UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

---

FORM 20-F/A

(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 AND
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
____

EXPLANATORY NOTE

This Amendment No. 1 amends
and restates in its entirety the Transition Report of the Registrant on Form
20-F for the transition period from June 30, 2000 to December 31, 2000 filed
with the Securities and Exchange Commission on July 16, 2001 (File No. 000-26983).
This Amendment is being filed to correct typographical errors in both the
Consolidated Statements of Loss and Deficit of the Six Months Ended December 31,
2000 and in the Auditors' Report, to include information in response to Item 11
of Form 20-F, and to reflect comments by the SEC received in connection with its
review of the Registrant's Form F-1 filed with the SEC on March 26, 2001.

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

A proprietary 3D distribution format based on the Dynamic Depth Cueing process.
The depth data is inserted into the original unaltered 2D image and delivered to the
end user via Internet, television or DVD.  The end user may then view the image in
2D or 3D.  The image can be viewed in 3D by activating a software or hardware decoder
to interpret the depth data and create the 3D image locally.

Anaglyph

A method of viewing stereoscopic images using glasses with red and blue
lenses to create a black and white 3D image.

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.

Dynamic Depth Cueing

A patented process that allows a still or moving 2D image to be analyzed to determine
the distance or depth of the objects in the scene in relation to the viewer.  The resulting
depth cue is used to enable the distribution of 2D compatible 3D content.

Freeware

Software that is given to the consumer without charge.  Freeware is also distributed
via the Internet as software downloaded from websites for which the user is not required
to pay a licensee fee.

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

Films created in 65/70mm format that are projected on screens that are considerably
larger than those found in retail theaters and cinemas.  The format is often referred
to by the brand name 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.

LCD Shutter Glasses

Viewing glasses with electronically controlled liquid crystal disply (LCD) lenses
used to create 3D images.  The LCD lenses are electronically switched to "shutter" ON
and OFF to obscure the viewers left and right eye as the alternate left and right eye
images are displayed on the screen.

Line Doubler

A hardware device that increases the display resolution of a video signal.  The
device takes two successive lines of a video signal and digitally recreates a third
intermediate line, based on information contained in the two lines being compared.
The additional intermediate lines are then displayed on screen and provides the
appearance of greater clarity and quality.

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. It
decodes scrambled video signals to allow cable and satellite operators to control
consumer access to certain premium channels.

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.

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

An image comprising of two subtly different (stereo) views of the same information.
The two images are interpreted by the viewer as being stereo 3D, having the appearance
of depth on the screen, or giving the impression that objects are moving off the
screen toward the viewer.

Streaming

A method of transferring
computer files (usually video images) between two locations whereby the files
are sent in real time. The video image or other multimedia file is played by the user's
player software directly from the information delivered via the Internet connection
as opposed to storing the multimedia file and playing it back from the user's
computer hard drive.  With a narrowband connection, the quality of the images are
often reduced.

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 18 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         9,021         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)     (0.28)
  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 September 21, 2001 the noon buying rate was Cdn$1.00 =
US$.6367.

|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. As of July 16, 2001,
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 October, 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.  In developing our products and services we have
targeted the Personal Computer, Internet, broadcast television, feature films, computer animation, video game
and professional audio/visual markets.  Within these markets, we will provide applications to create 2D compatible
3D images for distribution via the Internet, broadcast programming, DVD, as well as 3D theatrical movies and
interactive video games.

Software

Our OpticBoom Plug-In software application,
developed for use in web browsers and computer media players, decodes the embedded 2D data and creates
a 3D version of the image.  This year we launched a "freeware" version of our OpticBoom Plug-In
for Apple, Inc.'s QuickTime Movie Player, enabling 3D movie files to be viewed via the Internet, CD
or DVD.  Our OpticBoom Photo software application is capable of converting PC photographic
image files from 2D to 3D.  The images created may be viewed in 3D without glasses though a lenticular
lens laminated to the photograph or viewed through red/blue or LCD shutter glasses.  Our OpticBoom
Studio Pro software application is our professional media conversion and transmission application intended
for use in the Internet, film, DVD, video and broadcast media markets.

Hardware

Our principle activity and main focus does not include
the manufacture of hardware.  Rather, we intend to license our software technology to manufactures of cable
set-top boxes, PC peripherals, DVD players, and digital cameras and camcorders.

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.  Our video hardware has been used in medical
imaging products allowing medical personel to view surgical procedures as they
are performed.

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.

Conversion Services

We also provide a 2D to 3D
conversion service, allowing us to selectively offer 3D capabilities to
professional markets, such as film and television, and by customers for use in
advertising campaigns.

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

| |  |  | 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.
| |  | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Content Partners

Our content providers
include:

| |  |  | 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.
| |  | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | 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.
| |  | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | 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.

Our patent applications cover
the following areas:

- We have filed a number of patents and improvement applications regarding
    our Dynamic Depth Cueing compression, transmission and decoding
    techniques.  This process enables assimilation of depth information
    from a 2D image and delivery of a 2D compatible 3D image to the viewer using
    either analog or digital delivery mechanisms (Internet, DVD, cable,
    satellite and terrestrial broadcast) techniques for assimilating depth
    information from existing 2D images.  Our Dynamic Depth Cueing
    compression, transmission and decoding techniques generate a 3D image at the
    viewpoint while maintaining 2D compatibility.
- Regarding 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.  FPGA based circuit boards are downloaded to the microprocessor
    upon powering up the unit, thus offering the speed of a hardware application
    with the flexibility of a software application.  we have filed patent
    applications covering our Image Processing Method & Apparatus, which
    involves the real time conversion of standard 2D video signal to 3D based
    upon the movement characteristics in the scene.  We have also filed a
    patent application covering our Image Enhancement System, which increases
    the resolution of a standard video signal by line doubling and quadrupling
    the signal, allowing it to be displayed in 3D or in 2D at higher resolutions
    than it was originated in.
- 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.
- We have developed high quality viewing glasses that allow television
    viewers to view imaged in 3D withour the flicker associated with the present
    generation of shuttered 3D viewing glasses.  Our patented approach uses
    the sequencing of color to which the human eye is far less susceptible
    instead of the switching of light method used by liquid crystal display
    shutter glasses.  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 Publishers
Set-top Box ManufacturersPC Media Player Publishers                                    | LicenseSoftware           
|OpticBOOM(TM)Photo      | PC Users                                                             | ConsumersPC Peripheral Manufacturers
Digital Camera Manufacturers
Graphic Software Publishers
Photographic Image Processors | LicenseSoftware           
|OpticBOOM(TM)Studio Pro | Internet Video ProvidersTelevision Broadcasters
Film Post Production | Internet PublishersTelevision Content Providers
Film Content ProvidersFilm Library Owners                                   | Annual LicenseSupport Fees

PC/Internet

The Internet is a uniquely international visual medium where
content is delivered to users around the globe without the restrictions of country borders or regional
languages.  Commercial and consumer Internet 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 Internet
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 Internet 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 Photo software application used to convert 2D images and movies to 3D and
the OpticBOOM Plug-in that allows the user to view an encoded 2D image in 3D. Applying our process to a typical picture or movie file
increases the file size by approximately 1% above the original 2D picture or movie file size.  This allows the
encoded image file to be distributed via present day Internet connection speeds and 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(TM)Plug-in for the Internet/PC Market

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

We
have developed OpticBOOM Plug-in software for use with Internet Explorer
and Netscape Navigator Web browsers for viewing still photographic images. We
have also developed plug-in software for computer media players that enable the user
to view and listen to multimedia files on a personal computer. In 2000, we
released two plug-ins for Apples QuickTime Movie Player. Version 1.0 was
released in June 2000 for PC and Mac operating systems. It supported
downloadable narrowband media and required red/blue 3D glasses. Version 1.1 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. A streaming video prepared in our proprietary
2D compatible 3D format would be downloaded from an internet web site. Visitors to the
site who wish to view the video movie in 3D may download a free copy of the
OpticBOOM Plug-in compatible with their media player and install it on
their PC. The Freeware OpticBOOM Plug-in provides limited
functions at zero cost to the consumer. We hope this will 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 3D-image-authoring tools. Producing plug-in software
modules compatible with the most popular media players also allows us to reach a
sizeable audience of pre-existing users.

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

OpticBOOM(TM)Photo for the Internet/PC market

OpticBOOM
Photo will be a PC-based software application capable of converting PC
photographic image files from 2D to 3D and 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.
OpticBOOM Photo will enable consumer users to enhance digitized 2D
photographs created using scanning or digital camera technology. Upon
introduction, OpticBOOM Photo will provide a number of sophisticated tools
in an easy to use interface that make the process of converting and editing a 3D
image relatively simple. We expect that OpticBOOM Photo will include
red/blue 3D glasses as well as full color LCD shutter glasses to be used with PC
monitors.

The multiview
3D generation of OpticBOOM Photo will allow it 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 a 2D image. Multiview 3D is intended to open up the consumer
photographic market, allowing glasses-free 3D photographs to be created. We are
in discussions with major international supplier of photographic film and photo
refinishing equipment and services regarding the integration of OpticBOOM
Photo into the consumer photo processing market.

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

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

We
also expect OpticBOOM Photo to be sold through the Internet. The user
would download an encrypted version of the software product. After payment by
credit card is made, the user would receive a license to install and use the
software on their PC. We would likely contract with a third party to handle the
mechanics of selling our product on the Internet.

We
have also planned for a limited feature version of OpticBOOM Photo
intended for distribution with digital imaging products, such as flat bed
scanners and digital cameras. This provides the opportunity for us to gain a
sizable distribution base through bundling our product with popular scanner and camera
systems as a freeware component of another manufacturers
product. This method of distribution is intended to create further awareness of
our product with the possibility that the consumer will upgrade their
freeware version to a fully functional, chargeable version of the
product.

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

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

OpticBOOM
Studio Pro is our professional media conversion and transmission application
intended for use in Internet, film, DVD, video and broadcast media applications.
OpticBOOM Studio prepares 2D compatible 3D media for transmission through encoding the
medias data in a variety of Internet video formats supported by our
OpticBOOM Plug-in. OpticBOOM Studio Pro includes advanced scene
identification and tracking techniques. This allows the components of a scene
and their depth to be determined with minimal human intervention. In order to
support these features, OpticBOOM Studio Pro is founded on powerful
workstation hardware technology coupled with high capacity digital video storage
devices.

OpticBOOM 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 image
| | - | --------------------------------------------------------------

| |  | A powerful Intel Xeon or Itanium workstation capable of processing large volumes
of digitized film and video material
| | - | ---------------------------------------------------------------------------------------------------------------------

| |  | 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 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 license, and a royalty fee based upon the media created using the
product.

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

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

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

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.

Currently, the
delivery infrastructure used to bring television programming to the household is
being upgraded from the existing analog technology to digital.  This allows 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 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 developed these set-top
boxes, with 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
currently have such an agreement with Motorola.

Our
OpticBOOM Plug-in is designed for set-top box applications either as a
downloadable software module or as a hardware chip embedded in the set-top box
circuitry. Adding OpticBOOM Plug-in technology to the set-top box enables
the decoding and display of 2D compatible 3D images on standard television sets.
The unique nature of our 2D compatible 3D transmission process avoids the need for
two separate channels to deliver 3D content.  The content delivered is capable of
being viewed in 3D or in 2D. 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 allowing 2D television content to be transmitted and viewed
in 3D. We believe 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 format that can be viewed in 2D or 3D. The
OpticBOOM Studio Pro software allows the TV program to be digitally
processed 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(TM)Plug-in for the Broadcast Television Market

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

In
this manner, a digital broadcast signal prepared in our proprietary 2D
compatible 3D format may be delivered to the home. Television viewers who wish
to view the program in 3D may download the OpticBOOM Plug-in and 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 delivery of the first phase
of the OpticBOOM Plug-in for the Motorola set-top box is intended to be
complete by December 2002.

OpticBOOM(TM)Studio Pro for the Broadcast Television Market

OpticBOOM
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 Plug-in set-top box decoders.

OpticBOOM
Studio Pro for broadcast use is founded on the same software techniques and
hardware platform as previously described for Internet/PC use. We
expect to license OpticBOOM Studio Pro to principal organizations
including post-production companies, film studios, cable broadcasters,
television programmers and film library owners. We will charge an annual license
fee and a royalty fee based upon the media created using the product.

DVD Video

A significant market determining
the profitability of a feature film is the consumer video/DVD market. DVD is expected
to supersede videocassette in popularity over the coming years. 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.

Through the intergration of our
OpticBOOM technologies, DVD players can be used to display both 2D and 3D
images played from a single DVD disc. The OpticBOOM Plug-in is designed to
decode 2D compatible 3D images either as a hardware chip or as a DVD player accessory.
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 limited and
specialized 3D media that is 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. Films produced using
conventional 2D techniques can be converted to 3D, and prepared for distribution
in a proprietary 2D compatible 3D format. Furthermore, existing film libraries
can be converted to 3D for re-release on DVD as well.

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

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

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.
A second approach, that we have
not yet initiated, is to make OpticBOOM Plug-in compatible with the MPEG2 video
format, the format in which consumer DVDs are produced. The digital MPEG2 signal
stored on the DVD is similar to the digital broadcast signal used in television
set-top boxes. No schedule has yet been set to deliver a DVD MPEG2 OpticBOOM Plug-in.
Images can be viewed in 3D on television screens using low cost red and blue glasses or
consumer-priced liquid crystal display shutter glasses.

OpticBOOM Studio Pro for the DVD Video market

OpticBOOM Studio prepares
the 2D compatible 3D media for transmission through encoding the depth cue data to
the Internet movie formats supported by our OpticBOOM Plug-in PC media player
decoders. OpticBOOM Studio Pro for DVD use is founded on the same software
techniques and hardware platform as previously described for Internet/PC and broadcast
use. We expect to license OpticBOOM Studio Pro to principal organizations
including post-production companies, film studios, and film library owners. We
will charge an annual license fee and a royalty fee based upon the media created
using OpticBOOM Studio Pro.

Movie Films

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

Giant Screen "IMAX(R)" Films

The
giant screen market is mainly occupied by IMAX® Corporation, Showscan
Entertainment and iWERKS. The
production techniques and equipment required to produce a 3D giant screen film
are substantially different from those of a comparable 2D film. Special cameras
with dual lenses are required. Due to the weight of the extra film drums and the
additional camera hardware, 3D cameras are large and bulky, making certain
conventional shots impossible to film, and reducing the number of takes possible
during a day on location. This makes the process of producing a 3D giant screen
film expensive, with production budgets almost double that of a conventional 2D
film. For these reasons, few 3D films are made.

By
processing digitized giant screen 2D film with OpticBOOM Studio Pro, it is
possible to create a 3D IMAX® movie in post production. This reduces
production costs on-set and provides for a wider range of shot types for 3D film
makers. Post production 3D conversion allows film makers to expand the nature of
3D films to include mainstream consumer story lines and plots. The
advanced 3D editing capabilities of OpticBOOM Studio Pro permit extensive
artistic control over the 3D effects in each scene. Applying OpticBOOM
Studio Pro to incorrectly filmed 3D shots allows them to be manipulated
digitally and thus rescued. This combination of features makes OpticBOOM
Studio Pro a significant tool for 3D film makers.

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

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

35mm Theatrical Films and Professional Video

The
OpticBOOM Studio Pro toolkit has also been used to convert 35mm film and
professional video media with equal success. We have a relationship with IMAGICA
Corporation of Japan (the parent company of IMAGICA USA) to provide conversion
services for 35mm film and professional video media. We
have undertaken test conversion work for IMAGICA Corporation of Japan as a
prelude to anticipated commercial conversion contracts. We
have also converted Natures Symphony a VHS video production designed
for sale with Ilixco Inc.s LCD shutter glasses in North America.

Digital & Electronic Cinema

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

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

Digital
projection equipment and distribution is ideally suited to our 2D compatible 3D
transmission technologies, providing the opportunity to convert 35mm films to 3D
using OpticBOOM Studio Pro and to distribute these in 2D format with
embedded 3D depth cue data. The
theater owner may then decide whether to offer screenings of 3D versions of
encoded films by projecting the decoded 3D version. The same film can be viewed
in conventional 2D since the depth cue process leaves the 2D image unaltered.

Special Events, Advertising & Promotion

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

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

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

OpticBOOM Studio Pro can
be used in the special event market 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.

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

Computer Animation

A
growing number of productions, from IMAX® movies to theatrical films and
television programs are now being originated entirely from computer graphics
with no live action or filmed components. Examples include Pixars
Toy Story, Dreamworks Antz and Disneys
A Bugs Life. IMAX® recently concluded an agreement with
Mainframe Entertainment Inc. to bring computer animated 2D productions to the
IMAX® screen. Computer
animated productions are built from detailed models of the characters and
scenery that appears on-screen. Sophisticated animation tools create wire frame
representations of the characters and objects onto which highly detailed graphic
texture maps are rendered. This method creates increasingly realistic scenes to
the point where the difference between footage shot with a film camera and
footage created in the memory of a computer is difficult for the viewer to
discern. To
create 3D animation, present day techniques require the graphic artist to
recreate a second stereo 3D frame by re-rendering each scene from
the computer a second time. This more than doubles the time taken to create the
3D production compared with the original 2D version.

OpticBOOM
Studio Pro is capable of converting computer animated content to 3D and
providing it 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. It 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.

In
a back-to-back comparison of the process, a conventional render of a 3D computer
animated scene took almost 20 hours to complete whereas the OpticBOOM
Studio Pro toolkit required 2.5 hours to produce the same results. Due to the
increase in efficiency of creating 3D computer animation with OpticBOOM
Studio Pro, we have identified this as a productive method to market our
technologies. The converted 3D productions will be supplied for film, broadcast
and Internet use delivered via our proprietary 3D transmission technologies.

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

OpticBOOM
Studio Pro for computer animation use is founded on the same software techniques
and hardware platform as previously described for Internet/PC, broadcast and DVD
use. We expect to license OpticBOOM Studio Pro to principal organizations
including post-production companies, animation companies, film studios and film
library owners. We will charge an annual license fee and a royalty fee based
upon the media created using OpticBOOM Studio Pro.

Video Games

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

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

OpticBOOM
Studio Pro allows video from blockbuster films to be digitally processed, and to
create depth cue information for each frame of the background scenery. A video game
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.

This
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. 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(TM)Plug-in for the Video Game Market

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

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

OpticBOOM(TM)Studio Pro for the Video Game Market

OpticBOOM(TM)Studio prepares
the 2D compatible 3D media for transmission through encoding the depth cue data
to 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 Studio Pro to principal organizations
including post-production companies, film studios, and film library owners. We
will charge an annual license fee, and a royalty fee based upon the media
created using OpticBOOM Studio Pro.

Professional Audio/Visual

We are developing a range of
hardware products that are primarily aimed at the professional audio/visual market.
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                       
|---------------- | ------------------------------------------------------ | ----------------------------------------------------------------------------------------------------- | ------------------------------
|Depth Cue        | OpticBOOM StudioSet-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        | 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.

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

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

This
hardware based depth cue decoder may be embedded in chip sets of digital and
analog set- top boxes, set-top box accessories, DVD players, DVD player
accessories and PC MPEG cards. Accessories
for the current users of set-top boxes and DVD players may be manufactured,
ensuring consumers do not have to replace existing technologies to obtain the
benefits of 2D compatible 3D DVD movies and television broadcasts.

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

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

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

3D Demultiplexer for 3D Projection systems

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

We completed a prototype
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 Studio Pro.

We
have embedded some of the basic 2D to 3D conversion algorithms into a hardware
based real time 3D converter. This allows any conventional video signal from
videocassette, DVD, broadcast or video game console to be converted to a simple
form of 3D in real time. We
may license the manufacturing of this solution as an accessory or add-on PC card
in markets where the OpticBOOM Studio Pro professional off-line conversion
and transmission technologies for broadcast and DVD use do not gain widespread
acceptance.

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

Line Doubling for Video Signals

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

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

In early 1999, we undertook a project to revise the corporate web site; however, the
information found on the website is not part of this prospectus. 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
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® film media specialist in conjunction with IMAGICA USA, which resulted
in further industry and trade press exposure. The primary focus of our public
relations activities is centered upon creating a 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

Although we have focused on our web
site as the primary mechanism for disseminating information concerning our products and
services, we have created brochures and literature to support our sales and marketing activities.
We also advertise and promote the availability of our products in the appropriate publications.
As new hardware and software products are released, marketing materials and data specification
sheets are distributed to promote the release.

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. We
do not believe that our products and services compete with the majority of
3D based products offered in the video game and PC software markets,
since these products are normally not stereoscopic 3D as created by
our Dynamic Depth Cueing process. Stereoscopic 3D 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. A number of the organizations that do offer enhanced
or steroscopic 3D are well-established manufacturers and developers
of video hardware and software publishers. They may possess substantially greater
financial, marketing, personnel and other resources and have reputations relating
to product design, development, manufacture, marketing and service of digital media
manipulation and stereoscopic 3D display products. Additionally, some of our
competitors have significant budgets to permit them to implement extensive
advertising and promotional campaigns to market new products.

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:

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

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, Inc., based in the United States. These competitive products presently suffer
from a number of drawbacks that deliver images of lower quality than those
created by OpticBOOM. APEC and Wooboo use rudimentary pixel shifting
techniques that can produce distorted 3D versions of 2D images while VRex's technology
appears to be limited to creation of 3D images from pictures captured with a 3D camera or
originated using computer graphics modeling packages. Our OpticBOOM
software conversion products can manipulate 2D images with a high degree of
accuracy and can create 3D images from 2D photographs or 3D computer models.

Conversion of Streaming Video and Movies from 2D to 3D for Display on PCs

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

2D Compatible 3D Transmission and Delivery

We
have seen demonstrations of a number of compression and encoding techniques for
the delivery of 3D broadcast programming. None of these have taken the approach
of delivering 2D compatible 3D media by compressing the 3D data and reinserting
it into the original unaltered 2D image. 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 Inc., of Salt Lake City, UT, and 3D display
manufacturer VisuaLABS Inc. 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

Converting of Broadcast Quality Video and Movies from 2D to 3D for Display in 3D on Televisions

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

As described above, our competitors,
C3D Digital and VisuaLabs, use techniques that deliver 3D media only images. These
transmissions can only viewed with a proprietary decoder box and are not viewable in
2D on standard television sets. Our technique delivers 2D compatible 3D media that may
be viewed in either format.

Real Time Conversion of Broadcast Video Signals to 3D

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 Inc. also uses a real time converter to create 3D-only broadcast
material for distribution to their 3D channel subscribers. Due to the inherent
drawbacks of real time 3D generation (the limited 3D depth and the fact that 3D
cannot presently be automatically generated for scenes containing no motion),
the off-line 3D conversion process offered by OpticBOOM provides a more
comprehensive 3D result and allows the user to exercise full control over the 3D
effect in each scene, including those with no movement characteristics present.

Competition in the DVD Movie Market

Converting DVD Video from 2D to 3D for Display on Televisions

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

Presently,
we are not aware of any organization that is endeavoring to deliver 2D
compatible 3D DVD discs. We have applied for a number of patents regarding our
technique of delivering 2D compatible 3D media by compressing the 3D data and
reinserting it into the original unaltered 2D image for subsequent distribution.
Currently, our competitors use encoding techniques for the delivery of 3D-only
DVD movies that can only be viewed with a decoder box and are not viewable in 2D
in 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 also 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 35mm or 70mm movies from 2D to 3D.

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

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

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

Competition in the Computer Animation Market

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

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

Competition in the Video Game Market

Extraction of Depth Cues from Streaming Video and Movies For Compositing And
Display In 3D on PCs.

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.

Low Bandwidth Encoding of Depth Cue Data on DVD Discs to Allow Display in 2D or 3D.

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. None of our potential competitors have taken our
approach of delivering 2D compatible 3D media by compressing the 3D data and reinserting
it into the original unaltered 2D image for subsequent distribution.

Competition 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 we are not aware of any 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, Inc. 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 Inc.
as a real time converter for use with videocassettes and DVD players in the
United States. These hardware systems are offered in a variety of specifications
that offer equivalent performance to those offered by us. Since real time 3D can
only be created in a rudimentary manner based upon certain types of movement in
a scene it is therefore of a substantially lower quality than the depth cue
based 3D created with OpticBOOM Studio Pro.

Line Doubling For Video Signals

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

Competition in the Arcade Game Market

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

3D
glasses-free display lenses that have recently been previewed at video game
shows 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
similar to 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.

Since inception, we have incurred operating losses of
approximately $24.3 million related to the development and commercialization of our technologies. We
anticipate the launch of significant second and third generation developments of
previously successful commercialized products  through the remainder of 2001 which
will generate revenue and continue our expansion as a technology-based marketing, licensing and distribution company. The
rate at which this expansion 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                     

Technology revenue
represents amounts received from services performed related to the conversion of
2D to 3D content, license fees paid for the use of our technologies, and sales
of our hardware products described below.

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.

Other revenue represents
amounts received by our Australian subsidiary, Dynamic Digital Depth Australia
Pty Ltd, by way of Export Market Development Grants from the Federal Government
of Australia. These grants are provided to Australian companies to assist them
in developing export markets and are calculated by reference to both export
revenues earned and expenses incurred in developing export markets.

The table below details revenues
received from these 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. Conversion services have been purchased by
customers in the entertainment industry, such as theaters operated by Imagica
Corporation, and by customers for use in their advertising campaigns.

Hardware sales represent
sales of equipment using technologies developed by us. These activities
represent the initial commercialization of those technologies. To date our
hardware sales have been made to one customer, Karl Storz Imaging. This hardware
modifies the video image produced by medical imaging products used in surgery
and converts it to 3D. This allows medical personnel to view surgical procedures
in 3D as the surgery is performed. Karl Storz markets and sells our hardware
primarily to hospitals and other medical facilities.

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, and will continue to generate revenue as we launch
significant second and third generation developments of previously
commercialized products through the remainder of 2001.

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 audits, taxation, the registration of our common shares with the
SEC on Form F-1 and the filing of Form 20-F 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 when 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 8 Brodie Hall
Drive, Technology Park, Bentley, Western Australia at A$2,000,000 (US
$1,305,568). 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 (US $1,295,000) to
Dynamic Digital Depth Australia Pty. Ltd. from the Bank of Western Australia
Ltd. The loan facility was secured by the property and guaranteed by us or our
subsidiary, but required that any income from the sale of units of the building
be applied to the reduction of debt or as additional security for repayment of
debt in the manner required by the bank. Partial repayments of the loan facility
amounting to A$1,450,000 (US $930,441) were financed from sales of two units in
the building, including those occupied by us and our subsidiaries. On November 16,
1999, Dynamic Digital Depth Australia Pty. Ltd. entered into two separate contracts
of sale that generated A$1,600,000 (US $1,026,694) in gross sales and we expect
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 on October 15,
1999, the subsidiaries were paying rent of A$20,000 (US $12,950) 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 (US $61,003).
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 (US $39,596) 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 an attorney at Sara-Lane Sirey,
P.C., 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.

We were incorporated under the
laws of Alberta, Canada and our financial results are quantified in Canadian
dollars.  We raise equity funding through the sale of securities denominated in
Canadian dollars, whereas the majority of our obligations and expenditures are
incurred in US or Australian dollars.  Variations in exchange rates may give rise
to foreign exchange gains or losses that may be significant.  Market risks
relating to our operations result primarily from changes in interest rates, changes
in foreign exchange rates and concentrations of credit risk.  We do not engage
in any hedging or currency trading activities.

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

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                                            *
23.1   Consent of Ernst & Young                                                  **`

(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.

*     Previously filed in the Form 20-F filed on July 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: November 15, 2001 | By:/s/ Mark N. Schwartz
Mark N. SchwartzChief Financial Officer

### DYNAMIC DIGITAL DEPTH INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Auditors' Report
Consolidated Balance Sheets as at December 31, 2000, June 30, 2000 and 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, 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 statements of loss and
deficit and its cash flows for the six months ended December 31, 2000 and the
years ended June 30, 2000, June 30, 1999 and 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"      
|----------------- |  | ---------------------
|October ___, 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]            2,341,673      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 ended December 31, 2000 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 ended December 31, 2000 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 during the period ended December 31,
2000 of $158,808 (June 30, 2000:
$144,489, June 30, 1999: $110,583, year ended June 30, 1998: $31,231).

Dynamic Digital Depth Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSAs at and For
the Periods Ended December 31, 2000 and June 30, 2000, and 1999and 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 at December 31,
2000 (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 at December 31, 2000 (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

Unlimited number of voting common
sharesUnlimited 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 during the period ended December 31, 2000 (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
   Utilised by December 31                          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
    Utilised by December 31                         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
                                   ==============================================================================`

`(unaudited)`

`Six months ended                     Australia         USA          Canada          Eliminations     Consolidated
December 31, 1999                       $CAD          $CAD           $CAD               $CAD             $CAD
-----------------------------------------------------------------------------------------------------------------

Technology revenue                       28,950              -             -                 -          28,950

Interest revenue                         15,118         48,041         1,015                 -          64,174

Other revenue                             8,559              -             -                 -           8,559
                                   ------------------------------------------------------------------------------
Total revenue                            52,627         48,041         1,015                 -         101,683
                                   ------------------------------------------------------------------------------

Loss                                 (1,650,527)      (908,210)     (570,440)                -      (3,081,136)
                                   ------------------------------------------------------------------------------

Identifiable assets                   2,487,687     16,597,076     3,177,719       (16,514,418)      5,748,064
                                   ------------------------------------------------------------------------------

Capital assets                          681,264        690,878             -                 -       1,372,142
                                   ============================================================================`

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

`Australia           USA          Canada      Eliminations     Consolidated
Year ended June 30, 1999                $CAD            $CAD           $CAD           $CAD             $CAD
-----------------------------------------------------------------------------------------------------------------
Technology revenue                       29,545              -             -                 -          29,545

Interest revenue                          9,126         79,273        22,184                 -         110,583

Other revenue                            58,698              -             -                 -          58,698
                                   ------------------------------------------------------------------------------

Total revenue                            97,369         79,273        22,184                 -         198,826
                                   ------------------------------------------------------------------------------

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

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

Capital assets                          606,959         77,568             -                           684,527
                                   ==============================================================================`

`Australia           USA          Canada      Eliminations     Consolidated
Year ended June 30, 1998                $CAD            $CAD           $CAD           $CAD             $CAD
-----------------------------------------------------------------------------------------------------------------
Technology revenue                      299,099              -             -                 -         299,099

Interest revenue                          2,912         22,117         6,292                 -          31,321

Other revenue                            37,645              -             -                 -          37,645
                                   ------------------------------------------------------------------------------

Total revenue                           339,656         22,117         6,292                 -         368,065
                                   ------------------------------------------------------------------------------

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

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

Capital assets                          405,597         31,267             -                           436,864
                                   ==============================================================================`

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.

In July 2001, the Company completed a private placement of 1,796,079 units
consisting of one common share and one-half common share purchase warrant,
raising net proceeds of $5,029,024.  Each whole warrant is exercisable into
one common share at an exercise price of $3.50.  These warrants expire in
June 2003.

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.

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.