      $1.35         20,000     Mar. 16, 2001   Nov. 27, 2001
                       Dec. 20, 1997      20,000      $1.30         20,000     Feb. 4, 2000    Dec. 20, 2002
                       Mar. 24, 2000      40,000     $11.48              0         N/A         Mar. 24, 2005
                       May 18, 2001       40,000      $3.20              0         N/A         May 18, 2006

Ian Macintosh          Aug. 3, 1994       40,000      $1.25         40,000     May 12, 1999    Aug. 3, 1999
                       Nov. 27, 1996      20,000      $1.35         20,000     May 28, 1999    Nov. 27, 2001
                       Dec. 20, 1997      20,000      $1.30         20,000     May 28, 1999    Dec. 20, 2002
                       Mar 24, 2000       40,000     $11.48              0         N/A         Mar. 24, 2005
                       May 18, 2001       40,000      $3.20              0         N/A         May 18, 2006

Paul Kristensen        Aug. 3, 1994       29,770      $1.25        29, 770     May 26, 1999    Aug. 3, 1999
                       Nov. 27, 1996      20,000      $1.35              0         N/A         Nov. 27, 2001
                       Dec. 20, 1997      20,000      $1.30              0         N/A         Dec. 20, 2002
                       Mar. 24, 2000      40,000     $11.48              0         N/A         Mar. 24, 2005
                       May 18, 2001       40,000      $3.20              0         N/A         May 18, 2006

Eric Dillon            July 26, 2000     100,000      $3.91              0         N/A         July 26, 2005
                       May 18, 2001       30,000      $3.20              0         N/A         May 18, 2006

Geoffrey Roman              N/A            N/A         N/A           N/A           N/A               N/A

Christopher            Sept. 7, 1998     200,000      $1.50              0         N/A         Sept. 7, 2003
Yewdall
                       June 7,  1999     200,000      $2.80              0         N/A         June 7,  2004
                       July 26, 2000     200,000      $3.91              0         N/A         July 26, 2005
                       May 18, 2001      200,000      $3.20              0         N/A         May 18, 2006

Sara Lane Sirey        Dec. 20, 1997      20,000      $1.30          5,000     Oct. 18, 1999   Dec.20, 2002
                       May 18, 2001       20,000      $3.20              0         N/A         May 28, 2006

Mark N.                Nov. 3, 1999      400,000      $5.03              0         N/A         Jan. 14, 2005
Schwartz               May 18, 2001      140,000      $3.20              0         N/A         May 18, 2006

Phil Harman            May 10,  1996      20,000      $1.25         20,000     Jan. 31, 2000   May 10, 2001
                       Dec. 20, 1997     100,000      $1.30              0         N/A         Dec. 20, 2002
                       May 18, 2001      220,000      $3.20              0         N/A         May 18, 2006`

Long Term Incentive Plans

Our Company currently has no long term incentive plans, other than stock options granted
from time to time by our Board of Directors under the provisions of the Company's Existing Plan.

Stock Appreciation Rights and Restricted Shares

No stock appreciation rights or restricted shares were granted by the Company to any our
executive officers during the last fiscal year ended June 30, 2000 and the six months ended
December 31, 2000, and no stock appreciation rights were exercised.

Stock Option and SAR Re-Pricing

The Company did not make any downward re-pricing of stock options or stock
appreciation rights during the fiscal year ended June 30, 2000 and the six months transition period
ended December 31, 2000 or prior thereto.

Pension and Retirement Plans and Payments Made Upon Termination of Employment

Our company does not have any pension or retirement plan.  We have not provided
compensation, monetary or otherwise, during the fiscal year ended June 30, 2000 and the six
months ended December 31, 2000 to any person who now or previously has acted as an executive
officer of our company, in connection with or related to the retirement, termination, or resignation
of such person and the Company has provided no compensation to such persons as a result of a
change of control of our Company, its subsidiaries or affiliates.  Our Company is not a party to
any compensation plan or arrangement with our executive officers resulting from the resignation,
retirement, or termination of employment of such persons.

Item 7. Major Shareholders and Related Party Transactions.

A. Major shareholders.

To the best of the
Companys knowledge, the Company is not directly or indirectly owned or
controlled by another corporation or by any foreign government. The following
table sets forth certain information as of June 14, 2001 concerning the
beneficial ownership of common shares of Company as to each person known to the
management of the Company that is the beneficial owner of more than 5% of the
outstanding share of the Company:

`Percentage of Ownership of
                                                                     Outstanding Common
Name of Shareholder                     Number of Shares                   Shares
-------------------                     ----------------         --------------------------
CDS & Co.                               5,984,668                             26.7%
    Toronto, Ontario
Westgate International, LP              3,740,792                             16.7%
    Grand Cayman, Cayman Islands
The Liverpool Limited                   3,740,792                             16.7%
    Partnership
General Instrument                      1,860,000                              8.3%
    Corporation`

B.  Related party transactions.

None.

C.  Interests of experts and counsel.

Not Applicable.

Item 8.  Financial Information.

See Item 17.

Item 9.  The Offer and Listing.

A.  Listing Details

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 company's annual high and low market prices for the
five most recent full financial years on the CDNX and ASE.  All financial figures are expressed in
Canadian dollars.

`Financial Year
(June 30 year-end)         Annual High                   Annual Low
------------------         -----------                   ----------

2000                          $16.50                       $2.50
1999                           $3.80                       $0.80
1998                           $2.25                       $0.75
1997                           $2.30                       $1.00
1996                           $3.75                       $0.50`

(Note:  In October of 1998 we effected a one-for-five reverse stock split)

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
        (June 30 year-end)                       High                   Low
        ------------------                       ----                   ---
2001
----
Fourth Quarter                                   $3.75                  $2.77
Third Quarter                                    $4.25                  $3.00
Second Quarter                                   $4.48                  $3.00
First Quarter                                    $4.50                  $3.00

2000
----
Fourth Quarter                                   $7.25                  $4.56
Third Quarter                                   $16.50                 $6.35
Second Quarter                                   $9.50                  $3.25
First Quarter                                    $9.25                  $2.50

1999
----
Fourth Quarter                                   $3.80                  $1.15
Third Quarter                                    $1.50                  $0.80
Second Quarter                                   $2.05                  $1.10
First Quarter                                    $2.20                  $1.65

1998
----
Fourth Quarter                                   $2.25                  $1.20
Third Quarter                                    $1.90                  $0.75
Second Quarter                                   $2.00                  $1.25
First Quarter                                    $2.30                  $1.15`

Prices and volume for periods prior to August 1998 have been restated to give effect to a
one-for-five reverse stock split.

The following table sets forth the company's high and low market prices for the most
recent six months on the CDNX.  All financial figures are expressed in Canadian dollars

`Month                           High                                    Low
-----                           ----                                    ---
June 2001                       $3.25                                   $2.77
May 2001                        $3.70                                   $3.00
April 2001                      $3.75                                   $3.00
March 2001                      $3.72                                   $3.05
February 2001                   $3.72                                   $3.00
January 2001                    $4.75                                   $3.20
December 2000                   $4.20                                   $3.05`

On July 13, 2001, the closing price of the common shares on the CDNX was $2.80
per share.

B. Plan of distribution.

Not Applicable

C. Markets.

See Item 9A. above.

D. Selling shareholders.

Not Applicable.

E. Dilution.

Not Applicable.

F.  Expenses of the issue.

Not Applicable.

Item 10. Additional Information.

A. Share Capital

Not Applicable.

B.  Memorandum and articles of association.

Articles of Amalgamation

The Corporation is governed by its articles of amalgamation (the "Articles") under the
Business Corporations Act (Alberta) (the "ABCA") and by its by-laws (the "By-laws").  The
Corporation's Alberta corporation number is 20360267.  The Corporation's Articles provide that
there are no restrictions on the business the Corporation may carry on or on the powers the
Corporation may exercise.  Corporations incorporated under the ABCA are not required to include
specific objects or purposes in their articles or by-laws.

Directors

Subject to certain exceptions, including in respect of their own compensation, directors
may not vote on matters in which they have a material interest. The directors are entitled to
remuneration as shall from time to time be determined by the Board. The directors may exercise
all the powers of the Corporation to borrow money. These powers may be amended by resolution
of the shareholders. Directors are not required to retire at a particular age. There is no requirement
for the directors to hold shares.

Rights, Preferences and Dividends Attaching To Shares

Any dividend unclaimed after a period of six years from the date on which such dividend
is declared to be payable shall be forfeited and shall revert to the Corporation. Each of the holders
of the Corporation's common shares, as of the record date prior to a meeting, is entitled to attend
and to cast one vote for each common share held at such annual and/or special meeting, including
with respect to the re-election of directors. Subject to the provisions of the By-laws, all directors
may, if still qualified to serve as directors of the Corporation, stand for re-election. The
Corporation's Board of Directors is not replaced at staggered intervals.

The holders of the Corporation's common shares have the right to receive dividends in the
Corporation if and when declared. On a distribution of assets of the Corporation on a winding-up,
dissolution or other return of capital (subject to certain exceptions) the holders of the
Corporation's common shares the Corporation's shareholders shall have a right to receive their Pro
Rata share of such distribution. The Corporation's shareholders have no liability to further capital
calls as all shares issued and outstanding are fully paid and non-assessable.

There are no sinking fund or redemption provisions in respect of the Company's common
shares.

Action Necessary to Change the Rights of Shareholders

The rights attaching to the Common Shares may be varied by special resolution passed at a
meeting of that class's shareholders.

Limitations on The Rights To Own Shares

The Articles do not contain any limitations on the rights to own shares.

Annual and Special Meetings of Shareholders

The Corporation is required to mail a notice of meeting and management information
circular to registered shareholders not less than 21 days prior to the date of the meeting. Such
materials must be filed concurrently with the applicable securities regulatory authorities. Subject
to certain provisions of the by-laws, a quorum of two shareholders in person or represented by
proxy holding or representing by proxy not less than a prescribed percentage of the total number
of issued and outstanding shares of the Corporation is required. Shareholders and their duly
appointed proxies and corporate representatives are entitled to be admitted to all  annual and
special meetings of the Corporation.

Other Provisions of Articles and By-Laws

There are no provisions in the Articles or by-laws:

-   delaying or prohibiting a change in control of the Corporation that operate only with
respect to a merger, acquisition or corporate restructuring;

-   discriminating against any existing or prospective holder of shares as a result of such
shareholder owning a substantial number of shares;

-   requiring disclosure of share ownership; and

-   governing changes in capital, where such provisions are more stringent than those
required by law.

C. Material Contracts.

See the material contracts filed or incorporated by reference in this Transition Report and
the descriptions of such contracts contained in Item 4, B. Business Overview, Strategic Partnerships.

D. Exchange Controls.

Canada

There are currently no limitations imposed by Canadian federal or provincial laws on the
rights of non-resident or foreign owners of Canadian securities to hold or vote the securities held.
There are also no such limitations imposed by the Company's articles and bylaws with respect to
the Common Shares of the Corporation.

Investment Canada Act

Under the Investment Canada Act, the acquisition of control of a Canadian business by a
"non-Canadian" is subject to review by the Investment Review Division of Industry Canada
("Investment Canada"), a government agency, and will not be allowed unless the investment is
found likely to be of "net benefit" to Canada. An acquisition of control will be reviewable by
Investment Canada if the value of the assets of the Canadian business for which control is being
acquired is (i) Cdn$5 million or more in the case of a "direct" acquisition; (ii) Cdn$50 million or
more in the case of an "indirect" acquisition; or (iii) between CDN$5 million or more but less than
Cdn$50 million where the Canadian assets acquired constitute more than 50% of the asset value
of all entities acquired, or if the acquisition is not effected through the acquisition of control of a
foreign corporation.

These thresholds have been increased for the purposes of acquisition of control of a
Canadian business by investors from members of the World Trade Organization ("WTO"),
including Americans, or WTO member-controlled companies. A direct acquisition by a WTO
investor is reviewable only if it involves the direct acquisition of a Canadian business with assets
of CDN$209 million or more for the year 2001 (this figure is adjusted annually to reflect
inflation).  Indirect acquisitions by WTO investors are not reviewable, regardless of the size of the
Canadian business acquired, unless the Canadian assets acquired constitute more than 50% of the
value of all entities acquired, in which case the CDN$209 million threshold applies.

These increased thresholds applicable to WTO investors do not apply to the acquisition of
control of a Canadian business that is engaged in certain sensitive areas such as uranium
production, financial services, transportation or culture. In the case of the acquisition of control of
a cultural business, the Heritage Minister can elect to review the transaction even where it does
not exceed the lower asset threshold test above. Even if the transaction is not reviewable, a
non-Canadian must still give notice to Investment Canada of the acquisition of control of a
Canadian business within 30 days after its implementation.

Competition Act

Under the Competition Act (Canada) (the "Competition Act"), certain transactions are
subject to the pre-notification requirements of the Act whereby notification of the transaction and
specific information in connection therewith must be provided to the Commissioner of
Competition (the "Commissioner"). A transaction may not be completed until the applicable
statutory waiting periods have expired, namely 14 days or 42 days for a short-form or long-form
filing, respectively. As well, where the parties elect to file a short-form notification, the
Commissioner may "bump" the filing to a long-form, thereby restarting the clock once the parties
submit their filing.

A proposed transaction is subject to pre-notification only if the parties to the transaction
together with their affiliates have total assets in Canada or total revenues from sales in, from or
into Canada that exceed Cdn$400 million in aggregate value. Having met this first threshold, the
parties must then provide pre-notification if any one of the following additional thresholds is met:
1) for an acquisition of assets in Canada where the aggregate value of the assets in Canada or the
gross revenues from sales in or from Canada that are being acquired exceeds Cdn$35 million; 2)
in the case of an acquisition of shares of a company in Canada, where as a result of the proposed
acquisition, the person acquiring the shares, together with its affiliates, would own more than 20%
(or, if the person making the acquisition already owns more than 20% or more of the voting
shares of the target, then more than 50%) of the voting shares of a corporation that are publicly
traded, or in the case of a company of which the shares are not publicly traded, the threshold is
more than 35% of the voting shares (and more than 50% if the acquirer owns 35% or more of the
voting shares of the subject company prior to making the acquisition) and assets in Canada or the
revenues in or from Canada of the Corporation the shares of which are acquired exceed Cdn$35
million; or 3) in the case of a proposed amalgamation of two or more corporations where one or
more of the amalgamating corporations carries on an operating business (either directly or
indirectly) where the aggregate value of the assets in Canada that would be owned by the
continuing corporation resulting from the amalgamation would exceed Cdn$70 million or the
gross revenues from sales in or from Canada generated from the assets of the amalgamated entity
would exceed Cdn$70 million.

Finally, all merger transactions, regardless of whether they are subject to pre-merger
notification, are subject to the substantive provisions of the Competition Act namely, whether the
proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially in
a relevant market.

Australian Exchange Controls

Under temporary Australian foreign exchange controls, which may change in the future,
payments by an Australian resident to, or on behalf of the following payees may only be made
with Reserve Bank of Australia approval:

-   the Government of Iraq or its agencies or its nationals;

-   the authorities of the Federal Republic of Yugoslavia (Serbia and Montenegro) or its
agencies, who are not residents of Australia;

-   the Government of Libya or any public authority or controlled entity of the Government
of Libya, including any commercial, industrial or public utility undertaking owned or controlled
by the Government of Libya or by a public authority of Libya;

-   the Taliban (also known as the Islamic Emirate of Afghanistan) or any undertaking
owned or controlled, directly or indirectly, by the Taliban; or

-   the National Union for the Total Independence of Angola as an organization, senior
officials of UNITA or adult members of the immediate families of senior officials of UNITA.

The Australian dollar is freely convertible into US dollars except that all payments and
cash transactions in excess of $5,000 to non-residents must be reported to the Australian Cash
Transactions Agency, which monitors such transactions, whether they be in the form of cash,
dividends, capital or profits. The Foreign Acquisitions and Takeovers Act ("Foreign Acquisitions
Act") sets forth limitations on the rights of non-Australian residents to own or vote the ordinary
shares of an Australian company. The Foreign Acquisitions Act permits the Commonwealth
Treasurer to examine acquisitions and arrangements that could result in foreign persons
controlling an Australian business. The Commonwealth Treasurer may prohibit a proposed
takeover if it would lead to a change of control of a business where the resultant control would be
foreign and therefore considered to be against the national interest. The Foreign Acquisitions Act
contains divestiture provisions to ensure it can be enforced, as well as, stringent monetary-penalty
provisions for breaches and the making of false or misleading statements.

The Foreign Acquisitions Act requires the prior approval of the Commonwealth Treasurer
for certain classes of persons to enter into an agreement to acquire shares of an Australian
company, if, after the acquisition, such person or corporation would hold a substantial interest in
such corporation, as explained herein. The foregoing approval requirement applies to the
following classes of persons: (i) any natural person not ordinarily resident in Australia, (ii) any
corporation in which either a natural person not ordinarily resident in Australia or a foreign
corporation (as defined in the Foreign Acquisitions Act) holds a substantial interest, and (iii) two
or more such persons or corporations which hold an aggregate substantial interest.

The Foreign Acquisitions Act requires foreign persons or foreign-controlled entities to
give forty (40) days notice to the Commonwealth Treasurer of a proposal to acquire or increase
(or offer to acquire or increase) a single interest of 15% or more of the ownership or voting power
of an Australian company. If two or more foreign persons or foreign-controlled entities are acting
together, the threshold is 40% in the aggregate.

E. 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, partnership, or certain other entities 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.  Also shareholders who
acquired their stock through the exercise of employee stock options or otherwise as compensation
may be taxed differently than described below.

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 generally 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 U.S.
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 we
are neither a "Foreign Personal Holding Company," "Foreign Investment Company," "Passive
Foreign Investment Company," nor a "Controlled Foreign Company."  We cannot, however,
provide any certainty that we will never be considered one of the aforementioned entities.

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. in
certain cases 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 allocable portions of our taxable 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 generally includes interest, dividends, rents and royalties
or (ii) the average percentage, by fair market value (or, if we are a controlled foreign corporation
or make 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 Corporation

If more than fifty percent (50%) of the voting power or the value of all classes of stock 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 ("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 tax consequences
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, 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 may be 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.

F.  Dividends and paying agents.

Not Applicable.

G.  Statements by experts.

Not Applicable.

H. Documents on display.

Our Company is subject to the informational requirements of the Securities Exchange Act
of 1934, as amended, and file reports and other information with the SEC. You may read and
copy any of the company's reports and other information at, and obtain copies upon payment of
prescribed fees from, the Public Reference Room maintained by the SEC at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at certain of the SEC's regional offices at 7
World Trade Center, Suite 1300, New York, NY 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, IL 60661. In addition, the SEC maintains a Web site
that contains reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC at http://www.sec.gov. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.

Our Company is required to file reports and other information with the securities
commissions in all provinces of Canada. You are invited to read and copy any reports, statements
or other information, other than confidential filings, that the Company files with the provincial
securities commissions. These filings are also electronically available from the Canadian System
for Electronics Document Analysis and Retrieval (SEDAR) (http://www.sedar.com), the Canadian equivalent
of the SECs electronic document gathering and retrieval system.

As a foreign private issuer, the Company is exempt from the rules under the Securities
Exchange Act of 1934, as amended, prescribing the furnishing and content of proxy statements to
shareholders. We have included in this report certain information disclosed in our proxy statement
prepared under Canadian securities rules.

I. Subsidiary Information.

Not Applicable.

Item 11. Quantitative and Qualitative Disclosures About Market Risk.

Information relating to quantitative and qualitative disclosures about market risk is detailed in
Item 5.

Item 12. Description of Securities Other than Equity Securities.

Not Applicable.

Item 13. Defaults, Dividend Arrearages and Delinquencies.

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.

None.

Item 15.   [RESERVED].

Item 16.   [RESERVED].

Item 17. Financial Statements.

See financial statements following the signature page hereof.

Item 18. Financial Statements.

See  "Item 17.  Financial Statements."

Item 19. Exhibits.

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

Auditors' Report

Consolidated Balance Sheets as at December 31, 2000, June 30, 2000 and 1999 and
the unaudited Balance Sheet at December 31, 1999

Consolidated Statements of Loss and Deficit for the six-months ended December 31, 2000 and the years ended June 30, 2000, 1999 and
1998 and the unaudited six month period ended December 31, 1999

Consolidated Statements of Cash Flows for the six-months ended December 31, 2000 and the years ended June 30, 2000, 1999 and 1998 and
the unaudited six month period ended December 31, 1999

Notes to Consolidated Financial Statements

(b) Exhibits

`1.1    Certificate 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)
1.8    Amendment and Registration of Restated Articles dated May 4, 2001         *
2.1    Escrow Agreement -  Mirabeau/Montreal Trust Co. of Canada                (1)
2.2    Escrow Agreement - Mirabeau/Montreal Trust Co. of Canada/                (1)
       Salamander Resources Ltd.
2.3    Investment Agreement - Xenotech, Inc./Westgate Int'l., L.P. and          (1)
       Liverpool Limited Partnership
2.4    Common Share Purchase Warrant - Liverpool Limited Partnership            (1)
2.5    Common Share Purchase Warrant - Westgate Int'l., L.P.                    (1)
2.6    Warrant Option Agreement between Westgate Int'l., L.P. and Liverpool     (1)
       Limited Partnership and Red Reef Limited
2.7    Share Option Agreement between Westgate Int'l., L.P. and Liverpool       (1)
       Limited Partnership and Red Reef Limited
2.8    Voting and Disposition Agreement between Westgate Int'l., L.P. and       (1)
       Liverpool Limited Partnership and Neil W. Speakman, Robert Baker
       and Red Reef Limited
2.9    Registration Rights Agreement                                            (1)
2.10   Stock Option Plan dated November 13, 1998                                (1)
2.11   Form of Stock Option Agreement                                           (1)
2.12   Stock Option Plan dated February 6, 2000                                  *
2.13   Amendment to Stock Option Plan dated April 23, 2001                       *
3      Voting Trust Agreement - Xenotech Inc./Trustee/Red Reef Ltd.             (1)
4.1    Memorandum of Understanding between Dynamic Digital Depth USA            (1)
       Inc.  and  Video Applications Inc.
4.2    Development Agreement by and between Dynamic Digital Depth               (1)
       Research Pty. Ltd. and General Instrument Corporation
4.3    Statement of Work by and between Dynamic Digital Depth Research          (1)
       Pty. Ltd. and General Instrument Corporation
4.4    Consultancy Agreement with Angus Ducan Richards                          (1)
4.5    Deed of Compromise and Release with Angus Duncan Richards                (1)
4.6    Deed of Assignment with Angus Duncan Richards                            (1)
4.7    License Agreement with Angus Duncan Richards                             (1)
4.8    Deed between Dynamic Digital Depth Australia Pyt. Ltd. and Boston        (1)
       Tower Pty. Ltd. regarding 6-8 Brodie Hall Drive Technology Park
4.9    Lease between Dynamic Digital Depth Australia Pyt. Ltd. and Boston       (1)
       Tower Pty. Ltd. regarding 6-8 Brodie Hall Drive Technology Park
4.10   Employment Agreement with Neil W. Speakman                               (1)
4.11   Employment Agreement with Robert G. Baker                                (1)
4.12   Employment Agreement with Chris Yewdall                                  (1)
4.13   Employment Agreement with Phil Harman                                    (1)
4.14   Consultancy Agreement with AiCube Co. Ltd.                               (2)
4.15   Memorandum of Understanding by and between Dynamic Digital               (3)
       Depth USA Inc. and Dimension Technologies, Inc.
4.16   Memorandum of Understanding by and between Dynamic Digital               (3)
       Depth USA Inc. and Yd-Vision GMBH
4.17   Component License Agreement by and between Dynamic Digital               (3)
       Depth USA Inc. and Apple, Inc.
4.18   Development Agreement by and between Dynamic Digital Depth USA           (3)
       Inc. and Microsoft Corporation
4.19   Memorandum of Understanding by and between Dynamic Digital               (3)
       Depth and USA Inc. and Wave Pictures, N.V.
4.20   Memorandum of Understanding by and between Dynamic Digital               (3)
       Depth and USA Inc. and Sky High Entertainment, Inc.
4.21   Memorandum of by and between Dynamic Digital Depth and USA Inc.          (3)
       and Pluto Technologies, Inc.
8      Subsidiaries of the Registrant                                            *`

(1)     Incorporated by reference to DDD's Registration Statement on Form 20-F filed on August 9,
1999.

(2)     Incorporated by reference to DDD's Amendment No. 1 to Registration Statement on Form
20-F filed on November 15, 1999.

(3)     Incorporated by reference to DDD's Annual Report on Form 20-F filed on January 16, 2001.

*     Filed herewith.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this transitional report on its
behalf.

|                    | DYNAMIC DIGITAL DEPTH INC.                                     
|------------------- | ---------------------------------------------------------------
|Date: July 16, 2001 | By:/s/ Mark N. Schwartz
Mark N. SchwartzChief Financial Officer

Revised US Accounts  including 1999

### DYNAMIC DIGITAL DEPTH INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Auditors Report
Consolidated Balance Sheets as at December 31, 2000, June 30, 2000 and 1999 and
the unaudited Balance Sheet at December 31, 1999
Consolidated Statements of Loss and Deficit for the six-months ended December 31, 2000 and
the years ended June 30, 2000, 1999 and 1998 and the unaudited six month period ended
December 31, 1999
Consolidated Statements of Cash Flows for the six-months ended December 31, 2000 and the
years ended June 30, 2000, 1999 and 1998 and the unaudited six month period ended
December 31, 1999
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 December 31, 2000 and June
30, 2000, and June 30, 1999 and the consolidated statements of loss and deficit and cash flows for
the six months ended December 31, 2000 and the years ended June 30, 2000 and
June 30, 1999 and June 30, 1998. 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 the United
States. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.

In our opinion, these
consolidated financial statements present fairly, in all material respects, the
financial position of the Company as at December 31, 2000 June 30, 2000 and June 30, 1999 and
the consolidated results of its operations and its cash flows for the periods
then ended together with the year ended June 30, 1998 in accordance with
accounting principles generally accepted in Canada.

Accounting principles
generally accepted Canada varies 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,
June 30, 2000, and June 30, 1999, and the consolidated results of operations
for each of the periods ended December 31, 2000, June 30, 2000, 1999 and 1998
to the extent summarized in note 18 to the consolidated financial statements.

|Perth, Australia |  | "Ernst & Young"      
|---------------- |  | ---------------------
|May 15, 2001     |  | 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 May
15, 2001 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"      
|---------------- |  | ---------------------
|July 16, 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]

`(unaudited)
                                      Six-Months    Six-Months     Year       Year
                                        Ended         Ended        Ended      Ended
                                     December 31,  December 31,   June 30,   June 30,
                                         2000         1999         2000       1999
                                         $CAD         $CAD         $CAD       $CAD
                                     ------------------------------------------------

ASSETS [Note 6]

Current
Cash                                 2,506,994    2,538,317    4,092,627    3,768,936
Accounts receivable                     64,821      130,138      134,552       72,626
Security deposits and prepayments       87,032      178,732       66,369      199,017
                                     ------------------------------------------------
                                     2,658,847    2,847,187    4,293,548    4,040,579
Building units held for sale
   [Note 6]                          1,045,976    1,000,953    1,122,920            -
Deposit                                      -            -            -      508,508
Capital assets [note 3]              2,696,642    1,372,142    2,533,303      684,527
Patents [note 4]                       291,798      527,782      666,090      472,358
Restricted cash [note 5]               487,500            -      511,508           -
                                    -------------------------------------------------

                                     7,180,763    5,748,064    9,127,369    5,705,972
                                    -------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current

Accounts payable and accrued
     liabilities                       607,589      774,182      571,051      330,478
Current portion of obligation
     under capital leases [note 8]      84,931       28,656       64,173       43,655
Short-term debt [note 6]               464,643      523,090      490,435           -
                                      -----------------------------------------------
                                     1,157,163    1,325,928    1,125,659      374,133
                                     ------------------------------------------------
Obligation under capital leases
     [note 8]                           93,703      139,629      158,501       63,594
                                     ------------------------------------------------
Commitments and Contingencies
     [note 8]
Shareholders' equity
Share capital [note 9]              30,482,617   19,711,804   27,532,331   17,483,622
Deficit                            (24,277,755) (15,456,273) (19,337,156) (12,375,137)
Cumulative translation adjustment     (274,965)      26,976     (351,966)     159,760
                                   --------------------------------------------------
                                     5,929,897    4,282,507    7,843,209    5,268,245
                                   --------------------------------------------------
                                     7,180,763    5,748,064    9,127,369    5,705,972
                                   --------------------------------------------------`

See accompanying notes

On behalf of the Board:

|N Speakman | P Kristensen
|---------- | ------------
|Director   | Director    

Dynamic Digital Depth Inc.

CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

`(unaudited)
                                   Six-Months     Six-Months     Year      Year        Year
                                     Ended          Ended       Ended      Ended       Ended
                                  December 31,  December 31,  June 30,   June 30,    June 30,
                                    2000           1999         2000       1999        1998
                                    $CAD           $CAD         $CAD       $CAD        $CAD
                               ---------------------------------------------------------------

Revenue
Technology revenue               211,164         28,950       274,629      29,545     299,099
Interest income                  158,808         64,174       144,489     110,583      31,321
Other                             29,632          8,559        19,305      58,698      37,645
                               --------------------------------------------------------------
                                 399,604        101,683       438,423     198,826     368,065
                               --------------------------------------------------------------
Expenses
Amortization -
  capital assets                 452,682        112,984       448,473     115,667      34,100
Amortization -
  patent costs                    72,307         14,406        20,047      21,563       8,125
General and adminis-
  trative [note 10]              341,673      1,928,852     4,112,533   2,280,180   1,510,458
Interest on
  promissory notes                     -              -             -           -     264,633
Interest and borrowing
  costs on short term debt         21,567         24,445        43,491           -           -
Interest and borrowings costs
  on capital leases                10,298         16,535        29,419           -           -
Market development                274,778         30,935        54,577     210,023     306,324
Project and patenting
  costs                           391,192         28,665       177,435      18,803      32,883
Salaries and wages              1,775,706      1,025,997     2,514,467   1,023,180     468,435
Development costs                       -              -             -   2,595,619           -
                               --------------------------------------------------------------
                                 5,340,203      3,182,819     7,400,442   6,265,035   2,624,958
                               --------------------------------------------------------------

Loss before income taxes
  [note 11]                     (4,940,599)    (3,081,136)   (6,962,019) (6,066,209) (2,256,893)
                               --------------------------------------------------------------
Provision for income taxes
  [note 13]                              -              -             -           -           -
                               ---------------------------------------------------------------
Net Loss                        (4,940,599)    (3,081,136)   (6,962,019) (6,066,209) (2,256,893)
                               --------------------------------------------------------------
Deficit, beginning of
  year                         (19,337,156) (12,375,137) (12,375,137) (5,830,182) (3,573,289)

Prior period adjustment
  [note 15]                              -              -             -   (478,746)           -
                               --------------------------------------------------------------
Adjusted deficit,
  beginning of year            (19,337,156) (12,375,137) (12,375,137) (6,308,928) (5,830,182)
                               --------------------------------------------------------------
Deficit, end of year           (24,277,755) (15,456,273) (19,337,156) 12,375,137) (5,830,182)
                               --------------------------------------------------------------
Loss per share [note 9]              (0.23)         (0.17)        (0.37)      (0.38)      (0.21)
                               --------------------------------------------------------------
Weighted average number
 number of shares
 outstanding                    21,916,888     18,025,054    18,825,133  15,846,239  10,608,563
                               ----------------------------------------------------------------`

See accompanying notes

Dynamic Digital Depth Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

`(unaudited)
                                                    Six-Months     Six-Months      Year           Year          Year
                                                  Ended December     Ended         Ended         Ended          Ended
                                                     31, 2000       December       June           June          June
                                                       $CAD         31, 1999     30, 2000       30, 1999      30, 1998
                                                                      $CAD         $CAD           $CAD          $CAD
                                                  ------------------------------------------------------------------------
Operating Activities
Loss                                                 (4,940,599)   (3,081,136)   (6,962,019)    (6,066,209)   (2,256,893)
Add item not requiring a cash payment
   Foreign exchange differences on expenditure          145,580      (104,535)            -              -             -
   Amortization                                         524,989       127,390       468,520         95,790        42,225
   Loss on disposal of building                               -             -        22,967              -             -
   Imputed interest on promissory notes                       -             -             -              -       215,350
   Loss on disposal of capital assets                     1,534             -             -              -             -
   Write  off  of  patent  costs  capitalized  in
   prior years [note 4]                                 340,058             -        92,697              -             -
   Development costs written off                              -             -             -      2,595,619        27,411
Net change in non-cash working capital [note 7]          85,606       406,477       311,295       (413,095)       67,047
                                                  ----------------------------------------------------------------------
                                                     (3,842,832)   (2,651,804)   (6,066,540)    (3,787,895)   (1,904,860)
                                                  ----------------------------------------------------------------------
Investing Activities
Purchase of capital assets [note 7]                    (641,595)   (1,293,584)   (2,771,121)      (340,559)     (164,188)
Application of deposit                                        -             -             -       (508,508)            -
Patent costs                                            (81,453)      (69,830)     (365,195)      (192,882)     (122,033)
Development costs incurred                                    -             -             -       (780,562)     (486,450)
Proceeds from sale of capital assets                     18,352             -             -              -         8,209
                                                  ----------------------------------------------------------------------
                                                       (704,696)   (1,363,414)   (3,136,316)    (1,822,511)     (764,462)
                                                  ----------------------------------------------------------------------
Financing Activities
Proceeds from issuance of share capital for cash      2,950,286     2,228,182    10,048,709      2,681,837     7,753,638
Proceeds from short-term borrowings [note 7]             16,254       617,149       141,510              -             -
Proceeds from issuance of promissory notes                    -             -             -              -       698,679
Repayment of short term borrowings                       (7,814)            -             -              -             -
Capital lease principal reductions [note 8]             (44,038)      (33,023)     (109,184)       (51,442)      (66,815)
Restricted cash                                          24,008             -      (511,508)      1,727,660   (1,727,660)
                                                  ----------------------------------------------------------------------
                                                      2,938,696     2,812,308     9,569,527       4,358,055    6,657,842
                                                  ----------------------------------------------------------------------
Foreign exchange (loss)/gain on cash held
in foreign currency                                      23,199       (27,709)      (42,980)         15,114      (16,645)
                                                  ----------------------------------------------------------------------
Net increase/(decrease) in cash                      (1,585,633)   (1,230,619)      323,691      (1,237,237)   3,972,055

Cash, beginning of period                             4,092,627     3,768,936     3,768,936       5,006,173    1,034,118
                                                  ----------------------------------------------------------------------
Cash, end of period                                   2,506,994     2,538,317     4,092,627       3,768,936    5,006,173
                                                  ======================================================================`

See accompanying notes

Development costs incurred during the period include $nil depreciation (period
ended December 31, 1999: $nil, year ended June 30, 2000: $nil, year ended June 30, 1999:
$41,440, year ended June 30, 1998: $75,388) which is a non-cash movement.

Included in the net loss is interest paid on short-term debt and capital leases
during the period of $31,865 (period ended December 31, 1999: $40,980, year ended June 30,
2000: $72,910, year ended June 30, 1999: $nil, year ended June 30, 1998: $nil);
and interest received of $158,808 (June 30, 2000: $144,489, June 30, 2000: $110,583,
year ended June 30, 1998: $31,231).

Dynamic Digital Depth Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at and For the Periods Ended December 31, 2000 and June 30, 2000, and 1999
and the Period Ended June 30, 1998

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Dynamic Digital Depth Inc
(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
consolidated financial statements have been prepared on a going concern basis
which contemplates the realization 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 experienced significant operating losses
and cash outflows from operations in the six-months ended December 31, 2000 and
year ended June 30, 2000 and has a $24,277,755 deficit at December 31, 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 consolidated
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 consolidated 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 consolidated
financial statements have, in managements opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
accounting policies summarized below.

Revenue Recognition

Technology revenue from the
granting of licenses and hardware sales is recognized when; there is persuasive
evidence of an agreement, delivery has occurred, the vendors fee is fixed
or determinable, and the collectibility is probable.

Revenue From Government Organizations

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

Building Units Held For Sale

The building is carried in the
accounts at the lower of cost and fair market value. No amortization 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 amortization. Amortization 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                       | 3 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 since July 1,
2000 are being amortized over five years. The Company has also adopted a policy
of periodically reviewing its patent portfolio with a view to writing off the
costs incurred in applying for and registering such patents, where there is no
reasonable prospect that the technology represented by the patents will be
capable of producing revenues within the next succeeding twelve months. Any
further expenditures on patents or applications where costs to date have already
been written off will be expensed as they are incurred.

Research costs are expensed
as incurred. Development costs that meet specific criteria related to technical,
market and financial feasibility are capitalized. At present all capitalizable
costs are immaterial and thus have not been capitalized. Amortization of
development costs will start upon commencement of commercial production. The
costs will be amortized 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, security deposits and
prepayments, restricted cash, accounts payable and accrued liabilities, capital
lease obligations and short-term debt. As at December 31, 2000 and June 30,
2000, 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 they 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. Gains and losses arising from the translation of
sales and expenses are recognised in general and administrative expenses. At
December 31, 2000 this was a net gain of $1,521 (December 1999; gain $6,118,
June 2000: loss $3,064, June 1999: gain $96,841, June 1998: gain $6,010).

Taxation

The Company follows the
liability method of accounting for income taxes. Under this method, the Company
records income taxes to give effect to temporary differences between the
carrying amount and the tax basis of the Companys assets and liabilities.
Temporary differences arise when the realization of an asset or the settlement
of a liability would give rise to either an increase or decrease in the
Companys income taxes payable for the year or later period. Future income
taxes are recorded at the income tax rates that are expected to apply when the
future tax liability is settled or the future tax asset is realized. When
necessary, valuation allowances are established to reduce future income tax
assets to the amount expected to be realized. Income tax expense is the tax
payable for the period and the change during the period in future income tax and
liabilities.

Concentrations of credit risk

The Companys
financial instruments that are exposed to concentrations of credit risk consist
primarily of cash, security deposits and accounts receivable. The Companys
cash and security deposits are placed with high quality major Australian,
Canadian and American banking institutions, limiting its exposure to credit
risk. At balance date, the accounts receivable 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. The effect on
loss per share of the exercise of options and warrants is anti-dilutive.

Stock options

The Company has a stock
option plan which is described in Note 9. 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. CAPITAL ASSETS

`As at December 31, 2000
                                      --------------------------------------------------
                                                       Accumulated     Net Book Value
                                         Cost         Amortization
                                         $CAD             $CAD              $CAD
                                      --------------------------------------------------

Furniture and fixtures                  165,963            39,382          126,581
Office equipment                        136,313            70,594           65,719
Equipment under capital lease           239,632            68,216          171,416
Technical equipment                   1,635,575           691,667          943,908
Automotive equipment                     77,635            32,444           45,191
Leasehold improvements                1,360,535           246,052        1,114,483
Website                                 268,142            38,798          229,344
                                      -------------------------------------------------
                                      3,883,795         1,187,153        2,696,642
                                      =================================================`

`As at June 30, 2000
                                           --------------------------------------------------
                                                              Accumulated     Net Book Value
                                                Cost         Amortization
                                                $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
                                               22,215                 -           22,215
                                           --------------------------------------------------
                                            3,303,058           769,755        2,533,303
                                           =================================================`

`As at June 30, 1999
                                           -------------------------------------------------
                                                              Accumulated     Net Book Value
                                                Cost         Amortization
                                                $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
                                           =================================================`

4. PATENTS

`As at December 31, 2000               As at June 30, 2000           As at June 30, 1999
                      ---------------------------------   ---------------------------------   ---------------------------------
                                     Accumulated                         Accumulated                         Accumulated
                       Cost         Amortization            Cost         Amortization           Cost         Amortization
                       $CAD             $CAD                $CAD             $CAD               $CAD             $CAD
                      ---------------------------------   ---------------------------------   ---------------------------------
Patents                 339,452          47,654             718,243        52,153              507,534           35,176
                      ---------------------------------   ---------------------------------   ---------------------------------
Net book value                  291,798                             666,090                             472,358
                      ---------------------------------   ---------------------------------   ---------------------------------`

At December 31, 2000 after
reviewing its patent portfolio and in light of the new policy direction referred
to in Note 2, the Company has written off an amount of $340,058 (June 2000: $92,697, June 1999: $nil)
in expenditures (net of accumulated amortization) previously incurred and
capitalized.

5. 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 of 6.306 per cent (June 30, 2000: 5.419 per cent, June 30, 1999: nil percent)
over the term of the lease.

6. SHORT-TERM DEBT

The short-term debt is
collaterized 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 of 6.99 per cent plus 1.50 per cent
per annum (June 30, 2000: 6.19 per cent plus 1.50 per cent per annum, June 30, 1999: nil percent).

7. CONSOLIDATED STATEMENT OF CASH FLOWS

The net change in non-cash working capital was determined as follows:

`(unaudited)
                                        As at             As at           As at        As at        As at
                                      December 31,     December 31,      June 30,     June 30,     June 30,
                                         2000             1999            2000         1999         1998
                                         $CAD             $CAD            $CAD         $CAD         $CAD
                                     --------------   -------------   ------------- ------------ -------------
Decrease/(Increase) in
     accounts receivable                 69,731          (57,512)        (61,926)    (49,112)     (202,655)
Decrease/(Increase) in
     security deposits and                                                           (62,767)            -
     prepayments                        (20,663)          20,285         132,648
Increase in accounts payable
     and accrued liabilities             36,538          443,704         240,573    (301,216)      269,702
                                     --------------   -------------   ------------- ------------ -------------
                                         85,606          406,477         311,295    (413,095)       67,047
                                     ==============   =============   ============= ============ =============`

The following non cash transactions occurred:

`(unaudited)
                                                          As at          As at          As at June     As at       As at
                                                         December     December 31 ,     June 30       June 30,    June 30,
                                                         31, 2000         1999           2000           1999        1998
                                                           $CAD           $CAD           $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         508,482           -           -
Issuance of share capital under stock option
     exercise arrangement [note 9]                         (402,000)              -               -           -           -
Re-acquisition of share capital under stock option
     exercise arrangement [note 9]                          402,000               -               -           -           -
Acquisition of building units purchased for resale
     by way of short-term borrowings                              -       1,944,924       1,944,924           -           -
Deferred development costs capitalised                            -               -               -           -      46,668
Proceeds from sale of building units applied in
     reduction of short-term borrowings                           -      (1,354,020)     (1,354,020)          -           -`

8. COMMITMENTS AND CONTINGENCIES

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

`As at
                                                             December     As at June
                                                             31, 2000      30, 2000
                                                               $CAD          $CAD

2001                                                            100,009        84,376
2002                                                             74,829       111,630
2003                                                             24,451        59,820
                                                           ------------- -------------
Total minimum lease payments                                    199,289       255,826
Less: amount representing interest at 11.5%                     (20,655)      (33,152)
                                                           ------------- -------------
Present value of minimum lease payments                         178,634       222,674
Less: current portion                                           (84,931)      (64,173)
                                                           ============= =============
                                                                 93,703       158,501
                                                           ------------- -------------`

The following is a schedule
of future minimum lease payments under the operating leases which include leases
of motor vehicles, computers and other technical equipment:

|                             | As atDecember31, 2000$CAD | 
|---------------------------- | ------------------------- | 
|2001                         | 484,047                   | 
|2002                         | 523,372                   | 
|2003                         | 560,716                   | 
|2004                         | 445,857                   | 
|2005                         | 144,892                   | 
|2006                         | 152,137                   | 
|2007                         | 159,744                   | 
|2008                         | 167,731                   | 
|2009                         | 124,026                   | 
|Total minimum lease payments | 2,762,522                 | 

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 that is ongoing.
The Company refutes all of the allegations and is vigorously defending this
matter. In the event that Richards was to succeed in his claim the Company would
be exposed to a liability to pay Richards $CAD187,510 together with further
payments not exceeding $CAD158,840 per annum contingent upon the extent to which
the Company derives revenue and capital from commercial exploitation of certain
technologies which Richards assisted to develop.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 sought leave of the Court to amend his
statement of claim on January 10, 2001. The Court, apart from adding Mr. P
Kristensen, a director of the Company, to the action, rejected the application.
The Company intends to file an additional statement of defence seeking
additional security for costs. The Company believes that Richards claim is
without merit.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9. SHARE CAPITAL

Authorized

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

Issued - Common Shares

`Number of
                                                             Shares          $CAD
                                                            ------------------------
Balance at June 30, 1999 -
     common voting shares   (refer note 15)                 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 -
     net of issuance costs of $11,833                        2,500,000     4,988,167
                                                            ------------------------
Balance at June 30, 2000 - common voting shares             21,584,762    27,532,331
Issued for cash through private placements,
     net of issuance costs of $5,864                           581,230     2,900,286
Issued on exercise of stock options - cash                      40,000        50,000
                                   - non cash                  310,000       402,000
Shares acquired by the Company and cancelled - non cash       (133,500)     (402,000)
                                                            ------------------------
Balance at December 31, 2000 - common voting shares         22,382,492    30,482,617
                                                            ------------------------`

In October, 2000 a former
CEO and Director of the Company, exercised a total of 350,000 options. Of these,
40,000 exercisable at $1.25 were exercised for cash and the remainder, with an
exercisable value of $402,000, were exercised by way of an arrangement whereby
Mr Baker surrendered to the Company a total of 133,500 shares valued at $402,000
in lieu of payment. The Company subsequently cancelled these shares.

Stock Options

On February 6, 2000 the
Company established a stock option plan for its directors, management, employees
and consultants. This plan amended all earlier plans and allows the Company to
grant options for up to twenty per cent of the issued and outstanding shares of
the Company to a maximum of 3,634,952 common shares. There have been no changes
in original terms and conditions of options issued. 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 that exceeds five per cent of the issued and outstanding
shares of the Company. The option period is not to exceed ten years from the
date the option is granted. An option shall vest and may be exercised during the
option period in such manner as the Board of Directors may fix by resolution.

`Six months ended December        Six months ended December
                                         31, 2000                 31, 1999 (unaudited)
                              Number of       Weighted       Number of        Weighted
                                               Average                        Average
                               Options     Exercise Price     Options      Exercise Price
                                                $CAD                            $CAD
                              ---------------------------------------------------------------
Outstanding - beginning
of year                        2,551,000        5.82          1,100,770         1.60
Granted                          484,000        3.83             48,000         4.55
Exercised                      (350,000)        1.29                  -          -
Forfeited                       (75,000)        7.11                  -          -
                              ===========                    ===========
Outstanding - end of year      2,610,000        6.02          1,148,770         1.72
                              ===========                    ===========
Exercisable at end of year     1,594,000        6.64            222,230         3.35
                              ===========                    ===========
                                                                 Year ended June 30
                                           2000                          1999                         1998
                              Number of       Weighted       Number of  Weighted Average  Number of   Weighted Average
                                               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
                              -----------                    -----------                  -----------`

The following table
summarizes information about stock options outstanding at December 31, 2000:

`Options Outstanding                                          Options Exercisable
                                                 Weighted-Average   Weighted-Average        Number        Weighted-Average
Range of Exercise Prices   Number Outstanding     Remaining Life     Exercise Price     Exercisable at     Exercise Price
          $CAD            at December 31, 2000       - years              $CAD         December 31, 2000        $CAD

      0.00 to 2.99               677,000               2.15               1.86              527,000             1.72

      3.00 to 5.99              1,098,000              4.33               4.58              362,000             4.64

      6.00 to 8.99               55,000                2.15               7.11              25,000              7.11

     9.00 to 12.99               780,000               4.24              11.59              680,000             11.51
------------------------- ---------------------- ----------------- ------------------- ------------------ ------------------
------------------------- ---------------------- ----------------- ------------------- ------------------ ------------------

     1.00 to 12.99              2,610,000              2.52               6.02             1,594,000            6.64
------------------------- ---------------------- ----------------- ------------------- ------------------ ------------------`

Warrants

During the six months ended
December 31, 2000, the Company issued 581,230 share purchase warrants with
options to purchase common shares on a 1:1 basis at a price of $CAD5.50 per
share. All of these options expire on October 10, 2002.

During the fiscal year
ended June 30, 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 issue of
share purchase warrants during the fiscal year ended June 30, 2000, 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.

During the fiscal year
ended 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.

During the fiscal year
ended 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.

10. RELATED PARTY TRANSACTIONS

Legal fees of $39,488 (period ended December 31, 1999 - $82,913, year
ended June 30, 2000 - $149,842, June 30, 1999 - $35,436, June 30, 1998 - $145,147)
were paid by the Company to entities whose directors are also directors of the
Company or of one of its subsidiaries. These fees are presented at their exchange amount.

11. LOSS CARRY FORWARD

The Company has non-capital
accumulated losses carried forward for income tax purposes amounting to
$23,368,031, the benefit of which has not been reflected in the accounts. These
tax losses are as set out in the table below:

`Year                 $CAD
   Carried forward losses of Canadian
   Parent Company which must be utilised
   by June 30:
                                                    2002              127,878
                                                    2003              199,320
                                                    2004              371,867
                                                    2005              446,852
                                                    2006              625,758
                                                    2007            1,349,183
                                                    2008              556,241
   Carried forward losses of United
   States subsidiary which must be
   utilised by June 30:
                                                    2013              195,518
                                                    2014            1,760,141
                                                    2015            2,520,731
                                                    2016            2,503,452
    Carried forward losses of Australian
    subsidiaries that may be carried
    forward indefinitely subject to
    certain tests being met.                                       12,711,090
                                                           ------------------
                                                           ------------------
    Total                                                         $23,368,031
                                                           ------------------`

12. GEOGRAPHIC SEGMENTS

`Six months ended                     Australia         USA          Canada          Eliminations     Consolidated
December 31, 2000                       $CAD          $CAD           $CAD               $CAD             $CAD
-----------------------------------------------------------------------------------------------------------------

Technology revenue                       54,172        156,992             -                 -         211,164

Interest revenue                         10,256        108,435        40,117                 -         158,808

Other revenue                            29,632              -             -                 -          29,632
                                   ------------------------------------------------------------------------------
Total revenue                            94,060        265,427        40,117                 -         399,604
                                   ------------------------------------------------------------------------------

Loss                                 (1,937,658)    (2,444,678)     (558,262)                -      (4,940,599)
                                   ------------------------------------------------------------------------------

Identifiable assets                   2,071,484      5,073,168    26,280,670       (26,244,559)      7,180,763
                                   ------------------------------------------------------------------------------

Capital assets                          548,450      2,148,192             -                 -       2,696,642
                                   ==============================================================================`

`Australia           USA          Canada      Eliminations     Consolidated
Year ended June 30, 2000                $CAD            $CAD           $CAD           $CAD             $CAD
-----------------------------------------------------------------------------------------------------------------
Technology revenue                      254,149         20,480             -                 -         274,629

Interest revenue                         59,411         83,829         1,249                 -         144,489

Other revenue                            14,252          5,053             -                 -          19,305
                                   ------------------------------------------------------------------------------

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

Capital assets                          569,012      1,964,292             -                         2,533,303
                                   ==============================================================================`

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.

13. INCOME TAXES

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 future 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:

`(unaudited)
                                              Six-Months        Six-Months       Year Ended      Year Ended     Year Ended
                                            Ended December    Ended December      June 30,         June 30,       June 30,
                                               31, 2000          31, 1999           2000            1999            1998
                                                 $CAD              $CAD             $CAD            $CAD           $CAD
Prima facie income tax benefit (at rates
  applicable in the country of operation)
  on losses from normal activities            (1,959,000)       (1,239,097)      (2,789,438)    (2,306,784)     (912,254)
Decrease in tax benefit resulting from:
     Future tax asset valuation allowance      1,952,050         1,239,097        2,769,159      2,306,784       912,254
     Non deductible expenses                       6,950                 -           20,279              -             -
                                            ---------------- ----------------- ---------------- -------------- -------------
Income tax benefit                                     -                 -                -              -             -
                                            ================ ================= ================ ============== =============`

Future income taxes reflect
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. The components of the Companys future tax assets and
liabilities are as follows:

`(unaudited)
                                              Six-Months       Six-Months       Year Ended      Year Ended     Year Ended
                                            Ended December   Ended December      June 30,        June 30,        June 30,
                                               31, 2000         31, 1999           2000            1999            1998
                                                 $CAD             $CAD
Future tax assets:
     Net operating loss carry forwards          8,454,645          5,538,942        7,055,749      4,723,346      3,529,453
                                            ---------------- ---------------- ---------------- -------------- --------------
Total future income tax assets                  8,454,645          5,538,942        7,055,749      4,723,346      3,529,453
Valuation allowance                           (8,454,645)        (5,538,942)      (7,055,749)    (4,723,346)    (3,529,453)
                                            ---------------- ---------------- ---------------- -------------- --------------
Net future income tax assets                            -                  -                -              -              -
                                            ================ ================ ================ ============== ==============
Future tax liabilities                                  -                  -                -              -              -
                                            ================ ================ ================ ============== ==============`

The Company has provided a
valuation allowance for the full amount of net future income tax assets in light
of its history of operating losses since its inception.

14. SUBSEQUENT EVENTS

At the last Annual General Meeting
held on April 23, 2001 a resolution was passed by the shareholders amending the
exercise price of 700,000 stock options issued on March 24, down from $11.48 to
$3.20.

15. 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.

There is no difference between the US GAAP and Canadian GAAP treatment of this adjustment.

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

16. COMPARATIVES

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

17. 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, 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 15)                     -            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
                                  ============== =============== ================= =============== =============== ==================

Issue of 581,230  shares through
  private  placements, net of
  issuance costs                       581,230       2,900,286                 -               -               -      2,900,286
Issue of 350,000 shares on
  exercise of stock options:            40,000          50,000                 -               -               -         50,000
  Cash                                 310,000         402,000                 -               -               -        402,000

  Non-cash
Shares  acquired  by the Company
  and cancelled - Non-cash            (133,500)       (402,000)                 -               -               -      (402,000)
Gain on translation of foreign
  controlled entities                     -               -                 -          77,001               -            77,001
Net loss after tax                        -               -                 -               -     (4,940,599)        (4,940,599)
                                  ============== =============== ================= =============== =============== ==================
                                    22,382,492      30,482,617                 -       (274,965)    (24,277,755)      5,929,897
                                  ============== =============== ================= =============== =============== ==================`

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

18. 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 capitalized. Amortization 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 capitalized
development costs in the relevant year those costs were incurred. In the period
ended December 31, 2000 nil (year ended June 30, 2000: nil, year ended June 30,
1999: reversal of prior years adjustments $CAD(1,615,945), ) of development
costs have been expensed in the reconciliation to net loss under US GAAP,
representing expenditure incurred in that year. Refer to note 18 (e) for the
effect of the write off.

b) Patent Costs

Under Canadian GAAP patent
costs capitalised included both internal and external costs. Under US GAAP only
external costs are capitalised. Refer note 18 (e) for the effect of the
difference in GAAP.

c) 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. Stock options
granted to non-employees are accounted for in accordance with FAS 123. Under
Canadian GAAP, stock options issued to employees, directors and non-employees
are only recognized when converted and the exercise price paid is treated as
issued capital. Net income has been adjusted for the compensation expense that
would be recorded under US GAAP. This difference is disclosed in note 18(e).

A summary of the status of
the Companys stock option plan as of December 31, 2000 and 1999 and June
30, 2000 and 1999 and 1998, and the changes during the years ending on those
dates is presented below:

`Six months ended December        Six months ended December
                                         December                        31, 1999
                                         31, 2000                      (unaudited)

                              Number of       Weighted       Number of        Weighted
                                               Average                        Average
                               Options     Exercise Price     Options      Exercise Price
                                                $CAD                            $CAD
                              ---------------------------------------------------------------
Outstanding - beginning
of year                        2,551,000        5.82          1,100,770         1.60
Granted                          484,000        3.83             48,000         4.55
Exercised                       (350,000)       1.29                  -          -
Forfeited                        (75,000)       7.11                  -          -

Outstanding - end of year      2,610,000        6.02          1,148,770         1.72

Exercisable at end of year     1,594,000        6.64            222,230         3.35

Weighted average fair
value of options granted
during the year                 $1.85                          $3.00`

`Year ended June 30
                                           2000                          1999                         1998
                                Number        Weighted         Number      Weighted         Number       Weighted
                                  of           Average           of         Average           of          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. The effects of applying FAS 123 are not likely to be
representative of the effects on reported net income in future years. Under FAS
123 the compensation cost of options issued to employees, directors and
non-employees 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 the six months ended
December 31, 2000, and the years ended June 30, 2000 and 1999, respectively:
risk free interest rates of 5.4, 6.8 and 6.3 per cent; dividend yield of 0 per
cent for all years; expected lives of 5 years and volatility of 100, 100 and 70
per cent.

`(unaudited)
                                  Six months    Six months
                                    ended          ended              Year ended June 30
                                 December 31    December 31
                                    2000          1999          2000          1999         1998
                                    $CAD          $CAD          $CAD          $CAD         $CAD
                                --------------------------------------------------------------------
Net loss - as reported          (4,940,599)    (3,081,136)   (6,962,019)   (6,066,209)   (2,256,893)
Net loss - pro forma            (5,623,380)    (3,142,702)   (8,624,819)   (6,405,679)   (2,377,347)
                                --------------------------------------------------------------------
Pro forma earnings per share:
  Basic                              (0.26)         (0.17)        (0.46)        (0.40)        (0.22)`

d) 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.

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

`(unaudited)
                                        Six months      Six months                   Year ended June 30
                                          ended           ended
                                       December 31     December 31
                                           2000            1999           2000            1999              1998
                                           $CAD            $CAD           $CAD            $CAD              $CAD
                                      --------------- --------------- -------------- ---------------- ------------------
Net  loss  after  income  tax  under
Canadian GAAP                           (4,940,599)      (3,081,136)    (6,962,019)    (6,066,209)      (2,256,893)
  Reversal (write-off) development
  costs           18 (a)                         -                 -             -      1,615,945         (756,060)
  Promissory notes             18                -                 -             -              -          103,370
  (e)
  Internal patent costs        18                -                 -             -              -          (39,262)
  (b)
  Stock options expense    18 (c)         (454,505)         (65,126)    (1,621,410)       (11,334)         (77,620)
                                      --------------- --------------- -------------- ---------------- ------------------
                                      --------------- --------------- -------------- ---------------- ------------------
Net loss under US GAAP                  (5,395,104)      (3,146,262)    (8,583,429)    (4,461,598)      (3,026,465)
  Foreign    currency    translation
adjustment                                  77,001         (132,784)      (511,726)       232,946          (36,874)
                                      --------------- --------------- -------------- ---------------- ------------------
                                      --------------- --------------- -------------- ---------------- ------------------
Comprehensive loss                      (5,318,103)      (3,279,046)    (9,095,155)    (4,228,652)      (3,063,339)
                                      --------------- --------------- -------------- ---------------- ------------------
                                      --------------- --------------- -------------- ---------------- ------------------

Basic Earnings and Diluted  Earnings
per share under Canadian GAAP                (0.23)           (0.17)         (0.37)         (0.38)           (0.21)
                                      --------------- --------------- -------------- ---------------- ------------------
                                      --------------- --------------- -------------- ---------------- ------------------
Basic Earnings and Diluted  Earnings
per share under US GAAP                      (0.24)           (0.18)         (0.48)         (0.26)           (0.29)
                                      --------------- --------------- -------------- ---------------- ------------------`

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

`Six months      (unaudited)
                                    ended December    Six months                   Year ended June 30
                                          31             ended
                                                      December 31
                                         2000            1999            2000            1999             1998
                                         $CAD            $CAD            $CAD            $CAD             $CAD
                                    ------------------------------------------------------------------------------
Shareholders' equity under
  Canadian GAAP                         5,929,897       4,282,507       7,843,209      5,268,245        8,419,671
Development costs
  18 (a)                                    -               -               -              -           (1,615,945)
Internal patent costs                     (39,262)        (39,262)        (39,262)       (39,262)         (39,262)
  18 (b)
                                    ==============================================================================
Shareholders' equity under US GAAP      5,890,635       4,243,245       7,803,947      5,228,983        6,764,464
                                    ------------------------------------------------------------------------------`

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

`Six months      (unaudited)
                                    ended December    Six months                   Year ended June 30
                                          31             ended
                                                      December 31
                                         2000            1999            2000            1999             1998
                                         $CAD            $CAD            $CAD            $CAD             $CAD
                                    -----------------------------------------------------------------------------
Total assets under
  Canadian GAAP                       7,180,763       5,748,064       9,127,369      5,705,972        9,202,518
Development costs
  18 (a)                                  -               -               -              -           (1,615,945)
Internal patent cost
  18 (b)                                (39,262)        (39,262)        (39,262)       (39,262)         (39,262)
                                    =============================================================================
Total assets under US GAAP            7,141,501       5,708,802       9,088,107      5,666,710        7,547,311
                                    -----------------------------------------------------------------------------`

f) 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, but Company
management does not anticipate an impact of SAB 101 on their financial
statements.

g) 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.

h) 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 18(e) 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.

i) 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 18 (e) 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 18 (e) for the effect of the change in GAAP.