MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada.
Management is responsible for their integrity, objectivity and reliability and, where necessary, they reflect management's best estimates and judgments. Management is also responsible for the
maintenance of financial and operating systems, which include effective controls, to provide reasonable assurance that the Corporation's assets are safeguarded and that reliable financial information
is produced.

The
Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The board exercises these responsibilities
through its Audit Committee whose members are not involved in the daily activities of the Corporation. Each quarter the Audit Committee meets with management and, as necessary, with the independent
auditors, KPMG LLP, to satisfy itself that management's responsibilities are properly discharged and to review and report to the Board on the consolidated financial statements.

In
accordance with generally accepted auditing standards, the independent auditors conduct an examination each year in order to express a professional opinion on the consolidated
financial statements.

|/s/ Timothy E. Thorsteinson                                |  | /s/ David A. Toews                   
|---------------------------------------------------------- |  | -------------------------------------
|Timothy E. ThorsteinsonPresident & Chief Executive Officer |  | David A. ToewsChief Financial Officer



AUDITORS' REPORT TO THE SHAREHOLDERS

We have audited the consolidated balance sheets of Leitch Technology Corporation as at April 30, 2004 and 2003 and the consolidated statements of earnings,
retained earnings (deficit) and cash flows for each of the years in the three-year period ended April 30, 2004. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In
our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at April 30, 2004 and 2003 and the
results of its operations and its cash flows for each of the years in the three-year period ended April 30, 2004 in accordance with Canadian generally accepted accounting
principles.

|Toronto, Canada
June 4, 2004 | LOGOChartered Accountants
|---------------------------- | -------------------------

27

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LEITCH TECHNOLOGY CORPORATION        CONSOLIDATED BALANCE SHEETS        (In thousands of Canadian dollars)  April 30, 2004 and 2003

|                                                |                                          | 2004 |         | 2003    |  
|----------------------------------------------- | ---------------------------------------- | ---- | ------- | ------- | -
|Assets                                          |                                          |      |         |         |  
|Current assets:                                 |                                          |      |         |         |  
|                                                | Cash and cash equivalents                |      | $       | 31,603  |  
|                                                | Accounts receivable                      |      |         | 26,347  |  
|                                                | Inventory (note 6)                       |      |         | 44,605  |  
|                                                | Future income taxes (note 11)            |      |         | 3,085   |  
|                                                | Income taxes recoverable                 |      |         | 481     |  
|                                                | Prepaid expenses and other assets        |      |         | 6,384   |  
|                                                |                                          |      |         |         |  
|                                                |                                          |      | 112,505 |         |  
|Capital assets (note 7)                         |                                          |      | 34,656  |         |  
|Future income taxes (note 11)                   |                                          |      | 27,473  |         |  
|Investments in partly owned businesses (note 4) |                                          |      | 1,762   |         |  
|                                                |                                          |      |         |         |  
|                                                |                                          | $    | 176,396 |         | $
|                                                |                                          |      |         |         |  
|Liabilities and Shareholders' Equity            |                                          |      |         |         |  
|Current liabilities:                            |                                          |      |         |         |  
|                                                | Accounts payable and accrued liabilities |      | $       | 26,296  |  
|                                                | Income taxes payable                     |      |         | 19      |  
|                                                |                                          |      |         |         |  
|                                                |                                          |      | 26,315  |         |  
|Future income taxes (note 11)                   |                                          |      | 6,650   |         |  
|Other long-term liabilities (note 14)           |                                          |      | 5,880   |         |  
|Shareholders' equity:                           |                                          |      |         |         |  
|                                                | Capital stock (note 8)                   |      |         | 234,637 |  
|                                                | Contributed surplus (note 8)             |      |         | 114     |  
|                                                | Cumulative translation account           |      |         | (2,177  | )
|                                                | Deficit                                  |      |         | (95,023 | )
|                                                |                                          |      |         |         |  
|                                                |                                          |      | 137,551 |         |  
|Commitments (note 19)                           |                                          |      |         |         |  
|Subsequent events (notes 3 and 4(c))            |                                          |      |         |         |  
|                                                |                                          |      |         |         |  
|                                                |                                          | $    | 176,396 |         | $
|                                                |                                          |      |         |         |  

On
behalf of the Board:

|(Signed)ANTHONY GRIFFITHSChairman | (Signed)GRAHAM SAVAGEDirector
|--------------------------------- | -----------------------------

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

28

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LEITCH TECHNOLOGY CORPORATION        CONSOLIDATED STATEMENTS OF EARNINGS        (In thousands of Canadian dollars, except per share amounts)  Years ended April 30, 2004, 2003 and
2002

|                                                                                                  |                                           | 2004 |         | 2003   |   | 2002     |       
|------------------------------------------------------------------------------------------------- | ----------------------------------------- | ---- | ------- | ------ | - | -------- | ------
|Revenue                                                                                           |                                           | $    | 154,586 |        | $ | 179,981  |       
|Cost of goods sold, including inventory charge (note 14)                                          |                                           |      | 94,818  |        |   | 90,334   |       
|                                                                                                  |                                           |      |         |        |   |          |       
|Gross margin                                                                                      |                                           |      | 59,768  |        |   | 89,647   |       
|Expenses:                                                                                         |                                           |      |         |        |   |          |       
|                                                                                                  | Selling and administrative                |      |         | 57,947 |   |          | 68,411
|                                                                                                  | Gross research and development            |      |         | 32,243 |   |          | 36,760
|                                                                                                  | Investment tax credits                    |      |         | (2,977 | ) |          | (3,532
|                                                                                                  | Restructuring and other charges (note 14) |      |         | 13,382 |   |          |      
|                                                                                                  | Investment income, net                    |      |         | (404   | ) |          | (144  
|                                                                                                  |                                           |      |         |        |   |          |       
|                                                                                                  |                                           |      | 100,191 |        |   | 101,495  |       
|                                                                                                  |                                           |      |         |        |   |          |       
|Earnings (loss) from continuing operations before amortization, equity interests and income taxes |                                           |      | (40,423 | )      |   | (11,848  | )     
|Write-down and amortization (note 2):                                                             |                                           |      |         |        |   |          |       
|                                                                                                  | Goodwill                                  |      |         |       |   |          | 73,824
|                                                                                                  | Acquired technology                       |      |         |       |   |          | 15,258
|Equity interest in losses (earnings) of partly owned businesses (note 4)                          |                                           |      | (54     | )      |   | (189     | )     
|                                                                                                  |                                           |      |         |        |   |          |       
|Loss from continuing operations before income taxes                                               |                                           |      | (40,369 | )      |   | (100,741 | )     
|Income taxes (recovery) (note 11)                                                                 |                                           |      | (2,243  | )      |   | (2,245   | )     
|Income taxes (recovery)  partly owned businesses (note 11)                                       |                                           |      |        |        |   |         |       
|                                                                                                  |                                           |      |         |        |   |          |       
|                                                                                                  |                                           |      | (2,243  | )      |   | (2,245   | )     
|                                                                                                  |                                           |      |         |        |   |          |       
|Loss from continuing operations                                                                   |                                           |      | (38,126 | )      |   | (98,496  | )     
|Loss from discontinued operations, net of tax benefit (note 15)                                   |                                           |      |        |        |   |         |       
|Gain (loss) on disposal of discontinued operations, net of tax benefit (notes 2 and 15)           |                                           |      | 827     |        |   |         |       
|                                                                                                  |                                           |      |         |        |   |          |       
|Loss for the year                                                                                 |                                           | $    | (37,299 | )      | $ | (98,496  | )     
|                                                                                                  |                                           |      |         |        |   |          |       

Years ended April 30, 2004, 2003 and 2002

|                                                           |         | 2004 |   | 2003   |   | 2002 |       
|---------------------------------------------------------- | ------- | ---- | - | ------ | - | ---- | ------
|Loss per share from continuing operations:                 |         |      |   |        |   |      |       
|                                                           | Basic   |      | $ | (1.16  | ) | $    | (3.31 
|                                                           | Diluted |      |   | (1.16  | ) |      | (3.31 
|                                                           |         |      |   |        |   |      |       
|Loss per share:                                            |         |      |   |        |   |      |       
|                                                           | Basic   |      | $ | (1.13  | ) | $    | (3.31 
|                                                           | Diluted |      |   | (1.13  | ) |      | (3.31 
|                                                           |         |      |   |        |   |      |       
|Weighted average number of shares outstanding (thousands): |         |      |   |        |   |      |       
|                                                           | Basic   |      |   | 32,966 |   |      | 29,782
|                                                           | Diluted |      |   | 32,966 |   |      | 29,782

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

29

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LEITCH TECHNOLOGY CORPORATION        CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)        (In thousands of Canadian dollars)  Years ended April 30, 2004, 2003 and 2002

|                                               |  | 2004 |         | 2003 |   | 2002    |  
|---------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|Retained earnings (deficit), beginning of year |  | $    | (57,724 | )    | $ | 40,772  |  
|Loss for the year                              |  |      | (37,299 | )    |   | (98,496 | )
|                                               |  |      |         |      |   |         |  
|Retained earnings (deficit), end of year       |  | $    | (95,023 | )    | $ | (57,724 | )
|                                               |  |      |         |      |   |         |  

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

30

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LEITCH TECHNOLOGY CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands of Canadian dollars)  Years ended April 30, 2004, 2003 and 2002

|                                                 |                                                                 | 2004                                                            |        | 2003    |        | 2002   |        
|------------------------------------------------ | --------------------------------------------------------------- | --------------------------------------------------------------- | ------ | ------- | ------ | ------ | -------
|Cash flows from operating activities:            |                                                                 |                                                                 |        |         |        |        |        
|                                                 | Loss from continuing operations                                 |                                                                 | $      | (38,126 | )      | $      | (98,496
|                                                 | Items not involving cash:                                       |                                                                 |        |         |        |        |        
|                                                 |                                                                 | Depreciation                                                    |        |         | 11,859 |        |        
|                                                 |                                                                 | Future income taxes                                             |        |         | (4,166 | )      |        
|                                                 |                                                                 | Stock-based compensation (note 9)                               |        |         | 206    |        |        
|                                                 |                                                                 | Amortization of goodwill and acquired technology                |        |         |       |        |        
|                                                 |                                                                 | Write-down of goodwill and acquired technology                  |        |         |       |        |        
|                                                 |                                                                 | Equity interest in losses (earnings) of partly owned businesses |        |         | (54    | )      |        
|                                                 |                                                                 | Deferred gain on disposal of building                           |        |         | 53     |        |        
|                                                 |                                                                 | Loss (gain) on disposal of capital assets                       |        |         | 425    |        |        
|                                                 | Net change in non-cash balances related to operations (note 18) |                                                                 |        | 17,194  |        |        | 17,821 
|                                                 |                                                                 |                                                                 |        |         |        |        |        
|                                                 | Cash flows provided by (used in) continuing operations          |                                                                 |        | (12,609 | )      |        | 16,373 
|                                                 | Cash flows used in discontinued operations                      |                                                                 |        |        |        |        | (508   
|                                                 |                                                                 |                                                                 |        |         |        |        |        
|                                                 | Cash flows provided by (used in) operating activities           |                                                                 |        | (12,609 | )      |        | 15,865 
|Cash flows from financing activities:            |                                                                 |                                                                 |        |         |        |        |        
|                                                 | Other long-term liabilities                                     |                                                                 |        | 5,880   |        |        |       
|                                                 | Issue of capital stock                                          |                                                                 |        | 21,546  |        |        |       
|                                                 | Share issue costs                                               |                                                                 |        | (1,067  | )      |        |       
|                                                 |                                                                 |                                                                 |        |         |        |        |        
|                                                 | Cash flows provided by financing activities                     |                                                                 |        | 26,359  |        |        |       
|Cash flows from investing activities:            |                                                                 |                                                                 |        |         |        |        |        
|                                                 | Investment in capital assets                                    |                                                                 |        | (2,543  | )      |        | (3,642 
|                                                 | Business acquisitions and investments, net of cash acquired     |                                                                 |        |        |        |        |       
|                                                 | Proceeds from disposal of capital assets                        |                                                                 |        | 3,581   |        |        | 3,062  
|                                                 |                                                                 |                                                                 |        |         |        |        |        
|                                                 | Cash flows provided by (used in) investing activities           |                                                                 |        | 1,038   |        |        | (580   
|Change in cash balances due to foreign exchange  |                                                                 |                                                                 | (1,745 | )       |        | (4,667 | )      
|                                                 |                                                                 |                                                                 |        |         |        |        |        
|Increase (decrease) in cash and cash equivalents |                                                                 |                                                                 | 13,043 |         |        | 10,618 |        
|Cash and cash equivalents, beginning of year     |                                                                 |                                                                 | 18,560 |         |        | 7,942  |        
|                                                 |                                                                 |                                                                 |        |         |        |        |        
|Cash and cash equivalents, end of year           |                                                                 | $                                                               | 31,603 |         | $      | 18,560 |        
|                                                 |                                                                 |                                                                 |        |         |        |        |        
|Supplemental cash flow information:              |                                                                 |                                                                 |        |         |        |        |        
|                                                 | Income taxes paid                                               |                                                                 | $      | 396     |        | $      | 1,176  
|                                                 | Interest paid                                                   |                                                                 |        | 7       |        |        | 109    
|                                                 |                                                                 |                                                                 |        |         |        |        |        

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

31

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LEITCH TECHNOLOGY CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (In thousands of Canadian dollars, except number of shares and per share amounts)  Years ending
April 30, 2004, 2003 and 2002

Leitch Technology Corporation ("Leitch" or the "Company") is incorporated under the Ontario Business Corporations Act. The Company is a global leader in the design, development
and distribution of high-performance audio and video systems for the professional television industry. Applications for Leitch products span the marketplace and include broadcast, post
production, telecommunications, cable, internet and business-to-business. Leitch is headquartered in Toronto, Canada, with other key offices in the United States, the
United Kingdom, France and Hong Kong.

1.     Significant accounting policies:

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). These
principles conform in all material respects with the accounting principles generally accepted in the United States ("US GAAP"), except as described in note 20.

These
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company's main operating subsidiaries are: Leitch Technology
International Inc. (Canada); Leitch Incorporated (USA);
Leitch Europe Limited (UK); and Leitch Asia Limited (Hong Kong). Intercompany transactions and balances are eliminated on consolidation.

The
preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Significant estimates are used in determining, but not limited to, the
allowance for doubtful accounts, inventory valuation, income tax valuation allowances, asset retirement obligations, employee termination benefits, the useful lives and valuation of intangible assets
and the fair values of reporting units for purposes of goodwill impairment tests. Actual results could differ materially from those estimates.

Revenue
is derived primarily from the sale of equipment and services. Revenue is recognized upon shipment, provided that title to the goods is transferred to customers, persuasive
evidence of an arrangement exists and collectibility is reasonably assured. Provision is made for potential sales returns, which are historically not significant, at the time of shipment. Service
revenue is recognized as services are performed.

Cash
and cash equivalents are defined as highly liquid investments with original maturities of 90 days or less when purchased.

Inventory
is valued at the lower of cost and net realizable value. Cost includes materials and an application of relevant manufacturing value-add. In determining net
realizable value, the Company considers factors such as aging and future demand of the inventory, product lifecycle, and the ability to return inventory to suppliers.

32

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Capital
assets are stated at cost less accumulated depreciation. Depreciation is provided using the following methods and annual rates:

|Asset                           |  | Basis             |  | Rate              
|------------------------------- |  | ----------------- |  | ------------------
|Buildings                       |  | Straight line     |  | 4%  5%           
|Automobiles                     |  | Declining balance |  | 30%               
|Computer equipment and software |  | Straight line     |  | 20%  33%         
|Equipment                       |  | Straight line     |  | 10%  20%         
|Leasehold improvements          |  | Straight line     |  | Over term of lease

In
December 2002, the CICA issued Handbook Section 3063, "Impairment on Disposal of Long-lived Assets ("Section 3063") and revised CICA Handbook
Section 3475, "Disposal of Long-lived Assets and Discontinued Operations" ("Section 3475"). These Sections supersede the write-down and disposal provisions of
Section 3061, "Property, Plant and Equipment," and Section 3475, "Discontinued Operations." The new standards are consistent with US GAAP. Section 3063 establishes standards for
recognizing, measuring and disclosing impairment of long-lived assets held for use. The Company conducts its impairment test on long-lived assets when events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment is recognized when the carrying amount of an asset to be held and used exceeds the undiscounted future net cash
flows expected from its use and disposal. If there is an impairment, the impairment amount is measured as the amount by which the carrying amount of the asset exceeds its fair value, calculated using
discounted cash flows when quoted market prices are not available. Section 3475 provides specific criteria for and requires separate classification for assets held for sale and for these assets
to be measured at the lower of their carrying amounts or fair values, less costs to sell. Prior to May 1, 2003, the Company assessed and measured impairment by comparing the carrying amount to
the undiscounted future cash flows the long-lived assets were expected to generate. The Company adopted Sections 3063 and 3475 effective May 1, 2003, and the adoption
of these standards did not have a material impact on the consolidated financial statements.

Investments
in which the Company has significant influence but not control ("partly owned businesses") are accounted for using the equity method. Under the equity method, investments are
initially recorded at cost and the carrying value is adjusted, thereafter, to include the Company's pro rata share of post-acquisition earnings or losses of the investee. If there
is a loss in the value of an investment that is other than a temporary decline, the investment is written down to recognize the loss.

Research
costs, other than capital expenditures that have alternative uses, are expensed as incurred. Development costs are expensed as incurred unless they meet the criteria under
generally accepted accounting principles for deferral and amortization. The Company has not deferred any such development costs to date.

33

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Goodwill
represents the excess of the purchase consideration over the fair value of the net identifiable assets of businesses acquired. The Company is required to evaluate goodwill or
whether events or changes in circumstances indicate that the carrying amount may not be recoverable. Management conducts a fair value impairment test for goodwill using discounted future cash flows
expected to be provided by the operations of the reporting units to determine whether the fair value of each reporting unit exceeds its carrying value, including goodwill. To the extent a reporting
unit's carrying amount exceeds its fair value, an impairment of goodwill exists. Impairment is measured by comparing the fair value of goodwill, determined in a manner similar to a purchase price
allocation, to its carrying amount.

Other
intangible assets, shown as acquired technology, represent the fair value of existing technology purchased at the time of acquisition of the assets of Agilevision, LLC
("Agilevision") and the common shares of Digital Processing Systems Inc. ("DPS") were being amortized on a straight-line basis over a period of four years. An impairment in the
value of acquired technology is assessed based on projected discounted future cash flows.

The
Company conducted its annual goodwill and acquired technology assessment in the fourth quarter of fiscal 2003 and recorded an impairment charge. The impairment charge is described in
note 2.

Monetary
assets and liabilities denominated in foreign currencies are translated into Canadian dollars at exchange rates prevailing at the balance sheet date; revenue and expense items
are translated at the average rates prevailing during the year. The resulting gains or losses are included in the consolidated statements of earnings, except exchange gains or losses arising from the
translation of the Company's self-sustaining foreign operations, which are included in the cumulative translation account in shareholders' equity. When there is a reduction in the
Company's net investment in a self-sustaining foreign operation, a proportionate amount of the cumulative translation account is included in the determination of consolidated loss for the
year.

The
Company accounts for income taxes using the asset and liability method. Under this method, future income taxes are recognized for all significant temporary differences between the
tax and accounting treatment bases of assets and liabilities and for certain carryforward items. Future tax assets and liabilities are measured using enacted or substantively enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized in the year that
includes the enactment or substantive enactment date. Future income tax assets are recognized only to the extent that, in the opinion of management, it is more likely than not that the future income
tax assets will be realized.

The
Company uses the cost reduction method of accounting for investment tax credits. Under this method, investment tax credits are treated as a reduction of the relevant asset account or
of research and development expenses in the year that the credits become available and there is reasonable assurance that they will be realized.

34

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The
Company has a stock option plan for employees and directors. The Company has adopted the revised CICA Handbook Section 3870 ("Section 3870"), "Stock-based Compensation
and Other Stock-based Payments" which requires that a fair value method of accounting be applied to all stock-based compensation payments to both employees and non-employees. In accordance
with the transitional provisions of Section 3870, the Company has prospectively applied the fair value method of accounting for stock option awards granted after May 1, 2003, and,
accordingly, has recorded compensation expense in fiscal 2004. Prior to May 1, 2003, the Company accounted for its employee stock options using the intrinsic value method and no compensation
expense was recorded. Any consideration paid by employees on the exercise of stock options is recorded as share capital. All stock options issued under this plan have an exercise price equal to or
greater than the fair market value of the underlying common shares on the date of grant. The stock option plan and related disclosures is further described in note 9.

Basic
earnings per share is computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed using the weighted average
number of common and potential common shares outstanding during the year. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options using the
treasury stock method.

The
Company uses derivative financial instruments to hedge the cash flow risk associated with forecasted transactions in foreign currencies. These instruments include foreign exchange
option agreements and foreign exchange forward contracts. All such instruments are only used for risk management purposes and the Company does not enter into derivatives for speculative purposes.

The
Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge
transactions. The process includes linking all derivatives to specific forecasted transactions. The Company also formally assesses, both at the hedge's inception and at the end of each quarter,
whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

Gains
and losses on hedges of forecasted transactions are recognized in earnings in the same period as the underlying hedged transaction, or in earnings immediately when the hedge is no
longer effective or the forecasted transactions are no longer expected.

35

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The
Company records restructuring charges relating to employee terminations, contractual lease obligations and other exit costs in accordance with CICA Emerging Issues Committee Abstract
EIC-134, "Accounting for Severance and Termination Benefits" and EIC-135, "Accounting for Costs Associated with Exit and Disposal Activities." These standards require the
Company to prospectively record any restructuring charges only when the liability is incurred and can be measured at fair value. The recognition of restructuring charges requires management to make
certain judgments regarding the nature, timing and amount associated with the planned restructuring activities, including estimating sublease income. At the end of each reporting period, the Company
evaluates the appropriateness of the remaining accrued balances and adjusts accordingly.

In
March 2003, the CICA issued Handbook Section 3110, "Asset Retirement Obligations," which establishes standards for the recognition, measurement and disclosure of
liabilities for asset retirement obligations and the associated retirement costs. This section applies to legal obligations associated with the retirement of tangible long-lived assets
that results from their acquisition, lease construction, development or normal operation. The Company adopted this standard effective May 1, 2003, and there was no impact on the consolidated
financial statements.





36

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2.     Goodwill and acquired techology:

During
the fourth quarter of fiscal 2003, the Company performed its annual goodwill impairment test. The weak global economic environment, as well as prolonged declines in the
professional video market, contributed to an impairment of goodwill in the fourth quarter as estimated fair values of all the Company's reporting units fell below their respective carrying values. The
fair values of the reporting units were estimated using a combination of a market approach and discounted cash flows. Revenue and expense projections used in determining the fair values were based on
management's estimates, including estimates of current and future industry conditions. Cash flows were discounted using a weighted average cost of capital. The Company recorded a goodwill impairment
charge of $73,824, which reduced its goodwill balance to nil. During the fourth quarter of fiscal 2002, the Company determined that the fair values of each of its reporting units exceeded the carrying
values of those reporting units. Accordingly, no impairment loss was recognized in fiscal 2002.

In
fiscal 2002, as a result of the decision to dispose of the Semiconductor segment, the Company wrote down the goodwill balance of its Semiconductor reporting unit to nil. The
write-down resulted in a charge to estimated loss on disposal of discontinued operations of $1,311.

In
the fourth quarter of fiscal 2003, the Company recorded an impairment charge totalling $9,245, to write down acquired technology in the Video Processing and Distribution and Post
Production reporting units in connection with the regular recoverability review of acquired technology.

Amortization
of acquired technology was nil, $6,013 and $5,801 for the years ended April 30, 2004, 2003 and 2002, respectively.

3.     Business acquisition:

Subsequent to April 30, 2004, the Company acquired all the shares of Videotek, Inc. Videotek designs, manufactures and distributes innovative
hardware and software products that focus on test and measurement equipment, video demodulators, routing switchers, colour correctors and processors and related equipment for the professional video
and television broadcast markets. The purchase consideration for the acquisition consists of cash of $21,906, assumption of debt of $2,054 and acquisition costs of $1,027. The cash consideration is
payable as follows: (i) $17,798 on the closing date of May 14, 2004, (ii) $2,739 six months after the closing date and (iii) $1,369 twelve months after the closing date. In
addition, $2,739 will become payable upon the achievement of certain revenue and margin targets as specified in the agreement. The excess of the purchase price over the fair value of net tangible
assets acquired is approximately $12,391 and will be allocated to goodwill and other intangible assets. Any amounts allocated to other intangible assets will be amortized over their estimated useful
lives.

The
acquisition will be accounted for using the purchase method and, accordingly, the results of operations will be included in the consolidated financial statements from the date of
acquisition.

37

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The
Company has not yet completed the allocation of the purchase price for the acquisition. The preliminary allocation of the purchase price, based on management's estimates is as
follows:

|Net working capital                  |  | $ | 4,792 
|------------------------------------ |  | - | ------
|Capital assets                       |  |   | 7,119 
|Other assets                         |  |   | 685   
|Goodwill and other intangible assets |  |   | 12,391
|                                     |  |  
|                                     |  | $ | 24,987
|                                     |  |  
|Consideration comprises:             |  |   |       
|Cash                                 |  | $ | 21,906
|Assumption of debt                   |  |   | 2,054 
|Acquisition costs                    |  |   | 1,027 
|                                     |  |  
|                                     |  | $ | 24,987
|                                     |  |  

Any
contingent consideration paid will be recorded as additional goodwill.

4.     Investments in partly owned businesses:

The investments in partly owned businesses comprise the following:

|                                 |  | Ownership
% |  | 2004 |       | Ownership
% |    | 2003
|-------------------------------- |  | ----------- |  | ---- | ----- | ----------- | -- | ----
|Path 1 Network Technologies Inc. |  | 7           |  |      |      |             | 17 |     
|eyeon Software Inc.              |  | 50          |  |      | 1,762 |             | 50 |     
|                                 |  |             |  |      |       |             |    |     
|                                 |  |             |  | $    | 1,762 |             |    |     
|                                 |  |             |  |      |       |             |    |     

The
equity interest in losses (earnings) of partly owned businesses and write-downs comprise:

|                                      |                                  | 2004 |     | 2003 |   | 2002 |     
|------------------------------------- | -------------------------------- | ---- | --- | ---- | - | ---- | ----
|Equity interest in losses (earnings): |                                  |      |     |      |   |      |     
|                                      | Path 1 Network Technologies Inc. |      |     |     |   |      |    
|                                      | eyeon Software Inc.              |      |     | (54  | ) |      | 69  
|                                      | FastVibe Corporation             |      |     |     |   |      |    
|Write-downs (gains):                  |                                  |      |     |      |   |      |     
|                                      | Path 1 Network Technologies Inc. |      |     |     |   |      |    
|                                      | FastVibe Corporation             |      |     |     |   |      | (258
|                                      |                                  |      |     |      |   |      |     
|                                      |                                  | $    | (54 | )    | $ | (189 | )   
|                                      |                                  |      |     |      |   |      |     

38

---



On
October 12, 2000, the Company acquired a 50% interest in eyeon Software Inc. ("eyeon") as part of the Company's acquisition of DPS. eyeon develops compositing and image
processing software that is bundled in DPS products, as well as sold to third parties. The Company has significant influence but does not control eyeon and accounts for this investment under the
equity method. At the time of acquisition of DPS, eyeon's fair value was determined to be $1,674. DPS acquired its 50% interest in eyeon in 1996.

On
September 20, 2000, the Company acquired a 12.5% interest in FastVibe Corporation ("FastVibe"). Purchase consideration totalled $3,675, comprised entirely of cash. The excess
of cost over net tangible assets acquired of $3,570 was allocated to goodwill.

During
2002, the Company wrote off its remaining investment in FastVibe by $2,592 for other than temporary decline in the fair value of the investment.

During
2003, the Company sold its interest in FastVibe for proceeds of $258.

On
April 20, 2000, the Company acquired a 37.7% interest in Path 1 Network Technologies Inc. ("Path 1"). Path 1 designs and develops software and
hardware that allows for broadcast-quality video, CD-quality audio, telephony and other time-critical data to be transmitted end-to-end over IP Ethernet
Networks with guaranteed quality of service.

The
purchase consideration totalled $35,563, comprising $16,178 and 806,000 common shares valued at $19,385, which resulted in an excess of cost over net tangible assets acquired of
$34,102. The purchase price difference was allocated to goodwill.

During
2002, the Company wrote off its remaining investment in Path 1 by $25,249 as a result of a number of factors, including the financial condition of both Path 1 and
the markets in which it operates.

Subsequent
to year end, the Company sold its investment in Path 1 for net proceeds of approximately $2,040. This amount will be recorded as a gain during the Company's first
quarter of fiscal 2005.

5.     Banking facilities:

On October 31, 2003, the Company cancelled its existing revolving line of credit. On November 10, 2003, the Company obtained a
three-year operating bank line of up to $20,000 bearing interest at a variable rate based on the bank's prime lending rate plus 0.25%. In addition, the Company is obligated to pay a
commitment fee of 0.25% on the unused portion. The line is secured by all of the North American assets of the Company, and availability is based on quality and aging of accounts receivable in North
America. No amounts were drawn under the facility at April 30, 2004. Availability on the facility based on accounts receivable at April 30, 2004, was $8,378.

39

---



6.     Inventory:

|                 |  | 2004 |        | 2003
|---------------- |  | ---- | ------ | ----
|Raw materials    |  | $    | 11,917 |     
|Work in progress |  |      | 2,700  |     
|Finished goods   |  |      | 29,988 |     
|                 |  |      |        |     
|                 |  | $    | 44,605 |     
|                 |  |      |        |     

7.     Capital assets:

|2004                            |  | Cost |        | Accumulated depreciation |   | Net book value
|------------------------------- |  | ---- | ------ | ------------------------ | - | --------------
|Land                            |  | $    | 894    |                          |   |              
|Buildings                       |  |      | 6,091  |                          |   | 2,162         
|Automobiles                     |  |      | 181    |                          |   | 177           
|Computer equipment and software |  |      | 24,957 |                          |   | 14,928        
|Equipment                       |  |      | 52,976 |                          |   | 37,096        
|Leasehold improvements          |  |      | 7,050  |                          |   | 3,130         
|                                |  |      |        |                          |   |               
|                                |  | $    | 92,149 |                          | $ | 57,493        
|                                |  |      |        |                          |   |               

|2003                            |  | Cost |         | Accumulated depreciation |   | Net book value
|------------------------------- |  | ---- | ------- | ------------------------ | - | --------------
|Land                            |  | $    | 1,584   |                          |   |              
|Buildings                       |  |      | 10,574  |                          |   | 4,559         
|Automobiles                     |  |      | 284     |                          |   | 268           
|Computer equipment and software |  |      | 25,834  |                          |   | 12,264        
|Equipment                       |  |      | 57,201  |                          |   | 36,172        
|Leasehold improvements          |  |      | 8,043   |                          |   | 2,854         
|                                |  |      |         |                          |   |               
|                                |  | $    | 103,520 |                          | $ | 56,117        
|                                |  |      |         |                          |   |               

During
2004, the Company entered into a sale leaseback transaction with respect to its Virginia, USA, building. The building was sold for net proceeds of $3,219, resulting in a gain on
sale of $1,126. The entire building is being leased back for five years, and approximately 37% of the square footage is being leased for an additional five years. The gain on sale is being deferred
and amortized over the weighted average lease term.

40

---



8.     Capital stock:



A
summary of changes to issued share capital is as follows:

|                                                      |  | Common shares | 
|----------------------------------------------------- |  | ------------- | 
|
|Issued and outstanding, April 30, 2001, 2002 and 2003 |  | 29,782,080    | 
|Issue of common shares for cash                       |  | 4,788,000     | 
|Share issuance costs, net of income taxes of $460     |  |              | 
|Shares issued as compensation                         |  | 20,830        | 
|                                                      |  |               | 
|Issued and outstanding, April 30, 2004                |  | 34,590,910    | 
|                                                      |  |               | 

Pursuant
to a short form prospectus filed on August 21, 2003, the Company issued 4,450,000 common shares and a further 338,000 common shares through an over allotment option. The
price per share for the offering was $4.50, and the gross proceeds from the issuance was $21,546 (less share issue costs of $1,527 and related tax benefit of $460).

As
part of an employment contract, the Company agreed to grant 100,000 common shares of the Company to the Chief Executive Officer, which will vest equally over 24 months
commencing in December 2003. As these are direct awards of shares, the fair value, based on the share price of $4.44 on the date of grant is being recorded as compensation cost in the Company's
consolidated statement of earnings ratably over the vesting period. During 2004, 20,830 shares were issued under this contract.

41

---



9.     Stock-based compensation:

The Company has established a stock option plan to encourage ownership in the Company's shares by directors, officers and employees of the Company and its
subsidiaries. Options are granted with an exercise price equal to or greater than the market price of the common shares of the Company at the date of grant, for a term of five years, vesting at 5% per
three-month period.

Activity
under the Company's stock option plan is summarized as follows:

|                            |  | Options    |   | Weighted
average exercise
price per option
|--------------------------- |  | ---------- | - | ------------------------------------------
|Outstanding, April 30, 2001 |  | 3,188,785  |   | $                                         
|Granted                     |  | 881,500    |   |                                           
|Cancelled                   |  | (1,138,085 | ) |                                           
|                            |  |            |   |                                           
|Outstanding, April 30, 2002 |  | 2,932,200  |   |                                           
|Granted                     |  | 410,000    |   |                                           
|Cancelled                   |  | (521,825   | ) |                                           
|                            |  |            |   |                                           
|Outstanding, April 30, 2003 |  | 2,820,375  |   |                                           
|Granted                     |  | 366,000    |   |                                           
|Cancelled                   |  | (1,178,650 | ) |                                           
|                            |  |            |   |                                           
|Outstanding, April 30, 2004 |  | 2,007,725  |   |                                           
|                            |  |            |   |                                           
|Exercisable, April 30, 2004 |  | 1,002,675  |   | $                                         
|                            |  |            |   |                                           

The
following table summarizes information concerning outstanding and exercisable stock options at April 30, 2004:

|                |  | Options outstanding |   | Options exercisable
|--------------- |  | ------------------- | - | -------------------
|
|$4.04  $8.07   |  | 737,000             | * | 4.2                
|$8.08  $12.10  |  | 376,625             |   | 2.4                
|$12.11  $16.14 |  | 40,700              |   | 1.6                
|$16.15  $20.17 |  | 191,700             |   | 1.2                
|$20.18  $24.21 |  | 367,025             |   | 1.5                
|$24.22  $28.24 |  | 294,675             |   | 0.6                
|                |  |                     |   |                    
|                |  | 2,007,725           |   | 2.5                
|                |  |                     |   |                    

---

The Company has prospectively applied the fair value method of accounting for stock option awards granted after May 1, 2003, and,
accordingly, has recorded compensation expense of $114 in fiscal 2004.

42

---



Prior
to May 1, 2003, the Company accounted for its employee stock options using the intrinsic value method, and no compensation expense was recorded. Section 3870 provides
that companies also disclose, on a pro forma basis, loss for the year and loss per share had the Company adopted the fair value method for accounting for stock options granted from
May 1, 2001, to April 30, 2003. Had compensation expense been determined based on the fair value at the grant dates for these stock options, the Company's results would have been as
follows:

|                            |             | 2004 |   | 2003    |  
|--------------------------- | ----------- | ---- | - | ------- | -
|Loss for the year:          |             |      |   |         |  
|                            | As reported |      | $ | (37,299 | )
|                            | Pro forma   |      |   | (38,195 | )
|                            |             |      |   |         |  
|Loss per share as reported: |             |      |   |         |  
|                            | Basic       |      | $ | (1.13   | )
|                            | Diluted     |      |   | (1.13   | )
|                            |             |      |   |         |  
|Loss per share pro forma:   |             |      |   |         |  
|                            | Basic       |      | $ | (1.16   | )
|                            | Diluted     |      |   | (1.16   | )
|                            |             |      |   |         |  

The
fair value of each stock option grant, was determined on the date of grant, and the estimated fair value of the options is amortized over the vesting period on a
straight-line basis. The fair value of the stock options was determined using the Black-Scholes option pricing model, based on the following weighted average assumptions:

|                                                           |                                                        | 2004 |         | 2003
|---------------------------------------------------------- | ------------------------------------------------------ | ---- | ------- | ----
|Risk-free interest rate                                    |                                                        |      | 4.0%    |     
|Dividend yield                                             |                                                        |      | 0.0%    |     
|Expected life                                              |                                                        |      | 5 years |     
|Expected volatility                                        |                                                        |      | 52%     |     
|Weighted average grant date fair values of options issued: |                                                        |      |         |     
|                                                           | Options granted at estimated market price              |      | $       | 2.25
|                                                           | Options granted at greater than estimated market price |      |         | 1.68
|                                                           |                                                        |      |         |     

Because
additional stock options are expected to be granted each year, the above pro forma disclosure is not representative of pro forma effects on reported financial
results for future years.

43

---



10.   Loss per share:

The computation of basic loss per share is as follows:

|                                                |  | 2004 |            | 2003 |   | 2002       |  
|----------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|Loss for the year attributable to common shares |  | $    | (37,299    | )    | $ | (98,496    | )
|                                                |  |      |            |      |   |            |  
|Weighted average common shares outstanding      |  |      | 32,965,676 |      |   | 29,782,080 |  
|                                                |  |      |            |      |   |            |  
|Basic loss per share                            |  | $    | (1.13      | )    | $ | (3.31      | )
|                                                |  |      |            |      |   |            |  

As
the Company experienced a loss for the years ended April 30, 2004, 2003 and 2002, all potential common shares outstanding are considered anti-dilutive and all
excluded from the calculation of diluted loss per share.

11.   Income taxes:

The provision for income taxes comprises:

|                                             |  | 2004 |        | 2003 |   | 2002   |  
|-------------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|Current tax expense (recovery)               |  | $    | (494   | )    | $ | 448    |  
|Future tax recovery                          |  |      | (1,749 | )    |   | (2,693 | )
|                                             |  |      |        |      |   |        |  
|                                             |  |      | (2,243 | )    |   | (2,245 | )
|Future tax expense  partly owned businesses |  |      |       |      |   |       |  
|                                             |  |      |        |      |   |        |  
|Income tax expense (recovery)                |  | $    | (2,243 | )    | $ | (2,245 | )
|                                             |  |      |        |      |   |        |  

The
Company's provision for income taxes is made up as follows:

|                                                                                  |                                                                                                       | 2004 |         | 2003   |   | 2002    |       
|--------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ---- | ------- | ------ | - | ------- | ------
|Provision for income tax recovery based on statutory Canadian corporate tax rates |                                                                                                       | $    | (14,429 | )      | $ | (38,312 | )     
|Effect on recovery attributable to the following items:                           |                                                                                                       |      |         |        |   |         |       
|                                                                                  | Manufacturing and processing credit                                                                   |      |         | 254    |   |         | (154  
|                                                                                  | Foreign operations subject to different tax rates                                                     |      |         | 447    |   |         | 472   
|                                                                                  | Non-deductible amortization of goodwill and acquired technology                                       |      |         |       |   |         | 30,005
|                                                                                  | Differences between carrying cost and adjusted cost base of the investment in partly owned businesses |      |         |       |   |         | 28    
|                                                                                  | Non-taxable research and development credits                                                          |      |         | (483   | ) |         | (731  
|                                                                                  | Other                                                                                                 |      |         | (283   | ) |         | 932   
|                                                                                  | Valuation allowance                                                                                   |      |         | 12,251 |   |         | 5,515 
|                                                                                  |                                                                                                       |      |         |        |   |         |       
|Income tax expense (recovery)                                                     |                                                                                                       | $    | (2,243  | )      | $ | (2,245  | )     
|                                                                                  |                                                                                                       |      |         |        |   |         |       

Future
income taxes are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
tax basis.

44

---



Future
tax assets and liabilities comprise the following as at April 30, 2004, and 2003:

|                                                                             |  | 2004 |        | 2003
|---------------------------------------------------------------------------- |  | ---- | ------ | ----
|Future tax assets:                                                           |  |      |        |     
|Current:                                                                     |  |      |        |     
|Inventory and other reserves                                                 |  | $    | 3,085  |     
|Long-term:                                                                   |  |      |        |     
|Income tax effect of net operating losses carried forward                    |  |      | 31,990 |     
|Income tax effect of non-operating losses carried forward                    |  |      | 761    |     
|Share issue costs                                                            |  |      | 594    |     
|Goodwill                                                                     |  |      | 1,105  |     
|Research and development pool                                                |  |      | 6,973  |     
|Reserves                                                                     |  |      | 2,979  |     
|Other                                                                        |  |      | 837    |     
|                                                                             |  |      |        |     
|                                                                             |  |      | 45,239 |     
|Less valuation allowance                                                     |  |      | 17,766 |     
|                                                                             |  |      |        |     
|                                                                             |  |      | 27,473 |     
|                                                                             |  |      |        |     
|Total future tax assets                                                      |  | $    | 30,558 |     
|                                                                             |  |      |        |     
|Future tax liabilities:                                                      |  |      |        |     
|Long-term:                                                                   |  |      |        |     
|Capital assets  differences in depreciation and undepreciated capital costs |  | $    | 2,812  |     
|Investment tax credits                                                       |  |      | 1,892  |     
|Other                                                                        |  |      | 1,946  |     
|                                                                             |  |      |        |     
|Total future tax liabilities                                                 |  | $    | 6,650  |     
|                                                                             |  |      |        |     

12.   Pension costs:

A number of subsidiaries of the Company operate defined contribution savings plans (the "Plans") for their employees. The assets of the Plans are held separately
from those of the Company in independently administered funds. Contributions paid and expensed by the Company for the years ended April 30, 2004, 2003 and 2002 amounted to $1,189, $1,382 and
$1,357, respectively.

13.   Related party transactions:

The Company has entered into certain transactions with law firms of which two directors of the Company are partners. Total amounts paid to these related parties
for legal services totalled $651 (2003  $625, 2002  $767) and for legal fees associated with financing transactions
totalled $247 (2003  nil, 2002  nil). Compensation of $162 was paid to a director for services as interim CEO of the
Company during the year. Related party transactions have been recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

45

---



14.   Restructuring and other charges:

In fiscal 2004, the Company announced restructuring plans to reduce its expense base. These restructuring plans were focused on consolidating facilities,
workforce reductions and accelerating the obsolescence of certain of the Company's product offerings.

98
employees have been terminated as of April 2004 and will be paid out within 14 to 16 months after year end. The Company vacated one floor of the facilities in the
U.K. prior to April 30, 2004, and has accrued the lease rental costs for the remaining lease term and related asset impairment charges. These costs have been recorded in the consolidated
statements of earnings as restructuring and other charges.

The
write-down of inventory of $9,634 recorded in cost of sales is associated with the Company's decision to accelerate the obsolescence of certain product offerings.

The
following table details the activity through the accrued restructuring liability and the non-cash charge:

|                                                |                                   | Provision
during
2004 |        | Paid
during
2004 |   | Outstanding
April 30,
2004
|----------------------------------------------- | --------------------------------- | --------------------- | ------ | ---------------- | - | --------------------------
|Cash Component:                                 |                                   |                       |        |                  |   |                           
|                                                | Severance                         |                       | $      | 6,698            |   | $                         
|                                                | Lease exit costs                  |                       |        | 6,045            |   |                           
|                                                | Other                             |                       |        | 148              |   |                           
|                                                |                                   |                       |        |                  |   |                           
|                                                |                                   | $                     | 12,891 |                  | $ | 3,724                     
|Non-cash component:                             |                                   |                       |        |                  |   |                           
|                                                | Asset write-down                  |                       |        | 311              |   |                           
|                                                | Forgiveness of employee loan      |                       |        | 180              |   |                           
|                                                | Inventory charge                  |                       |        | 9,634            |   |                           
|                                                |                                   |                       |        |                  |   |                           
|Total restructuring                             |                                   |                       | 23,016 |                  |   |                           
|Amount recorded as a component of cost of sales |                                   |                       | (9,634 | )                |   |                           
|                                                |                                   |                       |        |                  |   |                           
|Total restructuring and other charges           |                                   | $                     | 13,382 |                  |   |                           
|                                                |                                   |                       |        |                  |   |                           
|Long-term liabilities consist of:               |                                   |                       |        |                  |   |                           
|                                                | Lease exist costs                 |                       | $      | 5,055            |   |                           
|                                                | Deferred gain on sale of building |                       |        | 825              |   |                           
|                                                |                                   |                       |        |                  |   |                           
|Total restructuring and other charges           |                                   | $                     | 5,880  |                  |   |                           
|                                                |                                   |                       |        |                  |   |                           

The
accrued restructuring liability was recorded in accrued liabilities and other long-term liabilities in the consolidated balance sheets.

46

---



15.   Discontinued operations:

During the second quarter of fiscal 2002, the Company approved a formal plan to sell the Semiconductor operating segment. In accordance with this decision, the
Company began accounting for the Semiconductor segment, SiliCon Construction Sweden AB ("SiCon Sweden"), as a discontinued operation with a measurement date of October 31, 2001. Subsequent to
October 31, 2001, the Company closed the North American operations of the Semiconductor segment and wrote down the value of the related goodwill, resulting in an estimated loss on disposal of
discontinued operations of $5,347, net of tax benefit of $445. The estimated loss on disposal and results of operations have been excluded from continuing operations in the consolidated statements of
earnings for all years presented. The loss from discontinued operations is net of tax benefits of $858 for the year ended April 30, 2002.

During
fiscal 2003, the Company sold 80.1% of its interest in the Semiconductor operating segment for $299.

The
Company continues to hold less than a 19.9% interest in SiCon Sweden with standard rights applicable to all common shareholders. The Company accounts for its remaining interest in
SiCon Sweden as a portfolio investment with a carrying value of nil. During fiscal 2004, the Company determined that the remaining accrual for discontinued operations liabilities of $827 was no longer
required and recorded a credit for this amount in the consolidated statements of earnings.

The
Semiconductor segment had revenue as follows:

|        |  | 2004 |  | 2003 |  | 2002
|------- |  | ---- |  | ---- |  | ----
|Revenue |  |     |  |     |  | $   
|        |  |      |  |      |  |     

47

---



16.   Segmented information:

The Company's operations include three reportable segments. These segments are Video Processing and Distribution, Servers and Post Production. Video Processing
and Distribution includes products that are used to distribute, process and switch high-quality video and audio signals. The Servers segment designs, manufactures and sells video servers.
The Post Production segment includes products that are used to capture, edit and record digital video.

The
accounting policies of the segments are the same as those described in the summary of significant accounting policies (note 1). The Company evaluates performance based on
several factors, of which the primary financial measures are revenue and contribution margin. The Company defines contribution margin as gross margin less net research and development costs.

Inter-segment
transactions are accounted for at market prices.

|2004                                                                                   |          | Video Processing
and Distribution |         | Servers |   | Post
Production |        | Other |        | Inter-segment
eliminations |   | Total  |      
|-------------------------------------------------------------------------------------- | -------- | --------------------------------- | ------- | ------- | - | --------------- | ------ | ----- | ------ | -------------------------- | - | ------ | -----
|Revenue:                                                                               |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|                                                                                       | External |                                   | $       | 112,471 |   | $               | 26,757 |       | $      | 15,358                     |   |        |     
|                                                                                       | Internal |                                   |         |        |   |                 |       |       |        |                           |   |        | 4,608
|                                                                                       |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|                                                                                       |          | $                                 | 112,471 |         | $ | 26,757          |        | $     | 15,358 |                            | $ | 4,608  |      
|                                                                                       |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Contribution margin                                                                    |          | $                                 | 30,615  |         | $ | 4,773           |        | $     | 4,748  |                            | $ | (5,026 | )    
|Selling and administrative expenses                                                    |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Other charges                                                                          |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Investment income, net                                                                 |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|                                                                                       |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Loss from continuing operations before amortization, equity interests and income taxes |          | $                                 | (40,423 | )      
|                                                                                       |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Total assets                                                                           |          | $                                 | 115,756 |         | $ | 28,340          |        | $     | 15,391 |                            | $ | 16,909 |      
|                                                                                       |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Capital asset expenditures                                                             |          | $                                 | 1,616   |         | $ | 545             |        | $     | 382    |                            |   |       |      
|                                                                                       |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      

48

---



|2003                                                                                                  |          | Video Processing
and Distribution |         | Servers |   | Post
Production |        | Other |        | Inter-segment
eliminations |   | Total |      
|----------------------------------------------------------------------------------------------------- | -------- | --------------------------------- | ------- | ------- | - | --------------- | ------ | ----- | ------ | -------------------------- | - | ----- | -----
|Revenue:                                                                                              |          |                                   |         |         |   |                 |        |       |        |                            |   |       |      
|                                                                                                      | External |                                   | $       | 126,537 |   | $               | 32,667 |       | $      | 20,777                     |   |       |     
|                                                                                                      | Internal |                                   |         |        |   |                 |       |       |        |                           |   |       | 4,608
|                                                                                                      |          |                                   |         |         |   |                 |        |       |        |                            |   |       |      
|                                                                                                      |          | $                                 | 126,537 |         | $ | 32,667          |        | $     | 20,777 |                            | $ | 4,608 |      
|                                                                                                      |          |                                   |         |         |   |                 |        |       |        |                            |   |       |      
|Contribution margin                                                                                   |          | $                                 | 43,237  |         | $ | 5,702           |        | $     | 7,480  |                            | $ | 4,608 |      
|Selling and administrative expenses                                                                   |          |                                   |         |         |   |                 |        |       |        |                            |   |       |      
|Interest income, net                                                                                  |          |                                   |         |         |   |                 |        |       |        |                            |   |       |      
|                                                                                                      |          |                                   |         |         |   |                 |        |       |        |                            |   |       |      
|Loss from continuing operations before equity interests, write-down and amortization and income taxes |          | $                                 | (11,848 | )      
|                                                                                                      |          |                                   |         |         |   |                 |        |       |        |                            |   |       |      
|Total assets                                                                                          |          | $                                 | 131,868 |         | $ | 29,294          |        | $     | 18,003 |                            | $ | 8,301 |      
|                                                                                                      |          |                                   |         |         |   |                 |        |       |        |                            |   |       |      
|Capital asset expenditures                                                                            |          | $                                 | 2,297   |         | $ | 690             |        | $     | 655    |                            |   |      |      
|                                                                                                      |          |                                   |         |         |   |                 |        |       |        |                            |   |       |      

|2002                                                                                       |          | Video Processing
and Distribution |         | Servers |   | Post
Production |        | Other |        | Inter-segment
eliminations |   | Total  |      
|------------------------------------------------------------------------------------------ | -------- | --------------------------------- | ------- | ------- | - | --------------- | ------ | ----- | ------ | -------------------------- | - | ------ | -----
|Revenue:                                                                                   |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|                                                                                           | External |                                   | $       | 140,779 |   | $               | 35,252 |       | $      | 22,211                     |   |        |     
|                                                                                           | Internal |                                   |         |        |   |                 |       |       |        |                           |   |        | 3,258
|                                                                                           |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|                                                                                           |          | $                                 | 140,779 |         | $ | 35,252          |        | $     | 22,211 |                            | $ | 3,258  |      
|                                                                                           |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Contribution margin                                                                        |          | $                                 | 53,128  |         | $ | 9,488           |        | $     | 8,241  |                            | $ | 3,258  |      
|Selling and administrative expenses                                                        |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Interest income, net                                                                       |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|                                                                                           |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Earnings from continuing operations before amortization, equity interests and income taxes |          | $                                 | 1,335   |        
|                                                                                           |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Total assets                                                                               |          | $                                 | 195,052 |         | $ | 55,362          |        | $     | 45,889 |                            | $ | 11,091 |      
|                                                                                           |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Capital asset expenditures                                                                 |          | $                                 | 11,158  |         | $ | 1,647           |        | $     | 1,765  |                            |   |       |      
|                                                                                           |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      
|Goodwill and acquired technology additions                                                 |          | $                                 | 989     |         |   |                |        |       |       |                            |   |       |      
|                                                                                           |          |                                   |         |         |   |                 |        |       |        |                            |   |        |      

49

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The
Company's external revenue by geographic region is based on the region in which the customer is located. The identifiable assets and goodwill are based on the geographic area in
which the Company operates:

|2004                |  | United States |        | Europe |   | Non-US
Americas |  | Pacific Rim |        | Total
|------------------- |  | ------------- | ------ | ------ | - | --------------- |  | ----------- | ------ | -----
|Revenue             |  | $             | 62,963 |        | $ | 38,042          |  | $           | 21,870 |      
|Identifiable assets |  |               | 50,046 |        |   | 30,207          |  |             | 88,162 |      
|                    |  |               |        |        |   |                 |  |             |        |      

|2003                |  | United States |        | Europe |   | Non-US
Americas |  | Pacific Rim |        | Total
|------------------- |  | ------------- | ------ | ------ | - | --------------- |  | ----------- | ------ | -----
|Revenue             |  | $             | 89,874 |        | $ | 33,034          |  | $           | 27,134 |      
|Identifiable assets |  |               | 55,627 |        |   | 32,200          |  |             | 94,183 |      
|                    |  |               |        |        |   |                 |  |             |        |      

|2002                             |  | United States |        | Europe |   | Non-US
Americas |  | Pacific Rim |         | Total
|-------------------------------- |  | ------------- | ------ | ------ | - | --------------- |  | ----------- | ------- | -----
|Revenue                          |  | $             | 97,119 |        | $ | 39,065          |  | $           | 32,611  |      
|Identifiable assets              |  |               | 69,875 |        |   | 31,100          |  |             | 109,213 |      
|Goodwill and acquired technology |  |               | 20,705 |        |   | 12,934          |  |             | 55,443  |      
|                                 |  |               |        |        |   |                 |  |             |         |      

Capital
assets employed in Canada, United States, Europe and other in 2004 were $26,499, $5,426 and $2,731, respectively, and in 2003 were $32,695, $10,342 and $4,366,
respectively.

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17.   Financial instruments:

The
Company uses derivative financial instruments, principally foreign exchange option agreements and foreign exchange forward contracts, to manage the risk to the Company from
fluctuations in exchange rates. Derivative financial instruments are not used for speculative purposes. Foreign exchange option and forward contracts are entered into with maturities of no longer than
two years. As at April 30, 2004, the Company had entered into various forward contracts to sell US dollars at various rates and increments aggregating US $5,500. The contracts mature at various
dates up to January 28, 2005. As at April 30, 2003, the Company had entered into various forward contracts to sell US dollars and Euros at various rates and increments aggregating US
$12,000 and EUR 6,000. As at April 30, 2002, the Company had entered into various forward contracts to sell US dollars at various rates and increments in the aggregate US $4,000.

The
Company does not have a significant exposure to any individual customer. As at April 30, 2004, and 2003, all of the Company's accounts receivable were insured, with the
exception of G7 governments and certain Fortune 500 companies. The Company is exposed to credit risk in the event of non-performance by counterparties in connection with its derivative
financial instruments and accounts receivable insurance contract. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but mitigates this
risk by dealing only with financially sound counterparties and, accordingly, does not anticipate loss for non-performance.

The
carrying values of cash and cash equivalents, accounts receivable, other long-term liabilities and accounts payable and accrued liabilities approximate their fair values
because of the short-term nature of these instruments. The fair value of the forward contracts was $49 lower and $887 higher than the carrying value of nil at April 30, 2004, and
2003, respectively. The fair value of the forward contracts was estimated by obtaining quotes of the amount that the Company would have to pay counterparties to terminate the agreements.

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18.   Net change in non-cash balances related to operations:

The net change in non-cash balances related to continuing operations is as follows:

|                                         |  | 2004 |        | 2003 |   | 2002    |  
|---------------------------------------- |  | ---- | ------ | ---- | - | ------- | -
|Accounts receivable                      |  | $    | 3,569  |      | $ | 19,487  |  
|Inventory                                |  |      | 12,268 |      |   | 8,179   |  
|Income taxes                             |  |      | 652    |      |   | 1,875   |  
|Prepaid expenses and other assets        |  |      | (255   | )    |   | 1,097   |  
|Accounts payable and accrued liabilities |  |      | 960    |      |   | (12,817 | )
|                                         |  |      |        |      |   |         |  
|                                         |  | $    | 17,194 |      | $ | 17,821  |  
|                                         |  |      |        |      |   |         |  

19.   Commitments:

The Company has entered into various operating leases for premises, automobiles and office equipment. The future minimum operating lease commitments for the next
five years and thereafter are as follows:

2005

$
4,2062006


3,8022007


3,4842008


3,3552009


3,355Thereafter


5,815$
24,017


Rent
expense was $4,259, $4,569 and $5,093 for the years ended April 30, 2004, 2003 and 2002, respectively.

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20.   Reconciliation to US GAAP:

The consolidated financial statements of the Company have been prepared in accordance with Canadian GAAP. The following adjustments would be required in order to
present the financial statements in accordance with US GAAP:

|                                                                                                                  |         | 2004 |         | 2003  |   | 2002    |      
|----------------------------------------------------------------------------------------------------------------- | ------- | ---- | ------- | ----- | - | ------- | -----
|Net loss in accordance with Canadian GAAP                                                                         |         | $    | (37,299 | )     | $ | (98,496 | )    
|DPS acquisition differences  IPR&D (a)(i)                                                                        |         |      |        |       |   | 2,763   |      
|Goodwill (a)(ii)                                                                                                  |         |      |        |       |   | 1,231   |      
|Adjustment to equity-accounted investment (b)                                                                     |         |      |        |       |   |        |      
|Tax effect of above adjustments                                                                                   |         |      |         |       |   | (610    | )    
|                                                                                                                  |         |      |         |       |   |         |      
|Loss in accordance with US GAAP                                                                                   |         |      | (37,299 | )     |   | (95,112 | )    
|Change in cumulative translation account (c)                                                                      |         |      | (3,018  | )     |   | (5,321  | )    
|Mark-to-market gain (loss) on cash flow  hedged foreign currency contracts, net of income tax effect (c) and (d) |         |      | (49     | )     |   | 612     |      
|                                                                                                                  |         |      |         |       |   |         |      
|US GAAP comprehensive loss                                                                                        |         | $    | (40,366 | )     | $ | (99,821 | )    
|                                                                                                                  |         |      |         |       |   |         |      
|US GAAP loss per share:                                                                                           |         |      |         |       |   |         |      
|                                                                                                                  | Basic   |      | $       | (1.22 | ) | $       | (3.35
|                                                                                                                  | Diluted |      |         | (1.22 | ) |         | (3.35
|                                                                                                                  |         |      |         |       |   |         |      
|Shareholders' equity based on Canadian GAAP                                                                       |         | $    | 137,551 |       | $ | 157,183 |      
|DPS acquisition differences, net of income tax effect (a)                                                         |         |      |        |       |   |        |      
|Other comprehensive income (c) and (d)                                                                            |         |      | (49     | )     |   | 612     |      
|                                                                                                                  |         |      |         |       |   |         |      
|Shareholders' equity based on US GAAP                                                                             |         | $    | 137,502 |       | $ | 157,795 |      
|                                                                                                                  |         |      |         |       |   |         |      

Summary
of accounting policy differences:

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Under
SFAS 2, the Company would have expensed all acquired IPR&D related to the investment in Path 1 in fiscal 2000. The Company's share of the IPR&D totalled $6,601, net of
future taxes of $4,400. For the years ended April 30, 2001 and 2000, the amortization charge for goodwill would be reduced by $510 and $18, respectively, by allocating part of the purchase
price to IPR&D. For the year ended April 30, 2001, tax rate reductions would reduce future income tax benefits by $1,594. As a result, the equity interest in the loss of Path 1 for the years
ended April 30, 2001, and 2000 would increase by $1,084 and $3,525, respectively (for a total of $4,609), net of future income taxes of ($1,594) and $3,058, respectively. The investment in Path
1 would increase (decrease) by $510 and ($6,583) and future income taxes would increase (decrease) by ($1,594) and $3,058, respectively. During the year ended April 30, 2002, the Company wrote
off its entire investment in Path 1. Under US GAAP, the write-down would be reduced by $4,609 for the charges taken in 2001 and 2000.

Under
Statement of Financial Accounting Standards 130 ("SFAS"), "Reporting Comprehensive Income" ("SFAS 130"), all changes in shareholders' equity other than transactions with
shareholders are included in comprehensive income regardless of whether they are considered to be results of operations of the period. Under Canadian GAAP, changes in the cumulative translation
account are excluded from earnings and are included as separate component of shareholders' equity, and unrealized gain or losses on cash flow hedge transactions are not recorded until the hedged item
is recognized in earnings.

The
Company designates its derivatives based upon criteria established by SFAS 133 "Accounting for Derivative Instruments and Hedging Activities." The Company uses derivative
financial instruments to manage risks from fluctuations in foreign exchange rates. These instruments include purchased foreign exchange option agreements and foreign exchange forward contracts. All
such instruments are only used for risk management purposes and are designated as cash flow hedges. For these derivatives, the effective portion of the derivative's gain or loss is initially reported
as a component of other comprehensive income and subsequently reclassified into earnings when the hedged exposure affects earnings. The ineffective portion of the gain or loss is reported in earnings
immediately.

During
2002, the Company adopted SFAS 133, which establishes accounting and reporting standards for derivative instruments and for hedging activities. SFAS 133 requires
that an entity recognize all derivatives as their assets or liabilities on the balance sheet and measure those instruments at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation.

For
the years ended April 30, 2004, and 2003, the application of SFAS 133 would have no impact on the Company's net earnings (loss). As at April 30, 2004, and 2003,
prepaid expenses and other assets would increase (decrease) by $(49) and $887, respectively; future income taxes, a current asset, would decrease by nil and $275, respectively; and other comprehensive
income, a component of shareholders' equity under US GAAP, would increase (decrease) by $(49) and $612, respectively.

54

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For
Canadian GAAP, the Company follows the provisions of the CICA Handbook Section 3465, "Income Taxes." For US GAAP reconciliation purposes, the Company follows the
recommendation of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").

Under
US GAAP, investment tax credits received by the Company in respect of its research and development expenditures are recorded as a reduction of income tax expense, while under
Canadian GAAP, these tax credits are recorded as a reduction of the research and development expense. Although there is no impact on net earnings (loss), under US GAAP, earnings (loss) before income
tax expense for the years ended April 30, 2004, 2003 and 2002 would have decreased by $2,977, $3,532 and $3,516, respectively, and income tax expense would have decreased by a corresponding
amount.

Under
US GAAP, the Company would not present a subtotal prior to write-down and amortization of acquired technology and goodwill and would include write-down and
amortization of acquired technology and goodwill with other operating costs under the heading expenses.

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