DDi 10K/A 2004 Annual report (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2004

or

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

		For the transition period from to

Commission file number: 000-30241

DDi CORP.

(Exact name of registrant as specified in its charter)


Delaware		06-1576013
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1220 Simon Circle, Anaheim, California (Address of principal executive offices)		92806 (Zip Code)

(714) 688-7200

(Registrant’s telephone number, including area code)

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

None

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

Common Stock, par value $0.001 per share

(Title of class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K o.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o

The aggregate market value of the Common Stock held by non-affiliates of the registrant as of June 30, 2004, was approximately $160,168,589 (computed using the closing price of $8.23 per share of Common Stock on June 30, 2004, as reported by the Nasdaq Stock Market).

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o.

As of March 1, 2005, DDi Corp. had 25,658,078 shares of common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS


	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 8. Financial Statements and Supplementary Data.
	Item 15. Exhibits and Financial Statement Schedules.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHBIIT 32.1
EXHIBIT 32.2

EXPLANATORY NOTE

DDi Corp. (the “Company”) is filing this Amendment No. 1 on Form 10-K/ A (this “Amendment”) to its Annual Report on Form 10-K for the year ended December 31, 2004, originally filed with the Securities and Exchange Commission (the “Commission”) on March 16, 2005 (the “Original Form 10-K”). This Amendment amends disclosures in Notes 2, 4 and 9 to the Financial Statements to clarify that the valuation determinations described therein were made by management.

Accordingly, Notes 2, 4 and 9 to the Financial Statements, with respect to such Financial Statements, which appear as part of Item 8 in Part II, are amended hereby. Because Item 8 incorporates the Quarterly Financial Information from Item 7 in Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the Original Form 10-K, we are required to republish Item 7 in this Amendment. No changes to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” have been made from the Original Form 10-K.

In addition, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, have been re-executed as of the date of, and are refiled as part of, this Amendment as Exhibits 31.1, 31.2, 32.1 and 32.2. Finally, a Consent of Independent Registered Public Accounting Firm dated August 16, 2005, is filed as part of this Amendment. Item 15 in Part IV hereof is accordingly amended.

Except for the items described above or contained in the Amendment, this Amendment continues to speak as of the date of the Original Form 10-K, and does not modify, amend or update in any way the financial statements or any other item or disclosures in the Original Form 10-K.

PART II


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations.*

Overview

We provide time-critical, technologically advanced printed circuit board engineering, manufacturing and other value-added services. We specialize in engineering and fabricating complex multi-layer printed circuit boards on a quick-turn basis and delivering technologically advanced solutions — with lead times as short as 24 hours. We have approximately 1,100 customers in the communications and networking, medical, test and industrial instruments, high-end computing, military and aerospace equipment markets. With such a broad customer base and an average of 40 to 50 new printed circuit board designs tooled per day, we have accumulated significant process and engineering expertise. Our core strength is developing innovative, high-performance solutions to customers during the engineering, test and launch phases of their new electronic product development. Our entire organization is focused on rapidly and reliably filling complex customer orders and building lasting client relationships. Our engineering capabilities and highly scalable manufacturing facilities in the United States and Canada enable us to respond to time-critical orders and technology challenges for our customers on a global basis.

Bankruptcy and Reorganization

From December 1997 through October 2002, we completed several acquisitions, including acquisitions in the United States, Canada and the United Kingdom. Beginning in early 2001, many of the end-markets into which we sell our products and services (including communications and networking equipment; medical, automotive, industrial and test equipment; computers and peripherals; and aerospace equipment) began to enter a significant downturn. Due to the decrease in demand for our services, combined with an increase in manufacturing capacity that resulted from our series of acquisitions, we had excess manufacturing capacity, which adversely affected our operating results. From late 2001 through mid-2003, we implemented a number of restructuring plans designed to reduce our expenses, increase operating efficiencies and focus our business on higher margin services. These restructuring plans included closing a number of facilities, including some of the facilities acquired in our acquisitions, writing-down unutilized assets, streamlining certain manufacturing facilities and eliminating certain sales offices.

Our financial performance in the fourth quarter of 2002 resulted in covenant defaults under the Dynamic Details senior credit facility. As a result of the defaults, we were not permitted to pay our interest obligations under the DDi Corp. 5.25% convertible subordinated notes or the DDi Corp. 6.25% convertible subordinated notes. We commenced discussions with the lenders under the Dynamic Details senior credit facility, convertible subordinated noteholders and other stakeholders regarding a consensual restructuring of our obligations through negotiations.

In connection with our restructuring efforts, on August 20, 2003, DDi Corp. and our subsidiary, DDi Capital Corp., filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. DDi Corp.’s other direct and indirect wholly-owned subsidiaries, including DDi Europe and Dynamic Details were not parties to the Chapter 11 cases. On December 2, 2003, the Bankruptcy Court entered an order confirming our Modified First Amended Plan of Reorganization dated as of August 30, 2003. On December 12, 2003, the effective date of our plan of reorganization, we reorganized and emerged from bankruptcy.

The following is a summary of some of the transactions that were consummated on or about the effective date of our plan of reorganization:


	•	Treatment of Our Pre-Bankruptcy Equity. All of our pre-bankruptcy equity securities were cancelled.

	•	Treatment of Our Pre-Bankruptcy Debt. All of our pre-bankruptcy documents evidencing or creating any indebtedness were canceled or satisfied in full and discharged.


	•	Issuance of Common Stock. We issued an aggregate of 23,500,000 shares of our common stock to the holders of our old convertible subordinated notes. We issued 249,926 shares of common stock to the holders of our pre-bankruptcy common stock.

	•	Issuance of Series A Preferred Stock. We issued an aggregate of 1,000,000 shares of our Series A preferred stock to the holders of our old convertible subordinated notes.

	•	Issuance of Warrants. We issued warrants to purchase an aggregate of 3,814,383 shares of our common stock to the lenders under our new senior credit facility and to holders of our old senior discount notes.

	•	Management and Director Stock Options. We granted options to purchase an aggregate of 2,620,434 shares of our common stock under our 2003 Management Equity Incentive Plan.

	•	Senior Accreting Notes. DDi Capital issued $17.7 million of its 16% senior accreting notes due 2009.

	•	New Senior Credit Facility. The rights of the lenders under Dynamic Details $65.9 million senior credit facility were modified, exchanged and restated as provided in a $72.9 million senior credit facility.

Fresh-Start Accounting

In connection with the Company’s emergence from bankruptcy, we have adopted “fresh-start” accounting principles prescribed by the American Institute of Certified Public Accountants’ Statement of Position 90-7 (“SOP 90-7”), “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” effective November 30, 2003. Under fresh-start accounting, a new reporting entity, known as the “Successor Company”, is deemed to be created, and the recorded amounts of assets and liabilities are adjusted to reflect their fair value. Accordingly, the consolidated financial statements for the Successor Company for the period from December 1, 2003 to December 31, 2003, and all subsequent periods, reflect the Company’s emergence from Chapter 11 and have been prepared utilizing the principles of fresh start reporting contained in SOP 90-7. As a result, the reported historical financial statements of the Company for periods prior to December 1, 2003, as presented in this Annual Report on Form 10-K, are not comparable to those of the Successor Company.

Discontinuation of European Business

The Company announced the discontinuation of its European business, and the placement into administration of DDi Europe, on February 9, 2005. Pursuant to the actions of the Administrators, DDi Europe will undergo a restructuring that will have the effect of the Company no longer having U.K.-based businesses. On February 9, 2005, DDi Technologies Limited, DDi Tewkesbury Limited and DDi International, each operating subsidiaries of DDi Europe were acquired by the eXception Group Ltd., a newly-formed U.K. corporation (the “eXception Group”) for approximately £20.1 million (approximately U.S.$37.2 million). The purchase price was determined by the Administrators. The eXception Group secured a separate credit facility from the Bank of Scotland to finance the purchase price for these companies. The Administrators applied approximately £19.6 million (approximately U.S.$36.2 million) of the proceeds from the sale of DDi Technologies Limited, DDi Tewkesbury Limited and DDi International to the outstanding indebtedness of DDi Europe and its subsidiaries under the DDi Europe credit facilities, leaving approximately £2.0 million (approximately U.S.$3.7 million) outstanding under the DDi Europe credit facilities. The Administrators will seek the sale or other disposition of the remaining assets of DDi Europe, including the businesses of the remaining operating subsidiaries of DDi Europe not transferred to eXception. The proceeds from the disposition of the remaining assets will be applied to satisfy the remaining £2.0 million outstanding under the DDi Europe credit facilities. To the extent that the net proceeds of such assets is less than £2.0 million, the eXception Group will pay any deficiency. Accordingly, pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and Emerging Issues Task Force (“EITF”) Issue No. 03-13, “Applying the Conditions in Paragraph 42 of Financial Accounting Standards Board (“FASB”) Statement No. 144 in Determining

Whether to Report Discontinued Operations,” the results of operations presented in the accompanying Consolidated Financial Statements have been presented to reflect DDi Europe as a discontinued operation. As a discontinued operation, revenues, expenses and cash flows of DDi Europe have been excluded from the respective captions in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows. Assets and liabilities of DDi Europe have been classified as held for sale under current assets, non-current assets, current liabilities and non-current liabilities, respectively.

All other references to operating results and statistical information reflect the ongoing operations of DDi Corp. and its subsidiaries, excluding DDi Europe, (collectively, the Company). In addition to the elimination of DDi Europe from the ongoing operations of the Company, the Company’s Series A Preferred Stock, the underlying liability of which depends solely on the value of DDi Europe, has been written down to its estimated fair market value of zero as of December 31, 2004, and the related estimated liability for accrued but unpaid dividends has been reversed in full in the quarter ended December 31, 2004 and included in discontinued operations in the Company’s Consolidated Statement of Operations.

Key Financial Indicators

The key financial indicators used by management to measure financial performance of our business include net sales and adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, non-cash compensation, goodwill impairment, restructuring and reorganization expenses, officer’s severance expense, loss on interest rate swap termination, fresh start accounting adjustments and gain or loss on extinguishment of debt).

Factors that tend to drive net sales include customers’ time-to-market and advanced technology requirements. Our management examines these factors to determine whether we have been successful in our strategy of (i) focusing on time-critical and technologically advanced services; (ii) maintaining our large and diverse customer base; and (iii) successfully attracting new customers and markets.

We believe that adjusted EBITDA is an important factor of our business because it reflects trends in operating performance. This financial measure is commonly used in our industry. It is also used by our lenders to determine components of covenant compliance. Growth in adjusted EBITDA is driven by higher gross profit and cost containment in selling, general and administration expenses.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for each period.

We believe our critical accounting policies, defined as those policies that we believe are: (a) the most important to the portrayal of our financial condition and results of operations, and (b) that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain, are as follows:


	•	fresh-start accounting;

	•	valuation of long-lived assets;

	•	goodwill impairment;

	•	inventory obsolescence;

	•	allowance for doubtful accounts;

	•	income taxes;


	•	litigation and other contingencies; and

	•	discontinued operation.

Fresh-start accounting — Upon emerging from the Chapter 11 proceedings, we were required to adopt fresh-start accounting in accordance with SOP 90-7, effective November 30, 2003. For financial reporting purposes, we were required to value our assets and liabilities at their current fair value. Through fresh-start accounting, we recorded assets and liabilities at their fair values resulting in a write-up of fixed assets by approximately $4.0 million. We also recorded additional goodwill of $99.8 million and other intangibles consisting of backlog and customer relationships of approximately $24.9 million and deferred lease liabilities of $8.1 million relating to over-market leases.

We determined the fair value of assets and liabilities based on independent business valuations of our reorganization equity value, tangible assets and intangible assets which relied on significant estimates and judgments relating to future earnings, cash flow projections and industry trend data. These valuations were prepared and used only for fresh-start reporting and are not required to be updated. If different estimates and judgments were used, they would result in different valuations which would impact our balance sheet, particularly our equity, debt, intangible assets, goodwill and property, plant and equipment.

Valuation of long-lived assets — We assess the potential impairment of long-lived tangible and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Changes in our operating strategy, such as the closure of a facility, can significantly reduce the estimated useful life of such assets. If the carrying value may not be recoverable then an asset impairment may be recorded. In our 2001, 2002 and the eleven months ended November 30, 2003 Consolidated Statements of Operations, we recorded impairments of long-lived assets resulting from plant closures of $66.9 million, $15.8 million and $1.8 million, respectively.

Goodwill impairment — We assess the potential impairment of goodwill at least annually, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying value may not be recoverable then an impairment of goodwill may be recorded. In our 2002 Consolidated Statements of Operations, we recorded impairments of goodwill resulting from the decline of our market capitalization and in the eleven months ended November 30, 2003 we recorded impairment of goodwill due to the fact we were negotiating with our convertible subordinated noteholders, senior discount noteholders and the lenders of our senior credit facility to implement a plan of reorganization and based on business valuations that indicated the book value of goodwill was in excess of its fair value.

Inventory obsolescence — We generally purchase raw materials in quantities that we anticipate will be fully used in the near term. Changes in operating strategy, however, such as the closure of a facility, can limit our ability to effectively utilize all of the raw materials purchased. If inventory is not utilized then an inventory impairment may be recorded. In our 2001, 2002 and the eleven months ended November 30, 2003 Consolidated Statements of Operations, we recorded restructuring-related inventory impairments resulting from plant closures and reduction of plant capacity and headcount. In addition to evaluations of the market value in connection with significant activities, we regularly monitor potential inventory obsolescence and, when necessary, reduce the carrying amount of our inventory to its market value.

Receivables and Allowance for Doubtful Accounts — Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on historical write-off experience and specific account review. We review our allowance for doubtful accounts at least quarterly. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged off against the allowance when we feel it is probable the receivable will not be recovered. We do not have any off-balance-sheet credit exposure related to our customers.

Income taxes — As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. The process incorporates a determination of the proper current tax balances together with temporary differences resulting from different

treatment of transactions for tax and financial statement purposes. Such differences result in deferred tax assets and liabilities, which are included within the Consolidated Balance Sheets. The recovery of deferred tax assets from future taxable income must be assessed and, to the extent that recovery is not likely, we establish a valuation allowance. Increases in valuation allowances result in the recording of additional tax expense. In our 2002, eleven months ended November 30, 2003 and year ended December 31, 2004 Consolidated Statements of Operations, we recorded tax expense to establish valuation allowances against our federal and state deferred tax assets based upon management’s expectation that the deferred tax assets would likely not be realized. Further, if our ultimate tax liability differs from the periodic tax provision reflected in the Consolidated Statements of Operations, additional tax expense may be recorded.

Litigation and other contingencies — Management regularly evaluates our exposure to threatened or pending litigation and other business contingencies. Because of the uncertainties related to the amount of loss from litigation and other business contingencies, the recording of losses relating to such exposures requires significant judgment about the potential range of outcomes. To date, we have not been affected by any litigation or other contingencies that have had, or are currently anticipated to have, a material impact on our results of operations, cash flows or financial position. As additional information about current or future litigation or other contingencies becomes available, management will assess whether such information warrants the recording of additional expense relating to the contingencies. Such additional expense could potentially have a material impact on our results of operations, cash flows and financial position.

Discontinued operation — We placed DDi Europe into administration on February 9, 2005 and pursuant to the actions of the Administrators, DDi Europe will undergo a restructuring that has the effect of the Company no longer having any continuing involvement in the operations of DDi Europe after February 9, 2005. On February 9, 2005, DDi Technologies Limited, DDi Tewkesbury Limited and DDi International, each operating subsidiaries of DDi Europe were acquired by the eXception Group Ltd., a newly-formed U.K. corporation. The operations and cash flows of DDi Europe have been eliminated from the operations of the Company as the result of the disposal transaction. Among other factors taken into consideration, the Company’s Board of Directors had concluded that the valuation of DDi Europe did not justify any further investment by the Company in support of its European subsidiaries. We estimated that the DDi Europe assets are likely worth no more than the amount of outstanding secured indebtedness prior to DDi Europe being placed into administration; therefore, the Company expects that administration will leave DDi Corp. with no residual value in the UK-based business. To arrive at our conclusion, we relied significantly on estimates and judgments relating to the values of our UK-based assets and the future earnings of our UK-based business. If different estimates and valuations were used, they would result in different valuations which would impact our estimate of the expected cash expenses to be incurred relative to the disposition of our European operations.

Results of Operations and Other Financial Data

As required by fresh start accounting, the 2003 year results have been separately presented under the heading “Predecessor DDi” for the period from January 1, 2003 through November 30, 2003 and “Reorganized DDi” for the period from December 1, 2003 through December 31, 2003. The total operating results for the fiscal year ended December 31, 2003, can be derived by adding the amounts under the columns for the eleven months ended November 30, 2003 and the one month ended December 31, 2003. Management believes comparisons of the full fiscal years are the most appropriate method of analyzing and evaluating our financial results. Accordingly, the financial discussions below compare the year ended December 31, 2003, derived by adding the results of Predecessor DDi for the eleven month period ended November 30, 2003 to the results of Reorganized DDi for the one month period ended December 31, 2003, with the year ended December 31, 2004 and the year ended December 31, 2002.

The following table sets forth Consolidated Statements of Operations Data and Other Financial Data for the year ended December 31, 2002, and the eleven months ended November 30, 2003 for Predecessor DDi Corp. and the one month ended December 31, 2003, and the year ended December 31, 2004 for Reorganized DDi Corp. The results of operations and other financial data of all prior periods presented have been reclassified to reflect DDi Europe as a discontinued operation. As a discontinued operation, revenues, expenses and capital expenditures of DDi Europe have been aggregated and reclassified separately from the respective captions of continuing operations in the Consolidated Statements of Operations Data. In addition, the data for the eleven months ended November 30, 2003 and the one month ended December 31, 2003 for Predecessor DDi Corp. and Reorganized DDi Corp., respectively, has been combined in one column to present the results for the full year ended December 31, 2003 (in millions):


											Combined
											Predecessor
											DDi Corp. &
								Reorganized			Reorganized			Reorganized
		Predecessor DDi Corp.						DDi Corp.			DDi Corp.			DDi Corp.

					Eleven Months			One Month
		Year Ended			Ended			Ended			Year Ended			Year Ended

		December 31,			November 30,			December 31,			December 31,			December 31,
		2002			2003			2003			2003			2004

Consolidated Statements of Operations Data:
Net sales		$	185.6		$	145.0		$	14.6		$	159.6		$	189.0
	Cost of goods sold		171.0			128.3			11.3			139.6			151.5
	Non-cash compensation and amortization of intangibles		—			—			6.9			6.9			12.6
	Restructuring related inventory impairment		3.4			1.7			—			1.7			—

Total cost of goods sold			174.4			130.0			18.2			148.2			164.1
	Gross profit (loss)		11.2			15.0			(3.6	)		11.4			24.9
Operating expenses:
Sales and Marketing:
	Sales and marketing		19.7			13.5			1.1			14.6			14.6
	Non-cash compensation		—			—			1.0			1.0			2.4

Total sales and marketing			19.7			13.5			2.1			15.6			17.0
General and Administration:
	General and administration		10.5			8.5			0.6			9.1			12.4
	Non-cash compensation		—			—			1.5			1.5			4.1
	Officer’s severance		—			—			—						0.7

Total general and administration			10.5			8.5			2.1			10.6			17.2
	Amortization of intangibles		—			—			0.4			0.4			4.6
	Goodwill impairment		128.7			2.0			—			2.0			—
	Restructuring and related charges		25.3			3.9			0.4			4.3			0.9
	Reorganization expenses		2.1			7.4			0.5			7.9			0.8

Operating loss			(175.1	)		(20.3	)		(9.1	)		(29.4	)		(15.6	)
	Interest rate swap valuation		—			—			—			—			—
	Loss on interest rate swap termination		—			5.6			—			5.6			—
	Interest expense and other expense, net		19.9			16.3			0.8			17.1			7.6


												Combined
												Predecessor
												DDi Corp. &
									Reorganized			Reorganized			Reorganized
			Predecessor DDi Corp.						DDi Corp.			DDi Corp.			DDi Corp.

						Eleven Months			One Month
			Year Ended			Ended			Ended			Year Ended			Year Ended

			December 31,			November 30,			December 31,			December 31,			December 31,
			2002			2003			2003			2003			2004

	Reorganization items:
		Gain on extinguishment of debt		—			(120.4	)		—			(120.4	)		—
		Fresh start accounting adjustments		—			(115.2	)		—			(115.2	)		—
		Reorganization proceeding expenses		—			14.0			1.1			15.1			—

Income (loss) from continuing operations before income taxes				(195.0	)		179.4			(11.0	)		168.4			(23.2	)
	Income tax expense			(17.0	)		(0.1	)		—			(0.1	)		(2.0	)

	Income (loss) from continuing operations			(212.0	)		179.3			(11.0	)		168.3			(25.2	)
	Net loss from discontinued operations, net of tax			(76.1	)		(14.9	)		(3.0	)		(17.9	)		(20.7	)

Net income (loss)				(288.1	)		164.4			(14.0	)		150.4			(45.9	)
Series B preferred stock dividend and accretion				—			—			—			—			(4.0	)

Net income (loss) available to common stockholders			$	(288.1	)	$	164.4		$	(14.0	)	$	150.4		$	(49.9	)

Other Financial Data:
Depreciation			$	16.1		$	12.4		$	0.9		$	13.3		$	9.9
Capital expenditures			$	8.0		$	3.9		$	0.1		$	4.1		$	4.4

The following table sets forth Consolidated Statements of Operations Data and Other Financial Data expressed as a percentage of net sales for the year ended December 31, 2002, and the eleven months ended November 30, 2003 for Predecessor DDi Corp. and the one month ended December 31, 2003 and the year ended December 31, 2004 for Reorganized DDi Corp. In addition, the data for the eleven months ended November 30, 2003 and the one month ended December 31, 2003 for Predecessor DDi Corp. and Reorganized DDi Corp., respectively, has been combined in one column to present the results for the full year ended December 31, 2003:


											Combined
											Predecessor
											DDi Corp. &
								Reorganized			Reorganized			Reorganized
		Predecessor DDi Corp.						DDi Corp.			DDi Corp.			DDi Corp.

					Eleven Months			One Month
		Year Ended			Ended			Ended			Year Ended			Year Ended

		December 31,			November 30,			December 31,			December 31,			December 31,
		2002			2003			2003			2003			2004

Consolidated Statement of Operations Data:
Net sales			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
	Cost of goods sold		92.1			88.4			77.4			87.5			80.1
	Non-cash compensation and amortization of intangibles		—			—			47.3			4.3			6.7
	Restructuring related inventory impairment		1.9			1.2			—			1.1			—

Total cost of goods sold			94.0			89.6			124.7			92.9			86.8
	Gross profit (loss)		6.0			10.4			(24.7	)		7.1			13.2
Operating expenses:
Sales and Marketing:
	Sales and marketing		10.6			9.3			7.6			9.1			7.6
	Non-cash compensation		—			—			6.8			0.6			1.3

Total sales and marketing			10.6			9.3			14.4			9.7			8.9


												Combined
												Predecessor
												DDi Corp. &
									Reorganized			Reorganized			Reorganized
			Predecessor DDi Corp.						DDi Corp.			DDi Corp.			DDi Corp.

						Eleven Months			One Month
			Year Ended			Ended			Ended			Year Ended			Year Ended

			December 31,			November 30,			December 31,			December 31,			December 31,
			2002			2003			2003			2003			2004

General and Administration:
	General and administration			5.7			5.9			4.1			5.7			6.6
	Non-cash compensation			—			—			10.3			0.9			2.2
	Officer’s severance			—			—			—			—			0.4

Total general and administration				5.7			5.9			14.4			6.6			9.2
	Amortization of intangibles			—			—			2.7			0.3			2.4
	Goodwill impairment			69.3			1.4			—			1.3			—
	Restructuring and related charges			13.6			2.7			2.7			2.7			0.5
	Reorganization expenses			1.1			5.1			3.4			4.9			0.4

Operating loss				(94.3	)		(14.0	)		(62.3	)		(18.4	)		(8.2	)
	Loss on interest rate swap termination			—			3.9			—			3.5			—
	Interest expense and other expense, net			10.7			11.2			5.5			10.7			4.0
	Reorganization items:
		Gain on extinguishment of debt		—			(83.0	)		—			(75.4	)		—
		Fresh start accounting adjustments		—			(79.5	)		—			(72.2	)		—
		Reorganization proceeding expenses		—			9.6			7.5			9.5			—

Income (loss) from continuing operations before income taxes				(105.0	)		123.8			(75.3	)		105.5			(12.2	)
	Income tax expense			(9.2	)		(0.1	)		—			(0.1	)		(1.1	)

Income (loss) from continuing operations				(114.2	)		123.7			(75.3	)		105.4			(13.3	)
	Net loss from discontinued operations, net of tax			(41.0	)		(10.3	)		(20.6	)		(11.2	)		(11.0	)

Net income (loss)				(155.2	)		(113.4	)		(95.9	)		94.2			(24.3	)
Series B preferred stock dividend and accretion				—			—			—			—			(2.1	)

Net income (loss) available to common stockholders				(155.2	)%		(113.4	)%		(95.9	)%		94.2	%		(26.4	)%

Other Financial Data:
Depreciation				8.7	%		8.6	%		6.2	%		8.3	%		5.2	%
Capital expenditures				4.3	%		2.7	%		0.7	%		2.6	%		2.3	%

Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003

Net sales increased $29.4 million to $189.0 million in 2004, from $159.6 million in 2003. The increase resulted from strengthened end market demand for our PCB products reflected in an increase of 12% in average selling prices and an increase in complementary assembly-related sales of $13.7 million, due both to an increase in demand from existing customers and to gaining significant new customers. The increase in net sales from 2003 occurred primarily in the communications/networking and medical/test/industrial end segments.

We have recorded non-cash compensation expense as a component of total cost of goods sold, total sales and marketing expense, and total general and administration expenses in both 2003 and 2004, resulting from the granting of equity compensation to certain members of our senior management. The higher level of non-cash compensation charges in 2004 reflects the fact that the vesting period of the associated equity grants commenced in the fourth quarter 2003. Though the expense recognized in 2003 includes the impact of the immediate vesting of certain stock options, the 2004 period incorporates a greater portion of the overall vesting period associated with the grants. The impact of non-cash compensation expense to the results of operations in each period is discussed more fully below.

Gross profit increased $13.5 million to $24.9 million in 2004, from $11.4 million in 2003. Gross profit for 2004 reflected amortization of intangibles totaling $0.8 million. Gross profit for 2003 reflected amortization of intangibles totaling $1.1 million and restructuring-related inventory impairments totaling $1.7 million. Gross profit for both periods also included non-cash compensation charges ($11.8 million in 2004 and $5.8 million in 2003). The increase in gross profit resulted principally from the higher level of sales, the majority of which was led by improvements in PCB pricing.

Total sales and marketing expenses increased $1.4 million to $17.0 million in 2004, from $15.6 million in 2003. The increase in total sales and marketing expenses is due to an increase of $1.4 million in non-cash compensation. Other sales and marketing expenses decreased slightly from 2003 to 2004 despite the higher level of net sales, due to operational restructuring initiatives undertaken in mid-2003 and to continued cost control. Total general and administration expenses increased $6.6 million to $17.2 million in 2004, from $10.6 million in 2003. The increase in total general and administration expenses is due to: (i) an increase of $2.6 million in non-cash compensation charges; (ii) Sarbanes-Oxley Section 404 compliance costs of $2.1 million in 2004; (iii) $0.7 million in 2004 severance costs relating to the departure of our former Chief financial Officer; and (iv) an increase in other professional fees of approximately $1.0 million, resulting from strategic reviews of our capital structure undertaken in 2004.

Amortization of intangibles (other than such amounts included in the determination of gross profit, as discussed above) was $4.6 million in 2004, as compared to $0.4 million in 2003. The increase is due to the recording of such costs for the full year 2004, whereas the 2003 amortization reflects only the period subsequent to the adoption of fresh start accounting. Amortization of intangibles will be $4.6 million for years 2005 through 2007 and $4.2 million in 2008.

In 2004, our results include restructuring and other related charges of $0.9 million, related to an operational realignment effected in October 2004. Such costs relate to severance, as we aligned our headcount with current demand for our products and optimized the work allocation amongst our facilities. We anticipated an annualized payroll cost savings of between $6 and $7 million as a result of this initiative. To date, it appears that the expected benefit of the initiative is being realized. Factors such as future demand will affect the extent to which we continue to realize the expected benefits of the realignment. In 2003, we recorded charges totaling $4.0 million related to streamlining our manufacturing facilities and otherwise increasing operational efficiencies. The impact of the 2003 restructuring initiatives on our gross profit and operating expenses are reflected in our 2003 and 2004 results of operations and are discussed more fully herein.

In 2004, our results also included $0.8 million of costs related to the completion of our financial restructuring. Expenses related to our financial restructuring in 2003 totaled $23.3 million consisting of $8.2 million of reorganization expenses and $15.1 million of reorganization proceeding expenses. The 2003 expenses are comprised primarily of professional fees, personnel retention costs under the Dynamic Details Key Employee Retention Program, or KERP, and the writeoff of debt issue costs associated with the extinguishment of the Company’s former subordinated bond debt.

In 2003, we terminated our interest rate swap agreement under our Dynamic Details senior credit facility resulting in a realized loss of $5.6 million.

In 2003, we recorded a gain of $115.2 million due to fresh start accounting adjustments relating to our emergence from Chapter 11 bankruptcy and a gain of $120.4 million resulting from the extinguishment of debt in connection with the completion of our financial restructuring.

Net interest expense for 2004 decreased $9.5 million to $7.6 million, from $17.1 million in 2003. The decrease is due primarily to the termination of the Company’s 5.25% and 6.25% convertible subordinated notes in 2003 and the repayment of our former senior term loans.

Income tax expense increased to $2.0 million in 2004, from $0.1 million in 2003. The provision for taxes in each period differs from the expected tax when applying the U.S. statutory rate due primarily to the recording of valuation allowances in each period and to the recording in 2003 of a nontaxable gain on the extinguishment of debt and fresh-start accounting adjustments, partially offset by non-deductible goodwill impairments in 2003.

Our European operations, DDi Europe, were placed into administration in February 2005. Because the DDi Europe credit facilities look solely to the UK assets as security and those assets are estimated to be worth no more than the amount of the outstanding secured indebtedness, we expect that the administration will leave DDi Corp. with no residual value in the UK-based businesses. We are reporting the results of operations relating to DDi Europe as discontinued operations. In addition, our Series A preferred stock, the underlying value of which depends solely on the value of DDi Europe, has been written down to its estimated fair market value of zero as of December 31, 2004, and the liability for accrued but unpaid dividends has been reversed in full in the quarter ended December 31, 2004 for a benefit recorded of $5.4 million which was included in discontinued operations. We reported net losses from discontinued operations of $20.7 million in 2004 and $17.9 million in 2003, representing the net losses associated with our European operations in each period.

In 2004, we reported $4.0 million of Series B preferred stock dividends and accretion. Of this amount, $2.7 million represented accrued dividends and the remaining $1.3 million represented amortization of the cost of issuing this security. See Current Indebtedness and Outstanding Preferred Stock of the Company below.

We reported a net loss available to common stockholders of $49.9 million in 2004, as compared to net income to common stockholders of $150.4 million in 2003. The decrease was primarily the result of: (i) the $120.4 million gain on the extinguishment of debt resulting from the extinguishment of debt in connection the completion of our financial restructuring; (ii) the $115.2 million adjustment for fresh start accounting; (iii) an increase in losses from discontinued operations; and (iv) an increase in non-cash compensation costs of $10.1 million. The impact of the foregoing items was partially offset by: (i) the increase in net sales; (ii) the reduction in net interest and other expense; (iii) the 2003 loss on the interest rate swap termination; and (iv) the reduction in costs associated with the completion of our financial restructuring.

Summary of 2003 Results

During 2003, we successfully implemented the terms of a plan of reorganization with our lenders through negotiations regarding a consensual restructuring of our obligations. We incurred expenses of $8.2 million during 2003 associated with the negotiations for the plan of reorganization, primarily professional fees, which are classified as “Reorganization charges.” We also incurred expenses directly associated with the bankruptcy proceedings, primarily professional fees and the write-off of debt issuance costs associated with the extinguishment of the 5.25% and 6.25% convertible subordinated notes, to implement the plan of reorganization of $15.1 million which are classified as “Reorganization proceeding expenses.”

As a result of the transactions consummated through the plan of reorganization, we recorded a gain of $115.2 million due to fresh start accounting adjustments and a gain on extinguishment of debt of $120.4 million for the exchange of common stock for debt to the holders of our 5.25% and 6.25% convertible subordinated notes. We recorded a liability relating to the Series A preferred stock issued at its estimated fair market value of $2.0 million which bears a 15% annual dividend rate on the face value of $15 million which is recorded to interest expense. In addition, the warrants issued to the lenders under our new senior credit facility and to holders of our new capital senior accreting notes are accounted for as a debt discount. We recorded the warrants at an aggregate estimated fair market value of approximately $1.2 million at November 30, 2003 and use the effective interest rate method to accrete the debt value to face at maturity through interest expense. Lastly, the grant of restricted stock and options in connection with our 2003 Management Equity Incentive Plan resulted in non-cash compensation expense totaling $8.3 million.

Year Ended December 31, 2003 Compared to the Year Ended December 31, 2002

Net sales decreased $26.0 million to $159.6 million in 2003, from $185.6 million in 2002. The decrease in net sales is primarily attributable to the disposition of several non-core operations in the latter part of 2002, which reduced sales by approximately $21.5 million. The remainder of the decrease in net sales was due principally to a reduced emphasis on the generation of turnkey assembly sales, due to our desire to minimize working capital demand during our financial restructuring.

Gross profit increased $0.2 million to $11.4 million in 2003, from $11.2 million in 2002. The increase in gross profit is due to the benefits of operational restructuring initiatives undertaken in the fourth quarter 2002 and the second quarter 2003 and to a reduction of $1.7 million in restructuring related inventory impairment charges. The foregoing items were partially offset by non-cash compensation charges of $5.7 million and amortization of intangibles totaling $1.2 million in 2003.

Total sales and marketing expenses decreased $4.1 million to $15.6 million in 2003, from $19.7 million in 2002. The decrease in total sales and marketing expenses reflects our continued cost control efforts and, to a lesser extent, a reduction in commissions due to the decrease in net sales. Partially offsetting the foregoing items were non-cash compensation charges of $1.0 million in 2003. Total general and administration expenses increased $0.1 million to $10.6 million in 2003, from $10.5 million in 2002. The increase in total general and administration expenses reflects non-cash compensation charges of $1.5 million in 2003, the impact of which was nearly offset by the benefits of continued cost control.

We recorded goodwill impairments of $2.0 million in 2003 and $128.7 million in 2002 (see Note 24 to the Consolidated Financial Statements), in each case as the result of the fact that book value was in excess of the fair value of goodwill.

In 2003, our results include net restructuring and other related charges of $4.3 million primarily related to streamlining our manufacturing facilities and otherwise increasing operating efficiencies, and revisions of estimates from previously recorded restructuring charges. In 2002, we recorded restructuring and other related charges of $25.3 million related to closure of certain facilities and streamlining of other manufacturing facilities.

Our results also include costs related to the completion of our financial restructuring totaling $23.3 million in 2003 and $2.1 million in 2002.

In 2003, we terminated our interest rate swap agreement under our Dynamic Details senior credit facility resulting in a realized loss of $5.6 million.

Net interest expense for 2003 decreased $2.8 million to $17.1 million, from $19.9 million in 2003. The decrease in net interest expense is due substantially to the termination of periodic interest charges on the Company’s 5.25% and 6.25% convertible subordinated notes on August 20, 2003 (the date of the filing of the DDi Corp. and DDi Capital Corp. voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code), partially offset by net non-cash credits recorded in 2002 in connection with the modification of the Dynamic Details interest rate swap agreement.

In 2003, the Company recorded a net tax expense of $0.1 million. This expense was less than the expected tax expense when applying the U.S. statutory rate, due to a nontaxable gain on extinguishment of debt and fresh-start accounting adjustments, partially offset by a non-deductible goodwill impairment, reorganization expenses, and an increase in valuation allowances. In 2002, we recorded net tax expense of $17.0 million. This expense was greater than the expected tax provision when applying the U.S. statutory rate, as a result of the impact of substantial non-deductible items (primarily the goodwill impairment) and the recording of valuation allowances relating to federal and state deferred tax assets, including certain state tax credits.

We reported losses from discontinued operations of $17.9 million in 2003 and $76.1 million in 2002, representing the net losses associated with our European operations in each period. The European losses in 2002 include a charge of $70.3 relating to the impairment of goodwill.

We reported net income available to common stockholders of $150.4 million in 2003, as compared to a net loss to common stockholders of $288.1 million in 2002. The increase was primarily the result of: (i) the $120.4 million gain on the extinguishment of debt; (ii) the $115.2 million adjustment for fresh start accounting; (iii) the higher level of goodwill impairment in 2002; (iv) a decrease in losses from discontinued

operations; and (v) the decrease in restructuring and related charges. The impact of the foregoing items was partially offset by: (i) the decrease in net sales; (ii) the 2003 loss on the interest rate swap termination; and (iv) the increase in costs associated with the completion of our financial restructuring.

Quarterly Financial Information

The following tables present selected quarterly financial information for (i) Predecessor DDi Corp. for each of the seven quarters ended September 30, 2003 and two months ended November 30, 2003 and one month ended December 31, 2003 and (ii) Reorganized DDi Corp. for each of the four quarters ended December 31, 2004. This information is unaudited but, in our opinion, reflects all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair presentation of this information, in accordance with generally accepted accounting principles. These quarterly results are not necessarily indicative of future results.


	Predecessor DDi Corp.																		Reorganized DDi Corp.

	Three Months Ended																Two		One
																	Months		Month
	Mar.		June		Sept.		Dec.			Mar.			June		Sept.		Ended		Ended			Mar.		June		Sept.		Dec.
	31,		30,		30,		31,			31,			30,		30,		Nov. 30,		Dec. 31,			31,		30,		30,		31,
	2002		2002		2002		2002			2003			2003		2003		2003		2003			2004		2004		2004		2004

	(In millions)
Net sales	$	47.0	$	47.3	$	44.9	$	46.4		$	41.1		$	35.8	$	38.2	$	29.8	$	14.6		$	48.1	$	49.9	$	47.1	$	44.0
Other cost of goods sold		42.9		42.3		39.2		46.6			38.0			33.6		33.4		23.2		11.3			36.7		37.5		40.6		36.7
Non-cash compensation and amortization of intangibles		—		—		—		—			—			—		—		—		6.9			5.7		2.5		2.3		2.1
Restructuring-related inventory impairment		—		3.4		—		—			—			1.7		—		—		—			—		—		—		—
												��
Total cost of goods sold		42.9		45.7		39.2		46.6			38.0			35.3		33.4		23.2		18.2			42.4		40.0		42.9		38.8

Gross profit (loss)	$	4.1	$	1.6	$	5.7	$	(0.2	)	$	3.1		$	.5	$	4.8	$	6.6	$	(3.6	)	$	5.7	$	9.9	$	4.2	$	5.2

The quarterly financial information provided above does not present net income (loss) and related per share data. Such information is not presented because it does not allow for meaningful comparisons among quarters. Data fluctuates greatly from quarter to quarter due to the changes in our net interest expense as a result of the reduction in debt with the use of proceeds from our debt and equity offerings, variability in our restructuring and related charges and reorganization expenses and the closure or sale of facilities. Further quarterly financial information not presented above is presented in our quarterly reports on Form 10-Q.

Liquidity and Capital Resources


	*General*

Our principal sources of liquidity to fund ongoing operations for the past two years has been existing cash and cash equivalents. We believe that our cash on hand, cash generated by operations, and the Dynamic Details asset based revolving credit facility will be sufficient to meet our anticipated needs to maintain operations, working capital, capital expenditures and debt service requirements and other commitments as they mature for at least the next twelve months. There can be no assurance, however, that the Company will be successful in executing its business plan, achieving profitability, or in attracting new customers, or in maintaining its existing customer base. Accordingly, the Company has made, and may in the future make, offerings of debt, preferred stock and common stock which will improve the Company’s liquidity position.


	*Consolidated Cash and Cash Equivalents and Available Borrowings*

As of December 31, 2004, cash and cash equivalents were $23.5 million, inclusive of $15.9 million of borrowings under the revolving credit facility. The amount drawn under the revolving credit facility as of December 31, 2004 effectively represents the full borrowing availability at that time. Our principal source of liquidity to fund ongoing operations for the year ended December 31, 2004 was cash provided by operations and existing cash and cash equivalents. The amount drawn on the revolving credit facility of $15.9 million as of December 31, 2004 was fully repaid during January 2005.

In connection with our emergence from Chapter 11 bankruptcy, the aggregate outstanding unpaid principal amount of senior debt, plus interest and fees, under the Dynamic Details senior credit facility was restructured, exchanged and repaid, and we entered into a new senior credit facility. As of December 31, 2003, we had $71.7 million principal outstanding, $1.2 million of letters of credit obligations outstanding and no available borrowings under the new senior credit facility. As discussed in detail below, the Company paid off in full the Dynamic Details senior credit facility on March 30, 2004.


	*Capital Raising Transactions in 2004*

On January 21, 2004, we issued 1,000,000 shares of our common stock to two institutional investors in a private placement for a total gross proceeds of $15,980,000. Immediately after the closing of that transaction, we used $4.5 million of the proceeds to pay down the Dynamic Details Senior Credit Facility, $4.0 million of the proceeds to pay down the DDi Europe revolving credit facility and $0.8 million of the proceeds to pay our placement agent and advisor. The remaining proceeds have been, and will continue to be, used for general corporate purposes.

On March 30, 2004, we issued 147,679 shares of Series B-1 Preferred Stock and 1,139,238 shares of Series B-2 Preferred Stock to institutional investors in a private placement at a price of $47.40 per share for an aggregate sales price of $61 million before placement fees and offering expenses (collectively, the “Series B Preferred”). Immediately after the closing of this transaction, on March 30, 2004, we repaid in full the outstanding balance of the Dynamic Details Senior Credit Facility and related accrued interest and fees thereon using proceeds of $54.8 million from the private placement of the Series B Preferred and $14.0 million cash on hand, including $7.5 million in restricted cash which was in an account deposited with the lender of such senior credit facility. For a description of the terms of the Series B Preferred, see Current Indebtedness and Outstanding Preferred Stock of the Company below.


	*Consolidated Cash Flows*

Net cash provided by (used in) operating activities from continuing operations for the year ended December 31, 2004 was $3.6 million, compared to $(6.6) million for the year ended December 31, 2003. The improvement is due primarily to higher sales and margins, partially offset by an increase in working capital demands. In 2004, we experienced net working capital demand resulting from: (i) the funding of restructuring and reorganization related expenses incurred in 2003 and (ii) growth in our net sales. The impact of the growth in the business was mitigated by cash management initiatives.

Net cash provided by (used in) investing activities from continuing operations for the year ended December 31, 2004 was $4.2 million, compared to $(1.9) million for the year ended December 31, 2003. The change is due primarily to proceeds from the disposition of restricted assets and a sale of fixed asset during the year ended December 31, 2004.

Net cash provided by (used in) financing activities from continuing operations for the year ended December 31, 2004 was $12.7 million compared to $(6.3) million for the year ended December 31, 2003. The net cash inflows for the year ended December 31, 2004 resulted primarily from the issuance of Series B preferred stock and common stock and borrowing on revolving credit facilities, partially offset by the repayment of long-term debt. The net cash outflows for the year ended December 31, 2003 resulted primarily from the refinancing and repayment of indebtedness.


	*Capital Expenditures*

Capital expenditures were $4.4 million for the year ended December 31, 2004 and $4.0 million for the year ended December 31, 2003. The increase in capital expenditures is primarily due to an expansion of our Longmont, Colorado assembly operation.

Contractual Obligations

The following table shows our contractual commitments as of December 31, 2004:

Payments Due by Period


		Year Ending December 31,

Commitments		2005		2006		2007		2008		2009		Thereafter		Total

		(In thousands)
DDi Capital Accreting Notes		$	—	$	—	$	—	$	—	$	18,394	$	—	$	18,394
Interest-Capital Accreting Notes			2,575		2,575		2,575		2,575		644		—		10,944
Mandatorily redeemable preferred stock(1)
	— Series B		20,333		40,667		—		—		—		—		61,000
	— Dividends		6,120		1,220		—		—		—		—		7,340
Capital Lease Obligations			1,077		58		—		—		—		—		1,135
Note Payable			350		300		—		—		—		—		650
Operating Leases			5,773		5,149		4,412		3,633		2,991		3,386		25,344

	Total Commitments	$	36,228	$	49,969	$	6,987	$	6,208	$	22,029	$	3,386	$	124,807

(1)

The Series B preferred stock is due to be repaid no later than January 1, 2009. Holders have the option to require the Company to redeem the shares earlier in three equal installments in 18 months, 24 months, and 30 months from issuance. This presentation assumes that the holders of the Series B preferred stock will exercise their option to require the Company to redeem the shares. To the extent shares of Series B preferred stock are not redeemed at the option of the holders, interest shall accrue on the notes at 6% per annum on any unredeemed shares until maturity in 2009. Both the redemption amounts and the 6% dividends may be paid in shares of common stock of the Company or in cash, at the election of the Company. The shares of common stock of the Company available to be utilized for redemption are limited to 10 million shares.

Current Indebtedness and Outstanding Preferred Stock of the Company

Dynamic Details Asset-based Credit Facility

On March 30, 2004, Dynamic Details, Incorporated and its U.S. subsidiaries entered into a three-year, $40,000,000 asset-based revolving credit facility with General Electric Capital Corporation, as agent and lender. During the second quarter of 2004, the asset base on the revolving credit facility was expanded to include the Company’s Canadian operations. At December 31, 2004, the interest rate was prime plus 3%. On an ongoing basis, pricing will be determined by the Company’s adjusted EBITDA numbers, and will range from LIBOR plus 3 to 4% on LIBOR loans or prime plus 2 to 3% for index rate loans. Availability under the credit facility is based on the Company reaching various liquidity and borrowing base tests. The credit facility contains standard representations and warranties, covenants and events of default for a facility of this size. The credit facility is guaranteed by DDi Corp. and its subsidiaries, DDi Intermediate Holdings Corp., or DDi Intermediate, and DDi Capital Corp. The credit facility collateralized by the assets of our domestic operating subsidiary, Dynamic Details. Under the credit facility, (i) DDi Corp. pledged 100% of the common stock of DDi Intermediate as collateral to secure the credit facility; (ii) DDi Intermediate pledged 100% of the common stock of DDi Capital as collateral to secure the credit facility; and (iii) DDi Capital pledged 100% of the common stock of Dynamic Details, Incorporated as collateral to secure the credit facility. Our asset-based revolving credit facility restricts our ability to pay cash dividends on our common stock and restricts our subsidiaries’ ability to pay dividends to us without the lender’s consent. As of December 31, 2004, we had $15.9 million available for borrowing under the credit facility, all of which was outstanding.


	*DDi Capital Accreting Notes*

The DDi Capital 16% senior accreting notes due 2009 were issued in an original principal amount of $17.7 million and will mature on January 1, 2009. The senior accreting notes were issued under an indenture dated as of December 12, 2003 between DDi Capital Corp., as issuer, and Wilmington Trust Co., as trustee. The senior accreting notes are senior unsecured obligations of DDi Capital. Interest is payable on the notes by issuance of additional senior accreting notes at an annual rate of 16% or, at DDi Capital’s election, in cash at an annual rate of 14%. Because of the decrease in DDi Capital’s leverage ratio, on June 1, 2004, DDi Capital was required to elect to pay interest due on all subsequent interest payments in cash starting June 15, 2004. Interest is charged on the accreted principal balance as of March 15, 2004, the most recent scheduled accreted interest payment date per the note indenture, of $18.4 million. The notes mature on January 1, 2009 and are redeemable by DDi Capital upon a change of control or upon sale of stock or property or other assets except through the ordinary course of business. The senior accreting notes have covenants customary for securities of this type. The covenants restrict the Company from incurring additional indebtedness and from making certain payments to its stockholders. As of December 31, 2004, the Company was in compliance with these covenants.

The DDi Capital senior accreting notes may be redeemed at the option of DDi Capital, in whole at any time, at a redemption price that is greater than the accreted value of the notes, plus accrued and unpaid interest, if any, to the redemption date. We have not redeemed any notes as of December 31, 2004.

Each holder of the senior discount notes also received a warrant to purchase a pro rata portion of 762,876 shares of the Company’s common stock. These warrants are held in an escrow account until December 12, 2005 and are exercisable at an exercise price of $0.001 per share from December 13, 2005 through July 31, 2008. As a result of our private placement of securities in January 2004, the warrants issued to the holder of the senior discount notes were adjusted pursuant to anti-dilution provisions, allowing such holders to purchase an aggregate of 807,090 shares of our common stock. The warrants issued to the senior notes holders will be terminated if, on or before December 12, 2005, DDi Capital pays all of its indebtedness to the holders of the senior accreting notes.

Series B Preferred Stock

As of March 1, 2005, 147,679 shares of Series B-1 Preferred Stock and 1,139,238 shares of Series B-2 Preferred Stock (collectively, the “Series B Preferred Stock”) were outstanding. Each share of the Series B Preferred is initially convertible into four shares of our common stock at any time at a conversion price of $11.85 per share, subject to certain anti-dilution and other customary adjustments. The Series B Preferred bear dividends at the rate of 6% per annum, payable quarterly, in cash or in common stock, commencing March 31, 2005 and is subject to mandatory redemption in five years. All accrued dividends on the Series B-1 and Series B-2 Preferred Stock must be paid before any dividends are declared or paid on shares of common stock. In addition, the holders of the Series B Preferred have the option to require us to redeem the shares in three equal installments in 18 months, 24 months and 30 months from issuance or earlier upon a change of control, certain events of default or other specified occurrences. We also have the right to redeem the Series B Preferred if our common stock trades above $20.75 for 30 consecutive trading days. The redemption price is at $47.40 per share plus accrued dividends, except in the case of certain defaults where there are premiums to the redemption cost. The Company has the option to make dividend and redemption payments using our common stock; provided that we may use no more than 10 million shares of common stock in the aggregate for such redemption payments. Shares of common stock issued as dividends or redemption payments are issued at a 5% discount to the weighted average market price over the 20 trading days prior to the dividend payment date. The Series B Preferred Stock Certificate of Determination also has covenants that restrict the Company from incurring additional indebtedness in excess of the greater of (i) in the aggregate, $80.0 million, or (ii) three times the Company’s EBITDA for the most recent four consecutive fiscal quarters.

Recently Issued Accounting Standards

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This statement specifies that instruments within its scope embody obligations of the issuer and that, therefore, the issuer must classify them as liabilities. Financial instruments within the scope of the pronouncement include mandatorily redeemable financial instruments, obligations to repurchase the issuer’s equity shares by transferring assets, and certain obligations to issue a variable number of shares. SFAS No. 150 was effective immediately for all financial instruments entered into or modified after May 31, 2003. For all other instruments, SFAS No. 150 originally was effective July 1, 2003 for the Company. In October 2003, the FASB voted to defer certain provisions of SFAS No. 150 indefinitely. In connection with fresh start accounting, on November 30, 2003, the Company recorded a liability in accordance with SFAS No. 150 related to mandatorily redeemable preferred stock at its estimated fair value of $2 million (see Note 9 to the consolidated financial statements). For those provisions of SFAS No. 150 deferred by the FASB, the Company does not expect there will be a material impact on its financial position or results of operations upon adoption.

In January 2003, the FASB issued and in December 2003, revised, FASB Interpretation No. 46 “Consolidation of Variable Interest Entities — an interpretation of ARB No. 51.” This interpretation addresses consolidation by business enterprises of variable interest entities, which have certain characteristics. The effective date of this interpretation varies based on certain criteria. The Company is required to apply all of this interpretation no later than the end of the first reporting period that ends after March 15, 2004. The adoption of this statement is not anticipated to have a material effect on the Company’s financial position, cash flows or results of operations.

In April 2004, the Emerging Issues Task Force issued EITF 03-6, Participating Securities and the Two — Class Method Under FASB Statement No. 128, Earnings Per Share. EITF 03-6 addresses a number of questions regarding the computation of earning per share by companies that have issued securities other than common stock that contractually entitle the holder to participate in dividends and earning of the company when, and if, it declares dividends on its common stock. The issue also provides further guidance in applying the two-class method of calculating earning per share, clarifying what constitutes a participating security and how to apply the two-class method of computing earnings per share once it is determined that a security is participating, including how to allocate undistributed earnings to such a security. EITF 03-6 is effective for fiscal periods beginning after March 31, 2004, which is the Company’s second quarter, and is require to be retroactively applied. There was no impact from the adoption of EITF 03-6 on the Company’s earnings per share for the periods presented as the Company has incurred net operating losses during the three and nine months ended September 30, 2004 and September 30, 2003, respectively, therefore the effect would be anti-dilutive.

In September 2004, the Emerging Issues Task Force finalized its consensus on EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share” (EITF 04-8). EITF 04-8 addresses when the dilutive effect of contingently convertible debt with a market price trigger should be included in diluted earnings per share (EPS). Under EITF 04-8, the market price contingency should be ignored and these securities should be treated as non-contingent, convertible securities and always included in the diluted EPS computation. EITF 04-8 requires these securities be included in diluted EPS using either the if-converted method or the net share settlement method, depending on the conversion terms of the security. EITF 04-8 is effective for all periods ending after December 15, 2004 and is to be applied by retrospectively restating previously reported EPS. Adoption of EITF 04-8 would not have an impact on reported EPS for any of the periods presented.

operations of the entity as a result of the disposal transaction, and (b) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. EITF Issue No. 03-13 addresses how companies should evaluate whether the operations and cash flows of a disposed component have been or will be eliminated from its ongoing operations and the types of continuing involvement that constitute “significant” continuing involvement. The consensus ratified in EITF Issue No. 03-13 is effective for a component of an entity that is disposed of or classified as held for sale in fiscal periods beginning after December 15, 2004 or earlier if disposed of or classified as held for sale within the company’s fiscal year that includes the date of consensus ratification. The Company announced the discontinuation of its European business, and the placement into administration of DDi Europe, on February 9, 2005. Accordingly, pursuant to SFAS No. 144 and EITF Issue No. 03-13, DDi Europe has been accounted for as a discontinued operation. The results of operations presented in the attached Condensed Consolidated Financial Statements have been presented to reflect DDi Europe as a discontinued operation. As a discontinued operation, revenues, expenses and cash flows of DDi Europe have been excluded from the respective captions in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first interim or annual period after June 15, 2005, with early adoption encouraged. The pro forma disclosures previously permitted under SFAS 123, no longer will be an alternative to financial statement recognition. We are required to adopt SFAS 123R in the third quarter of fiscal 2005, beginning July 1, 2005. Under SFAS 123R, we must determine the transition method to be used at date of adoption, the appropriate fair value model to be used for valuing share-based payments and the amortization method for compensation cost. The transition methods include prospective and retroactive adoption options. Under the retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. We anticipate adopting the prospective method and expect that the adoption of SFAS 123R will have an impact similar to the current pro forma disclosure for existing options under SFAS 123 in Footnote 2 to our consolidated financial statements.

Factors That May Affect Our Future Results

The terms of our lending arrangements and outstanding Series B Preferred Stock may restrict our financial and operational flexibility.

The terms of our indebtedness restrict, among other things, our ability to incur additional indebtedness, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. Further, DDi Capital and Dynamic Details are also required to maintain specified financial ratios and satisfy certain financial condition tests. Our subsidiaries’ ability to meet those financial ratios and tests can be affected by events beyond our subsidiaries’ control, and there can be no assurance that they will meet those tests. Substantially all our assets and our subsidiaries’ assets are pledged as security under our senior credit facility.

We may need additional capital in the future and it may not be available on acceptable terms, or at all.

Looking ahead at long-term needs, we may need to raise additional funds for the following purposes:


	•	to fund our operations beyond 2005;

	•	to fund working capital requirements for future growth that we may experience;


	•	to enhance or expand the range of services we offer;

	•	to increase our sales and marketing activities; or

	•	to respond to competitive pressures or perceived opportunities, such as investment, acquisition and international expansion activities.

If such funds are not available when required or on acceptable terms, our business and financial results could suffer.

The holders of our Series B Preferred Stock might become entitled to demand that we redeem the preferred stock. If we are unable to comply with that demand, the redemption price and dividends on the preferred stock may increase.

On March 30, 2004, we sold in a private placement 147,679 shares of Series B-1 Preferred Stock and 1,139,238 shares of Series B-2 Preferred Stock (collectively, the “Series B Preferred Stock”) to institutional investors. At the option of the holders of the Series B Preferred Stock, we are required to redeem the preferred shares in three equal installments in 18 months, 24 months and 30 months from issuance or earlier upon a change of control, certain events of default, or other specified occurrences. The first optional redemption date is September 30, 2005, on which date the holders of the Series B Preferred Stock can require us to redeem up to one-third of the outstanding Series B Preferred Stock. We have the option to make redemption payments in either cash or the Company’s common stock (up to a maximum of 10 million shares, unless the holders otherwise agree), except in the event of a default or certain other occurrences when the redemption payments must be made in cash. If the holders of the Series B Preferred Stock exercise their right to require us to redeem the Series B Preferred stock and we are not permitted to pay the redemption price in shares of common stock or have insufficient common stock available to pay the redemption price in full because of the 10 million share limit, we may not have enough funds to pay the redemption price in cash for all tendered shares of Series B Preferred Stock. If the Company is unable to redeem all of the Series B Preferred Stock submitted for redemption, (i) the Company must redeem a pro rata amount from each holder of the Series B Preferred Stock, (ii) the redemption price for any shares not redeemed as required would increase to 108% of the stated value of the Preferred Stock plus accrued dividends; (iii) in addition to any dividends required to be paid on the Series B Preferred Stock, the unpaid portion of the redemption price would accrue interest at the rate of 8.0% per annum, payable monthly in cash; and (iv) the holders of the Series B Preferred Stock holding in the aggregate at least a majority in interest of the then outstanding Series B Preferred Stock, would have the right to demand a stockholders’ meeting and, at such meeting the holders of the Series B Preferred Stock would have the right to elect an additional director to the Board of Directors.

Holders of our Series B Preferred Stock have the right to convert their preferred stock into shares of the Company’s common stock and to receive dividends payable in the Company’s common stock causing substantial dilution to common shareholders.

The holders of our Series B Preferred Stock have the right to convert the principal amount of their shares into shares of the Company’s common stock. In addition, we have the option of paying the redemption price for and dividends on the Series B Preferred Stock in shares of the Company’s common stock. Shares issued as dividends or redemption payments are issued at a 5% discount to the market price at the time of the payment. The holders of our Series B Preferred Stock have an anti-dilution protections. The conversion price for the Series B Preferred Stock is subject to weighted average antidilution provisions whereby, if we issue shares in the future for consideration below the existing conversion price (currently $11.85), then (with certain exceptions, including the issuance of common stock as payment of dividends or redemption payments on the Series B Preferred Stock) the conversion price for the Series B Preferred stock will automatically be decreased, allowing the holders of the Series B Preferred Stock to receive additional shares of the Company’s common stock upon conversion. The issuance of additional shares of Common Stock pursuant to the terms of the Series B Preferred Stock could cause possibly substantial dilution to our common stockholders. Further, subsequent sales of the shares in the public market could depress the market price of our stock by creating an excess in supply of shares for sale. Issuance of these shares and sale of these shares in the public market could also impair our ability to raise capital by selling equity securities.

If the demand for our customers’ products decline, demand for our products will be similarly affected and our revenues, gross margins and operating performance will be adversely affected.

Our customers that purchase printed circuit board engineering and manufacturing services from us are subject to their own business cycles. Some of these cycles show predictability from year to year. However, other cycles, are unpredictable in commencement, depth and duration. A downturn, or any other event leading to additional excess capacity will negatively impact our revenues, gross margins and operating performance.

We cannot accurately predict the continued demand for our customers’ products and the demands of our customers for our products and services. As a result of this uncertainty, our past operating results, earnings and cash flows may not be indicative of our future operating results, earnings and cash flows.

Unless we are able to respond to technological change at least as quickly as our competitors, our services could be rendered obsolete, which would reduce our revenue and operating margins.

The market for our services is characterized by rapidly changing technology and continuing process development. The future success of our business will depend in large part upon our ability to maintain and enhance our technological capabilities, to develop and market services that meet evolving customer needs and to successfully anticipate or respond to technological changes on a cost-effective and timely basis. We are more leveraged than some of our principal competitors, and therefore may not have the financial flexibility to respond to technological changes as quickly as these competitors.

In addition, the printed circuit board engineering and manufacturing services industry could in the future encounter competition from new or revised technologies that render existing technology less competitive or obsolete or that reduce the demand for our services. We cannot assure you that we will effectively respond to the technological requirements of the changing market. To the extent we determine that new technologies and equipment are required to remain competitive, the development, acquisition and implementation of such technologies and equipment may require us to make significant capital investments. We cannot assure you that we will be able to obtain capital for these purposes in the future or that any investments in new technologies will result in commercially viable technological processes.

We may experience significant fluctuation in our revenue because we sell primarily on a purchase order basis, rather than pursuant to long-term contracts.

Our operating results fluctuate because we sell on a purchase-order basis rather than pursuant to long-term contracts, and we expect these fluctuations to continue in the future. We are therefore sensitive to variability in demand by our customers. Because we time our expenditures in anticipation of future sales, our operating results may be less than we estimate if the timing and volume of customer orders do not match our expectations. Furthermore, we may not be able to capture all potential revenue in a given period if our customers’ demand for quick-turn services exceeds our capacity during that period. Because of these factors, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance. Because a significant portion of our operating expenses are fixed, even a small revenue shortfall can have a disproportionate effect on our operating results. It is possible that, in future periods, our results may be below the expectations of public market analysts and investors. This could cause the market price of our common stock to decline.

We rely on a core group of significant customers for a substantial portion of our net sales, and a reduction in demand, or an inability to pay, from this core group could adversely affect our total revenue.

Although we have a large number of customers, net sales to our largest customer accounted for approximately 8% of our net sales in 2004. Net sales to our ten largest customers accounted for approximately 35% of our net sales during the same period. We may depend upon a core group of customers for a material percentage of our net sales in the future. Substantially all of our sales are made on the basis of purchase orders rather than long-term agreements. We cannot assure you that significant customers will order services from us in the future or that they will not reduce or delay the amount of services ordered. Any reduction or delay in orders could negatively impact our revenues. In addition, we generate significant accounts receivable in

connection with providing services to our customers. If one or more of our significant customers were to become insolvent or otherwise were unable to pay us for the services provided, our results of operations would be adversely affected.

If we experience excess capacity due to variability in customer demand, our gross margins may decline.

We maintain our production facilities at less than full capacity to retain our ability to respond to additional quick-turn orders. However, if these orders are not received, we could experience losses due to excess capacity. Whenever we experience excess capacity, our sales revenue may be insufficient to fully cover our fixed overhead expenses and our gross margins will decline. Conversely, we may not be able to capture all potential revenue in a given period if our customers’ demands for quick-turn services exceed our capacity during that period.

We are subject to intense competition, and our business may be adversely affected by these competitive pressures.

The printed circuit board industry is highly fragmented and characterized by intense competition. We principally compete with independent and captive manufacturers of complex quick-turn and longer-lead printed circuit boards. Our principal competitors include other established public companies, smaller private companies and integrated subsidiaries of more broadly based volume producers that also manufacture multi-layer printed circuit boards and other electronic assemblies. We also expect that competition will increase as a result of industry consolidation. Some of our principal competitors are less highly-leveraged than us and may have greater financial and operating flexibility.

For us to be competitive in the quick-turn sector, we must maintain a large customer base, a large staff of sales and marketing personnel, considerable engineering resources and proper tooling and equipment to permit fast turnaround of small lots on a daily basis.

If Asian based production capabilities increase in sophistication, we may lose market share and our gross margins may be adversely affected by increased pricing pressure.

Price competition from printed circuit board manufacturers based in Asia and other locations with lower production costs may play an increasing role in the printed circuit board markets in which we compete. While printed circuit board manufacturers in these locations have historically competed primarily in markets for less technologically advanced products, they are expanding their manufacturing capabilities to produce higher layer count, higher technology printed circuit boards. In the future, competitors in Asia may be able to effectively compete in our higher technology markets, which may force us to lower our prices, reducing our gross margins or decreasing our net sales.

We rely on suppliers for the timely delivery of raw materials used in manufacturing our printed circuit boards, and an increase in industry demand or the presence of a shortage for these raw materials may increase the price of these raw materials and reduce our gross margins.

To manufacture our printed circuit boards, we use raw materials such as laminated layers of fiberglass, copper foil and chemical solutions, which we generally order from our suppliers on a purchase order basis. We use just-in-time procurement practices to maintain raw materials inventory at low levels and do not have guaranteed supply contracts with our suppliers. Although we have preferred suppliers for most of our raw materials, the materials we use are generally readily available in the open market, and numerous other potential suppliers exist. However, from time to time manufacturers of products that also use these raw materials increase their demand for these materials and, as a result, the availability of these materials decreases and the prices of these materials increase. In particular, if printed circuit board manufacturers in Asia continue to increase their production, demand for raw materials and corresponding price increases could result. During these periods of increased demand, our gross margins may decrease as we have to pay more for our raw materials. If a raw material supplier fails to satisfy our product quality standards, it could harm our customer relationships.

Suppliers may from time to time extend lead times, limit supplies or increase prices due to capacity constraints or other factors, which could harm our ability to deliver our products on a timely basis.

Defects in our products could result in financial or other damages to our customers, which could result in reduced demand for our services and liability claims against us.

Defects in the products we manufacture, whether caused by a design, manufacturing or materials failure or error, may result in delayed shipments, customer dissatisfaction, or a reduction in or cancellation of purchase orders. If these defects occur either in large quantities or too frequently, our business reputation may be impaired. Defects in our products could result in financial or other damages to our customers. Our sales arrangements generally contain provisions designed to limit our exposure to product liability and related claims, but existing or future laws or unfavorable judicial decisions could negate these limitation of liability provisions. Product liability claims made against us, even if unsuccessful, would be time consuming and costly to defend. Although we maintain a warranty reserve, this reserve may not be sufficient to cover our warranty or other expenses that could arise as a result of defects in our products.

If we are unable to protect our intellectual property or infringe or are alleged to infringe others’ intellectual property, our operating results may be adversely affected.

We primarily rely on trade secret laws and restrictions on disclosure to protect our intellectual property rights. We cannot be certain that the steps we have taken to protect our intellectual property rights will prevent unauthorized use of our technology. Our inability to protect our intellectual property rights could diminish or eliminate the competitive advantages that we derive from our proprietary technology.

We may become involved in litigation in the future to protect our intellectual property or because others may allege that we infringe on their intellectual property. These claims and any resulting litigation could subject us to significant liability for damages and invalidate our proprietary rights. In addition, these lawsuits, regardless of their merits, would likely be time consuming and expensive to resolve and would divert management’s time and attention. Any potential intellectual property litigation alleging our infringement of a third-party’s intellectual property also could force us or our customers to:


	•	stop producing products that use the intellectual property in question;

	•	obtain an intellectual property license to sell the relevant technology at an additional cost, which license may not be available on reasonable terms, or at all; and

	•	redesign those products or services that use the technology in question.

The costs to us resulting from having to take any of these actions could be substantial and our operating results could be adversely affected.

Complying with applicable environmental laws requires significant resources and if we fail to comply, we could be subject to substantial liability.

Our operations are regulated under a number of federal, state, local and foreign environmental and safety laws and regulations that govern, among other things, the discharge of hazardous materials into the air and water, as well as the handling, storage and disposal of such materials. These laws and regulations include the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act, as well as analogous state and foreign laws. Compliance with these environmental laws is a major consideration for us because we use in our manufacturing process materials classified as hazardous such as ammoniacal etching solutions, copper and nickel. Our efforts to comply with applicable environmental laws require an ongoing and significant commitment of our resources. Over the years, environmental laws have become, and may in the future become, more stringent, imposing greater compliance costs on us. In addition, because we are a generator of hazardous wastes and our sites may become contaminated, we may be subject to potential financial liability for costs associated with an investigation and any remediation of such sites. Even if we fully comply with applicable environmental laws and are not directly at fault for the contamination, we may still be liable. The wastes we generate include spent

ammoniacal etching solutions, solder stripping solutions and hydrochloric acid solution containing palladium, waste water which contains heavy metals, acids, cleaners and conditioners; and filter cake from equipment used for on-site waste treatment.

Violations of environmental laws could subject us to revocation of the environmental permits we require to operate our business. Any such revocations could require us to cease or limit production at one or more of our facilities, thereby negatively impacting revenues and potentially causing the market price of our common stock to decline. Additionally, if we are liable for any violation of environmental laws, we could be required to undertake expensive remedial actions and be subject to additional penalties.

Several of our officers and directors are named defendants in several securities class action complaints and other litigation, which could divert management attention and result in substantial indemnification costs.

Certain of our current and former officers and directors have been named as defendants in a number of class action and related lawsuits. See“Business — Legal Proceedings.” Under Delaware law, our charter documents, and certain indemnification agreements we entered into with our executive officers and directors, we must indemnify our current and former officers and directors to the fullest extent permitted by law. The indemnification covers any expenses and/or liabilities reasonably incurred in connection with the investigation, defense, settlement or appeal of legal proceedings. The obligation to provide indemnification does not apply if the officer or director is found to be liable for fraudulent or criminal conduct. For the period in which the claims were asserted, we had in place director’s and officer’s liability insurance policies. We are unable to estimate what our indemnification liability in these matters may be. If our director’s and officer’s liability insurance policies do not adequately cover our expenses related to those class action lawsuits, we may be required to pay judgments or settlements and incur expenses in aggregate amounts that could have a material adverse effect on our financial condition, cash flows or results of operations. In addition, these lawsuits could divert management attention from our day to day operations, which could have a material adverse effect on our business.

We depend on our key personnel and may have difficulty attracting and retaining skilled employees.

Our future success will depend to a significant degree upon the continued contributions of our key management, marketing, technical, financial, accounting and operational personnel, including Bruce D. McMaster, our President and Chief Executive Officer. None of our key employees has entered into an employment agreement or other similar arrangement, with the exception of a non-solicitation agreement between Bruce D. McMaster and us. The loss of the services of one or more key employees could have a material adverse effect on our results of operations. We also believe that our future success will depend in large part upon our ability to attract and retain additional highly skilled managerial and technical resources. Competition for such personnel is intense. There can be no assurance that we will be successful in attracting and retaining such personnel. In addition, recent and potential future facility shutdowns and workforce reductions may have a negative impact on employee recruiting and retention.

Our manufacturing processes depend on the collective industry experience of our employees. If these employees were to leave and take this knowledge with them, our manufacturing processes may suffer, and we may not be able to compete effectively.

Other than our trade secret protection, we rely on the collective experience of our employees to ensure that we continuously evaluate and adopt new technologies in our industry. If a significant number of employees involved in our manufacturing processes were to leave our employment and we are not able to replace these people with new employees with comparable experience, our manufacturing processes may suffer as we may be unable to keep up with innovations in the industry. As a result, we may not be able to continue to compete effectively.

Sales of large amounts of our common stock or the perception that sales could occur may depress our stock price.

We issued an aggregate of 23,749,926 shares of our common stock upon our emergence from bankruptcy to former holders of our debt and equity securities and other claimants. These shares may be sold at any time, subject to compliance with applicable law, including the Securities Act and certain provisions of our certificate of incorporation, bylaws and registration rights agreements with the holders of such shares.

Sales in the public market of large blocks of shares of our common stock acquired pursuant to our plan of reorganization, or the perception that those sales could occur, could lower our stock price and impair our ability to raise funds in future stock offerings. Such sales could also impair our ability to raise additional capital through the sale of our equity securities in the future.

The trading price of our common stock may continue to be volatile.

The market price of our common stock could be subject to wide fluctuations in response to numerous factors, many of which are beyond our control. These factors include, among other things, actual or anticipated variations in our operating results and cash flow, the nature and content of our earnings releases and our competitors’ earnings releases, announcements of technological innovations that impact our services, customers, competitors or markets, changes in financial estimates by securities analysts, business conditions in our markets and the general state of the securities markets and the market for similar stocks, changes in capital markets that affect the perceived availability of capital to companies in our industries, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general economic and market conditions, such as recessions.

The trading price of our common stock may be affected by the future trading volume.

Our common stock is listed on the Nasdaq National Market. Limited trading volume of our common stock could affect the trading price by magnifying the effect of larger purchase or sale orders and could increase the trading price volatility in general. No prediction can be made as to future trading volumes of our common stock on the Nasdaq National Market.

We may in the future seek to raise funds through equity offerings, or there may be other events which could have a dilutive effect on our common stock.

In the future we may seek to raise capital through offerings of our common stock, securities convertible into our common stock, or rights to acquire such securities or our common stock. In any such case, the result could ultimately be dilutive to our common stock by increasing the number of shares outstanding.

In connection with our plan of reorganization, we issued warrants that were exercisable for 4,035,454 shares of our common stock as of February 6, 2004. The shares issuable upon exercise of the warrants may increase subject to anti-dilutive rights which we granted to the warrant holders. The warrants are held in an escrow account until December 12, 2005 and are subject to reduction or termination. We also granted options to purchase an aggregate of 2,620,434 shares of our common stock and 1,250,000 shares of restricted stock under our 2003 Management Equity Incentive Plan, and an additional 2,919,686 shares of our common stock may be issued to members of management under our 2003 Management Incentive Plan and 2003 Directors Equity Incentive Plan upon the exercise of options not yet granted under the plans or pursuant to restricted stock grants. See“Capitalization” and“Description of Capital Stock.” The maximum number of options that will become exercisable will be less than the number of options granted based on the level of the Company’s repayment of its Senior Credit Facility. If these options or warrants to purchase our common stock are exercised or other equity interests are granted under our 2003 Management Incentive Plan and 2003 Directors Equity Incentive Plan or under other plans adopted in the future, such equity interests will have a dilutive effect on our common stock.


Item 8.	*Financial Statements and Supplementary Data.*

The financial statement information, including the reports of the independent registered public accounting firm (which includes such firm’s attestation report on management’s assessment of internal control over financial reporting and the effectiveness of internal control over financial reporting), required by this Item 8 is set forth on pages F-1 to F-53 of this Amendment No. 1 on Form 10-K/A and is hereby incorporated into this Item 8 by reference. The Quarterly Financial Information required by this Item 8 is set forth in Item 7 of this Amendment No. 1 on Form 10-K/A and is hereby incorporated into this Item 8 by reference.

PART IV


Item 15.	*Exhibits and Financial Statement Schedules.*

(a)(1)Financial Statements

Index to Financial Statements


	Page

Reports of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets as of December 31, 2003 and 2004		F-4
Consolidated Statements of Operations for the Year Ended December 31, 2002, Eleven Months Ended November 30, 2003 (Predecessor DDi Corp.), One Month Ended December 31, 2003 and the Year Ended December 31, 2004 (Reorganized DDi Corp)		F-5
Consolidated Statements of Comprehensive Income (Loss) for the Year Ended December 31, 2002, Eleven Months Ended November 30, 2003 (Predecessor DDi Corp.), One Month Ended December 31, 2003 and Year Ended December 31, 2004 (Reorganized DDi Corp)		F-6
Consolidated Statements of Stockholders’ Equity (Deficit) for the Year Ended December 31, 2002, Eleven Months Ended November 30, 2003 (Predecessor DDi Corp.), One Month Ended December 31, 2003 and Year Ended December 31, 2004 (Reorganized DDi Corp)		F-7
Consolidated Statements of Cash Flows for the Year Ended December 31, 2002, Eleven Months Ended November 30, 2003 (Predecessor DDi Corp.), One Month Ended December 31, 2003 and Year Ended December 31, 2004 (Reorganized DDi Corp)		F-9
Notes to Consolidated Financial Statements		F-12

(a)(2)Financial Statement Schedules.

Schedule II — Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or the notes thereto.

(a)(3)Exhibits.

The exhibits listed below are hereby filed with the Securities and Exchange Commission as part of this Annual Report on Form 10-K. Certain of the following exhibits have been previously filed with the Commission pursuant to the requirements of the Securities Act or the Exchange Act. Such exhibits are identified by the parenthetical references following the listing of each such exhibit and are incorporated herein by reference. We will furnish a copy of any exhibit upon request, but a reasonable fee will be charged to cover our expense in furnishing such exhibit.


Exhibit			Description

	2	.1	Modified First Amended Joint Plan of Reorganization Dated As Of August 30, 2003.(1)

	2	.2	Order Confirming Debtors’ Modified First Amended Joint Plan of Reorganization Dated as of August 30, 2003.(1)

	3	.1	Amended and Restated Certificate of Incorporation of DDi Corp.(1)

	3	.2	Certificate of Designation of DDi Corp.(1)

	3	.3	Certificate of Designation of Series B Preferred Stock of DDi Corp.(2)

	3	.4	Amended and Restated Bylaws of DDi Corp.(3)

Material Contracts Relating to Management Compensation Plans or Arrangements

	10	.1	Dynamic Details Incorporated Senior Management Bonus Program.(19)

	10	.2	Dynamic Details, Inc. Key Employee Retention Plan.(4)


Exhibit			Description

	10	.3	Dynamic Details, Inc. Severance Plan for Key Employees and Summary Plan Description Effective December 19, 2002.(4)

	10	.4	DDi Corp. Amended and Restated Severance Plan for Key Employees Effective December 19, 2004.(5)

	10	.5	2003 Directors Equity Incentive Plan.(6)

	10	.6	Form of Stock Option Agreement (2003 Directors Equity Incentive Plan).(6)

	10	.7	DDi Corp. 2003 Management Incentive Plan.(7)

	10	.8	Form of Restricted Stock Agreement (2003 Management Equity Incentive Plan)(8)

	10	.9	Form of Stock Option Agreement (2003 Management Equity Incentive Plan)(8)

	10	.10	Form of Amendment to Restricted Stock Agreement (with schedule of parties attached).(9)

	10	.11	Severance Agreement and General Release dated November 17, 2004 between DDi Corp. and Joseph P. Gisch.(10)

	10	.12	Employment Letter dated November 1, 2004 between DDi Corp. and Mikel Williams.(5)

	10	.13	Non-Solicitation Agreement dated December 12, 2003 by and between Bruce McMaster and Dynamic Details, Inc.(7)

Other Material Contracts

	10	.14	Indenture dated as of December 12, 2003 with respect to DDi Capital Senior Accreting Notes due 2009.(1)

	10	.15	Senior Discount Warrant Agreement, dated as of December 12, 2003.(1)

	10	.16	Senior Discount Warrant Escrow Agreement, dated as of December 12, 2003.(1)

	10	.17	Registration Rights Agreement, dated as of December 12, 2003, relating to DDi Corp. Secured Lender Warrants.(1)

	10	.18	Registration Rights Agreement, dated as of December 12, 2003, relating to DDi Corp. Senior Discount Warrants.(1)

	10	.19	Registration Rights Agreement, dated as of December 12, 2003, relating to Series A Preferred Stock of DDi Corp.(1)

	10	.20	Registration Rights Agreement, dated as of December 12, 2003, relating to Preferred Stock of DDi Europe.(1)

	10	.21	Amendment and Restatement Deed, dated November 15, 2001, relating to a Facilities Agreement dated 27 May 1999, among(i) DDi Europe Limited, formerly known as MCM Electronics Limited, (ii) the additional borrowers named therein, (iii) the other charging parties named therein and (iv) the Governor and Company of the Bank of Scotland.(11)

	10	.22	Working Capital Letter, dated November 15, 2001, among(i) DDi Europe Limited, (ii) the additional borrowers named therein and (iii) the Governor and Company of the Bank of Scotland.(11)

	10	.23	Composite Guarantee and Debenture, dated November 15, 2001, among(i) DDi Europe Limited and the additional charging companies named herein and (ii) the Governor and Company of the Bank of Scotland.(11)

	10	.24	Real Property Master Lease Agreement dated January 1, 1996 between James I. Swenson and Susan G. Swenson, as Trustees of the Swenson Family Trust, and Details, Inc.(12)

	10	.25	Personal Property Master Lease Agreement dated January 1, 1996 between James I. Swenson and Susan G. Swenson, as Trustees of the Swenson Family Trust, and Details, Inc.(12)

	10	.26	Amendment Number One to Real Property Master Lease Agreement dated January 1, 1997 between James I. Swenson and Susan G. Swenson, as trustees of the Swenson Family Trust and Details, Inc.(13)

	10	.27	Lease dated June 15, 1994, by and between Michael J. Irvin, Trustee of the Davila Living Trust dated March 13, 1989 and Colorado Springs Circuits, Inc., regarding 6031-6035 Galley Road, Colorado Springs, Colorado(14)


Exhibit			Description

	10	.28	Lease dated June 15, 1994, by and between Michael J. Irvin, Trustee of the Davila Living Trust dated March 13, 1989 and Colorado Springs Circuits, Inc., regarding 2115 Victor Place, Colorado Springs, Colorado(14)

	10	.29	Lease dated June 15, 1994, by and between Michael J. Irvin, Trustee of the Davila Living Trust dated March 13, 1989 and Colorado Springs Circuits, Inc., regarding 980 Technology Court, Colorado Springs, Colorado.(14)

	10	.30	Lease Agreement dated July 22, 1991 between Geomax and Dynamic Circuits, Inc.(16)

	10	.31	Lease dated March 20, 1997 by and between Mercury Partners 30, Inc. and Dynamic Circuits, Inc.(15)

	10	.32	Amendment to Lease Agreement, dated as of November 9, 2001 by and between D & D Tarob Properties, LLC and Dynamic Details Incorporated Silicon Valley.(16)

	10	.33	Lease dated November 12, 1997 by and between Miller and Associates and Dynamic Circuits Inc.(13)

	10	.34	Lease dated August 18, 1998, by and between Mrs. Alberta M. Talley, Trustee and Dynamic Circuits, Inc.(15)

	10	.35	Lease Agreement dated April 14, 1998 by and between Continental Electric Contractors and Cuplex, Inc.(9)

	10	.36	Lease Agreement dated as of May 13, 1996, as amended by a First Lease Amendment dated August 7, 1996, between 410 Forest Street Realty Trust and Cuplex, Inc.(15)

	10	.37	Lease Agreement dated as of November 2, 1995, between Trammell Crow International Partners and Cuplex, Inc.(13)

	10	.38	Share Purchase Agreement dated October 24, 2002 by and between H.N. Goff, G.P. Harvey and H.L. Williams and DDi Europe Limited.(4)

	10	.39	Tax Deed dated October 24, 2002 by and between H.N. Goff, G.P. Harvey and H.L. Williams and DDi Europe Limited.(4)

	10	.40	Minority Share Purchase Agreement dated October 24, 2002 by and between Jamie Fuller and others and DDi Europe Limited.(4)

	10	.41	Stock Purchase Agreement dated January 21, 2004 by and among DDi Corp. and the purchasers identified on the schedule of investors attached thereto.(7)

	10	.42	Registration Rights Agreement dated January 21, 2004 by and among DDi Corp. and certain purchasers of DDi Corp.’s capital stock listed on the signature pages thereof.(7)

	10	.42	Purchase Agreement dated as of March 29, 2004, by and between DDi Corp. and each of the purchasers whose names and addresses are set forth on the signature page thereof.(2)

	10	.42	Credit Agreement dated as of March 30, 2004, among Dynamic Details, Incorporated, Dynamic Details, Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley, and Laminate Technology Corp.; the other Credit Parties signatory thereto; General Electric Capital Corporation, for itself, as Lender, and as Agent for Lenders, and the other Lenders signatory thereto from time to time.(2)

	10	.42	Security Agreement, dated as of March 30, 2004, made by Dynamic Details, Incorporated, Dynamic Details Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley, Laminate Technology Corp., Dynamic Details Incorporated, Colorado Springs, DDi Sales Corp., Dynamic Details Texas, LLC, DDi-Texas Intermediate Partners II, L.L.C., DDi-Texas Intermediate Holdings II, L.L.C., and Dynamic Details, L.P., in favor of General Electric Capital Corporation, as agent for the lenders from time to time party to the Credit Agreement.(2)

	10	.42	Guaranty dated as of March 30, 2004, made by DDi Corp., DDi Intermediate Holdings Corp., DDi Capital Corp., Dynamic Details Incorporated, Colorado Springs, DDi Sales Corp., Dynamic Details Texas, LLC, DDi-Texas Intermediate Partners II, L.L.C., DDi-Texas Intermediate Holdings II, L.L.C., Dynamic Details, L.P., in favor of General Electric Capital Corporation, as agent for the lenders from time to time party to the Credit Agreement.(2)


Exhibit			Description

	10	.42	Pledge Agreement dated as of March 30, 2004, made by Dynamic Details, Incorporated, Dynamic Details, Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley, Laminate Technology Corp., DDi Corp., DDi Intermediate Holdings Corp., DDi Capital Corp., Dynamic Details Incorporated, Colorado Springs, DDi Sales Corp., Dynamic Details Texas, LLC, DDi-Texas Intermediate Partners II, L.L.C., DDi-Texas Intermediate Holdings II, L.L.C., Dynamic Details, L.P., in favor of General Electric Capital Corporation, as agent for the lenders from time to time party to the Credit Agreement.(2)

	10	.42	Patent, Trademark and Copyright Security Agreement dated as of March 30, 2004, made by Dynamic Details, Incorporated, Dynamic Details Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley, Laminate Technology Corp., Dynamic Details Incorporated, Colorado Springs, DDi Sales Corp., Dynamic Details Texas, LLC, DDi-Texas Intermediate Partners II, L.L.C., DDi-Texas Intermediate Holdings II, L.L.C., and Dynamic Details, L.P., in favor of General Electric Capital Corporation, as agent for the lenders from time to time party to the Credit Agreement.(2)

	10	.42	Master Agreement for Documentary Letters of Credit, dated as of March 30, 2004.(2)

	10	.42	Master Agreement for Standby Letters of Credit, dated as of March 30, 2004.(2)

	10	.42	First Supplemental Indenture, dated as of February 24, 2004, between DDi Capital Corp. and Wilmington Trust Company, as trustee.(2)

	10	.42	Credit Agreement dated as of June 30, 2004 among Dynamic Details Canada, Corp., and DDi Canada Acquisition Corp., as Borrowers, the Other Credit Parties Signatory Thereto, as Credit Parties, the Lenders Signatory Thereto from Time to Time, as Lenders, and GE Canada Finance Holding Company, as Agent and Lender.(17)

	10	.42	Guaranty, dated as of June 30, 2004, made by DDi Corp., a Delaware corporation, DDi Intermediate Holdings Corp., a California corporation, DDi Capital Corp., a California corporation, Dynamic Details, Incorporated, a California corporation, Dynamic Details Incorporated, Virginia, a Delaware corporation, Dynamic Details Incorporated, Silicon Valley, a Delaware corporation, Laminate Technology Corp., a Delaware corporation, Dynamic Details Incorporated, Colorado Springs, a Colorado corporation, DDi Sales Corp., a Delaware corporation, Dynamic Details Texas, LLC, a Delaware limited liability company, DDi-Texas Intermediate Partners II, L.L.C., a Delaware limited liability company, DDi-Texas Intermediate Holdings II, L.L.C., a Delaware limited liability company, and Dynamic Details, L.P., a Delaware limited partnership, in favor of GE Canada Finance Holding Company, a Nova Scotia unlimited liability company.(17)

	10	.42	Intercreditor Agreement dated as of June 30, 2004, between GE Capital Finance Holding Company, a Nova Scotia unlimited liability company, and General Electric Capital Corporation, a New York corporation.(17)

	10	.42	Master Agreement for Documentary Letters of Credit, dated as of June 30, 2004.(17)

	10	.42	Master Agreement for Standby Letters of Credit, dated as of June 30, 2004.(17)

	10	.42	Security Agreement dated as of June 30, 2004, made by Dynamic Details Canada, Corp., and DDi Canada Acquisition Corp. in favor of GE Canada Finance Holding Company.(17)

	10	.42	Pledge Agreement dated as of June 30, 2004, made by Dynamic Details, Incorporated, DDi Canada Acquisition Corp. in favor of GE Canada Finance Holding Company.(17)

	10	.42	Amendment No. 1 to Credit Agreement dated as of June 30, 2004, by and among Dynamic Details, Incorporated, Dynamic Details, Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley and Laminate Technology Corp., the other Credit Parties signatory thereto; and General Electric Capital Corporation.(17)

	14	.1	Code of Business Conduct and Ethics.(18)

	21	.1	Subsidiaries of DDi Corp.(19)

	23	.1*	Consent of PricewaterhouseCoopers LLP

	31	.1*	Certification of Chief Executive Officer of DDi Corp., Pursuant to Rule 13a-14 of the Securities Exchange Act.


Exhibit			Description

	31	.2*	Certification of Chief Financial Officer of DDi Corp., Pursuant to Rule 13a-14 of the Securities Exchange Act.

	32	.1*	Certification of Chief Executive Officer of DDi Corp., Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32	.2*	Certification of Chief Financial Officer of DDi Corp., Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


	*	Filed herewith.


	(1)	Previously filed with the Commission on December 17, 2003 as an exhibit to DDi Corp.’s Current Report on Form 8-K.

	(2)	Previously filed with the Commission on April 7, 2004 as an exhibit to DDi Corp.’s Current Report on Form 8-K.

	(3)	Previously filed with the Commission on January 20, 2004 as an exhibit to DDi Corp.’s Registration Statement on Form 8-A/ A.

	(4)	Previously filed with the Commission on March 31, 2003 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.

	(5)	Previously filed with the Commission on December 23, 2004 as an exhibit to DDi Corp.’s Current Report on Form 8-K.

	(6)	Previously filed with the Commission on June 14, 2004 as an exhibit to DDi Corp.’s Registration Statement on Form S-8, Registration No. 333-116418.

	(7)	Previously filed with the Commission on February 12, 2004 as an exhibit to DDi Corp.’s Registration Statement on Form S-1, Registration No. 333-112786.

	(8)	Previously filed with the Commission on February 13, 2004 as an exhibit to DDi Corp.’s Registration Statement on Form S-8, Registration No. 333-112853.

	(9)	Previously filed with the Commission on January 12, 2005 as an exhibit to DDi Corp.’s Current Report on Form 8-K.


(10)	Previously filed with the Commission on November 19, 2004 as an exhibit to DDi Corp.’s Current Report on Form 8-K.

(11)	Previously filed with the Commission on March 25, 2002 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.

(12)	Previously filed with the Commission on November 26, 1997 as an exhibit to DDi Capital’s Registration Statement on Form S-4, Registration No. 333-41187.

(13)	Previously filed with the Commission on March 30, 2001 as an exhibit to DDi Corp.’s, DDi Capital’s and Dynamic Details’ combined Annual Report on Form 10-K.

(14)	Previously filed with the Commission on January 20, 1998 as an exhibit to Amendment No. 1 to DDi Capital’s Registration Statement on Form S-4, Registration No. 333-41187.

(15)	Previously filed with the Commission on March 31, 1999 as an exhibit to DDi Capital’s and Dynamic Details’ combined Annual Report on Form 10-K.

(16)	Previously filed with the Commission on March 25, 2002 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.

(17)	Previously filed with the Commission on August 16, 2004 as an exhibit to DDi Corp.’s Quarterly Report on Form 10-Q.

(18)	Previously filed with the Commission on March 30, 2004 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.


(19)	Previously filed with the Commission on March 16, 2005 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, DDi Corp. has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized, in the city of Anaheim, state of California, on the 17th day of August, 2005.


	DDi CORP.


	By:	/s/ MIKEL H. WILLIAMS



	Mikel H. Williams
	Senior Vice President and Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of DDi Corp.:

We have completed an integrated audit of DDi Corp.’s (Successor Company or Reorganized Company) 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and an audit of its consolidated financial statements as of and for the one month ended December 31, 2003 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated Financial Statements and Financial Statement Schedule

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of DDi Corp. and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for the year ended December 31, 2004 and for the one month ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and this financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and this financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 1, 3 and 4 to the consolidated financial statements, the United States Bankruptcy Court for the Southern District of New York confirmed the Company’s Modified First Amended Plan of Reorganization dated as of August 30, 2003 (the “plan”) on December 2, 2003. Confirmation of the plan resulted in the restructuring or exchange of certain debt of the Company and substantially alters rights and interests of equity security holders as provided for in the plan. The plan was substantially consummated on December 2, 2003 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh start accounting as of November 30, 2003.

Internal Control Over Financial Reporting

Also, in our opinion, management’s assessment, included in theReport of Management on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established inInternal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over

F-1

financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


	/s/ PricewaterhouseCoopers LLP

Orange County, California

March 11, 2005

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of DDi Corp.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the results of operations and cash flows of DDi Corp. and its subsidiaries (Predecessor Company) for the period from January 1, 2003 to November 30, 2003 and for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 1, 3 and 4 to the consolidated financial statements, the Company filed a petition on August 20, 2003 with the United States Bankruptcy Court for the Southern District of New York for reorganization under the provisions of Chapter 11 of the Bankruptcy Code. The Company’s Modified First Amended Plan of Reorganization dated as of August 30, 2003 was substantially consummated on December 2, 2003 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh start accounting.


	/s/ PricewaterhouseCoopers LLP

Orange County, California

March 11, 2005

F-3

DDi CORP.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


				Reorganized DDi Corp.
				December 31,

				2003			2004

				(See Note 21)
ASSETS
Current assets:
		Cash and cash equivalents		$	11,202		$	23,526
		Cash and cash equivalents — restricted (see Note 8)			7,500			—
		Accounts receivable, net			23,861			26,564
		Inventories			16,610			17,996
		Prepaid expenses and other			1,357			1,713
		Current assets held for disposal			26,311			33,016

			Total current assets		86,841			102,815
Property, plant and equipment, net					43,666			36,376
Debt issuance costs, net					—			1,780
Goodwill					99,829			99,375
Other intangibles, net					23,376			18,009
Deferred income tax asset					663			541
Assets held for disposal					36,969			26,245
Other					722			810

	Total assets			$	292,066		$	285,951


LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
		Current maturities of long-term debt and capital lease obligations		$	1,186		$	916
		Revolving credit facilities			—			15,948
		Accounts payable			13,371			16,389
		Accrued expenses and other liabilities			18,827			14,527
		Income tax payable			998			1,099
		Note payable			500			—
		Current liabilities held for disposal			34,889			67,853

			Total current liabilities		69,771			116,732
Long-term debt and capital lease obligations					89,338			18,252
Notes payable and other					11,758			8,602
Liabilities held for disposal					27,697			3,725
Series A mandatorily redeemable preferred stock					2,066			—

	Total liabilities				200,630			147,311

Commitments and contingencies (Note 17)
Series B mandatorily redeemable preferred stock					—			61,557
Stockholders’ equity:
	Common stock — $0.001 par value, 75,000,000 shares authorized, 23,749,926 and 25,513,522 shares issued and outstanding at December 31, 2003 and 2004, respectively				24			26
		Additional paid-in capital			138,661			147,739
		Deferred compensation			(32,454	)		(9,445	)
		Accumulated other comprehensive loss			(152	)		(712	)
		Stockholder receivables			(635	)		(652	)
		Accumulated deficit			(14,008	)		(59,873	)

			Total stockholders’ equity		91,436			77,083

				$	292,066		$	285,951

The accompanying notes are an integral part of these consolidated financial statements.

F-4

DDi CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)


				Predecessor DDi Corp.						Reorganized DDi Corp.

							Eleven Months			One Month
				Year Ended			Ended			Ended			Year Ended
				December 31,			November 30,			December 31,			December 31,
				2002			2003			2003			2004

				(See Note 21)			(See Note 21)			(See Note 21)
Net sales				$	185,612		$	144,950		$	14,613		$	189,007
	Cost of Goods Sold:
		Cost of goods sold			171,006			128,232			11,339			151,520
		Restructuring-related inventory impairment			3,397			1,736			—			—
		Non-cash compensation and amortization of intangibles			—			—			6,855			12,556

		Total cost of goods sold			174,403			129,968			18,194			164,076
			Gross profit (loss)		11,209			14,982			(3,581	)		24,931
	Operating expenses:
		Sales and Marketing:
			Sales and marketing		19,695			13,521			1,123			14,531
			Non-cash compensation		—			—			1,021			2,402

			Total sales and marketing		19,695			13,521			2,144			16,933
		General and Administration:
			General and administration		10,535			8,533			535			12,368
			Non-cash compensation		—			—			1,533			4,155
			Officer’s severance		—			—			—			676

			Total general and administration		10,535			8,533			2,068			17,199
		Amortization of intangibles			—			—			383			4,598
		Goodwill impairment			128,700			2,000			—			—
		Restructuring and other related charges			25,268			3,823			439			903
		Reorganization expenses			2,092			7,378			471			829

		Operating loss			(175,081	)		(20,273	)		(9,086	)		(15,531	)
Loss on interest rate swap termination					—			5,621			—			—
Interest expense and other expense, net					19,923			16,316			788			7,637
Reorganization items:
	Gain on extinguishment of debt				—			(120,444	)		—			—
	Fresh start accounting adjustments				—			(115,167	)		—			—
	Reorganization proceeding expenses				—			14,034			1,138			—

		Income (loss) from continuing operations before income taxes			(195,004	)		179,367			(11,012	)		(23,168	)
Income tax benefit (expense)					(16,969	)		(60	)		39			(1,984	)

Income (loss) from continuing operations					(211,973	)		179,307			(10,973	)		(25,152	)
Net loss from discontinued operations, net of tax					(76,120	)		(14,885	)		(3,035	)		(20,713	)

Net income (loss)					(288,093	)		164,422			(14,008	)		(45,865	)
Less: Series B preferred stock dividends and accretion					—			—			—			(4,044	)

Net income (loss) available to common stockholders				$	(288,093	)	$	164,422		$	(14,008	)	$	(49,909	)

Income (loss) per share of common stock from continuing operations — basic				$	(4.40	)	$	3.63		$	(0.46	)	$	(1.15	)
Income (loss) per share of common stock from continuing operations — diluted				$	(4.40	)	$	3.02		$	(0.46	)	$	(1.15	)
Net income (loss) per share of common stock — basic				$	(5.98	)	$	3.33		$	(0.59	)	$	(1.97	)
Net income (loss) per share of common stock — diluted				$	(5.98	)	$	2.78		$	(0.59	)	$	(1.97	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

DDi CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)


		Predecessor DDi Corp.						Reorganized DDi Corp.

					Eleven Months			One Month
		Year Ended			Ended			Ended			Year Ended
		December 31,			November 30,			December 31,			December 31,
		2002			2003			2003			2004

		(See Note 21)			(See Note 21)			(See Note 21)
Net income (loss)		$	(288,093	)	$	164,422		$	(14,008	)	$	(45,865	)
Other comprehensive income (loss):
	Foreign currency translation adjustments		7,257			783			(152	)		(560	)
	Unrealized loss on interest rate swap agreements, net of income tax effect		(6,115	)		(165	)		—			—
	Reclassification adjustment for loss on interest rate swap termination		—			5,621			—			—
	Unrealized holding loss on marketable securities — available for sale		(46	)		(4	)		—			—
	Effect of fresh start accounting adjustments		—			(3,020	)		—			—

Comprehensive income (loss)		$	(286,997	)	$	167,637		$	(14,160	)	$	(46,425	)

The accompanying notes are an integral part of these consolidated financial statements.

F-6

DDi CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)


		Common Stock						Additional											Other
								Paid-In			Deferred		Stockholder			Accumulated			Comprehensive
		Shares			Amount			Capital			Compensation		Receivables			Deficit			Loss			Total

								(In thousands, except share amounts)
Balance, December 31, 2001 (Predecessor DDi Corp.)			47,950,886		$	480		$	541,215		$	—	$	(712	)	$	(414,200	)	$	(4,311	)	$	122,472
	Issuance of common stock upon exercise of stock options		206,222			2			149			—		—			—			—			151
	Issuance of common stock through Employee Stock Purchase Plan		975,907			9			329			—		—			—			—			338
	Foreign currency translation adjustment		—			—			—			—		—			—			7,257			7,257
	Accrued interest on stockholder receivables		—			—			—			—		(16	)		—			—			(16	)
	Repayment of stockholder receivables		—			—			—			—		110			—			—			110
	Unrealized loss on interest rate swap agreements, net of income tax effect		—			—			—			—		—			—			(6,115	)		(6,115	)
	Unrealized holding loss on marketable securities		—			—			—			—		—			—			(46	)		(46	)
	Compensation charge for stock option modification		—			—			82			—		—			—			—			82
	Net loss		—			—			—			—		—			(288,093	)		—			(288,093	)

Balance, December 31, 2002 (Predecessor DDi Corp.)			49,133,015			491			541,775			—		(618	)		(702,293	)		(3,215	)		(163,860	)
	Issuance of common stock upon exercise of stock options		79,465			1			3			—		—			—			—			4
	Issuance of common stock through Employee Stock Purchase Plan		313,656			3			15			—		—			—			—			18
	Foreign currency translation adjustment		—			—			—			—		—			—			783			783
	Accrued interest on stockholder receivables		—			—			—			—		(15	)		—			—			(15	)
	Unrealized loss on interest rate swap agreements, net of income tax		—			—			—			—		—			—			(165	)		(165	)
	Reclassification adjustment for loss on interest rate swap termination		—			—			—			—		—			—			5,621			5,621
	Unrealized holding loss on marketable securities		—			—			—			—		—			—			(4	)		(4	)
	Net income		—			—			—			—		—			164,422			—			164,422
	Cancellation of common stock		(49,526,136	)		(495	)		495			—		—			—			—			—
	Issuance of new common stock		249,926			1			—			—		—			—			—			1
	Debt discharge		23,500,000			23			88,172			—		—			—			—			88,195
	Fresh start accounting adjustments		—			—			(534,851	)		—		—			537,871			(3,020	)		—

F-7

DDi CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) — (Continued)


		Common Stock				Additional												Other
						Paid-In			Deferred			Stockholder			Accumulated			Comprehensive
		Shares		Amount		Capital			Compensation			Receivables			Deficit			Loss			Total

						(In thousands, except share amounts)
Balance, November 30, 2003 (Predecessor DDi Corp.)			23,749,926		24		95,609			—			(633	)		—			—			95,000


Balance, December 1, 2003 (Reorganized DDi Corp.)			23,749,926		24		95,609			—			(633	)		—			—			95,000
	Deferred compensation		—		—		43,052			(43,052	)		—			—			—			—
	Amortization of deferred compensation included in continuing operations		—		—		—			8,255			—			—			—			8,255
	Amortization of deferred compensation included in discontinued operations		—		—		—			2,343			—			—			—			2,343
	Foreign currency translation adjustment		—		—		—			—			—			—			(152	)		(152	)
	Accrued interest on stockholder receivables		—		—		—			—			(2	)		—			—			(2	)
	Net loss		—		—		—			—			—			(14,008	)		—			(14,008	)

Balance, December 31, 2003 (Reorganized DDi Corp.)			23,749,926		24		138,661			(32,454	)		(635	)		(14,008	)		(152	)		91,436
	Deferred compensation adjustments		—		—		(2,027	)		2,027			—			—			—			—
	Amortization of deferred compensation included in continuing operations		—		—		—			18,345			—			—			—			18,345
	Amortization of deferred compensation included in discontinued operations		—		—		—			2,637			—			—			—			2,637
	Issuance of new common stock in private placement, net of offering costs		1,000,000		2		14,765			—			—			—			—			14,767
	Issuance of common stock upon exercise of stock options		94,846		—		383			—			—			—			—			383
	Issuance of restricted common stock		668,750		—		1			—			—			—			—			1
	Foreign currency translation adjustment		—		—		—			—			—			—			(560	)		(560	)
	Accrued interest on shareholder receivables		—		—		—			—			(17	)		—			—			(17	)
	Dividends payable on Series B preferred stock		—		—		(2,765	)		—			—			—			—			(2,765	)
	Accretion on Series B Preferred Stock		—		—		(1,279	)		—			—			—	��		—			(1,279	)
	Net loss															(45,865	)		—			(45,865	)

Balance, December 31, 2004 (Reorganized DDi Corp.)			25,513,522	$	26	$	147,739		$	(9,445	)	$	(652	)	$	(59,873	)	$	(712	)	$	77,083

The accompanying notes are an integral part of these consolidated financial statements.

F-8

DDi CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


				Predecessor DDi Corp.						Reorganized DDi Corp.

							Eleven Months			One Month
				Year Ended			Ended			Ended			Year Ended
				December 31,			November 30,			December 31,			December 31,
				2002			2003			2003			2004

				(See Note 21)			(See Note 21)			(See Note 21)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Income (loss) from continuing operations			$	(211,973	)	$	179,307		$	(10,973	)	$	(25,152	)
	Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities:
		Non-cash and accrued restructuring and other related charges			26,114			6,899			570			757
		Accrued reorganization proceeding charges			—			3,170			40			—
		Restructuring related inventory impairment			3,347			1,736			—			—
		Depreciation			16,147			12,399			923			9,856
		Provision for doubtful accounts			690			413			2			426
		Amortization of debt issuance costs and discount			4,650			2,439			47			1,496
		Capital senior note accretion			—			—			157			581
		Amortization of intangible assets			—			—			1,537			5,367
		Goodwill impairment			128,700			2,000			—
		Amortization of deferred interest rate swap (income) loss			(5,946	)		5,054			—			—
		Write-off of debt issuance costs			2,014			6,162			—
		Deferred income taxes			31,096			—			—			(24	)
		Interest income on stockholder receivables			(16	)		(15	)		(2	)		(17	)
		Loss (gain) on sale of fixed assets			(57	)		65			(48	)		164
		Gain on extinguishment of debt			—			(120,444	)		—
		Fresh start accounting adjustments			—			(115,167	)		—
		Non cash compensation			—			—			8,255			18,345
	Change in operating assets and liabilities, net of acquisitions:
		(Increase) decrease in accounts receivable			1,706			1,274			2,795			(2,832	)
		Increase in inventories			(8,467	)		(1,879	)		(1,230	)		(1,195	)
		(Increase) decrease in prepaid expenses and other			(24	)		2,030			208			(427	)
		Increase in current income taxes			9,040			1,926			145			281
		Increase (decrease) in accounts payable			(424	)		(4,811	)		3,883			2,337
		Increase (decrease) in accrued expenses and other accrued liabilities			(4,237	)		5,248			(751	)		(6,327	)

	Net cash provided by (used in) continuing operations				(7,640	)		(12,194	)		5,558			3,636
	Net cash provided by (used in) discontinued operations				(3,228	)		(6,970	)		1,091			(4,700	)

			Net cash provided by (used in) operating activities		(10,868	)		(19,164	)		6,649			(1,064	)

(continued on next page)

F-9

DDi CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)


			Predecessor DDi Corp.						Reorganized DDi Corp.

			Year Ended			Eleven Months			One Month
			December 31,			Ended			Ended			Year Ended
						November 30,			December 31,			December 31,
			2002			2003			2003			2004

			(See Note 21)			(See Note 21)			(See Note 21)
			(In thousands)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of equipment and leasehold improvements			(7,997	)		(3,897	)		(132	)		(4,378	)
	Proceeds from sale of fixed assets			199			70			800			1,510
	Purchase of marketable securities — available for sale			(18,912	)		(64	)		—			—
	Proceeds from sale of marketable securities — available for sale			40,725			175			—			—
	Proceeds from (investment in) restricted assets			(12,500	)		1,892			—			7,500
	Merger and acquisition related expenditures			(516	)		(750	)		—			(475	)
	Net cash used in investing activities from discontinued operations			(6,225	)		(1,418	)		(278	)		(3,354	)

		Net cash provided by (used in) investing activities		(5,226	)		(3,992	)		390			803

(continued on next page)

F-10

DDi CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)


			Predecessor DDi Corp.						Reorganized DDi Corp.

			Year Ended			Eleven Months			One Month
			December 31,			Ended			Ended			Year Ended
						November 30,			December 31,			December 31,
			2002			2003			2003			2004

			(See Note 21)			(See Note 21)			(See Note 21)
			(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from issuance of long-term debt			100,000			—			—			—
	Payments on long-term debt			(67,274	)		(2,621	)		—			(71,695	)
	Net borrowings (payments) on revolving credit facilities			—			—			—			15,948
	Payments of debt issuance costs			(5,471	)		(1,715	)		—			(2,350	)
	Payments of other notes payable			(461	)		—			—			(500	)
	Principal payments on capital lease obligations			(1,604	)		(1,879	)		(83	)		(1,330	)
	Payment of pro-rata portion of deferred swap liability			(3,761	)		—			—			—
	Repayment of stockholder receivables			110			—			—			—
	Proceeds from issuance of Series B preferred stock			—			—			—			61,000
	Costs incurred in connection with the issuance of Series B preferred stock			—			—			—			(3,488	)
	Proceeds from issuance of common stock			—			—			—			15,980
	Costs incurred in connection with the issuance of common stock			—			—			—			(1,213	)
	Issuance of common stock through Employee Stock Purchase Plan			338			18			—			—
	Proceeds from exercise of stock options			151			4			—			383
	Net cash provided by (used in) financing activities from discontinued operations			(662	)		5,737			(726	)		308

		Net cash provided by (used in) financing activities		21,366			(456	)		(809	)		13,043

	Effect of exchange rate changes on cash			33			(282	)		(68	)		(458	)

		Net increase (decrease) in cash and cash equivalents		5,305			(23,894	)		6,162			12,324
Cash and cash equivalents, beginning of period				23,629			28,934			5,040			11,202

Cash and cash equivalents, end of period			$	28,934		$	5,040		$	11,202		$	23,526

The accompanying notes are an integral part of these consolidated financial statements.

F-11

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Basis of Presentation

The consolidated financial statements for DDi Corp. (“DDi Corp.”) include the accounts of its wholly-owned subsidiaries, DDi Intermediate Holdings Corp. (“Intermediate”) and its subsidiaries, DDi Europe Limited (“DDi Europe” f/k/a MCM Electronics Limited (“MCM”)), DDi Capital Corp. (“DDi Capital”), a wholly-owned subsidiary of Intermediate, which includes the accounts of its wholly-owned subsidiary Dynamic Details, Incorporated and its subsidiaries (“Dynamic Details”). Collectively, DDi Corp. and its subsidiaries are referred to as the “Company.”

All intercompany transactions have been eliminated in consolidation.

In October 1997, the Company completed a recapitalization transaction with a group of investors. The historical bases of the Company’s assets and liabilities were not affected. In connection with the recapitalization, DDi Corp. incorporated Dynamic Details as a wholly-owned subsidiary and contributed substantially all of its assets, subject to certain liabilities, to Dynamic Details. In November 1997, DDi Corp. organized DDi Capital as a wholly-owned subsidiary, and in February 1998, contributed substantially all its assets (including all of the shares of common stock of Dynamic Details), subject to certain liabilities, including discount notes (as described in Note 8, the “Capital Senior Discount Notes”), to DDi Capital. In July 1998, DDi Corp. organized Intermediate as a wholly-owned subsidiary and contributed all of the shares of common stock of DDi Capital to Intermediate. In April 2000, DDi Corp. acquired MCM, and subsequently combined MCM with its other European operations to form DDi Europe. The Company filed a petition on August 20, 2003 with the United States Bankruptcy Court for reorganization under the provisions of Chapter 11. The Company’s Plan of Reorganization dated as of August 30, 2003 was substantially consummated on December 2, 2003 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh start accounting.

The Company announced the discontinuation of its European business and the placement into administration of DDi Europe on February 9, 2005 (see Note 21). Accordingly, DDi Europe is presented in the consolidated financial statements as a discontinued operation. As a discontinued operation, revenues, expenses and cash flows of DDi Europe have been excluded from the respective captions in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows. The assets and liabilities of DDi Europe have been shown as current and non-current assets held for disposal and current and non-current liabilities held for disposal, respectively, in the Consolidated Balance Sheets. Dynamic Details represents the operating division of DDi Corp.

The Company has historically experienced negative cash flows from operations. The Company had net cash used in continuing operations of $7.6 million and $12.2 million for the year ended December 31, 2002, the eleven months ended November 30, 2003, respectively. The Company’s principal source of liquidity to fund ongoing operations has been cash, cash equivalents, cash provided from continuing operations for the one month ended December 31, 2003 and the year ended December 31, 2004 and debt and/or equity offerings. The Company’s management believes the Company has sufficient cash and availability under its asset based revolving credit facility to meet its operating, capital and debt service requirements for the next twelve months. There can be no assurance, however, that the Company will be successful in executing its business plan, achieving profitability, or in attracting new customers, or in maintaining its existing customer base. Accordingly, the Company has and may make offerings of debt, preferred stock and common stock which will improve the Company’s liquidity position.

Fresh Start Accounting

In connection with DDi Corp.’s emergence from bankruptcy (see Note 3), the Company adopted “fresh-start” accounting principles prescribed by the American Institute of Certified Public Accountants’ Statement

F-12

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” effective November 30, 2003. Under fresh start accounting, a new reporting entity, known as “Reorganized DDi Corp.” or the “Successor Company”, is deemed to be created, and the recorded amounts of assets and liabilities are adjusted to reflect their fair value. Accordingly, the balance sheets, operating results and cash flows of the Successor Company and the Predecessor Company have been separately disclosed. For the purposes of these financial statements, references to the “Predecessor Company” are references to the Company for periods prior to December 1, 2003 and references to the “Successor Company” are references to the Company for periods subsequent to November 30, 2003. The Successor Company’s financial statements are not comparable to the Predecessor Company’s financial statements. Although December 2, 2003, was the date the bankruptcy court approved the Company’s plan of reorganization and December 12, 2003, was the effective date of the plan of reorganization (and the date of the Company’s emergence from bankruptcy), for financial reporting convenience purposes, the Company accounted for the consummation of the plan of reorganization as of November 30, 2003. The impact of this was not material to these financial statements. There were no material unsatisfied conditions as of December 2, 2003.

Nature of Business

The Company is a leading provider of time-critical, technologically advanced, electronics manufacturing services. Headquartered in Anaheim, California, the Company offers fabrication and assembly services from its facilities located across North America to customers on a global basis.


2.	SIGNIFICANT ACCOUNTING POLICIES

The preparation of the Company’s consolidated financial statements, in accordance with accounting principles generally accepted in the United States of America, requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for each period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Cash and cash equivalents — Management defines cash and cash equivalents as highly liquid deposits with maturities of 90 days or less when purchased. The Company maintains cash and cash equivalents balances at certain financial institutions in excess of amounts insured by federal agencies. Management does not believe that as a result of this concentration it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships.

Cash and cash equivalents — restricted — The Company had classified a portion of its cash and cash equivalents as restricted at December 31, 2003 pursuant to a minimum liquidity covenant related to the Senior Credit Facility and such cash balance became unrestricted at March 31, 2004 (see Note 8).

Receivables and Allowances for Doubtful Accounts — Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is management’s best estimate of the amount of probable credit losses in existing accounts receivable. Management determines the allowance based on historical write-off experience and specific account review. Management reviews the allowance for doubtful accounts at least quarterly. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged off against the allowance when we feel it is probable the receivable will not be recovered. The Company does not have any off-balance-sheet credit exposure related to our customers.

F-13

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Inventories — Inventories include freight-in, materials, labor and manufacturing overhead costs and are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

Property, plant and equipment — Property, plant and equipment are stated at depreciated historical cost for Predecessor DDi Corp. and have been adjusted for recognition of fair values for Reorganized DDi Corp. Such fair values were recognized in accordance with fresh start accounting and were recorded on November 30, 2003 based upon a valuation analysis performed by management. Depreciation is provided over the estimated useful lives of the assets using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. For leasehold improvements, amortization is provided over the shorter of the estimated useful lives of the assets or the lease term and is included in the caption depreciation expense.

Debt issuance costs and debt discounts — The Company defers certain debt issuance costs relating to the establishment of its various debt facilities and the issuance of its debt instruments (see Note 8). These costs are capitalized and amortized over the expected term of the related indebtedness using the effective interest method.

The Company issued the Capital Senior Discount Notes, Senior Credit Facility and Capital Senior Accreting Notes (as defined in Note 8) at a discount. Discounts are reflected in the accompanying balance sheets as a reduction of face value and are amortized over the expected term of the related indebtedness using the effective interest method.

Amortization of debt issuance costs and discount included as interest expense amounted to approximately $4.7 million for the year ended December 31, 2002. For the eleven months ended November 30, 2003, approximately $2.4 million of amortization was included as interest expense and for the one month ended December 31, 2003, approximately $0.05 million of amortization was included as interest expense. Amortization included as interest expense was $1.5 million for the year ended December 31, 2004.

Business combinations — The Company accounts for all business combinations in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 141 “Business Combinations”. The results of operations since the date of acquisition are included in the consolidated financial statements.

Revenue recognition — The Company recognizes revenue when there is persuasive evidence of an arrangement with the customer which states a fixed and determinable sales price and terms, delivery of the product has occurred in accordance with the terms of the sale, collectibility of the sale is reasonably assured, returns are reasonably estimable and there are no remaining obligations.

Product warranty — The Company records warranty expense at the time revenue is recognized and maintains a warranty accrual for the estimated future warranty obligation based upon the relationship between historical sales volumes and anticipated costs. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims and the estimated cost of repair. The Company assesses the adequacy of the warranty accrual each quarter.

F-14

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The changes in the Company’s warranty reserves for the year ended December 31, 2002, the eleven months ended November 30, 2003, the one month ended December 31, 2003 and the year ended December 31, 2004 is as follows:


	Predecessor						Reorganized
	DDi Corp.						DDi Corp.

	Year			Eleven Months			One Month			Year
	Ended			Ended			Ended			Ended
	December 31, 2002			November 30, 2003			December 31, 2003			December 31, 2004

Beginning balance	$	596		$	659		$	547		$	522
Current year warranty charges		65			38			—			134
Net utilization		(2	)		(150	)		(25	)		—

Ending Balance	$	659		$	547		$	522		$	656

Shipping costs — Shipping costs billed to customers are included in revenue with related costs in cost of goods sold in accordance with Emerging Issues Task Force (“EITF”) 00-10 “Accounting for Shipping and Handling Fees and Costs.”

Comprehensive income — SFAS No. 130 “Reporting Comprehensive Income” establishes requirements for reporting and disclosure of comprehensive income (loss) and its components. Comprehensive income (loss) for DDi Corp. consists primarily of net income (loss) plus the effect of foreign currency translation adjustments and net losses on interest rate swaps.

Concentration of credit risk — Financial instruments which potentially expose the Company to concentration of credit risk consist principally of trade accounts receivable. To minimize this risk, the Company performs ongoing credit evaluations of customers’ financial condition and maintains contacts with its customers which allows the Company to monitor current changes in business operations so it can respond as needed; the Company, however, generally does not require collateral. In 2004, 2003 and 2002, no individual customer accounted for 10% or more of the Company’s net sales and no individual customer accounted for 10% or more of the Company’s total receivables at the respective year end.

Environmental matters — The Company expenses environmental expenditures related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. Expenditures which extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. The Company determines its liability on a site-by-site basis and records a liability at the time when it is probable and can be reasonably estimated. To date, such costs have not been material (see Note 17).

Income taxes — The Company records on its balance sheet deferred tax assets and liabilities for expected future tax consequences of events that have been recognized in different periods for financial statement purposes versus tax return purposes. Management provides a valuation allowance for net deferred tax assets when it is more likely than not that a portion of such net deferred tax assets will not be recovered through future operations (see Note 16).

Long-lived assets — The Company evaluates long-lived assets that are to be disposed by sale and measures them at the lower of book value or fair value less cost to sell and evaluates all other long-lived assets with finite lives periodically for impairment. The Company evaluates potential impairment by comparing the carrying amount of the assets with the estimated associated undiscounted cash flows. If an impairment exists, the Company measures the impairment utilizing discounted cash flows.

Goodwill and identifiable intangibles — The Company follows SFAS No. 142, “Goodwill and Other Intangible Assets” and prospectively ceased amortization of goodwill and other intangible assets with indefinite lives. SFAS No. 142 requires goodwill and intangible assets that are not amortized be tested for

F-15

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

impairment at least annually (see Note 25). SFAS No. 142 also requires goodwill to be assigned to and tested for impairment at the reporting unit level. The Company determined its reporting units based on their economic characteristics in accordance with SFAS 142.

As part of fresh start accounting, an allocation of the reorganization value resulted in goodwill of $99.8 million (exclusive of discontinued operations) and identified intangible assets with finite lives totaling $24.9 million. This latter balance consists of $23.0 million relating to customer relationships and $1.9 million relating to backlog. The amortization expense relating to backlog is reported as a component of cost of goods sold. Amortization related to customer relationships and backlog for the one month ended December 31, 2003, was $0.4 million and $1.1 million, respectively. Amortization related to customer relationships and backlog for the year ended December 31, 2004 was $4.6 million and $0.8 million respectively. The backlog is amortized over three months. The useful life of the customer relationships is five years. Estimated amortization expense for the five succeeding fiscal years is as follows (in thousands):


	Reorganized
Year Ending December 31,	DDi Corp.

2005	$	4,598
2006		4,598
2007		4,598
2008		4,215
2009		—

Deferred lease liability — This represents the excess of actual lease payments due under operating leases over market value of such leases (at net present value) which will be amortized as a reduction of rent expense over the remaining term of the leases. The Company recognized a deferred lease liability of $8.1 million through fresh-start accounting, of which $2.1 million and $1.9 million is a current deferred liability at December 31, 2003 and 2004, respectively. Amortization for the one month ended December 31, 2003 and the year ended December 31, 2004 was $0.2 million and $2.1 million, respectively.

Foreign currency translation — The Company has designated local currency as the functional currency for its foreign subsidiaries. Accordingly, the assets and liabilities of foreign subsidiaries are translated at the rates of exchange at the balance sheet date. The income and expense items of these subsidiaries are translated at average monthly rates of exchange. The resulting translation gains and losses are included as a component of stockholders’ equity on the consolidated balance sheet. The impact of these translation gains and losses on comprehensive income (loss) are included on the consolidated statements of comprehensive income (loss).

Derivative financial instruments — The Company has only limited involvement with derivative financial instruments. From October 1998 through April 2003 the Company utilized interest rate exchange agreements (“Swap Agreements”) (see Note 12) to reduce the risk of fluctuations in interest rates applicable to its Senior Term Facility (see Note 8).

See Note 12 for a discussion of the termination of the interest rate swap agreement in 2003.

Stock options — The Company has adopted the disclosure only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” which establishes a fair value based method of accounting for compensation cost related to stock option plans and other forms of stock-based compensation plans. The Company has elected to provide the pro forma disclosures as if the fair value based method had been applied. In accordance with SFAS No. 123, the Company applies the intrinsic value based method of accounting defined under APB Opinion No. 25 and, accordingly, does not recognize compensation expense for its plans to the extent employee options are issued at exercise prices equal to or greater than the fair market value and the number of options is known at the date of grant. On December 31, 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS No. 148 amends

F-16

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SFAS No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for all fiscal years and interim periods ending after December 15, 2002. Because the Company did not elect to voluntarily adopt the SFAS 123 fair value method of accounting for stock-based employee compensation, the transition alternatives of SFAS 148 did not have an impact on its consolidated financial position or results of operations.

Had non-cash compensation expenses for all stock-based compensation plans been determined consistent with SFAS No. 123, DDi Corp.’s net income (loss) allocable to common stock and net income (loss) per share allocable to common stock would have been the following (amounts in millions, except per share data):


		Predecessor DDi Corp.						Reorganized DDi Corp.

					Eleven Months			One Month
		Year Ended			Ended			Ended			Year Ended
		December 31,			November 30,			December 31,			December 31,
		2002			2003			2003			2004

Net income (loss) available to holders of common stock:
	As reported basic	$	(288.1	)	$	164.4		$	(14.0	)	$	(49.9	)
	Less: non-cash compensation expenses under FAS 123, net of tax		(6.2	)		(7.4	)		(10.4	)		(23.8	)
	Add: non-cash compensation expenses under APB 25, net of tax		—			—			10.0			21.0

	Pro forma basic	$	(294.3	)	$	157.0		$	(14.4	)	$	(52.7	)

	As reported diluted	$	(288.1	)	$	171.7		$	(14.0	)	$	(49.9	)
	Less: non-cash compensation expenses under FAS 123, net of tax		(6.2	)		(7.4	)		(10.4	)		(23.8	)
	Add: non-cash compensation expenses under APB 25, net of tax		—			—			10.0			21.0

	Pro forma diluted	$	(294.3	)	$	164.3		$	(14.4	)	$	(52.7	)

Net income (loss) per share available to holders of common stock — basic:
	As reported	$	(5.98	)	$	3.33		$	(0.59	)	$	(1.97	)
	Pro forma	$	(6.11	)	$	3.18		$	(0.61	)	$	(2.08	)
Net income (loss) per share available to holders of common stock — diluted:
	As reported	$	(5.98	)	$	2.78		$	(0.59	)	$	(1.97	)
	Pro forma	$	(6.11	)	$	2.66		$	(0.61	)	$	(2.08	)

In addition, the Company complies with the provisions of FIN No. 28,Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans(“FIN 28”), which requires use of the variable accounting method with respect to certain stock options where the ability to exercise those stock options are based on contingencies. Stock-based non-cash compensation expense with respect to such options has been and in the future will be based on the amount by which the common stock closing price at the end of each quarterly reporting period, or at the date of exercise, if earlier, exceeds the exercise price. Depending upon the movements in the market value of the Company’s common stock, the variable accounting treatment of certain

F-17

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

stock options may result in significant additional stock-based non-cash compensation expense in future periods.

Basic and diluted earnings per share — The Company has adopted the provisions of SFAS No. 128 “Earnings Per Share,” which requires the Company to report both basic net income (loss) per share, which is based on the weighted average number of common shares outstanding, and diluted net income (loss) per share, which is based on the weighted average number of common shares outstanding and dilutive potential common shares outstanding.

In connection with the plan of reorganization, Predecessor DDi Corp.’s 49,526,136 shares of pre-bankruptcy common stock were converted to 249,926 shares of the Reorganized DDi Corp.’s common stock at a conversion rate of 198.1473 to 1.

The following is a reconciliation of the numerator and denominator used in the primary and diluted income (loss) per share calculation (in thousands, except share data):


		Predecessor DDi Corp.					Reorganized DDi Corp.

					Eleven Months		One Month
		Year Ended			Ended		Ended			Year Ended
		December 31,			November 30,		December 31,			December 31,
		2002			2003		2003			2004

Numerator:
Net income (loss) available to holders of common stock (basic)		$	(288,093	)	$	164,422	$	(14,008	)	$	(49,909	)
Add: income impact of assumed conversions of convertible debt			—			7,327		—			—

Net income (loss) available to holders of common stock (diluted)		$	(288,093	)	$	171,749	$	(14,008	)	$	(49,909	)

Denominator:
Weighted average shares of common stock outstanding (basic)			48,175,353			49,357,100		23,749,926			25,287,763
Dilutive potential common shares:
	Convertible debt, stock options and warrants		—			12,434,571		—			—

Shares used in computing diluted income (loss) per share			48,175,353			61,791,671		23,749,926			25,287,763

F-18

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table is a calculation of net income per share of common stock from continuing operations and discontinued operations (in thousands, except share data):


	Predecessor DDi Corp.						Reorganized DDi Corp.

				Eleven Months			One Month
	Year Ended			Ended			Ended			Year Ended
	December 31,			November 30,			December 31,			December 31,
	2002			2003			2003			2004

Income (loss) from continuing operations	$	(211,973	)	$	179,307		$	(10,973	)	$	(25,152	)
Less: Series B preferred stock dividends and accretion		—			—			—			(4,044	)

Income (loss) from continuing operations available to common stockholders (basic)		(211,973	)		179,307			(10,973	)		(29,196	)
Add: income impact of assumed conversions of convertible debt		—			7,327			—			—

Income (loss) from continuing operations allocable to common stock (diluted)	$	(211,973	)	$	186,634		$	(10,973	)	$	(29,196	)

Net loss from discontinued operations, net of tax (basic and diluted)	$	(76,120	)	$	(14,885	)	$	(3,035	)	$	(20,713	)

Weighted average shares of common stock outstanding (basic)		48,175,353			49,357,100			23,749,926			25,287,763

Weighted average shares of common stock outstanding (diluted)		48,175,353			61,791,671			23,749,926			25,287,763

Income (loss) per share of common stock from continuing operations — basic	$	(4.40	)	$	3.63		$	(0.46	)	$	(1.15	)

Income (loss) per share of common stock from continuing operations — diluted	$	(4.40	)	$	3.02		$	(0.46	)	$	(1.15	)

Net income (loss) per share of common stock from discontinued operations — basic	$	(1.58	)	$	(0.30	)	$	(0.13	)	$	(0.82	)

Net income (loss) per share of common stock from discontinued operations — diluted	$	(1.58	)	$	(0.24	)	$	(0.13	)	$	(0.82	)

As a result of the net losses incurred during the year ended December 31, 2002, the one month ended December 31, 2003 and the year ended December 31, 2004, potential common shares of 14,394,011, 3,029,561 and 12,025,645, respectively, were anti-dilutive and excluded from the diluted net loss per share calculation for those periods. Potential common shares of 2,259,939 were anti-dilutive and excluded from the diluted net income per share calculation for the eleven months ended November 30, 2003.

Segment reporting — SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” established standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products and services, geographic areas and major customers. Operating segments are defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose separate financial information is available and is evaluated regularly by the Company’s chief operating decision makers, or decision making group, to perform resource allocations and performance assessments.

F-19

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s chief operating decision maker is the Chief Executive Officer. Based on the evaluation of the Company’s financial information, management believes that the Company operates in one reportable segment which develops, manufactures, assembles and tests complex printed circuit boards, backpanels and related electronic products. The Company operates in one geographical area, North America. Revenues are attributed to the country in which the customer buying the product is located. Revenues by product and service are not reported as it is impracticable to do so.

The following summarizes financial information by geographic area (in thousands):


			Predecessor DDi Corp.				Reorganized DDi Corp.

					Eleven Months		One Month
			Year Ended		Ended		Ended		Year Ended
			December 31,		November 30,		December 31,		December 31,
			2002		2003		2003		2004

Net sales:
	North America(1)		$	182,827	$	135,882	$	13,608	$	180,817
	Asia			2,423		5,264		624		5,826
	Other			362		3,804		381		2,364

		Total	$	185,612	$	144,950	$	14,613	$	189,007


(1)	Sales to the United States represent the majority of sales to North America.

Reclassifications — Certain prior year amounts have been reclassified to conform with the 2004 presentation. See Note 21 regarding Discontinued Operations.

Recently issued accounting standards — In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This statement specifies that instruments within its scope embody obligations of the issuer and that, therefore, the issuer must classify them as liabilities. Financial instruments within the scope of the pronouncement include mandatorily redeemable financial instruments, obligations to repurchase the issuer’s equity shares by transferring assets and certain obligations to issue a variable number of shares. SFAS No. 150 was effective immediately for all financial instruments entered into or modified after May 31, 2003. For all other instruments, SFAS No. 150 originally was effective July 1, 2003 for the Company. In October 2003, the FASB voted to defer certain provisions of SFAS No. 150 indefinitely. In connection with fresh start accounting, on November 30, 2003, the Company recorded a liability in accordance with SFAS No. 150 related to mandatorily redeemable Series A preferred stock at its estimated fair value of $2 million (see Note 9). For those provisions of SFAS No. 150 deferred by the FASB, the Company does not expect there will be a material impact on its financial position or results of operations upon adoption.

In January 2003, the FASB issued and in December 2003, revised, FASB Interpretation No. 46 “Consolidation of Variable Interest Entities — an interpretation of ARB No. 51.” This interpretation addressed consolidation by business enterprises of variable interest entities, which have certain characteristics. The effective date of this interpretation varies based on certain criteria. The Company is required to apply this interpretation no later than the end of the first reporting period that ends after March 15, 2004. The adoption of this statement did not have a material effect on the Company’s financial position, cash flows or results of operations.

In April 2004, the Emerging Issues Task Force issued EITF 03-6,Participating Securities and the Two-Class Method Under FASB Statement No. 128, Earnings Per Share. EITF 03-6 addresses a number of questions regarding the computation of earnings per share by companies that have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings of the company when, and if, it declares dividends on its common stock. The issue also provides further guidance in applying

F-20

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the two-class method of calculating earnings per share, clarifying what constitutes a participating security and how to apply the two-class method of computing earnings per share once it is determined that a security is participating, including how to allocate undistributed earnings to such a security. EITF 03-6 is effective for fiscal periods beginning after March 31, 2004, and is required to be retroactively applied. There was no impact from the adoption of EITF 03-6 on the Company’s earnings per share for the periods presented as the Company had no securities issued prior to December 2003 that contractually entitled the holder to participate in dividends and earnings. For the one month ended December 31, 2003, and the year ended December 31, 2004, the adoption of EITF 03-6 had no impact on the Company’s earnings per share as the Company incurred net operating losses and the effect would be anti-dilutive.

In September 2004, the Emerging Issues Task Force finalized its consensus on EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share” (EITF 04-8). EITF 04-8 addresses when the dilutive effect of contingently convertible debt with a market price trigger should be included in diluted earnings per share (EPS). Under EITF 04-8, the market price contingency should be ignored and these securities should be treated as non-contingent, convertible securities and always included in the diluted EPS computation. EITF 04-8 requires these securities be included in diluted EPS using either the if-converted method or the net share settlement method, depending on the conversion terms of the security. EITF 04-8 is effective for all periods ending after December 15, 2004 and is to be applied by retrospectively restating previously reported EPS. The adoption of EITF 04-8 had no impact on the Company’s earnings per share.

In November 2004, the FASB ratified the consensus reached by the Emerging Issues Task Force regarding EITF Issue No. 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations.” SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that the results of operations of a component of an entity that either has been disposed of or classified as held for sale should be reported in discontinued operations if: (a) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction, and (b) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. EITF Issue No. 03-13 addresses how companies should evaluate whether the operations and cash flows of a disposed component have been or will be eliminated from its ongoing operations and the types of continuing involvement that constitute “significant” continuing involvement. The consensus ratified in EITF Issue No. 03-13 is effective for a component of an entity that is disposed of or classified as held for sale in fiscal periods beginning after December 15, 2004 or earlier if disposed of or classified as held for sale within the company’s fiscal year that includes the date of consensus ratification. The Company announced the discontinuation of its European business, and the placement into administration of DDi Europe, on February 9, 2005. Accordingly, pursuant to SFAS No. 144 and EITF Issue No. 03-13, DDi Europe has been accounted for as a discontinued operation. The results of operations presented in the accompanying Consolidated Financial Statements have been presented to reflect DDi Europe as a discontinued operation for all periods presented. As a discontinued operation, revenues, expenses and cash flows of DDi Europe have been excluded from the respective captions in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows. Assets and liabilities of DDi Europe have been classified as held for sale under current and non-current assets, and current and non-current liabilities, respectively.

In November 2004, the Financial Accounting Standards Board issued FAS No. 151, Inventory costs, an amendment of ARB No. 43 Chapter 4. This Statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). It requires that those items be recognized as current-period charges regardless of whether they meet the criterion. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this statement shall be applied prospectively for inventory costs incurred during fiscal years

F-21

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

beginning after June 15, 2005. We do not expect the adoption of this statement would have a material impact on our results of operations or financial position.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first interim or annual period after June 15, 2005, with early adoption encouraged. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. The Company is required to adopt SFAS 123R in the third quarter of fiscal 2005, beginning July 1, 2005. Under SFAS 123R, the Company must determine the transition method to be used at date of adoption, the appropriate fair value model to be used for valuing share-based payments and the amortization method for compensation cost. The transition methods include prospective and retroactive adoption options. Under the retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. The Company anticipates adopting the prospective method and expects that the adoption of SFAS 123R will have an impact similar to the current pro forma disclosure for existing options under SFAS 123 in Note 2 to the Consolidated Financial Statements.


3.	VOLUNTARY REORGANIZATION UNDER CHAPTER 11

Bankruptcy and Reorganization

On August 20, 2003, DDi Corp. and DDi Capital filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. DDi Corp.’s other direct and indirect wholly-owned subsidiaries, including Intermediate, DDi Europe and Dynamic Details were not parties to the Chapter 11 cases. After the Chapter 11 cases were filed, DDi Corp. and DDi Capital continued to manage its properties and operate its businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with Sections 1107(a) and 1108 of Chapter 11. On December 2, 2003, the Bankruptcy Court entered an order confirming the Company’s Modified First Amended Plan of Reorganization dated as of August 30, 2003. On December 12, 2003, the effective date of the Company’s plan of reorganization, the Company reorganized and emerged from bankruptcy. DDi Corp. and its subsidiaries are now operating its businesses and properties as a group of reorganized entities pursuant to the terms of the plan of reorganization.

The following is a summary of the significant transactions that were consummated on or about the effective date of the Company’s plan of reorganization:

Current Equity — On the effective date of the plan of reorganization, the Company’s certificate of incorporation and bylaws were amended and restated. The Company now has 80,000,000 shares of capital stock, consisting of 75,000,000 shares of Common Stock, $0.001 par value per share, and 5,000,000 shares of Preferred Stock, $0.001 par value per share. In addition, a certificate designating 1,000,000 shares of preferred stock as Series A preferred stock became effective. The Series A preferred stock has an annual dividend of 15% and an aggregate liquidation preference of $15 million.

Pre-Bankruptcy Common Equity — All of the pre-bankruptcy equity securities, including all outstanding shares of the Company’s common stock and all outstanding options and warrants to purchase common stock, were cancelled in the Chapter 11 proceedings. On the effective date of the plan of reorganization, the holders

F-22

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of DDi Corp.’s pre-bankruptcy common equity received an aggregate of 249,926 shares of the Reorganized DDi Corp.’s common stock.

5.25% Convertible Subordinated Notes — On the effective date of the plan of reorganization, DDi Corp.’s 5.25% convertible subordinated notes, of which $100 million in principal amount and accrued interest of $5.1 million was outstanding as of December 12, 2003, were cancelled and discharged and each holder of the 5.25% convertible subordinated notes received a pro rata share of (i) 10,800,000 shares of the Reorganized DDi Corp.’s common stock and (ii) 500,000 shares of the Company’s Series A preferred stock.

6.25% Convertible Subordinated Notes — On the effective date of the plan of reorganization, DDi Corp.’s 6.25% convertible subordinated notes, of which $100 million in principal amount and accrued interest of $5.5 million was outstanding as of December 12, 2003, were cancelled and discharged and each holder of the 6.25% convertible subordinated notes received a pro rata share of (i) 12,700,000 shares of the Reorganized DDi Corp.’s common stock and (ii) 500,000 shares of the Company’s Series A preferred stock.

DDi Capital Senior Discount Notes — On the effective date of the plan of reorganization, DDi Capital’s senior discount notes, of which $16.1 million in principal amount and accrued interest of $1.6 million was outstanding as of December 12, 2003, were cancelled and discharged and each holder of the senior discount notes received a pro rata share of $17.7 million in senior accreting notes issued by DDi Capital pursuant to an indenture. Interest is payable on the senior accreting notes by issuance of additional senior accreting notes at an annual rate of 16% or, at DDi Capital’s election, in cash at an annual rate of 14%. Because of the decrease in DDi Capital’s leverage ratio, on June 1, 2004, DDi Capital was required to elect to pay interest due on all subsequent interest payments in cash starting June 15, 2004. Interest is calculated on the accreted principal balance as of March 15, 2004, the most recent scheduled interest payment date per the note indenture, of $18.4 million. The notes mature on January 1, 2009 and are redeemable by DDi Capital. The notes have covenants customary for securities of this type (see Note 8). Each holder of the senior discount notes also received a warrant to purchase pro rata shares of 762,876 shares of the Company’s common stock. These warrants are held in an escrow account until December 12, 2005 and are exercisable at an initial exercise price of $0.01 per share from December 13, 2005 through July 31, 2008. These warrants will be terminated if, on or before December 12, 2005, DDi Capital pays all of its indebtedness to the holders of the senior accreting notes which was $17.7 million as of December 31, 2003 and $18.4 million as of December 31, 2004.

Management Equity Incentive Plan and 2003 Directors Equity Incentive Plan — On the effective date of the plan of reorganization, the reorganized Company established a new 2003 Management Equity Incentive Plan and a new 2003 Directors Equity Incentive Plan. On December 19, 2003, the Company granted options to purchase an aggregate of 2,416,758 shares of common stock under the 2003 Management Equity Incentive Plan. An additional 2,523,362 shares of common stock may be issued to members of management under the 2003 Management Incentive Plan and 600,000 shares of common stock may be issued to directors under the 2003 Directors Equity Incentive Plan upon the exercise of options granted under the plans. The Company has also issued 1,250,000 shares of restricted common stock under the 2003 Management Incentive Plan.

New Senior Credit Facility — As of December 12, 2003, the Dynamic Details senior credit facility consisted of a Tranche A term facility of approximately $16.2 million, a Tranche B term facility of approximately $49.7 million and a revolving line of credit of up to $15 million including revolving credit loans, letters of credit and swing line loans (access to the full amount is subject to conditions set forth in the agreement and was limited to $1.2 million which was reserved for letters of credit). In addition, as of December 12, 2003, Dynamic Details had a $5.8 million liability resulting from the interest rate swap termination (see Note 12). On December 12, 2003, the aggregate outstanding unpaid principal amount of senior debt, plus interest and fees, under the Dynamic Details senior credit facility was restructured and exchanged, the rights of the lenders under the credit facility and interest rate swap agreement were modified, exchanged and restated as provided in the new senior credit facility. The new senior credit facility consisted of (a) a Tranche A Revolving and Term Loan Facility in an aggregate amount of $15.0 million which was

F-23

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

available as a revolving loan until June 30, 2005, at which time any outstanding amounts under such facility could be converted to a Tranche A Term Loan with a maturity date of April 15, 2008 and (b) a Tranche B Term Loan in the aggregate amount of $57.9 million with a maturity date of April 15, 2008. No significant amortization under either Tranche was due until 2005. In connection with the new senior credit facility, DDi Corp. and DDi Capital executed and delivered two guarantee and collateral agreements, pursuant to which (i) the Company pledged one hundred percent (100%) of the common stock of DDi Intermediate as collateral to secure the new senior credit facility, and (ii) DDi Intermediate pledged one hundred percent (100%) of the common stock of DDi Capital as collateral to secure the new senior credit facility.

On the effective date of the plan of reorganization, the lenders under the new senior secured credit facility received warrants to purchase an aggregate of 3,051,507 shares of the Company’s common stock. These warrants are held in an escrow account until December 12, 2005 and are exercisable at an initial exercise price of $0.01 per share from December 13, 2005 through July 31, 2008. The Company may reduce the number of these warrants that are exercisable by permanently reducing and terminating the Company’s borrowings under the new senior credit facility by at least 50% by December 12, 2005. The warrants will be reduced by the same percentage by which the new senior credit facility is reduced as of December 12, 2005, and the warrants will be terminated if 100% of the Company’s borrowings under the new senior credit facility are paid by December 12, 2005. On March 30, 2004, the Company repaid in full the outstanding balance of the new Senior Credit Facility and related accrued interest and fees, thereby removing the restriction on the Company’s $7.5 million restricted cash (see Note 8).


4.	FRESH-START ACCOUNTING

As discussed in Note 1, DDi Corp. adopted the provisions of fresh-start accounting as of November 30, 2003. Management determined the estimated reorganization equity value of DDi Corp. to be $75 million to $95 million. The assumptions underlying the valuation are described in more detail in the disclosure statement sent to security holders entitled to vote on the plan of reorganization and attached as an exhibit to the DDi Corp. Current Report on Form 8-K filed on December 17, 2003. The valuation was based upon several generally accepted valuation methodologies, including discounted cash flows and market analysis. The Company elected to use $95 million because it was most representative of the Company’s reorganization equity value in light of the Company’s market capitalization subsequent to the Company’s emergence from Chapter 11. The assigned equity value range is based upon the reorganized value of the ongoing business and includes significant estimates made by management based on information available as of November 30, 2003. The Company’s reorganization value was determined to be approximately $292 million, which includes the fair value of the Reorganized DDi Corp.’s long term debt and equity plus the fair value of current liabilities at the date of emergence of $67 million. Valuation methodologies require the input of highly subjective assumptions. Actual future results and events could differ substantially from current estimates and assumptions. Any changes in valuation could affect the Company’s balance sheet.

SOP 90-7 requires an allocation of the reorganization value in conformity with procedures specified by SFAS No. 141, Business Combinations, which requires that assets be recorded at their fair value and liabilities be recorded at the present value of the amounts to be paid. The tangible assets were valued using the costs and market comparable methods. The intangible assets were valued using the income approach and the cost approach methods.

The net effect of all fresh start accounting adjustments resulted in the recording of income of $118.4 million which is reflected in Predecessor DDi Corp.’s Statement of Operations for the eleven months ended November 30, 2003.

On November 30, 2003, the Company recognized a gain of $120.4 million associated with the exchange of the 5.25% and 6.25% Convertible Subordinated Notes for 23,500,000 shares of Reorganized DDi Corp common stock and 1,000,000 shares of Series A preferred stock under the plan.

F-24

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Reorganized DDi Corp’s gain on discharge of debt was calculated as follows (in thousands):


Carrying value of 5.25% Convertible Subordinated Notes	$	100,000
Carrying value of 6.25% Convertible Subordinated Notes		100,000
Carrying value of related accrued interest		10,639
94% equity of the Reorganized DDi Corp. (23,500,000 shares of common stock)		(88,195	)
Fair value of 1,000,000 shares of DDi Series A preferred stock		(2,000	)

Gain on extinguishment debt	$	120,444

The Company announced the discontinuation of its European business, and the placement into administration of DDi Europe, on February 9, 2005. Accordingly, pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and EITF Issue No. 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations.” DDi Europe has been accounted for as a discontinued operation. In accordance with SFAS No. 144, the Fresh Start Consolidated Balance Sheet at November 30, 2003 has been presented to reflect DDi Europe as a discontinued operation. As a discontinued operation, the assets and liabilities of DDi Europe have been classified as held for disposal under current and non-current assets and current and non-current liabilities, respectively. See Note 21. The net effect of all fresh start accounting adjustments related to DDi Europe resulted in income of $3.2 million and has been reflected in net loss from discontinued operations in the eleven months ended November 30, 2003.

A reconciliation of the adjustments recorded in connection with the debt restructuring and the adoption of fresh-start accounting, at November 30, 2003 is presented below (in thousands):

DDi Corp.

Fresh Start Consolidated Balance Sheets at November 30, 2003


															Reclassed
			Predecessor							Reorganized					Reorganized
			DDi Corp.							DDi Corp.					DDi Corp.
												Reclass for
			November 30,		Debt		Fresh-Start			November 30,		Discontinued			November 30,
			2003		Restructure		Adjustments			2003		Operations			2003

			(In thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	5,040	$	—	$	—		$	5,040	$	—		$	5,040
	Cash and cash equivalents — restricted			—		—		7,500	(i)		7,500		—			7,500
	Accounts receivable, net			43,757		—		—			43,757		(17,030	)		26,727
	Inventories			25,626		—		—			25,626		(10,268	)		15,358
	Prepaid expenses and other			2,876		—		—			2,876		(1,316	)		1,560
	Current assets held for disposal			—		—		—			—		28,614			28,614

		Total current assets		77,299		—		7,500			84,799		—			84,799
Property, plant and equipment, net				71,432		—		4,036	(c)		75,468		(30,262	)		45,206
Debt issuance costs, net				3,256		—		(3,256	)(c)		—		—			—
Goodwill, net				5,565		—		99,829	(c)		105,394		(5,565	)		99,829
Other intangibles, net				—		—		24,913	(c)		24,913		—			24,913
Cash and cash equivalents — restricted				7,500		—		(7,500	)(i)		—		—			—
Deferred income tax asset				—		—		—			—		663			663
Assets held for disposal				—		—		—			—		35,899			35,899
Other				798		—		—			798		(72	)		726

		Total assets	$	165,850	$	—	$	125,522		$	291,372	$	663		$	292,035


LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
	Current maturities of long-term debt and capital lease obligations		$	91,649	$	—	$	(90,248	)(e)	$	1,401		(240	)	$	1,161
	Revolving credit facilities			12,073		—		—			12,073		(12,073	)		—

F-25

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


																		Reclassed
			Predecessor									Reorganized						Reorganized
			DDi Corp.									DDi Corp.						DDi Corp.
															Reclass for
			November 30,			Debt			Fresh-Start			November 30,			Discontinued			November 30,
			2003			Restructure			Adjustments			2003			Operations			2003

			(In thousands)
	Accounts payable			24,412			—			—			24,412			(14,928	)		9,484
	Accrued expenses and other			25,032			—			2,343	(d)		27,375			(8,114	)		19,261
	Income tax payable			822			—			200	(c)		1,022			(1,006	)		16
	Note payable			500			—			—			500			—			500
	Interest rate swap valuation			5,770			—			(5,770	)(e)		—			—			—
	Current liability held for disposal			—			—			—			—			36,361			36,361

		Total current liabilities		160,258			—			(93,475	)		66,783			—			66,783
	Long term debt and capital lease obligations			19,112						94,847	(e)(f)		113,959			(24,555	)		89,404
	Deferred income tax liability			1,101			—			62	(c)		1,163			(1,163	)		—
	Notes payable and other			6,747			—			5,720	(d)		12,467			—			12,467
	Liabilities held for disposal			—			—			—			—			26,381			26,381
	Mandatorily redeemable preferred stock Series A			—			2,000	(a)		—			2,000			—			2,000
Liabilities subject to compromise:
	Long-term debt and capital lease obligations			200,000			(200,000	)(a)		—			—			—			—
	Notes payable and other			10,639			(10,639	)(a)		—			—			—			—

		Total liabilities		397,857			(208,639	)		7,154			196,372			663			197,035
Stockholders’ equity (deficit): vr,cg5;TB
	Common stock for Predecessor DDi Corp.			495			(495	)(b)		—			—			—			—
	Common stock for Reorganized DDi Corp.			—			24	(a)(b)		—			24			—			24
	Additional paid-in-capital			541,794			88,666	(a)(b)		(534,851	)(c)		95,609			—			95,609
	Accumulated other comprehensive income			3,020			—			(3,020	)(g)		—			—			—
	Stockholder receivables			(633	)		—			—			(633	)		—			(633	)
	Accumulated deficit			(776,683	)		120,444	(a)		656,239	(h)		—			—			—

		Total stockholders’ equity (deficit)		(232,007	)		208,639			118,368			95,000			—			95,000

			$	165,850		$	—		$	125,522		$	291,372		$	663		$	292,035


(a)	To record the discharge of indebtedness, including accrued interest, in accordance with the plan of reorganization ($210.6 million), Reorganized DDi Corp. issued common stock ($88.2 million) and Series A Preferred stock ($2 million) to holders of the convertible subordinated notes.


(b)		To eliminate Predecessor DDi Corp. common stock and record the issuance of the Reorganized DDi Corp. common stock.

(c)		To adjust the carrying value of assets and liabilities to fair value.

(d)		To record deferred lease liability.

(e)		To reclassify long term portion of the new Senior Credit Facility to long term debt.

(f)		To record the fair value of common stock warrants issued to the holders of the new Senior Credit Facility and the Senior Accreting Notes in accordance with the plan of reorganization.

(g)		To reclassify foreign currency translation adjustments as part of fresh start accounting.

(h)		To eliminate accumulated deficit as part of fresh start accounting.

(i)		To reclassify noncurrent restricted cash to current restricted cash.

F-26

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	ACCOUNTS RECEIVABLE

Accounts receivable, net consist of the following (in thousands):


	Reorganized DDi Corp.

	December 31,

	2003			2004

Accounts receivable	$	24,937		$	28,143
Less: Allowance for doubtful accounts		(1,076	)		(1,579	)

	$	23,861		$	26,564


6.	INVENTORIES

Inventories consist of the following (in thousands):


	Reorganized DDi Corp.

	December 31,

	2003		2004

Raw materials	$	7,307	$	8,094
Work-in-process		7,048		7,020
Finished goods		2,255		2,882

	$	16,610	$	17,996


7.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following (in thousands):


	Reorganized DDi Corp.

	December 31,

	2003			2004

Buildings and leasehold improvements	$	9,794		$	9,864
Machinery and equipment		29,884			32,427
Office furniture and equipment		2,880			3,836
Vehicles		72			58
Land and building held for sale (Garland, Texas)		1,500			—
Deposits on equipment		451			962

		44,581			47,147
Less: Accumulated depreciation		(915	)		(10,771	)

	$	43,666		$	36,376

The depreciable lives assigned to buildings are 30-40 years. Existing leasehold improvements are depreciated over 5-7 years. Machinery, office furniture, equipment and vehicles are each depreciated over 3-7 years. Deposits are not depreciated as the related asset has not been placed into service.

Buildings and leasehold improvements include capital leases of approximately $0.6 million and $0.5 million with related accumulated depreciation of $30,000 and $0.3 million at December 31, 2003 and 2004, respectively. Machinery and equipment includes capital leases of approximately $0.1 million and $0.1 million, with related accumulated depreciation of $2,000 and $27,000 at December 31, 2003 and 2004, respectively.

F-27

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The land and building associated with the closure of the Garland, Texas facility (see Note 18) held for sale by the Company had a book value of approximately $1.5 million at December 31, 2003. The Company recorded a write-down of $0.8 million through restructuring expense during the eleven months ended November 30, 2003 to reflect the fair value of the land and building of approximately $1.5 million. The sale for this land and building for $2.0 million, less environmental fees of $0.5 million to be deposited into an escrow account for 5 years, was completed on March 12, 2004.


8.	REVOLVING CREDIT FACILITY, LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations consist of the following (in thousands):


		Reorganized DDi Corp.

		December 31,

		2003			2004

Senior Credit Facility, net of unamortized discount of $895 at December 31, 2003		$	70,799		$	—
Dynamic Details Revolving Credit Facility(a)			—			15,948
Capital Senior Accreting Notes, due January 1, 2009 face amount of $17,656 at December 31, 2003 and $18,394 at December 31, 2004, respectively, net of unamortized discount of $229 and $200 at December 31, 2003 and 2004, respectively			17,427			18,194
Capital lease obligations			2,298			974

	Sub-total		90,524			35,116
Less: current maturities			(1,186	)		(916	)
Less: Dynamic Details Revolving Credit Facility			—			(15,948	)

	Total	$	89,338		$	18,252


(a)	Interest rate is based on Prime rate. The effective interest rate as of December 31, 2004 was 8.25%.

Senior Credit Facility

Dynamic Details and Dynamic Details Incorporated, Silicon Valley entered into the Senior Credit Facility with a syndicate of banks, including JPMorgan Chase Bank, as Collateral, Co-Syndication and Administrative Agent (formerly Chase Manhattan Bank, N.A.) and Bankers Trust Company, as Documentation and Co-Syndication Agent. Borrowings under the Senior Credit Facility consisted of a senior term facility (the “Senior Term Facility”) and a revolving credit facility. The Senior Credit Facility was jointly and severally guaranteed by Intermediate and DDi Capital and substantially all of the indirect subsidiaries of DDi Capital, and was collateralized by (a) pledges of all of the capital stock of Dynamic Details and of substantially all of its subsidiaries and (b) liens upon substantially all of the assets of Dynamic Details and of substantially all of its subsidiaries.

Effective December 12, 2003, Dynamic Details restructured its Senior Credit Facility outside of the Chapter 11 bankruptcy proceedings including the $5.8 million liability resulting from the interest rate swap termination (see Note 12). The aggregate outstanding unpaid principal amount of senior debt, plus interest and fees, under the Dynamic Details senior credit facility was restructured and exchanged and repaid and the rights of the lenders under the credit facility and interest rate swap agreement were modified, exchanged and restated as provided in this new senior credit facility. The new senior credit facility consisted of (a) a Tranche A Revolving and Term Loan Facility in an aggregate amount of $15.0 million which was available as

F-28

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

a revolving loan until June 30, 2005, at which time any outstanding amounts under such facility were to be converted to a Tranche A Term Loan with a maturity date of April 15, 2008 and (b) a Tranche B Term Loan in the aggregate amount of $57.9 million with a maturity date of April 15, 2008. No significant amortization under either Tranche was due until 2005. The new senior credit facility had $71.7 million outstanding, and $1.2 million reserved for letters of credit, as of December 31, 2003. No additional amounts for borrowing were available under the new Senior Credit Facility at December 31, 2003.

Borrowings under the Dynamic Details senior credit facility for the Tranche A revolving credit facility and term loan and the Tranche B term loan bore cash interest at a rate equal to one month LIBOR plus 4.50% and accrued deferred simple interest at a rate of 4.625% per annum. The accrued deferred interest was payable upon Dynamic Details achieving consolidated EBITDA (earnings before interest, taxes, depreciation, amortization and other significant charges) of $50 million at the end of any fiscal quarter for the preceding 12 month period or, with respect to Tranche A and a portion of Tranche B, due at maturity, and with respect to the remaining portion of Tranche B, was due at maturity if the fair value of Dynamic Details, as defined, exceeded the principal outstanding on the senior credit facility at that time. The deferred interest was payable thereafter on a quarterly basis in arrears.

On the effective date of the plan of reorganization, the lenders under the new senior secured credit facility received warrants to purchase an aggregate of 3,051,507 shares of the Company’s common stock. In connection with the completion of a private placement in January 2004 (see Note 15) and the anti-dilution provisions of the warrants, the amount of warrants issued was adjusted to purchase an aggregate of 3,228,364 shares. The Company recorded the warrants at an aggregate fair value of $0.9 million at November 30, 2003 and used the effective interest rate method to accrete the debt value to face at maturity through interest expense. These warrants were to be held in an escrow account until December 12, 2005 and were exercisable at an initial exercise price of $0.001 per share from December 13, 2005 through July 31, 2008. The Company would reduce the number of these warrants that were exercisable by permanently reducing and terminating the Company’s borrowings under the new senior credit facility by at least 50% by December 12, 2005. The warrants would be reduced by the same percentage by which the new senior credit facility is reduced as of December 12, 2005, and the warrants would be terminated if 100% of the Company’s borrowings under the new senior credit facility are paid by December 12, 2005. On March 30, 2004, the Company repaid in full the outstanding balance of the new Senior Credit Facility and related accrued interest and fees (see Note 10), and the above warrants were terminated.

The senior lenders required the Company to establish a reserve account and maintain a minimum of $7.5 million in such account at all times, which is reflected as restricted cash on the consolidated balance sheet at December 31, 2003. The Company had access only to the interest earned on the funds in the reserve account.

The Company repaid the outstanding balance of the new Senior Credit Facility in March 2004 and as a result, the restricted cash became unrestricted cash.

Revolving Credit Facility

On March 30, 2004, immediately after the Dynamic Details’ Senior Credit Facility was paid off, Dynamic Details and the Company’s other North American subsidiaries entered into an asset-based revolving credit facility with a commitment up to $40 million through March 30, 2007, depending upon the value of the asset base. The asset base is calculated as 85% of eligible accounts receivable as defined by the agreement. During the second quarter of 2004, the asset base on the revolving credit facility was expanded to include the Company’s Canadian operations. As of December 31, 2004, the Company was able to borrow up to $15.9 million against the revolving credit facility of which $15.9 million was outstanding. The facility bears interest at LIBOR plus 4% on LIBOR loans and prime plus 3% for index rate loans. Interest will be determined by Dynamic Details’ adjusted EBITDA numbers, and will range from LIBOR plus 3% to 4% on

F-29

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

LIBOR loans or prime plus 2% to 3% for index rate loans. The effective interest rate at December 31, 2004 was 8.25%. The revolving credit facility has covenants that place a limit on the level of capital expenditures and a minimum fixed charge ratio. The Company’s asset-based revolving credit facility restricts the Company’s ability to pay cash dividends on its common stock and restricts our subsidiaries’ abilities to pay dividends to us without the lender’s consent.

5.25% Convertible Subordinated Notes

On February 14, 2001, DDi Corp. issued 5.25% Convertible Subordinated Notes due March 1, 2008 with an aggregate principal of $100.0 million. These notes were convertible at any time prior to maturity into shares of common stock at a conversion price of $30.00 per share, subject to certain adjustments. These notes generated proceeds of $97.0 million, net of underwriting discounts. The net proceeds of this transaction were used to repurchase a portion of the Capital Senior Discount Notes and the Dynamic Details senior subordinated notes.

As a result of the default under the Senior Credit Facility and the terms of the forbearance agreement, the Company was not permitted to pay its interest obligations on March 1, 2003. Failure to make such interest payments within 30 days of their due date amounted to a default. In connection with DDi Corp.’s Chapter 11 petition filing on August 20, 2003, the Company ceased recording interest expense on these notes in accordance with SOP 90-7.

On the effective date of the plan of reorganization, the DDi Corp. 5.25% convertible subordinated notes, of which $100.0 million in principal amount was outstanding as of December 12, 2003, were cancelled or satisfied in full and discharged and each holder of the 5.25% convertible subordinated notes received a pro rata share of (i) 10,800,000 shares of the Company’s common stock and (ii) 500,000 shares of the Company’s Series A preferred stock (See Note 3).

6.25% Convertible Subordinated Notes

On April 2, 2002, DDi Corp. completed its private offering of $100.0 million aggregate principal amount of 6.25% Convertible Subordinated Notes due April 1, 2007. These notes were convertible at any time prior to maturity into shares of common stock at a conversion price of $11.04 per share, subject to certain adjustments. These notes generated proceeds of $95.8 million, net of underwriting discounts. Approximately $47.9 million of the net proceeds from the sale were used to repay a portion of the Dynamic Details Senior Term Facility, $12.5 million was placed in an interest reserve account to cover two years of interest payments on the notes and the remainder was used for working capital and general corporate purposes.

In connection with the $47.9 million repayment of the Senior Term Facility, Dynamic Details elected to amend its swap agreement by reducing the notional balance of the swap to reflect the impact of the debt repayment on the outstanding principal. In connection with the amendment of the swap agreement, Dynamic Details paid approximately $3.1 million to the counterparty, representing the pro-rata portion of the deferred swap liability. In addition, the Company recorded a write-off of debt issuance costs of approximately $2.0 million, offset by a net credit of $3.4 million as a result of the swap amendment, which collectively are included in net interest expense in 2002.

As a result of the default under the Senior Credit Facility and the terms of the forbearance agreement, the Company was not permitted to pay its interest obligations due on April 1, 2003. Failure to make such interest payments within 30 days of their due date amounted to a default. In connection with DDi Corp.’s Chapter 11 petition filing on August 20, 2003, the Company ceased recording interest expense on these notes in accordance with SOP 90-7.

On the effective date of the plan of reorganization, the DDi Corp. 6.25% convertible subordinated notes, of which $100.0 million in principal amount was outstanding as of December 12, 2003 were cancelled or

F-30

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

satisfied in full and discharged and each holder of the 5.25% convertible subordinated notes received a pro rata share of (i) 12,700,000 shares of the Company’s common stock and (ii) 500,000 shares of the Company’s Series A preferred stock (See Note 3).

Capital Senior Discount Notes

The Capital Senior Discount Note indenture also contained covenants that restricted the Company from incurring additional indebtedness and from making certain payments, including dividend payments to its stockholders.

On the effective date of the plan of reorganization, the Capital Senior Discount Notes, of which $16.1 million in principal amount and accrued interest of $1.6 million was outstanding as of December 12, 2003, were cancelled or satisfied in full and discharged and each holder of the senior discount notes received a pro rata share of $17.7 million in senior accreting notes issued by DDi Capital pursuant to an indenture.

Capital Senior Accreting Notes

DDi Capital issued $17.7 million in unsecured senior accreting notes pursuant to the plan of reorganization. Interest is payable on the senior accreting notes by issuance of additional senior accreting notes at an annual rate of 16% or, at DDi Capital’s election, in cash at an annual rate of 14%. Because of the decrease in DDi Capital’s leverage ratio, on June 1, 2004, DDi Capital was required to elect to pay interest due on all subsequent quarterly interest payments in cash starting June 15, 2004. Interest is calculated on the accreted principal balance as of March 15, 2004, the most recent scheduled accreted interest payment date per the note indenture, of $18.4 million. As of December 15, 2004, DDi Capital has paid $1.9 million in interest in cash to the holders of the senior accreting notes. The notes mature on January 1, 2009 and are redeemable by DDi Capital upon a change of control or upon sale of stock or property or other assets except through ordinary course of business. The notes have covenants customary for securities of this type. The covenants restrict the Company from incurring additional indebtedness and from making certain payments, including dividend payments to its stockholders. As of December 31, 2004, the Company was in compliance with these covenants. Each holder of the senior discount notes also received a warrant to purchase pro rata shares of 762,876 shares of the Company’s common stock. In connection with the completion of a private placement in January 2004 (see Note 15) and the anti-dilution provisions of the warrants, the amount of warrants issued was adjusted to purchase an aggregate of 807,090 shares. The Company recorded the warrants at an aggregate fair value of $0.2 million at November 30, 2003 and is using the effective interest rate method to accrete the debt value to face at maturity through interest expense. For the one month ended December 31, 2003 and the year ended December 31, 2004, total warrant accretion was $2,000 and $29,000, respectively. These warrants are held in an escrow account until December 12, 2005 and are exercisable at an initial exercise price of $0.001 per share from December 13, 2005 through July 31, 2008. The warrants will be terminated if, on or before December 12, 2005, DDi Capital pays all of its indebtedness to the holders of the senior accreting notes.

Note Payable

DDi Corp. issued a note payable of $0.5 million to its independent financial advisor in consideration of their fees related to the consummation of the plan of reorganization. The note bore interest at a rate of 16% per annum and was due on March 31, 2004. The note was repaid in January 2004 in connection with proceeds received from a private placement (see Note 15).

Debt Issuance Costs

During the year ended December 31, 2002, the eleven months ended November 30, 2003 and the year ended December 31, 2004, the Company has capitalized debt issuance costs related to various of its debt

F-31

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

instruments. During the second quarter of 2002, approximately $47.9 million of the proceeds from the 6.25% Convertible Subordinated Notes were used to repay a portion of the Dynamic Details Senior Term Facility and the net carrying amount of the related debt issuance costs of $2.0 million was written-off and included in interest expense in accordance with SFAS No. 145 “Rescission of FASB Statements No. 4, 44, and 64, Amendment of SFAS No. 13 and Technical Corrections.” During the eleven months ended November 30, 2003, approximately $5.7 million of debt issuance costs relating to the 5.25% and 6.25% Convertible Subordinated Notes, $0.4 million related to the Senior Discount Notes and $0.1 million relating to the Senior Accreting Notes were written off through reorganization proceeding expense in accordance with SOP 90-7. Additionally, approximately $3.2 million of debt issuance costs relating to the Senior Credit Facility was adjusted as part of fresh start accounting (see Note 4) as of November 30, 2003. For the one month ended December 31, 2003, approximately $0.4 million was expensed through reorganization and reorganization proceeding expenses.

In March 2004, the Company incurred debt issuance costs of $2.4 million in connection with obtaining an asset based revolving credit facility. These costs are being amortized into interest expense using the straight-line method (which approximates the effective interest method) over the facility period. For the year ended December 31, 2004, $0.6 million has been amortized.

Change of Control

Upon a change in control, each holder of the Capital Senior Accreting Notes may require DDi Capital to repurchase all or a portion of such holder’s notes at a cash purchase price equal to 100% of the principal amount or the accreted value, plus accrued and unpaid interest if any, to the date of repurchase. The Revolving Credit Facility provides that an occurrence of such a change in control constitutes an event of default, which could require the immediate repayment of the Revolving Credit Facility. No change of control occurred through December 31, 2004.


9.	SERIES A MANDATORILY REDEEMABLE PREFERRED STOCK

In connection with the plan of reorganization, the Company’s certificate of incorporation and bylaws were amended and restated. The Company has authorized 5,000,000 shares of Preferred Stock at $0.001 par value per share. A certificate designating 1,000,000 shares of preferred stock as Series A Preferred Stock (the “Series A Preferred”) became effective with such shares being issued to the Company’s former Convertible Subordinated Noteholders (see Note 3). The Series A Preferred has an annual dividend of 15% and an aggregate liquidation preference of $15 million with a mandatory redemption date of January 31, 2009. The preferred stock will only be paid to the extent there is value, as defined in DDi Europe, beyond what is owed on the DDi Europe Facility Agreement. As of November 30, 2003, the Company recorded a liability in accordance with SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” related to the preferred stock at its estimated fair value of $2 million. This estimated fair value was based upon a valuation analysis performed by management. The Company has been accreting the preferred stock to the amount expected to be paid at maturity using the effective interest method. Total accretion for the one month ended December 31, 2003 and the year ended December 31, 2004 was $66,000 and $1.0 million, respectively. Total accrued dividends were $0.1 million and $2.2 million for the one month ended December 31, 2003 and the year ended December 31, 2004, respectively. As a result of DDi Europe’s placement into administration, there has been an impairment of the valuation of the Series A Preferred. The Company has written down Series A Preferred stock to its estimated fair market value of zero as of December 31, 2004, and has reversed in full the related estimated liability for dividends accrued but unpaid through December 31, 2004. As the result, the Company, in the fourth quarter of 2004, reduced its loss from discontinued operations by approximately $5.4 million.

F-32

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


10.	SERIES B MANDATORILY REDEEMABLE PREFERRED STOCK

On March 30, 2004, the Company completed a private placement of 147,679 shares of Series B-1 Preferred Stock and 1,139,238 shares of Series B-2 Convertible Preferred Stock (collectively, the “Series B Preferred”) to certain institutional investors at a price of $47.40 per share for an aggregate sales price of $61.0 million before placement fees and offering expenses of $3.5 million. Each share of the Series B Preferred is initially convertible into four shares of common stock at any time at a conversion price of $11.85 per share, subject to certain anti-dilution adjustments. In general, the Series B Preferred vote together with the common shares based on the number of shares into which the Series B Preferred could convert on the day that the Series B Preferred was issued. In addition, the Series B Preferred is entitled to elect a member of the Company’s Board of Directors in the event the Company fails to redeem the Series B Preferred when required. The Series B Preferred bears dividends at the rate of 6% per annum, payable quarterly commencing March 31, 2005 and is subject to mandatory redemption in five years. In addition, the holders of the Series B Preferred have the option to require the Company to redeem the shares in three equal installments in 18 months, 24 months and 30 months from issuance or earlier upon a change of control, certain events of default or other specified occurrences. The Company also has the right to redeem the Series B Preferred if Reorganized DDi Corp.’s common stock trades above $20.75 for 30 consecutive trading days. The redemption price equals cost plus accrued dividends, except in the case of certain defaults where there are premiums to the redemption cost. On May 26, 2004, the Company’s shareholders approved a proposal to allow the Company to have the option to make dividend and redemption payments using Reorganized DDi Corp.’s common stock provided that no more than 10 million shares of common stock in the aggregate is used for such redemption payments. The Series B Preferred Stock Certificate of Determination also has covenants that restrict the Company from incurring additional indebtedness in excess of the greater of (i) in the aggregate, $80.0 million, or (ii) three times the Company’s EBITDA for the most recent four consecutive fiscal quarters. The Company recorded the redemption value of the Series B Preferred, $61.0 million, net of issuance costs of $3.5 million. As of December 31, 2004, accrued dividends for Series B Preferred is $2.8 million. The Company amortizes the $3.5 million of related debt issuance costs into additional paid-in capital using the effective interest method based on the Series B Preferred holders’ redemption option to require the Company to redeem the shares in three equal installments in 18 months, 24 months and 30 months from issuance. As of December 31, 2004, a total of $1.3 million of debt issuance costs has been amortized.

On March 30, 2004, the Company repaid in full the outstanding balance of the Dynamic Details Senior Credit Facility and related accrued interest and fees using proceeds of $54.8 million from the private placement of the Series B Preferred (see Note 8).


11.	ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses consist of the following (in thousands):


	Reorganized
	DDi Corp.

	December 31,

	2003		2004

Accrued salaries and related benefits	$	5,111	$	6,145
Accrued interest payable		161		143
Accrued restructuring charges		5,301		418
Deferred lease liability		2,147		1,877
Other accrued expenses		6,107		5,944

	$	18,827	$	14,527

F-33

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


12.	DERIVATIVES

Pursuant to its interest rate risk management strategy and to certain requirements imposed by the Company’s Senior Credit Facility (see Note 8)in November 2001, the Company entered into new swap agreements. The agreements qualified as effective hedges under SFAS No. 133. The initial fair value of the amended swaps were being recognized as reductions to periodic interest expense over their remaining term, in accordance with SFAS No. 133. The annual fixed rate of interest paid under the swap agreements was 5.99% and 6.49% for 2002 and 2003, respectively. The overall effective interest rate for the Senior Term Facility, after giving effect to the swap agreement, as of December 31, 2002, was 9.92%.

In April 2002, in connection with the $47.9 million repayment of the Senior Term Facility, Dynamic Details elected to amend its swap agreement by reducing the notional balance of the swap to reflect the impact of the debt repayment on the outstanding principal. In connection with the amendment of the swap agreement, Dynamic Details paid approximately $3.1 million to the counterparty, representing the pro-rata portion of the deferred swap liability.

On April 25, 2003, pursuant to notification by the counter-party of their intent to exercise their right to terminate the interest rate swap agreement, the agreement was terminated at a cost of $5.8 million, the fair market value of the liability at termination. In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” since it is probable, as determined by EITF 02-04, “Determining Whether a Debtor’s Modification or Exchange of Debt Instruments is within the Scope of FASB Statement No. 15,” and EITF 96-19, “Debtor’s Accounting for a Modification or Exchange of Debt Instruments,” that terms of the Senior Term Facility will be modified and will not be repaid in accordance with its currently stated terms, the amount of net unrealized losses on the interest rate swap reported in accumulated other comprehensive income has been realized and thus has been reclassified into the Company’s net loss. The net realized loss of $5.6 million related to the termination of the interest rate swap agreement has been reclassified into loss on interest rate swap termination, a component of non-operating expenses, during the eleven months ended November 30, 2003.


13.	FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments including cash equivalents, marketable securities, accounts receivable, accounts payable, accrued liabilities and variable rate debt approximate book value as of December 31, 2003 and 2004. The fair value of the Company’s Capital Senior Accreting Notes at December 31, 2003 and 2004 approximates book value.


14.	CAPITAL LEASE OBLIGATIONS

DDi Corp. leases certain facilities and equipment under capital lease obligations bearing implicit interest rates ranging from 6% to 12%. Certain leases contain an option for an additional term at the end of the initial term and an option to purchase the facilities and equipment at their fair values at the end of the initial term and at the end of the second term.

Future Payments

Total minimum capital lease payments remaining at December 31, 2004 are $1.1 million, including $0.2 million representing interest, of which $1.0 million and $0.1 million are payable in 2005 and 2006, respectively.

F-34

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


15.	STOCKHOLDERS’ EQUITY

Common Stock

DDi Corp. has 75,000,000 shares authorized and has 23,749,926 and 25,513,522 shares of $0.001 par value common stock issued and outstanding at December 31, 2003 and 2004, respectively.

In January 2004, the Company completed a private placement of 1,000,000 shares of common stock to institutional investors for gross proceeds of $16.0 million before placement fees and offering expenses of $1.2 million. The shares of common stock were priced at $15.98 per share. The Company was required to use a portion of the proceeds, $4.5 million, to pay down the then outstanding Dynamic Details Senior Credit Facility. In addition, the Company used certain of the proceeds to pay in full the note payable to the Company’s independent financial adviser plus accrued interest, $0.5 million. Each of these payments was made in January 2004. In connection with the completion of this private placement, the amount of warrants issued to the holders of the Senior Accreting Notes was adjusted, pursuant to the antidilution provisions of the warrants. (See Note 8).

Stockholder Receivables

DDi Corp. has a note receivable from a certain executive officer which is collateralized by DDi Corp.’s common stock (see Note 23).

Employee Stock Purchase Plan

During 2000, the Company’s Board of Directors adopted the Employee Stock Purchase Plan (“ESPP”) and the non-U.S. Employee Stock Purchase Plan (“non-U.S. ESPP”) (collectively the “Plans”). The Plans allowed eligible employees to purchase shares of common stock through payroll deductions at a discounted price. A total of 1,450,000 shares of common stock were reserved for issuance under the Plans, 1,250,000 shares under the ESPP, which are intended to qualify under Section 423 of the Internal Revenue Code and 200,000 shares under the non-U.S. ESPP. The Plans allowed for purchases in a series of offering periods, each six months in duration, with new offering periods (other than the initial offering period) commencing on January 1 and July 1 of each year. The initial offering period commenced on April 14, 2000, the date of the initial public offering. Unless terminated earlier by the Company’s Board of Directors, the plans had a term of ten years. The plans were suspended indefinitely as of July 1, 2003. The net weighted-average fair value per share granted under the Plans was $0.68 and $0.11 for shares granted in 2002 and the eleven months ended November 30, 2003, respectively, calculated using the Black-Scholes option pricing model, assuming that no dividends were to be declared, a volatility of 100% and a risk free interest rate of 1.78% in 2002 and 1.24% for the eleven months ended November 30, 2003. For the year ended December 31, 2002, 975,907 shares of common stock were purchased through the ESPP. For the eleven months ended November 30, 2003, 313,656 shares of common stock were purchased through the ESPP.

Common Stock Warrants

In connection with the plan of reorganization, all warrants issued under Predecessor DDi Corp. were cancelled and Reorganized DDi Corp. granted warrants to purchase, at $0.001 per share, 762,876 shares to the holders of the DDi Capital Senior Accreting Notes. These warrants are held in an escrow account until December 12, 2005 and are exercisable from December 13, 2005 through July 31, 2008.

These warrant agreements have anti-dilution provisions in the event of changes in or issuance of common stock, business combination, liquidation, tender offer or exchange offer. In connection with the completion of a private placement in January 2004, the amount of warrants issued was adjusted to warrants to purchase an aggregate of 807,090 shares for the holders of the Senior Accreting notes. The warrants issued to the senior

F-35

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

note holders will be terminated if, on or before December 15, 2005, DDi Capital pays all of its indebtedness to the holders of the senior accreting notes.

Stock Options

DDi Corp. adopted the DDi Corp. 2003 Management Equity Incentive Plan (the “2003 Plan”). Awards under the 2003 Plan may be made to officers and key employees of DDi Corp. or any of its subsidiaries whose participation in the 2003 Plan is determined to be in the best interests of DDi Corp. by the Compensation Committee of the Board of Directors (“Compensation Committee”). The 2003 Plan permits the granting of options (both incentive and nonqualified stock options) and shares of restricted common stock in such amounts and with such terms and conditions as the Compensation Committee shall determine, subject to the provisions of the 2003 Plan. DDi Corp. has reserved an aggregate of 5,540,120 shares of common stock and an aggregate of 1,250,000 shares of restricted stock (subject to adjustment as provided for in the plan) of DDi Corp. for issuance under the 2003 Plan. Stock options granted vest in equal installments, with one-third vesting immediately upon grant, one-third in eighteen months and one-third in thirty-six months.

The following table summarizes DDi Corp.’s stock option activities under the 2003 Plan for the years ended December 31, 2003 and 2004:


									Weighted
	Option						Outstanding		Average
	Available for			Number of			Price per		Exercise
	Grant			Options			Option		Price

Balance as of December 1, 2003		—			—		$	—	$	—
Shares reserved		4,191,617
Granted		(2,542,506	)		2,542,506		$	0.49 - $ 5.75	$	4.26
Exercised
Forfeited

Balance as of December 31, 2003		1,649,111			2,542,506		$	0.49 - $ 5.75	$	4.26
Additional Shares reserved		600,000
Granted		(389,100	)		389,100		$	3.88 - $10.45	$	6.23
Transferred in from contingent options		374,251			374,252		$	0.001 - $0.001	$	0.001
Exercised					(94,846	)	$	0.49 - $ 5.75	$	4.10
Forfeited		58,510			(58,510	)	$	0.001 - $10.45	$	4.91

Balance as of December 31, 2004		2,292,722			3,152,502		$	0.001 - $10.45	$	3.99

The following table summarizes information about DDi Corp. stock options outstanding at December 31, 2004:


Options Outstanding								Options Exercisable

				Weighted Average
Range of		Number		Remaining		Weighted Average		Number		Weighted Average
Exercise Prices		Outstanding		Contractual Life		Exercise Price		Exercisable		Exercise Price

	$0.001 - $0.001		370,511		3.7	$	0.001		255,738	$	0.001
	$ 0.49 - $ 0.49		475,716		8.4	$	0.49		169,656	$	0.49
	$ 3.88 - $ 5.75		2,171,675		8.8	$	5.04		860,999	$	5.05
	$10.45 - $10.45		134,600		9.3	$	10.45		44,835	$	10.45

	$0.001 - $10.45		3,152,502		8.2	$	3.99		1,331,228	$	3.68

F-36

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The number of options exercisable at December 31, 2003 was 680,835 which had a weighted average exercise price of $4.08.

The weighted-average fair value per option of the stock options granted under the 2003 Plan is $13.30 and $3.30 for the one month ended December 31, 2003 and the year ended December 31, 2004, respectively, using the Black-Scholes option-pricing model with the following assumptions:


	One Month
	Ended			Year Ended
	December 31,			December 31,
	2003			2004

Expected Dividend Yield		0	%		0	%
Expected stock price volatility		170	%		61.07	%
Risk-free Interest rate		2.83	%		3.10	%
Expected life (years)		4			4

Contingent Options

The Company also granted 577,928 shares of stock options under the 2003 Plan on December 19, 2003 which had conditions which must be met to allow for exercise (“Contingent Options”). The condition to be measured to determine the exercisability of the contingent options was to be based on the Company’s outstanding borrowings under the new Senior Credit Facility on December 12, 2005. Certain contingent options are exercisable if less than 50%, between 50% and 100% and 100% of the borrowings are repaid from the effective date of the new Senior Credit Facility (December 12, 2003). These three scenarios are discussed in detail below.

If less than 50% of the borrowings on the new Senior Credit Facility are repaid by December 12, 2005, all the options with a strike price of $0.49 (the “$0.49 Options”), all the options with a strike price of $5.00 (the “$5.00 Options”), and all the options with a strike price of $5.75 (the “$5.75 Options”) will vest and become exercisable and all the options with a strike price of $0.001 (the “$0.001 Options”) would be forfeited. If between 50% and 100% of the borrowings on the new Senior Credit Facility are repaid by December 12, 2005, for each of the $0.49 Options, $5.00 Options and $5.75 Options, 42,186 shares will vest and become exercisable and 50% of the $0.001 Options would vest and become exercisable. If 100% of the borrowings on the new Senior Credit Facility are repaid by December 12, 2005, all the $0.49 Options, $5.00 Options and $5.75 Options would be forfeited and all the $0.001 Options would vest and become exercisable. The Company estimated that 100% of the borrowings on the new Senior Credit Facility would be repaid by December 12, 2005 to calculate compensation expense related to the Contingent Options. Under this assumption, only the $0.001 Options would be exercisable. The Contingent Options are accounted for using variable accounting under APB 25 and are amortized under FIN 28, which requires measurement of compensation expense to be based on the market value of the Company’s common stock at the reporting date, December 31, 2003, of $14.70 per share. Compensation expense of $1.3 million relating to one-third of the $0.001 Options that immediately vested at the date of grant and amortization of compensation expense relating to one-third of the $0.001 Options vesting from December 19, 2003 through June 19, 2005 and one-third of the $0.001 options vesting from December 19, 2003 through December 19, 2006 was recorded in the one month ended December 31, 2003.

The new Senior Credit Facility was repaid in full on March 30, 2004 and, accordingly, all of the $0.49 Options, $5.00 Options and $5.75 Options were forfeited and all the $0.001 Options were vested and become exercisable on December 12, 2005. Compensation expense of $1.2 million related to the vested $0.001 Options were recorded in 2004 based on the market price of $11.20 per share of the Company’s common stock price at the date the contingency was lifted.

F-37

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes DDi Corp.’s contingent stock option activities under the 2003 Plan for the years ended December 31, 2003 and 2004:


	Contingent						Outstanding		Weighted
	Options			Number of			Price per		Average
	Available for			Contingent			Contingent		Exercise
	Grant			Options			Option		Price

Balance as of December 1, 2003		—			—		$	—	$	—
Shares reserved		1,318,791
Granted		(577,928	)		577,928		$	0.001 - $ 5.75	$	1.32
Exercised		—			—
Forfeited		—			—

Balance as of December 31, 2003		740,863			577,928		$	0.001 - $ 5.75	$	1.32
Additional Shares reserved		—			—
Cancelled due to lifting of contingency		(366,612	)		(203,676	)	$	0.49 - $ 5.75	$	3.75
Transferred to non-contingent options		(374,251	)		(374,252	)	$	0.001 - $0.001	$	0.001

Balance as of December 31, 2004		—			—		$	—	$	—

Restricted Stock

The Company granted 1,250,000 shares of restricted stock at par value of $0.001 on December 19, 2003 to certain officers and members of management of the Company. The shares vest in increments with 50% vesting on March 2, 2004 and 50% vesting on January 15, 2005 or by the employees’ election on June 1, 2005. The Company calculated compensation expense on these shares using the fair market value on the grant date which was $13.60. The amount relating to the 50% vesting on March 2, 2004 is amortized over the period from date of grant to the vesting date. The amount relating to the 50% vesting on January 15, 2005 or June 1, 2005 will be amortized over the period from March 3, 2004 to January 15, 2005 or June 1, 2005. During the fourth quarter of 2004, the Company entered into a severance agreement with the former Chief Financial Officer (see Note 24) which accelerated the vesting from February 15, 2005 to November 15, 2004 on 50% of the restricted stock, amounting to 43,750 shares, due to the former Chief Financial Officer. The compensation expense related to these shares was amortized over the period from March 2, 2004 through November 15, 2004. The Company recorded $1.5 million and $12.3 million of compensation expense during the one month ended December 31, 2003 and during the year ended December 31, 2004, respectively, related to the restricted stock.

Director Options

In connection with the Company’s emergence from Chapter 11 bankruptcy, on December 19, 2003, DDi Corp. adopted the DDi Corp. 2003 Directors Equity Incentive plan (the “2003 Directors Plan”) for non-employee directors of the Company. DDi has reserved an aggregate of 600,000 shares of common stock of DDi Corp. for issuance under the 2003 Directors Plan. The directors of the Company approved the grant of options to purchase 500,000 shares of common stock of the Company to the Company’s five non-employee directors (each receiving a grant of 100,000 options) at $5 per share on December 19, 2003 subject to the approval of the Directors’ Plan by the shareholders of the Company. On May 26, 2004, the shareholders approved the Directors Plan and, accordingly, the grant of these shares. The stock price on May 26, 2004 was $7.57 and is used to compute the compensation expense related to the stock options. The vesting on these shares is 40% immediately upon approval of grant by shareholders and 20% each year thereafter on December 19th of each year from 2004 through 2006. The Company recorded compensation expense of $0.8 million for the year ended December 31, 2004, related to these options.

F-38

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred Compensation

Grants of stock options and grants of Contingent Options and Restricted Stock under the 2003 Plan which were issued at exercise prices that were less than the fair market values of the Company’s common stock at the date of the grants have resulted in compensation expense. The fair market values of the Company’s common stock at the date of grants for those options and stock issued at less than fair market value is summarized as follow:


		Market Value of Company’s
		Common Stock at Date of Grant

		Granted During			Granted During
		the One Month			Year
		Ended			Ended
		December 31,			December 31,
		2003			2004

Stock Options under 2003 Plan:
	Granted December 19, 2003	$	13.60
	Granted April 1, 2004				$	11.04
Contingent Options under 2003 Plan:
	Granted December 19, 2003	$	14.70	(a)
	Contingency lifted March 30, 2004				$	11.20
Restricted Stock
	Granted December 19, 2003	$	13.60
Director’s Options
	Shareholders approved May 26, 2003				$	7.57


(a)	Variable accounting under FIN 44 is used, therefore the balance sheet date is used as the measurement date.

The grants of stock options, Contingent Options and restricted stock have resulted in deferred compensation expenses and non-cash compensation charge summarized as follow:


		One Month		Year
		Ended		Ended
		December 31,		December 31,
		2003		2004

		in million		in million
Deferred Compensation Expense for grants of stock options, Contingent Options and restricted stock (net of adjustments and cancellation)		$	35.0	$	0.03

Non-Cash Compensation Charge for grants of stock options, Contingent Options and restricted stock:
	Cost of Good Sold	$	5.8	$	11.8
	Sales and Marketing Expenses		1.0		2.4
	General and administrative expenses		1.5		4.1

Total non-cash compensation charge		$	8.3	$	18.3

The deferred compensation expense for the Contingent Options was adjusted to reflect the fair value of the Company’s common stock at the time the contingency was lifted on March 30, 2004, the new measurement date. Accordingly, the Company’s common stock value of $11.20 per share at March 30, 2004 was used in place of the stock value of $14.70 at December 31, 2003.

F-39

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


16.	INCOME TAX MATTERS

The provision (benefit) for income taxes in the year ended December 31, 2002, and for the eleven months ended November 30, 2003, and one month ended December 31, 2003 and the year ended December 31, 2004 from continuing operations consist of the following:


		Predecessor DDi Corp.					Reorganized DDi Corp.

				Eleven Months			One Month
				Ended			Ended			Year Ended
		December 31,		November 30,			December 31,			December 31,
		2002		2003			2003			2004

Current:
	Federal	$	—	$	—		$	—		$	340
	State		—		—			—			—
	Foreign		534		828			(39	)		1,644

			534		828			(39	)		1,984

Deferred:
	Federal		12,250		—			—			—
	State		4,185		—			—			—
	Foreign		—		(768	)		—			—

			16,435		(768	)		—			—

Provision (benefit) for income taxes from continuing operations		$	16,969	$	60		$	(39	)	$	1,984

Deferred income tax assets and liabilities from continuing operations consist of the following at December 31:


		Reorganized DDi Corp.

		December 31,

		2003			2004

Deferred tax assets:
	Net operating loss carryforwards		39,592			36,186
	Trade receivables		227			199
	Deferred compensation		3,347			7,516
	Tax credits		5,051			6,413
	Accrued liabilities		4,394			5,111
	Capitalized research and development costs		3,104			5,494
	Capital loss carryforwards		29,200			30,423
	Other		1,818			2,655

			86,733			93,997

Deferred tax liabilities:
	Property, plant and equipment		(214	)		2,406
	Intangible assets		(7,871	)		(6,825	)

			(8,085	)		(4,419	)

Valuation allowance			(77,985	)		(89,037	)

	Net deferred tax assets from continuing operations	$	663		$	541

F-40

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred tax assets and liabilities, and refunds and liabilities for prior tax returns at November 30, 2003 are based on management’s best estimate of the ultimate settlement that will be accepted by tax authorities. Management will continually evaluate these matters. At the date of any material change in management’s best estimate of items related to income tax refunds and liabilities prior to November 30, 2003, and at the date that these items are settled with the tax authorities, any refund or liability previously recognized is adjusted to decrease or increase the remaining balance of goodwill established at November 30, 2003 through fresh-start accounting.

The income tax provision (benefit) from continuing operations differs from the amount of income tax determined by applying the U.S. federal statutory income tax rate to the income (loss) from continuing operations before income taxes as below:


		Predecessor DDi Corp.						Reorganized DDi Corp.

					Eleven Months			One Month
		Year Ended			Ended			Ended			Year Ended
		December 31,			November 30,			December 31,			December 31,
		2002			2003			2003			2004

Computed “expected” tax expense (benefit) from continuing operations		$	(68,251	)	$	62,778		$	(3,854	)	$	(8,109	)
Increase (decrease) in income taxes resulting from:
	State taxes, net of credits, valuation allowance and federal tax benefit		6,345			—			—			—
	Goodwill amortization and impairment		45,045			700			—			—
	Gain on extinguishment of debt		—			(71,355	)		—			—
	Fresh start accounting adjustments		—			(34,940	)		—			—
	Reorganization expenses		—			4,550			525			—
	Non-deductible officer’s compensation		—			—			—			700
	Research and development credits		(820	)		(484	)		(41	)		(325	)
	Increase in valuation allowance		33,143			39,231			3,205			9,108
	Other		1,507			(420	)		126			610

Provision (benefit) for income taxes for continuing operations		$	16,969		$	60		$	(39	)	$	1,984

At December 31, 2004, the Company has U.S. federal and various state net operating loss (“NOL”) carryforwards of approximately $95 million and $34 million, respectively. The federal and state NOLs begin expiring in 2021 and 2005, respectively. Approximately $1 million of state NOLs expire in 2005.

At December 31, 2004, the Company has U.S. federal and state research and experimentation (“R&E”) credits of approximately $3.6 million and $2.8 million, respectively. The federal R&E credits begin to expire in 2018 and the state R&E credits carryover indefinitely.

At December 31, 2004, the Company had a United States federal capital loss carryforward of approximately $83 million, which expires in 2008. Generally, capital losses can only be utilized to offset capital gains.

Substantial changes in the Company’s ownership occurred in December 2003; as such, there is an annual U.S. federal and state limitation on the amount of the NOL and other tax attribute carryforwards incurred prior to the ownership change which can be utilized in subsequent years. The annual U.S. federal and state limitation is approximately $12.9 million and $4.8 million, respectively. The amounts of the federal NOLs and credits subject to this limitation are $91 million and $3.3 million, respectively. The amounts of the state NOLs

F-41

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and credits subject to this limitation are $33 million and $2.5 million, respectively. The amount of the federal capital loss carryforward subject to this limitation is $83 million. Pursuant to Sections 382 and 383 of the Internal Revenue Code, the utilization of NOLs and other tax attributes may be subject to further substantial limitations if certain ownership changes occur in future periods. The Company does not believe an ownership change occurred as of December 31, 2004 that would further limit the Company’s utilization of its NOLs credits, and/or capital loss carryforwards.

Based upon the substantial net operating loss carryovers and expected future operating results, management concluded that it is more likely than not that substantially all of the deferred tax assets at December 31, 2004 may not be realized. Consequently, the Company established a valuation allowance for these deferred tax assets that are not expected to be realized. In addition, the Company expects to provide a full valuation allowance on future tax benefits realized in the United States until it can sustain a level of profitability that demonstrates its ability to utilize the assets. Any reduction of a valuation allowance that related to net deferred tax assets that were in existence as of applying fresh-start accounting, will be recognized as a decrease to the remaining balance of goodwill established through fresh-start accounting.

U.S. income taxes have not been provided on approximately $5.9 million of undistributed earnings of foreign subsidiaries since management considers these earnings to be invested indefinitely or substantially offset by foreign tax credits. It is not practicable to estimate the amount of unrecognized deferred U.S. taxes on these undistributed earnings.

The Company is currently under examination by the Internal Revenue Service, various foreign taxing authorities and various state taxing authorities. Any refunds and/or liabilities resulting from audits from periods prior to applying fresh-start accounting may result in cash refunds and/or cash payments and a corresponding decrease or increase to goodwill. The Company believes the results of these audits will not have a material impact on the Company’s financial position, cash flows or results of operations.

On October 22, 2004, the American Jobs Creation Act of 2004 (“AJCA”) was signed into law. The AJCA provides several incentives for US multinational corporations and US manufacturers. Subject to certain limitations, the incentives include an 85% dividend received deduction for certain dividends from controlled foreign corporations that repatriate accumulated income abroad, and a deduction for domestic qualified production activities taxable income. The US Treasury Department is expected to issue guidance with regards to these provisions. Until this guidance is issued, we will not be able to evaluate whether to take advantage of this opportunity or the potential impact on our income tax provision, if any.


17.	COMMITMENTS, CONTINGENCIES AND GUARANTEES

Environmental matters — The Company’s operations are regulated under a number of federal, state and local environmental laws and regulations, which govern, among other things, the discharge of hazardous materials into the air and water as well as the handling, storage and disposal of such materials. Compliance with these environmental laws are major considerations for all printed circuit board manufacturers because metals and other hazardous materials are used in the manufacturing process. In addition, because the Company is a generator of hazardous wastes, the Company, along with any other person who arranges for the disposal of such wastes, may be subject to potential financial exposure for costs associated with an investigation and remediation of sites at which it has arranged for the disposal of hazardous wastes, if such sites become contaminated. This is true even if the Company fully complies with applicable environmental laws. In addition, it is possible that in the future new or more stringent requirements could be imposed. Management believes it has complied with all applicable environmental laws and regulations. There have been no claims asserted nor is management aware of any unasserted claims for environmental matters.

Operating leases — The Company has entered into various operating leases principally for office space and equipment that expire at various dates through 2011. Future annual minimum lease payments under all

F-42

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

non-cancelable operating leases with initial or remaining terms of one year or more consist of the following at December 31, 2004 (in thousands):


			Reorganized
			DDi Corp.

Year Ending December 31,
		2005	$	5,773
		2006		5,149
		2007		4,412
		2008		3,633
		2009		2,991
		Thereafter		3,386

	Future minimum lease payments		$	25,344

Rent expense for the year ended December 31, 2002 and the eleven months ended November 30, 2003 was approximately $7.0 million and $5.7 million, respectively, for Predecessor DDi Corp.

Rent expense for the one month ended December 31, 2003 and the year ended December 31, 2004 was approximately $0.3 million and $4.0 million, respectively, for Reorganized DDi Corp.

Litigation — The Company is a party to various legal actions arising in the ordinary course of its business. The Company believes that the resolution of these legal actions will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Guarantees — During the year ended December 31, 2004, the Company entered into an agreement that required the Company to guarantee the contingent consideration to be paid related to DDi Europe’s 2002 purchase of Kamtronics Limited. The payments are to be paid by DDi Europe through June 2006, and in the event of default, the Company has guaranteed to remedy an aggregate amount not to exceed £0.3 million (approximately U.S.$0.6 million).

Retirement plans — The Company has various retirement plans available to eligible employees. Participants can elect to contribute 1% to 15% of their annual compensation to the retirement plans. For domestic employees, these contributions are made under Section 401(k) of the Internal Revenue Code. Depending on the plan, through May 2002 the Company matched employee contributions at $0.25 per $1.00 contributed, subject to a maximum per employee participant, or the Company contributes from 3% to 10% of the eligible employee’s annual compensation. For the plan year ended December 31, 2002, employer contributions totaled $0.2 million. Employer contributions to the retirement plans have been suspended since May 2002.

Key Employee Retention Program — In December 2002, the Company executed a plan to retain employees under the Key Employee Retention Program (“KERP”). The KERP is a discretionary retention bonus program which paid a stay bonus in three installments, on December 31, 2002, July 1, 2003 and January 1, 2004. The stay bonus was accrued based on the participant’s service as an employee to the Company. As of December 31, 2002, the Company incurred $1.5 million of expenses. For the eleven months ended November 30, 2003, the Company incurred $2.8 million of expenses and for the one month ended December 31, 2003, the Company incurred $0.2 million of expenses. All of the expenses incurred during 2003 relate to the final two installment payments of the stay bonus. These amounts have been classified as reorganization expenses (see Note 19). All amounts were paid by December 31, 2004.

Indemnification of Directors and Officers — The Company’s certificate of incorporation provides that it will indemnify its directors and officers to the fullest extent permitted by the Delaware General Corporation Law. The Company has obtained liability insurance for its directors and officers with respect to liability arising

F-43

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

out of their capacity or status as directors and officers against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding. Currently, several of the Company’s current and former officers and directors are named defendants in several securities class action complaints and other litigation. At this time, management believes the Company will not incur significant costs associated with these matters.


18.	RESTRUCTURING AND OTHER RELATED CHARGES


	*2002 Charges*

In June 2002, management and the Company’s Board of Directors approved a plan to close its Dallas, Texas and Moorpark facilities and selected design centers. In conjunction with this plan, DDi Corp. recorded charges in the second quarter of 2002 totaling $17.2 million. Of these amounts, $3.4 million represented restructuring related inventory impairments and were therefore reflected as a component of gross profit. The remaining $13.8 million of charges were classified as “Restructuring and other related charges.” Such charges consist of $8.2 million relating to impairments of net property, plant and equipment and $5.6 million in accrued restructuring expenses. Such accrued expenses represent $2.6 million in severance and related expenses associated with the involuntary termination of the 138 staff and management employees from the plant closures and $3.0 million in other exit costs. The closure of the facilities was effectively complete by December 31, 2002.

In September 2002, management and the Company’s Board of Directors approved a plan to write-down unutilized assets, streamline certain manufacturing facilities, and eliminate certain sales offices, including the office based in Tokyo, Japan. In conjunction with this plan, DDi Corp. recorded charges in the third quarter of 2002 totaling $8.7 million, which were classified as “Restructuring and other related charges.” Such charges consisted of $7.1 million relating to impairments of net property, plant and equipment, and $1.6 million in accrued restructuring expenses. Such accrued restructuring expenses represent $1.0 million in estimated facilities closure costs such as minimum lease payments through the scheduled maturities of the non-cancelable real property operating leases and the estimated costs of readying facilities for lease or sale and $0.6 million in other exit costs. The streamlining and closure of the facilities was effectively complete by December 31, 2002.

In December 2002, DDi implemented further restructuring initiatives to scale down its Anaheim, California facility, resulting in restructuring charges of $2.7 million. Such charges consist of $0.5 million relating to impairment of net property, plant and equipment, $1.6 million in accrued restructuring expenses and $0.6 million in severance and other exit costs. Of the amount of restructuring expenses accrued, $1.1 million was related to severance costs associated with the involuntary termination of 153 staff and management employees and $0.5 million was related to other exit costs.

During 2002, DDi Corp. recorded impairments in net property, plant and equipment aggregating $15.8 million. These calculated impairments were made in accordance with SFAS No. 144, based upon a detailed review of the individual long-lived assets in the closed facilities. These assets were determined to be obsolete or redundant equipment with no residual value, after consideration of estimated disposal costs. Accordingly, these assets were written down to zero value.


	*2003 Charges*

For the eleven months ended November 30, 2003, DDi Corp. recorded charges totaling $5.5 million, which were classified as “Restructuring and other related charges.” Such charges primarily represent costs related to streamlining manufacturing facilities, increasing operating efficiencies and revision of estimates from previously recorded restructuring charges and included $1.6 million in accrued restructuring expenses and $0.9 million in severance and other exit costs. The charges also consist of $1.7 million relating to

F-44

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

impairment of inventory which are reflected as a component of cost of goods sold, $1.0 million relating to impairment of net property, plant and equipment primarily related to the Dallas-based electronics enclosure operations the Company sold, $0.8 million relating to impairment of net property, plant and equipment primarily related to the closure of the Garland, Texas based operations, $0.3 million in facilities closure costs, $0.2 million in other exit costs and a non-cash benefit of ($1.0) million resulting principally from a reduction in estimated net lease exit costs recorded as part of the operational restructuring initiatives undertaken in 2002. The accrued restructuring expenses of $1.6 million relate to other exit costs.

The charges recorded in the one month ended December 31, 2003 also represent revision of estimates from previously recorded restructuring charges of $0.4 million and consisted of $0.1 million in other exit costs and $0.3 million in accrued restructuring expenses which relate to costs associated with readying facilities for disposition.


	*2004 Charges*

For the year ended December 31, 2004, DDi Corp. recorded charges totaling $0.9 million which were classified as “Restructuring and other related charges.” Such charges primarily represent costs related to lowering the cost structure of its manufacturing operations by reducing the workforce at its Northern California manufacturing facility and increasing operational efficiencies. The charges consist of $1.0 million relating to severance costs and $0.3 million in exit costs, offset by a benefit of $0.4 million in adjustments to the estimate for facilities closure costs.

Total accrued restructuring expenses at December 31, 2004 were $0.4 million. These accrued restructuring expenses represent $0.1 million in other exit costs and $0.3 million associated with readying facilities for disposition. The Company expects to pay these accrued amounts through 2005.


19.	REORGANIZATION EXPENSES

During the fourth quarter of 2002, the Company initiated plans to restructure debt and retain employees. These efforts resulted in reorganization charges of $2.1 million. Of these amounts, $0.6 million is related to professional fees and $1.5 million is related to personnel retention costs under the Dynamic Details Key Employee Retention Program (“KERP”) (see Note 17).

During the eleven months ended November 30, 2003, the Company recorded reorganization charges of $7.4 million. These charges consist of $4.9 million related to professional fees and other costs associated with the reorganization. The charges also include $2.5 million related to personnel retention costs under the Dynamic Details KERP. In the one month ended December 31, 2003, the reorganization charges totaled $0.5 million and consisted of $0.3 million related to the write-off of debt issuance costs and $0.2 million related to personnel retention costs under the Dynamic Details KERP.

During the year ended 2004, the Company recorded reorganization charges of $0.8 million. These charges were relating to professional fees and other costs associated with the reorganization of Reorganized DDi Corp’s debt structure as well as charges relating to personnel retention costs under the Dynamic Details KERP. There are no accrued reorganization expenses at December 31, 2004.


20.	REORGANIZATION PROCEEDING EXPENSES

During the eleven months ended November 30, 2003, the Company recorded reorganization charges relating to the Chapter 11 proceedings of $14.0 million. These charges consist of $8.8 million related to professional fees directly associated with the Chapter 11 proceedings, $6.2 million related to the write-off of debt issuance costs on the 5.25% Convertible Subordinated Notes, 6.25% Convertible Subordinated Notes, 12.5% Senior Discount Notes, and 16% Capital Senior Accreting Notes, and a non-cash benefit of $1.0 million related to the reversal of accrued interest on the 12.5% Senior Discount Notes. In December 2003, the

F-45

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company recorded reorganization charges relating to the Chapter 11 proceedings of $1.1 million which consist of $0.1 million related to the write-off of debt issuance costs on the 16% Senior Accreting Notes and $1.0 million related to professional fees directly associated with the Chapter 11 proceedings.


21.	DISCONTINUED OPERATIONS

The Company announced the discontinuation of its European business, and the placement into administration of DDi Europe, on February 9, 2005. The Company’s Board of Directors had previously concluded that the valuation of DDi Europe did not justify any further investment by the Company in support of its European subsidiaries. The Company subsequently announced it was unable to reach a satisfactory agreement on restructuring the terms of, and obtaining a further extension of credit under, the DDi Europe credit facilities. The Company anticipates the disposition of DDi Europe to be completed in the first quarter of 2005, resulting in a non-cash gain on disposition as DDi Europe’s net liabilities exceed its net assets at December 31, 2004 by $12.3 million. The Company has only guaranteed payment of approximately $0.6 million of such liabilities (see Note 17).

Accordingly, pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and EITF Issue No. 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations,” DDi Europe has been accounted for as a discontinued operation. In accordance with SFAS No. 144, the results of operations presented in the Consolidated Financial Statements have been reclassified to reflect DDi Europe as a discontinued operation. As a discontinued operation, revenues, expenses and cash flows of DDi Europe have been aggregated and reclassified separately from the respective captions of continuing operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows. Assets and liabilities of DDi Europe have been aggregated and classified as held for disposal under current assets, non-current assets, current liabilities, and non-current liabilities, respectively.

All other references to operating results reflect the ongoing operations of DDi Corp. and its subsidiaries, excluding DDi Europe, (collectively, the Company). In addition to the reclassification of DDi Europe from the ongoing operations of the Company, the Company’s Series A Preferred Stock, the underlying liability of which depends solely on value, as defined in DDi Europe, has been written down to its estimated fair market value of zero as of December 31, 2004, and the related estimated liability for accrued but unpaid dividends has been reversed in full in the quarter ended December 31, 2004 and is also included with the results of discontinued operations (See Note 9.)

F-46

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The results of operations of the discontinued business of DDi Europe is summarized as follows:

DDi Europe Statements of Operations

(In thousands)


			Predecessor						Reorganized

						Eleven Months			One Month
			Year Ended			Ended			Ended			Year Ended
			December 31,			November 30,			December 31,			December 31,
			2002			2003			2003			2004

Net sales			$	63,214		$	76,779		$	6,780		$	99,775
Cost of goods sold				58,647			71,336			7,770			90,927

		Gross profit (loss)		4,567			5,443			(990	)		8,848
Operating expenses:
	Sales and marketing			3,293			2,814			1,330			4,957
	General and administration			5,986			7,041			762			10,513
	Goodwill impairment			70,300			9,645			—			7,252
	Restructuring and other related charges			1,374			—			—			7,044
	Reorganization expenses			175			1,568			101			329

Operating loss				(76,561	)		(15,625	)		(3,183	)		(21,247	)
Interest expense and other expense, net				2,225			1,862			536			750
Fresh start accounting adjustments				—			(3,201	)		—			—

Loss from discontinued operations before income taxes				(78,786	)		(14,286	)		(3,719	)		(21,997	)
Income tax benefit (expense)				2,666			(599	)		684			1,284

Net loss from discontinued operations			$	(76,120	)	$	(14,885	)	$	(3,035	)	$	(20,713	)

F-47

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The statement of financial position of the discontinued business of DDi Europe at December 31, 2003 and December 31, 2004 is as follows:

DDi Europe Balance Sheets

(In thousands)


				December 31,

				2003		2004

ASSETS
Current assets:
	Accounts receivable, net			$	15,279	$	18,973
	Inventories				9,682		11,874
	Prepaid expenses and others				1,350		2,169

		Total current assets			26,311		33,016
Property, plant and equipment, net					31,252		26,243
Goodwill					5,623		—
Other					94		2

	Total assets			$	63,280	$	59,261

LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current liabilities:
	Current maturities of capital lease obligations			$	253	$	325
	Facilities Agreement				—		27,454
	Revolving credit facilities				11,809		13,552
	Accounts payable				15,316		16,338
	Accrued expenses and other liabilities				7,511		10,184

		Total current liabilities			34,889		67,853
Long-term debt and capital lease obligations					25,461		123
Deferred income tax liability					1,196		—
Notes payable and other					1,040		3,602

		Total liabilities			62,586		71,578

			Total stockholder’s equity (deficit)		694		(12,317	)

				$	63,280	$	59,261

F-48

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


22.	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (in thousands)


		Predecessor DDi Corp.				Reorganized DDi Corp.

				Eleven Months		One Month
		Year Ended		Ended		Ended		Year Ended
		December 31,		November 30,		December 31,		December 31,
		2002		2003		2003		2004

CASH PAYMENTS FOR:
	Income taxes	$	630	$	366	$	—	$	906

	Interest	$	14,957	$	4,831	$	553	$	2,130

	Reorganization proceeding expenses	$	—	$	5,295	$	1,962	$	1,543


23.	RELATED PARTY TRANSACTIONS

The Company leases a facility used for engineering and assembly from D&D Tarob Properties, LLC (“D&D”), an entity owned or controlled by the Company’s former Chairman and Director. During the year ended December 31, 2002, the Company paid $0.7 million, for the eleven months ended November 30, 2003, the Company paid $0.7 million, for the one month ended December 31, 2003 the Company paid $0.1 million, and the Company paid $0.9 million for the year ended December 31, 2004 to D&D under this lease agreement.

On November 30, 2001, pursuant to the terms of a Secured Promissory Note and Pledge Agreement, the Company loaned the President, Chief Executive Officer a recourse note in the amount of $0.6 million bearing interest at a rate of 2.7% per annum, compounded quarterly, which matured in November 2002 but has not been repaid to date. The note is collateralized by shares of the Company’s common stock. As of December 31, 2004, the outstanding principal and accrued interest due under the note was approximately $0.7 million.


24.	OFFICER’S SEVERANCE

During the fourth quarter of 2004, the Company incurred officer’s severance expense of $676,000 related to the severance agreement entered into between the Company and the former Chief Financial Officer. At December 31, 2004, the accrued balance related to this expense is $556,000 and is expected to be paid through 2005.


25.	GOODWILL AND INTANGIBLES

On January 1, 2002, the Company adopted SFAS Nos. 141 and 142. SFAS No. 141 “Business Combinations” requires that the purchase method of accounting be used for all business combinations, establishes specific criteria for recognizing intangible assets separately from goodwill and requires certain disclosures regarding reasons for a business combination and the allocation of the purchase price paid. SFAS No. 142 “Goodwill and Other Intangible Assets” establishes that goodwill and certain intangible assets will not be amortized and the amortization period of certain other intangible assets will no longer be limited to forty years. In addition, SFAS No. 142 requires that goodwill and intangible assets that are not amortized be tested for impairment at least annually. The Company completes its annual impairment test in the fourth quarter of each fiscal year.

Based on the Company’s initial transition impairment testing during the first quarter of 2002, no impairment was recognized. Due to a continued stock price decline during both the second and third quarters of 2002, tests of impairment were performed in each of these quarters. The analyses indicated that the book value of goodwill during each quarter was in excess of its fair value, as determined by the Company’s market capitalization. After assessing the goodwill impairment at a reporting unit level, the Company calculated and

F-49

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

recorded goodwill impairment charges of $45.0 million and $7.0 million, for DDi Corp. in the quarters ended June 30 and September 30, 2002, respectively. Due to evolving financial and other factors affecting the Company’s business, primarily the Company’s then discussions with its senior lenders, convertible subordinated noteholders and other stakeholders, and based on business valuations that indicated the book value of goodwill was in excess of its fair value at December 31, 2002, the Company calculated and recorded goodwill impairment charges during the fourth quarter of 2002 of $76.7 million.

In the second and third quarters of 2003, the Company amended the contingent consideration relating to a prior purchase transaction and replaced it with a settlement of $2.0 million to be paid over the next three years. The amounts were originally capitalized as additional purchase price to goodwill. However, due to evolving financial factors affecting the Company’s business, primarily the Company’s then discussions with its senior lenders, the DDi Corp. convertible subordinated noteholders and other stakeholders, and based on business valuations that indicated the book value of goodwill was in excess of its fair value, the Company recorded goodwill related impairment charges of $2.0 million during the quarter ended June 30, 2003.

As part of fresh start accounting, an allocation of the reorganization value resulted in goodwill of $99.8 million (with no tax basis) and identified intangible assets totaling $24.9 million. This balance of identified intangible assets consists of $23.0 million relating to the customer relationships which is amortized over its estimated useful life of five years, and the remaining $1.9 million relates to the backlog which was amortized over its estimated useful life of three months. The amount relating to backlog is reported as a component of cost of goods sold. Amortization related to customer relationships and backlog for the one month ended December 31, 2003, was $0.4 million and $1.1 million, respectively. Amortization related to customer relationships and backlog for the year ended December 31, 2004, was $4.6 million and $0.8 million, respectively.

The changes in the carrying amount of goodwill for the one month ended December 31, 2003 and the year ended December 31, 2004 are as follows (in thousands):


	Reorganized DDi Corp.

	One Month
	Ended		Year Ended
	December 31,		December 31,
	2003		2004

Beginning balance	$	99,829	$	99,829
Goodwill increases (decreases), primarily due to adjustments to fresh start accounting		—		(454	)
Impairment charges		—		—

Ending balance	$	99,829	$	99,375


26.	SUBSEQUENT EVENTS

Discontinuation of European Business

The Company announced the discontinuation of its European business, and the placement into administration of DDi Europe, on February 9, 2005. Pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and EITF Issue No. 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations,” DDi Europe has been accounted for as a discontinued operation. In accordance with SFAS No. 144, the results of operations presented in the Consolidated Financial Statements have been presented to reflect DDi Europe as a discontinued operation. As a discontinued operation, revenues, expenses and cash flows of DDi Europe have been aggregated and reclassified separately from the respective captions of continuing operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows. Assets and liabilities of

F-50

DDi CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

DDi Europe have been aggregated and classified as held for disposal under current and non-current assets, and current and non-current liabilities, respectively. See Note 21.

Declaration of Dividend

On February 23, 2005, the Board of Directors of the Company declared a dividend on the Company’s Series B Preferred Stock, in the amount of approximately $3.6 million, for dividends accrued and payable as of March 31, 2005. As permitted by the Certificate of Designation of the Series B Preferred Stock, the Company irrevocably elected to pay the dividend in the form of shares of the Company’s common stock. The Company expects to issue the common stock to pay the dividend on or about March 31, 2005. In accordance with the Certificate of Designation of the Series B Preferred Stock, the common stock issued will be valued at a 5% discount to the weighted-average market price for the 20 trading days prior to March 31, 2005.

F-51

FINANCIAL STATEMENT SCHEDULE

The financial statement Schedule II — VALUATION AND QUALIFYING ACCOUNTS is filed as part of this Form 10-K.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

DDi CORP.


		Predecessor DDi Corp.

		Balance
		at		Charged					Balance at
		Beginning		to					End of
		of Period		Income		Deductions			Period

		(In thousands)
Allowance for Doubtful Accounts
	Year ended December 31, 2002	$	4,278	$	690	$	(3,527	)	$	1,441
	Eleven months ended November 30, 2003	$	1,441	$	413	$	(502	)	$	1,352


		Reorganized DDi Corp.

		Balance
		at		Charged					Balance at
		Beginning		to					End of
		of Period		Income		Deductions			Period

		(In thousands)
Allowance for Doubtful Accounts
	One month ended December 31, 2003	$	1,352	$	2	$	(278	)	$	1,076
	Year ended December 31, 2004	$	1,076	$	426	$	77		$	1,579

F-52

EXHIBIT INDEX


Exhibit			Description

	2	.1	Modified First Amended Joint Plan of Reorganization Dated As Of August 30, 2003.(1)

	2	.2	Order Confirming Debtors’ Modified First Amended Joint Plan of Reorganization Dated as of August 30, 2003.(1)

	3	.1	Amended and Restated Certificate of Incorporation of DDi Corp.(1)

	3	.2	Certificate of Designation of DDi Corp.(1)

	3	.3	Certificate of Designation of Series B Preferred Stock of DDi Corp.(2)

	3	.4	Amended and Restated Bylaws of DDi Corp.(3)

Material Contracts Relating to Management Compensation Plans or Arrangements

	10	.1	Dynamic Details Incorporated Senior Management Bonus Program.(19)

	10	.2	Dynamic Details, Inc. Key Employee Retention Plan.(4)

	10	.3	Dynamic Details, Inc. Severance Plan for Key Employees and Summary Plan Description Effective December 19, 2002.(4)

	10	.4	DDi Corp. Amended and Restated Severance Plan for Key Employees Effective December 19, 2004.(5)

	10	.5	2003 Directors Equity Incentive Plan.(6)

	10	.6	Form of Stock Option Agreement (2003 Directors Equity Incentive Plan).(6)

	10	.7	DDi Corp. 2003 Management Incentive Plan.(7)

	10	.8	Form of Restricted Stock Agreement (2003 Management Equity Incentive Plan)(8)

	10	.9	Form of Stock Option Agreement (2003 Management Equity Incentive Plan)(8)

	10	.10	Form of Amendment to Restricted Stock Agreement (with schedule of parties attached).(9)

	10	.11	Severance Agreement and General Release dated November 17, 2004 between DDi Corp. and Joseph P. Gisch.(10)

	10	.12	Employment Letter dated November 1, 2004 between DDi Corp. and Mikel Williams.(5)

	10	.13	Non-Solicitation Agreement dated December 12, 2003 by and between Bruce McMaster and Dynamic Details, Inc.(7)

Other Material Contracts

	10	.14	Indenture dated as of December 12, 2003 with respect to DDi Capital Senior Accreting Notes due 2009.(1)

	10	.15	Senior Discount Warrant Agreement, dated as of December 12, 2003.(1)

	10	.16	Senior Discount Warrant Escrow Agreement, dated as of December 12, 2003.(1)

	10	.17	Registration Rights Agreement, dated as of December 12, 2003, relating to DDi Corp. Secured Lender Warrants.(1)

	10	.18	Registration Rights Agreement, dated as of December 12, 2003, relating to DDi Corp. Senior Discount Warrants.(1)

	10	.19	Registration Rights Agreement, dated as of December 12, 2003, relating to Series A Preferred Stock of DDi Corp.(1)

	10	.20	Registration Rights Agreement, dated as of December 12, 2003, relating to Preferred Stock of DDi Europe.(1)

	10	.21	Amendment and Restatement Deed, dated November 15, 2001, relating to a Facilities Agreement dated 27 May 1999, among(i) DDi Europe Limited, formerly known as MCM Electronics Limited, (ii) the additional borrowers named therein, (iii) the other charging parties named therein and (iv) the Governor and Company of the Bank of Scotland.(11)

	10	.22	Working Capital Letter, dated November 15, 2001, among(i) DDi Europe Limited, (ii) the additional borrowers named therein and (iii) the Governor and Company of the Bank of Scotland.(11)

	10	.23	Composite Guarantee and Debenture, dated November 15, 2001, among(i) DDi Europe Limited and the additional charging companies named herein and (ii) the Governor and Company of the Bank of Scotland.(11)


Exhibit			Description

	10	.24	Real Property Master Lease Agreement dated January 1, 1996 between James I. Swenson and Susan G. Swenson, as Trustees of the Swenson Family Trust, and Details, Inc.(12)

	10	.25	Personal Property Master Lease Agreement dated January 1, 1996 between James I. Swenson and Susan G. Swenson, as Trustees of the Swenson Family Trust, and Details, Inc.(12)

	10	.26	Amendment Number One to Real Property Master Lease Agreement dated January 1, 1997 between James I. Swenson and Susan G. Swenson, as trustees of the Swenson Family Trust and Details, Inc.(13)

	10	.27	Lease dated June 15, 1994, by and between Michael J. Irvin, Trustee of the Davila Living Trust dated March 13, 1989 and Colorado Springs Circuits, Inc., regarding 6031-6035 Galley Road, Colorado Springs, Colorado(14)

	10	.28	Lease dated June 15, 1994, by and between Michael J. Irvin, Trustee of the Davila Living Trust dated March 13, 1989 and Colorado Springs Circuits, Inc., regarding 2115 Victor Place, Colorado Springs, Colorado(14)

	10	.29	Lease dated June 15, 1994, by and between Michael J. Irvin, Trustee of the Davila Living Trust dated March 13, 1989 and Colorado Springs Circuits, Inc., regarding 980 Technology Court, Colorado Springs, Colorado.(14)

	10	.30	Lease Agreement dated July 22, 1991 between Geomax and Dynamic Circuits, Inc.(15)

	10	.31	Lease dated March 20, 1997 by and between Mercury Partners 30, Inc. and Dynamic Circuits, Inc.(15)

	10	.32	Amendment to Lease Agreement, dated as of November 9, 2001 by and between D & D Tarob Properties, LLC and Dynamic Details Incorporated Silicon Valley.(16)

	10	.33	Lease dated November 12, 1997 by and between Miller and Associates and Dynamic Circuits Inc.(13)

	10	.34	Lease dated August 18, 1998, by and between Mrs. Alberta M. Talley, Trustee and Dynamic Circuits, Inc.(15)

	10	.35	Lease Agreement dated April 14, 1998 by and between Continental Electric Contractors and Cuplex, Inc.(9)

	10	.36	Lease Agreement dated as of May 13, 1996, as amended by a First Lease Amendment dated August 7, 1996, between 410 Forest Street Realty Trust and Cuplex, Inc.(15)

	10	.37	Lease Agreement dated as of November 2, 1995, between Trammell Crow International Partners and Cuplex, Inc.(13)

	10	.38	Share Purchase Agreement dated October 24, 2002 by and between H.N. Goff, G.P. Harvey and H.L. Williams and DDi Europe Limited.(4)

	10	.39	Tax Deed dated October 24, 2002 by and between H.N. Goff, G.P. Harvey and H.L. Williams and DDi Europe Limited.(4)

	10	.40	Minority Share Purchase Agreement dated October 24, 2002 by and between Jamie Fuller and others and DDi Europe Limited.(4)

	10	.41	Stock Purchase Agreement dated January 21, 2004 by and among DDi Corp. and the purchasers identified on the schedule of investors attached thereto.(7)

	10	.42	Registration Rights Agreement dated January 21, 2004 by and among DDi Corp. and certain purchasers of DDi Corp.’s capital stock listed on the signature pages thereof.(7)

	10	.42	Purchase Agreement dated as of March 29, 2004, by and between DDi Corp. and each of the purchasers whose names and addresses are set forth on the signature page thereof.(2)

	10	.42	Credit Agreement dated as of March 30, 2004, among Dynamic Details, Incorporated, Dynamic Details, Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley, and Laminate Technology Corp.; the other Credit Parties signatory thereto; General Electric Capital Corporation, for itself, as Lender, and as Agent for Lenders, and the other Lenders signatory thereto from time to time.(2)

	10	.42	Security Agreement, dated as of March 30, 2004, made by Dynamic Details, Incorporated, Dynamic Details Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley, Laminate Technology Corp., Dynamic Details Incorporated, Colorado Springs, DDi Sales Corp., Dynamic Details Texas, LLC, DDi-Texas Intermediate Partners II, L.L.C., DDi-Texas Intermediate Holdings II, L.L.C., and Dynamic Details, L.P., in favor of General Electric Capital Corporation, as agent for the lenders from time to time party to the Credit Agreement.(2)


Exhibit			Description

	10	.42	Guaranty dated as of March 30, 2004, made by DDi Corp., DDi Intermediate Holdings Corp., DDi Capital Corp., Dynamic Details Incorporated, Colorado Springs, DDi Sales Corp., Dynamic Details Texas, LLC, DDi-Texas Intermediate Partners II, L.L.C., DDi-Texas Intermediate Holdings II, L.L.C., Dynamic Details, L.P., in favor of General Electric Capital Corporation, as agent for the lenders from time to time party to the Credit Agreement.(2)

	10	.42	Pledge Agreement dated as of March 30, 2004, made by Dynamic Details, Incorporated, Dynamic Details, Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley, Laminate Technology Corp., DDi Corp., DDi Intermediate Holdings Corp., DDi Capital Corp., Dynamic Details Incorporated, Colorado Springs, DDi Sales Corp., Dynamic Details Texas, LLC, DDi-Texas Intermediate Partners II, L.L.C., DDi-Texas Intermediate Holdings II, L.L.C., Dynamic Details, L.P., in favor of General Electric Capital Corporation, as agent for the lenders from time to time party to the Credit Agreement.(2)

	10	.42	Patent, Trademark and Copyright Security Agreement dated as of March 30, 2004, made by Dynamic Details, Incorporated, Dynamic Details Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley, Laminate Technology Corp., Dynamic Details Incorporated, Colorado Springs, DDi Sales Corp., Dynamic Details Texas, LLC, DDi-Texas Intermediate Partners II, L.L.C., DDi-Texas Intermediate Holdings II, L.L.C., and Dynamic Details, L.P., in favor of General Electric Capital Corporation, as agent for the lenders from time to time party to the Credit Agreement.(2)

	10	.42	Master Agreement for Documentary Letters of Credit, dated as of March 30, 2004.(2)

	10	.42	Master Agreement for Standby Letters of Credit, dated as of March 30, 2004.(2)

	10	.42	First Supplemental Indenture, dated as of February 24, 2004, between DDi Capital Corp. and Wilmington Trust Company, as trustee.(2)

	10	.42	Credit Agreement dated as of June 30, 2004 among Dynamic Details Canada, Corp., and DDi Canada Acquisition Corp., as Borrowers, the Other Credit Parties Signatory Thereto, as Credit Parties, the Lenders Signatory Thereto from Time to Time, as Lenders, and GE Canada Finance Holding Company, as Agent and Lender.(17)

	10	.42	Guaranty, dated as of June 30, 2004, made by DDi Corp., a Delaware corporation, DDi Intermediate Holdings Corp., a California corporation, DDi Capital Corp., a California corporation, Dynamic Details, Incorporated, a California corporation, Dynamic Details Incorporated, Virginia, a Delaware corporation, Dynamic Details Incorporated, Silicon Valley, a Delaware corporation, Laminate Technology Corp., a Delaware corporation, Dynamic Details Incorporated, Colorado Springs, a Colorado corporation, DDi Sales Corp., a Delaware corporation, Dynamic Details Texas, LLC, a Delaware limited liability company, DDi-Texas Intermediate Partners II, L.L.C., a Delaware limited liability company, DDi-Texas Intermediate Holdings II, L.L.C., a Delaware limited liability company, and Dynamic Details, L.P., a Delaware limited partnership, in favor of GE Canada Finance Holding Company, a Nova Scotia unlimited liability company.(17)

	10	.42	Intercreditor Agreement dated as of June 30, 2004, between GE Capital Finance Holding Company, a Nova Scotia unlimited liability company, and General Electric Capital Corporation, a New York corporation.(17)

	10	.42	Master Agreement for Documentary Letters of Credit, dated as of June 30, 2004.(17)

	10	.42	Master Agreement for Standby Letters of Credit, dated as of June 30, 2004.(17)

	10	.42	Security Agreement dated as of June 30, 2004, made by Dynamic Details Canada, Corp., and DDi Canada Acquisition Corp. in favor of GE Canada Finance Holding Company.(17)

	10	.42	Pledge Agreement dated as of June 30, 2004, made by Dynamic Details, Incorporated, DDi Canada Acquisition Corp. in favor of GE Canada Finance Holding Company.(17)

	10	.42	Amendment No. 1 to Credit Agreement dated as of June 30, 2004, by and among Dynamic Details, Incorporated, Dynamic Details, Incorporated, Virginia, Dynamic Details Incorporated, Silicon Valley and Laminate Technology Corp., the other Credit Parties signatory thereto; and General Electric Capital Corporation.(17)

	14	.1	Code of Business Conduct and Ethics.(18)

	21	.1	Subsidiaries of DDi Corp.(19)

	23	.1*	Consent of PricewaterhouseCoopers LLP

	31	.1*	Certification of Chief Executive Officer of DDi Corp., Pursuant to Rule 13a-14 of the Securities Exchange Act.

	31	.2*	Certification of Chief Financial Officer of DDi Corp., Pursuant to Rule 13a-14 of the Securities Exchange Act.


Exhibit			Description

	32	.1*	Certification of Chief Executive Officer of DDi Corp., Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32	.2*	Certification of Chief Financial Officer of DDi Corp., Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


	*	Filed herewith.


	(1)	Previously filed with the Commission on December 17, 2003 as an exhibit to DDi Corp.’s Current Report on Form 8-K.

	(2)	Previously filed with the Commission on April 7, 2004 as an exhibit to DDi Corp.’s Current Report on Form 8-K.

	(3)	Previously filed with the Commission on January 20, 2004 as an exhibit to DDi Corp.’s Registration Statement on Form 8-A/ A.

	(4)	Previously filed with the Commission on March 31, 2003 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.

	(5)	Previously filed with the Commission on December 23, 2004 as an exhibit to DDi Corp.’s Current Report on Form 8-K.

	(6)	Previously filed with the Commission on June 14, 2004 as an exhibit to DDi Corp.’s Registration Statement on Form S-8, Registration No. 333-116418.

	(7)	Previously filed with the Commission on February 12, 2004 as an exhibit to DDi Corp.’s Registration Statement on Form S-1, Registration No. 333-112786.

	(8)	Previously filed with the Commission on February 13, 2004 as an exhibit to DDi Corp.’s Registration Statement on Form S-8, Registration No. 333-112853.

	(9)	Previously filed with the Commission on January 12, 2005 as an exhibit to DDi Corp.’s Current Report on Form 8-K.


(10)	Previously filed with the Commission on November 19, 2004 as an exhibit to DDi Corp.’s Current Report on Form 8-K.

(11)	Previously filed with the Commission on March 25, 2002 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.

(12)	Previously filed with the Commission on November 26, 1997 as an exhibit to DDi Capital’s Registration Statement on Form S-4, Registration No. 333-41187.

(13)	Previously filed with the Commission on March 30, 2001 as an exhibit to DDi Corp.’s, DDi Capital’s and Dynamic Details’ combined Annual Report on Form 10-K.

(14)	Previously filed with the Commission on January 20, 1998 as an exhibit to Amendment No. 1 to DDi Capital’s Registration Statement on Form S-4, Registration No. 333-41187.

(15)	Previously filed with the Commission on March 31, 1999 as an exhibit to DDi Capital’s and Dynamic Details’ combined Annual Report on Form 10-K.

(16)	Previously filed with the Commission on March 25, 2002 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.

(17)	Previously filed with the Commission on August 16, 2004 as an exhibit to DDi Corp.’s Quarterly Report on Form 10-Q.

(18)	Previously filed with the Commission on March 30, 2004 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.


(19)	Previously filed with the Commission on March 16, 2005 as an exhibit to DDi Corp.’s Annual Report on Form 10-K.

DDi (DDICQ) Inactive 10-K/A2004 FY Annual report (amended)