DDD.L Regulatory News (DDD)

8 May 2015

DDD Group PLC

Final results for the year ended 31 December 2014

Los Angeles, California: DDD Group plc (AIM: DDD; OTCQX: DDDGY), the advanced imaging and 3D solutions company, announces its final financial results for the year ended 31 December 2014 and the posting of its Annual Report and Accounts, as well as the Notice of Annual General Meeting, which is to be held on 9 June 2015.

Operational Highlights:

· 13m units of DDD TriDef 2D to 3D conversion solutions shipped primarily by TV licensees in period (2013: 11m total TV, PC, and mobile); cumulative total TriDef unit shipments of 51m at 31 December 2014

· Completed the development of new software solutions aimed at the video conferencing and video gaming markets and commenced Beta testing with leading global prospective distribution partners

· Signed new license agreement with a manufacturer of next generation glasses-free 3D PCs and tablets

· Closed the loss-making Yabazam 3D streaming movie service in early December 2014

· Filed additional patents for 2D solutions leveraging the 3D depth image analysis expertise

Financial Highlights:

· Revenues of $2,533,000 (2013: $3,386,000)

· Gross profit margin improved 80 basis points to 99.8% (2013: 99%)

· Adjusted EBITDA* loss from continuing operations of $285,000 (2013: loss of $203,000)

· Loss from continuing operations of $2,209,000 (2013: loss of $2,490,000)

· Loss per share from continuing operations $0.015 (2013: $0.018)

· Cash at 31 December 2014 $697,000 (December 2013: $2,661,000)

· The Group issued approximately $906,000 (£535,000) of long-term debt through the Convertible Unsecured Loan Note program

*Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortisation adjusted for the non-cash share based payment expense required under IFRS

Subsequent to Period End

· The Group raised $1.1m (net of fees) through a combination of Convertible Unsecured Loan Notes and and an Equity Placing which completed on 1 April 2015

Chris Yewdall, Chief Executive said:

"Having completed a strategic review and streamlined the Group's operations to focus on emerging opportunities for our expertise and IP in scaleable 2D growth markets, the results reflect the turnaround plan that was implemented during the year. The plan resulted in research and development resources being deployed to deliver new software products and accompanying patents, whilst exiting from unprofitable aspects of the 3D market.

The development team delivered on the technical objectives that enabled the beta release of the new TriDef SmartCam background removal solution to prospective distribution partners in the PC video conferencing and gaming markets in late 2014. In the months since the release, the development team has continued to refine the performance and features of the product in response to customer feedback and the Company is now engaged in negotiations with the first distribution partners, all of whom have sizeable customer bases in the intended markets.

Furthermore, the Group is making good progress towards the release of TriDef SmartCam capabilities on the Android platform. In addition to video conferencing applications, the delivery on Android is expected to enable innovative solutions to popular mobile applications in digital photography and social media markets which the Group will address during 2015.

Having changed our patent advisor to Dominion Harbor during the second half of 2014, we continue to make steady progress towards the licensing of our patent library in instances where we have identified the potential use of our internationally issued patent claims by third parties. As progress continues, we expect to be in a position to guide on the scale and timing of these potential licenses in due course.

For 2015, the Group will focus on commercialising the new 2D products with our distribution partners in the PC video conference and gaming markets, delivering the Android versions of these new products to enable the Group to address new mobile opportunities in the digital photography and social media markets and assisting Dominion Harbor in concluding licensing discussions with prospective licensees."

The Group expects to post to shareholders its Annual Report and Accounts for the financial year ending 31 December 2014 and Notice of Annual General Meeting by Thursday, 14 May 2015.

Copies of the Annual Report and Accounts are now available from the Company's website at www.DDD.com and at the Company's registered office, 42-50 Hersham Road, Walton-on-the-Thames, Surrey, KT12 1RZ, United Kingdom.

The Annual General Meeting of the Company will be held at 10:30 a.m. on Tuesday 9 June 2015 at 3 More London Riverside, London SE1 2AQ.

Enquiries

About DDD

DDD transforms the visual experience. Its advanced imaging and TriDef® solutions are licensed by leading brands for use in TVs, tablets and PCs. Over 51 million 3D products have been shipped by DDD's licensees worldwide. DDD's shares are quoted on the London Stock Exchange's AIM Market (AIM: DDD) and the OTCQX (DDDGY). For more information please visit www.ddd.com.

During 2015, the Group expects to complete the launch of PC and mobile versions of the new 2D products which will be made available to device manufacturers, software developers and directly to consumers using existing online distribution channels already used by the Group. Beta testing of these new products commenced in late 2014 with key prospective licensees and partners and successful conclusion of commercial agreements is expected to augment the current licensing revenue from 3D technologies while reducing the Group's reliance on the performance of the 3D market and creating diversified licensing income.

The Group will continue to work closely with Dominion Harbor to address the apparent unlicensed use of its patent claims with the objective of securing license fees for the use of the Group's international patent library claims in various 3D consumer products and professional services.

Where practical, the Group will continue to pursue new patent filings for the underlying concepts involved in these new solutions in order to continue to strengthen its international patent library.

Despite the challenges of 2014, the Board is confident that the Group can return to the growth performance that was demonstrated in recent years as the new technologies are delivered and the licensees are secured during 2015.

Since inception, the Group's technical team has developed world-class expertise in the efficient extraction and processing of depth from a two dimensional image. The primary focus of the Group has been to develop a series of patents and technologies based on this expertise that delivered practical solutions for the stereoscopic 3D industry as this has been the first mass-market where the Group's technologies and products could be licensed in volume. Recognising that the market for 3D products was not growing as quickly as had originally been forecast, the Group developed a turnaround plan with the goal of delivering a new range of technologies that can return the Group to profitability.

The turnaround plan was shaped around a series of criteria:

· The new markets should leverage the Group's existing technical expertise, products and patents

· The new solutions should address existing and future requirements for the Group's OEM customers

· The new markets should be significant in size, non-niche and show strong near term growth potential

· The new solutions should not be constrained by the need to add special hardware to the target devices

· The route to market should include direct to consumer app licensing in addition to OEM licensing

Throughout 2013 and 2014 the Company researched a number of market opportunities and focused on the development of innovative new solutions that have resulted in a number of recent patent applications being filed. At the core of these new solutions lies the Group's leading expertise in automatically analyzing and deriving the depth in a 2D image.

Efficient encoding of 2D streaming video

The first of these developments yielded the patents and technologies that facilitate more efficient encoding of 2D video that was announced in 2013. The value proposition is simple. Since the viewer is often focused on actors and objects towards the front of the scene, the depth information can be used to guide the movie encoding process to direct more of the available picture quality to areas of interest to the viewer. The result of this approach is that the same quality picture can be delivered for approximately 20% less bandwidth. This technology underpinned the late 2013 investment in the company by US-based mobile licensing specialist, InterDigital Communications Corporation (Nasdaq: IDCC).

Efficient encoding of 2D video conferences

During 2014, the Group began to develop the depth-based video encoding solution for use in video conferencing. This necessitated the development of TriDef SmartCam, a solution that is able to automatically identify and track the video conference participant from the image being captured by their 2D webcam so that the video encoding process can be directed at the regions of the video conference that contain the viewer's face, head and torso where more encoding detail can be applied. Again, the value proposition is simple in that video conference participants are typically looking at the other participant's face; therefore having the ability to dedicate more of the available bandwidth to areas of visual interest to the participant will increase the perceived quality of the video conference experience. Similarly the option also exists to use this approach to deliver the same quality picture for approximately 20% less bandwidth in instances where bandwidth is at a premium, as is the case when video conferences are conducted using smartphones and tablets with mobile data plans.

Real time background substitution

Due to the accuracy with which the TriDef SmartCam software can identify and track the end user, the Group also identified that the solution can be used to remove the user's background during a video conference and replace it with an alternative image. This is a valuable feature for both business and consumer users alike who may wish to obscure the environment that they are conducting the video conference from, such as an office cubicle, airport lounge or home study. Prior to TriDef SmartCam, background substitution has either required the end user to have a 'green screen' located behind them or requires the use of a special hardware sensor such as Intel's RealSense. The value proposition for TriDef SmartCam in background substitution is that no special coloured background screen is required and that the TriDef SmartCam software makes use of the existing 2D webcam in the user's PC, smartphone or tablet, making it compatible with pre-existing devices already available to consumers and eliminating incremental hardware cost for the PC, smartphone or tablet manufacturers.

The Group has chosen to follow the successful format of its TriDef 3D Game software which enabled hundreds of the most popular PC and mobile games to be played in 3D without needing to change the game software. As a 'middleware' application, TriDef SmartCam is instantly compatible with popular video conferencing applications including Skype, QQ from Tencent Holdings, ooVoo and Lenovo's Youyue.

Enhanced social photography

With the widespread availability of high quality digital cameras in smartphones and tablets, the sharing of personal photographs through social media and other online forums has grown significantly in recent years. Using the TriDef SmartCam's ability to isolate the person from their background in a digital photograph taken with a smartphone or tablet enables some significant improvements to the way in which 'selfie' photographs can be created. By allowing the user to take their preferred picture of the background with the scene facing camera and then taking the user's picture with the user facing camera, the two can be interactively combined with an intuitive touch interface that enables the user to position and re-size their image in front of the background to create the perfect 'selfie'. The value proposition for the end user is simple in as much as this approach enables them to create improved photographs where the user and background are properly illuminated and framed and no part of the user is otherwise obscuring important aspects of the background scene.

Enhanced social media engagement

By combining the user/background removal capabilities of the TriDef SmartCam with the Group's well established technologies for analyzing the depth structure of a photo, video or game, it becomes possible to deliver a highly innovative means of engaging users at a deeper level with their favourite content. With the user's background removed, the 'selfie shot' can be positioned within a scene from a photo, game or video. Additionally, the user can choose which parts of the scene are in front of their selfie image and which remain behind. The same intuitive, simple touch screen compatible interface allows the user's image to be repositioned, resized and set at any one of a range of different layers within the image.

In the social photography market, photographs can be shared where the recipient is able to include his or her own selfie image within the photo they receive before re-sharing it with the sender or distributing it via social media. The value proposition for the end user is simple in as much as this approach enables them to simply create highly engaging photographs for sharing on social media without the need to use complex, time consuming photo editing techniques. As social media networks seek innovative methods to create better engagement with their members, the Group believes that these new solutions will be well received by end users.

Addressable Market

In research that was published in January of 2014, DisplaySearch has forecast that the market for new consumer devices that are equipped with such a depth sensing capability will grow from approximately 273 million units in 2015 to over 1.2 billion units annually by 2017.

Importantly, as outlined in the Group's growth strategy, the Group's new solutions are not dependent on the inclusion of any new hardware (as was the case in 3D with the need for a special 3D display) in the user's device and are targeted at existing and new PC, smartphone and tablet devices that are already available.

Specific Risks

Competitive risk exists in the market as follows:

· streaming video and video conferencing software providers may determine that the pre-processing approach is not suited to their business needs, resulting in low uptake of the solution by prospective licensees;

· video conferencing users may determine that the pre-processing approach and background substitution is not beneficial resulting in low uptake of the solution by prospective licensees;

· competitive streaming bandwidth or picture quality improvement solutions may offer a better result and/or more favorable terms, reducing the attractiveness of the proposition to prospective licensees; and

· consumers may not adopt the interactive digital photography capabilities to improve their selfie photographs resulting in lower uptake of the app by consumers;

Following the delivery of the Windows and Android prototypes of the TriDef SmartCam solution, the Group has seen a positive response from mobile device manufacturers who are looking for solutions that improve the picture quality for their video conferencing apps. Where possible, the Group undertakes early stage solution development in close collaboration with key partners in different markets with the goal of ensuring that the solution has the required features and bandwidth performance when it is formally released. Discussions with consumer video conferencing providers have identified that background substitution is a feature that they wish to deploy to their users and the Group's ability to enable this feature using hardware that the user already owns is seen as a critical advantage over the alternatives such as physical 3D hardware sensors which are not widely available and require the end user to purchase a new product or device. While the new social photography features are something that users are not currently familiar with, success through a simple, intuitive touch screen interface which many users are already familiar with, is expected to improve the chances of successful adoption.

3D TECHNOLOGY LICENSING BUSINESS

Automatic 2D to 3D conversion

The ability to create depth information from a 2D image was initially packaged as technology solutions that are licensed into the market for consumer 3D displays, including televisions, personal computers, smartphones and tablets. The value proposition is simple as there is insufficient 3D content from film studios and from television production companies to support a 24 hour/day, seven day/week 3D TV channel; therefore having the capability to automatically convert existing 2D TV shows, movies and games in the home is an important feature for consumer electronics manufacturers and consumers alike. For the consumer, it ensures that a diverse range of 3D content is instantly accessible upon purchase of the 3D product. For the consumer electronics manufacturer, the inclusion of this capability overcomes the consumers' concern over lack of available 3D content when purchasing their 3D product.

Addressable market:

Of the markets that the Group is currently active in, the market for 3D consumer devices is the most mature with the 3D Television market representing the strongest opportunity. The Group saw shipments of licenses for 3D TV chips increase by 20% year over year as the global TV market shipments continued to recover.

As noted in the Annual Report and Accounts for 2013, licensing and royalty revenue from the PC market continued to decline to minimal levels in 2014, and the Group does not expect that the 3D PC market will contribute materially to future 3D technology licensing revenues. This has been the reason behind the declining revenue base and the decrease in active licensees reported in the KPIs.

Given the emphasis placed by display manufacturers on the development of non-3D features, including increasing the resolution of 2D displays, the availability of cost-effective 'glasses-free' 3D display technologies remains a constraining factor on the delivery of mass-market 3D smartphone and tablet products. Consequently license and royalty revenues from the Company's Android 3D apps were low. The Group does not expect that the 3D smartphone and tablet market will contribute materially to future 3D technology licensing revenues until the next generation glasses-free 3D mobile displays become widely available.

Specific Risks

Competitive risk exists in the market as follows:

· unlicensed use of the Group's intellectual property;

· alternative 2D to 3D conversion methods which have been used by some manufacturers that yield lower quality visual results;

· license agreement renewal terms and non-renewals; and

· changes in licensee production due to economic conditions or market demand for 3D products

The Group has partnered with a suitable intellectual property licensing specialist in order to address unlicensed use of the Company's patent claims. Where possible the Group seeks to renew license agreements on terms that are as close to the original license agreement terms as is possible. In certain cases, since the royalties adjust based on cumulative shipment of the Group's technologies by the licensee, the per-unit royalties reduce as production increases. The Group monitors feedback from its licensees as well as from independent market research firms and adjusts its product development strategies and support resources in line with developing market trends.

Patent Licensing

To date, the majority of the Group's licensing revenue has been derived from the 2D to 3D conversion technology licensing program, whereby the Group provides a software application or reference design to the licensee for inclusion with the licensee's 3D products.

With over 51 million 3D consumer products that include the Group's TriDef 3D technologies shipped by leading manufacturers since early 2010, there is now an established value for the internationally registered patent claims on which DDD's solutions have been built. As new revenue streams continue to be developed, the Group expects that patent licensing revenue will grow as the Group establishes its patent rights with prospective licensees. The patent licensing program also has the potential to create license and royalty revenue from applications in 3D markets that are outside the scope of the current technology licensing program. The Group appointed Dominion Harbor LLC as its exclusive patent licensing advisor in August 2014. Dominion Harbor is working closely with the Group to secure patent licensees in the consumer and professional 3D markets.

Specific Risks

Competitive risk exists in the market as follows:

· the Group's intellectual property advisory partner may be unsuccessful in assisting in the expansion of the licensing program; and

· the financial cost of asserting the patent rights by litigation may be too significant for the Group to bear when compared to the value of the resulting license fee.

The Group has thoroughly investigated the available options for licensing its patent rights and plans to implement an approach that maximises the success of the program whilst minimising the financial risks to the Group. Through partnering with an established intellectual property licensing specialist, the Group is able to take advantage of industry best practices when seeking licenses. The pre-existing technology licensing royalties provide an established value by which license fees can be calculated, mitigating the risk that prospective licensees will propose unrealistically low licensing terms.

Looking forward - 3D Technology market direction

During 2014, the Group continued to realise the majority of its revenues from technology licenses in the 3D television market. Given the continued decline in 3D PC shipments and the continued lack of available mass market glasses-free displays for the smartphone and tablet manufacturers, the Group restructured its development resources to place more emphasis on the delivery of new technologies and products intended for use in the larger 2D market opportunities.

As part of this review, the Group also closed its Yabazam 3D movie streaming service in late 2014 which was available to users of 3D Smart TVs from Samsung, LG Electronics and Panasonic. Downloads of the Yabazam 3D app to Smart TVs began to decline in the second quarter of 2014, consistent with a restructuring of the Smart TV stores and support infrastructure by leading manufacturers including Samsung. This restructuring reflected the modest adoption of Smart TV apps beyond the more popular streaming services including Netflix and Amazon Prime.

With the marketing emphasis in the consumer television market now being placed on features including ultra high definition (UHD) televisions, and 3D having become an expected feature on many larger TVs, the Group has shifted emphasis from developing and licensing solutions exclusively into the 3D market in order to address other markets with stronger growth potential.

In the PC market, the Group will continue to maintain software and game support for the OEM and consumer market for as long as continuing in the 3D PC market remains sustainable.

In the mobile device and tablet market, the Group completed development of the TriDef 3D Games and TriDef 3D Gallery applications for Android devices. The new applications are available in the Google Play app store to introduce the software at no risk for new users. A paid upgrade option is available that enables a fully featured upgrade version of the software for users who wish to upgrade for unlimited, full use of the software.

The Group continues to monitor developments in the 3D market and remains well positioned to take advantage of any emerging opportunities for new 3D devices through its existing products and solutions.

Revenues from continuing operations for the year ended 31 December 2014 were $2,533,000 (2013: $3,386,000), a decrease of 25%, which is directly attributable to the decline in licensing to the 3D PC market that has been occurring since late 2012. All of the revenues in both periods relate to the technology segment.

The total reported shipments of the Group's technologies in the 3D market increased from 11.2 million to 13.1 million units; however, the mix of unit shipments by volume was heavily weighted to the embedded chip market for 3D TVs with the lowest average royalty per unit (ARPU). The mix by volume was: 99.9% TV, 0.1% PC and negligible mobile devices (2013: 97.1% TV, 2.7% PC, 0.2% mobile) and resulted in a decline in royalties from OEM agreements to $2,367,000 (2013: $3,132,000). Direct to consumer software licensing sales were $117,000 (2013: $203,000) for the year also reflecting the decline in the availability of 3D PCs.

Other technology licensing royalty revenues were $29,000 (2013: $51,000). This includes royalties received from IP patent licensing as well as royalties from other license agreements which are non-unit royalty based. Finally, $20,000 (2013: nil) was recognised as a license fee following termination of a PC licensing agreement which had a non-refundable first year license fee.

Gross profit decreased by 25% to $2,528,000 (2013: $3,356,000) and gross margin increased to 99.98% (2013: 99.1%) as a result of the continued shift in revenue mix towards higher margin 3D TV royalties.

Administration expenses for continuing operations decreased by 20.7% to $3,153,000 (2013: $3,974,000) due to continued streamlining of operations, a response to the slowdown in 3D revenues while the Group shifts its focus to the new 2D technologies and products. Additional savings were achieved with the move to a lower cost office in Australia and on the parent company costs as the Group restrained investor relations activities during the year. The cost savings were supplemented by the net foreign exchange impact of the US dollar against the Australian dollar and British pound during the period.

Other income decreased to $340,000 (2013: $415,000) with the majority being related to the Australian R&D incentive program.

The non-cash share-based incentive cost decreased to $148,000 (2013: $426,000).

Adjusted Group loss before tax and share-based incentive costs from continuing operations totalled $1,672,000 (2013: $1,483,000). The reported pre-tax loss from continuing operations was $1,820,000 (2013: $1,909,000).

The total taxation charge was $389,000 (2013: $581,000). Taxation includes foreign withholding taxes withheld at source as well as local sales taxes, adjusted by the movement in the Deferred Tax Asset and Liability accounts.

In December 2014, the Group closed down the Yabazam 3D movie streaming service and accounted for the transaction as a discontinued operation. The loss for the service for 2014 was $700,000 (2013: $416,000) and included loss on intangible asset disposals of $395,000 and $6,000 for inventory disposal at the time of the closure.

The Group recorded a loss per share from continuing operations of 1.5 cents per share (2013: 1.8 cents per share) and a total loss per share during the year of 2.0 cents per share (2013: loss 2.1 cents per share).

Net cash used in operating activities was $918,000 (2013: $179,000). Capitalised expenditure was $1,822,000 (2013: $1,897,000) of this, $72,000 (2013: nil) was a restricted cash deposit as required by the new Australian office lease agreement. This cash flow was supplemented by $836,000 of net proceeds raised from the issue of new unsecured convertible loan notes (2013: $1,281,000 from net equity issuance), resulting in cash of $697,000 at the end of 2014 (2013: $2,661,000).

_____________________

1 Reserve transfer for exercised, forfeited and expired options.

SELECTED NOTES TO THE SUMMARY FINANCIAL STATEMENTS

1. Selected financial data disclosure

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2014 or 2013 but is derived from those accounts. Statutory accounts for 2013 have been delivered to the registrar of companies, and those for 2014 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report except for an emphasis of matter in relation to going concern in 2013 and 2014 and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. 

Restatement of 2013 accounts:

The 2013 financial results have been restated for the Yabazam discontinued operation (reclassification of $416,000 to loss from discontinued operation as described more fully in Note 3) and to correct a formulaic error. The formulaic error arose in consolidation. The correction of the error increased amortisation expense and accumulated amortisation by $337,000; thereby increasing the total loss after tax for the 2013 financial year to $2,906,000 (loss per share: 2.1 cents/share compared to 1.86 cents loss per share previously reported) and reducing the net book value of intangible assets reported in 2013 to $3,091,000 from $3,428,000. The restatements have no net effect on the consolidated statement of cash flow given that the formulaic error was in reference to a non-cash item.

Going Concern Review:

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report which will be contained in full as part of the 2014 Annual Report and Accounts.

The recently completed financing (announced 9 March 2015 and completed 1 April 2015) provides sufficient working capital through the end of 2015 with modest revenue assumptions from new products. The Directors have prepared cash flow forecasts up to 31 December 2018 under various scenarios based on performance assumptions for the 2D and 3D business units which indicate the Company will have access to sufficient cash. The revenue forecast includes assumptions regarding existing contracts and new revenue streams arising from contracts which are in the negotiation phase; however, there is uncertainty that contract negotiations will be finalised.

If there are material adverse variances against these forecasts, the Company is able to institute measures to take mitigating actions to manage cash resources and access additional funding from strategic sources if required.

The Directors have concluded that the combination of these circumstances represent a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. Nevertheless after making enquiries, the Directors have a reasonable expectation that the Company will have access to adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts.

2. Segmental reporting

In accordance with IFRS 8, operating segments are reporting in a manner that is consistent with the internal reporting provided to the Board of Directors, the chief operating decision maker. Management information that is regularly reported to the Board for the purposes of allocating resources and monitoring performance is the monthly board pack. The board pack contains an analysis of revenue for the Group's activities. At present, given the size of the Group, costs of goods sold and operating expenses cannot be allocated on a reasonable basis to the segments below and, as a result, the segmental analysis is limited to the Group gross profit.

With the discontinuation of the Yabazam business, the Group is currently only operating one segment for technology licensing.

Major customers

The customers contributing over 10% to the gross revenues of the Group are as noted in the following table:

Regional breakdown

The majority of the Group's revenues (2014: 95%; 2013: 95%) are from customers based in the Asia Pacific region.

3. Discontinued Operation

In December 2014, the Yabazam 3D streaming movie service was closed and the operation discontinued. The headcount attributed to the Yabazam service had been reduced in 2013 and again in 2014. Additionally, much of the development of the Yabazam apps was through a third-party and capitalised in intangible assets. There were some initiatives that were developed by the Australian R&D team which was part of the IFRS asset. The development work was halted in April 2014.

The closure resulted in disposals of R&D, other intangible assets, and inventory. The other income/(expense) line item includes non-cash loss on assets in 2014 of $395,000 and a loss on inventory in 2014 of $6,000.

4. (Loss)/profit per share

1 Deferred Shares:

On 5 July 2008 the share capital of the Company was split so that a total of 74,416,547 ordinary shares of par value 10 pence became 74,416,547 deferred shares of par value 9 pence plus 74,416,547 new ordinary shares of par value 1 penny.

The holders of the deferred shares shall not be entitled to receive any dividend out of the profits of the Company available for distribution. On a distribution of assets on a winding-up or other return of capital (otherwise than on conversion or redemption or purchase by the Company of any of its shares) the holders of the deferred shares shall be entitled to receive the amount paid up on their shares after distribution (in cash or in specie) to the holders of the new ordinary shares the amount of £100,000,000 in respect of each new ordinary share held by them. The deferred shares shall not entitle their holders to any further or other right of participation in the assets of the Company. The holders of deferred shares shall not be entitled to receive notice of or to attend (either personally or by proxy) any general meeting of the Company or to vote (either personally or by proxy) on any resolution to be proposed. No certificates will be issued in respect of the deferred shares. The diluted loss per share does not differ from the basic loss per share, as these shares are anti-dilutive.

For 2014 and 2013, the diluted loss per share does not differ from the basic loss per share as the exercise of share options would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.

5. Intangible assets

1 Due to the nature and size of the discontinued operation in regards to the intangible assets, the presentation has been separated to identify the continuing operation.

There is no impairment to the intangibles in any of the reported periods.

6. Convertible Loan Debt

On 30 July 2014, the Company issued Convertible Unsecured Loan Notes ("2014 Notes") totalling £535,000 ($906,000 at historical exchange rate) to certain Directors of the Group and to Arisawa Manufacturing Company, pursuant to the existing authorities granted to the board of Directors. The Notes can be converted by the holders into ordinary shares of 1 pence each in the capital of the Company ("Shares") at a conversion price of 10 pence nominal amount of Notes per Share. The Company has the option to redeem the Notes at any time at a 5% premium to their nominal value plus accrued interest. Any Notes outstanding on 30 January 2016 will, at the option of the Company, be repaid in cash or settled by the issue of Shares at the conversion price; in both cases accrued interest will be payable in cash.

The Notes have an annual interest rate of 7%. Interest payments are made semi-annually on 28 June and 28 December of each year.

The loan notes have conversion rights to equity and mature in January 30, 2016 (18 months from the date of issue). As such they are treated as compound instruments. The valuation of the liability is achieved by discounting the maturity value of the note at the rate available to the Group on a simple loan. Given the Group had no pre-existing debt (or simple loans), an estimated rate of 9% was used for this calculation. The residual value is the equity element of the instrument. The present value of the convertible note's equity element is considered an immaterial amount at the time of the establishment of the loan and therefore the financial liability element is $912,000 (£587,000). The change in the valuation in the denominated currency is charged to the consolidated statement of comprehensive income as finance charges.

7. Events after the balance sheet date

Financial:

On 9 March 2015, the Company announced that it had entered into agreements to issue £350,000 of Convertible Unsecured Loan Notes ("2015 Notes") pursuant to the existing authorities of the Board. The Company also announced a proposed placing of, in aggregate, 23,750,000 new ordinary shares of 1 pence each at a placing price of 2 pence per share (total £475,000) conditional on the passing by shareholders of resolutions to authorise the Company to allot additional ordinary shares and dis-apply statutory pre-emption rights at the Company's General Meeting to be held 31 March 2015.

The 2015 Notes have a 24 month life (due March 2017), pay semi-annual interest at 7% and have similar conversion terms as the 2014 Notes, however, the conversion price is 5 pence per share. The 2015 Notes were subscribed to by four of the Directors and the largest shareholder, all of which are related parties.

On 31 March 2015, the shareholders approved the necessary resolution to complete the placing at a General Meeting. 22,500,000 shares were admitted on 1 April for £450,000.

The Group's published regulatory announcements can be found on the Group's website at http://www.ddd.com/investors/rns-announcements/.

8. The Group's full Annual Report and Accounts is available on the Company's website and will be posted to shareholders on or before 14th May 2015.

9. The Annual General Meeting of DDD Group plc will be held at Norton Rose LLP, 3 More London Riverside, London SE1 2AQ at 10.30am on Tuesday 9th June 2015.