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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
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                                   Form 20-F

     REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF
     THE  SECURITIES EXCHANGE ACT OF 1934

                                      -OR-
 [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 for the fiscal year ended January 31, 2006
                                      -OR-
     TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 (NO FEE REQUIRED) for the transition
     period from ______ to ______

     SHELL COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 Date of event requiring this shell company
     report ______

     Commission File Number: 0-30906
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                             DataMirror Corporation
             (Exact name of Registrant as specified in its charter)

                                    Ontario
                        (Jurisdiction of Incorporation)

                            3100 Steeles Avenue East
                                   Suite 1100
                            Markham, Ontario, Canada
                                    L3R 8T3
                                 (905) 415-0310
             (Address of Registrant's principal executive offices)
 -------------------------------------------------------------------------------

Securities registered or to be registered pursuant to Section 12(b) of the Act:
None

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act :  Common Shares, no par value


Indicate  the number of  outstanding  shares of each class of the  issuer's
classes of capital or common  stock as of the close of the period covered by
the annual report.

  As at January 31, 2006, 8,291,280 Common Shares were issued and outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined by Rule 405 of the Securities Act.

     Yes |_|   No |X|

If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.

     Yes |X|   No |_|

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports)


<PAGE>

and (2) has been subject to such filing requirements for the past 90 days.

     Yes |X|   No |_|

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

     Large accelerated filer    Accelerated filer     Non-accelerated filer |X|

Indicate by check mark which financial statement item the registrant has
elected to follow.

     Item 17 |X|  Item 18

If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).

     Yes |_|   No |X|


<PAGE>

<TABLE>
<CAPTION>
                                                           TABLE OF CONTENTS

<S>          <C>                                                                                                          <C>
ITEM 1.      Identity of Directors, Senior Management and Advisors..........................................................4

ITEM 2.      Offer Statistics and Expected Timetable........................................................................4

ITEM 3.      Key Information................................................................................................5

ITEM 4.      Information on the Registrant.................................................................................12

ITEM 5.      Operating and Financial Review and Prospects..................................................................25

ITEM 6.      Directors, Senior Management and Employees....................................................................40

ITEM 7.      Major Shareholders and Related Party Transactions.............................................................52

ITEM 8.      Financial Information.........................................................................................55

ITEM 9.      The Offer and Listing.........................................................................................55

ITEM 10.     Additional Information........................................................................................57

ITEM 11.     Quantitative and Qualitative Disclosures About Market Risk....................................................63

ITEM 12.     Description of Securities Other than Equity Securities........................................................64

ITEM 13.     Defaults, Dividend Arrearages and Delinquencies...............................................................65

ITEM 14.     Material Modifications to the Rights of Security Holders and Use of Proceeds..................................65

ITEM 15.     Controls and Procedures.......................................................................................65

ITEM 16A.    Audit Committee Financial Expert..............................................................................65

ITEM 16B.    Code of ethics................................................................................................66

ITEM 16C.    Principal Accountant Fees and Services........................................................................66

ITEM 16D.    Exemptions from the Listing Standards for Audit Committees....................................................66

ITEM 16E.    Purchases of Equity Securities by the Issuer and Affiliated Purchasers........................................67

ITEM 17.     FINANCIAL STATEMENTS..........................................................................................68

ITEM 18.     FINANCIAL STATEMENTS..........................................................................................97

ITEM 19.     EXHIBITS......................................................................................................97

SIGNATURES.................................................................................................................98

EXHIBIT 6.1...............................................................................................................100

EXHIBIT 12.1..............................................................................................................102

EXHIBIT 12.2..............................................................................................................104
</TABLE>

                                                                              3
<PAGE>


                                     PART I


ITEM 1.   Identity of Directors, Senior Management and Advisors

A.   Directors and Senior Management.

          Information not required for annual report.

B.    Advisors.

          Information not required for annual report.

C.    Auditors.

          Information not required for annual report.


ITEM 2.   Offer Statistics and Expected Timetable

          Information not required for annual report.

                                                                              4
<PAGE>


ITEM 3.   Key Information

A.    Selected Financial Data.

         The following selected consolidated financial information is derived
from the audited Consolidated Financial Statements of DataMirror Corporation
(together with its subsidiaries "DataMirror" or the "Company") presented in
accordance with Canadian generally accepted accounting principles ("GAAP"), and
the notes thereto and must be read in conjunction with such Consolidated
Financial Statements and related notes thereto included elsewhere in the Annual
Report and "Item 5. Operating and Financial Review and Prospects". These
principles conform in all material respects with accounting principles
generally accepted in the United States, except as described in Note 19 to the
Company's consolidated financial statements. Historic results are not
necessarily indicative of the results that you may expect for any other future
period or for a full year. Data is in thousands of U.S. dollars, except share
and per share data which are reported in U.S. dollars per share. Selected
financial data is presented for fiscal years 2004, 2005 and 2006 only as five
years of selected financial data cannot be presented on a restated basis,
without unreasonable effort or expense.

<TABLE>
<CAPTION>
                                                              Statement of Income(2)
                                                          For the Years Ended January 31,

                                                     2006         2005((1)                2004(1)
                                                     ----         --------                -------
                                                                (restated -          (restated -
                                                                      note)                note)
<S>                                                <C>               <C>                  <C>
Revenue
   Licence                                        $18,232           $17,444              $18,511
   Maintenance                                     23,342            22,641               20,703
   Services                                         3,171             3,544                3,991
                                         -----------------    --------------     ----------------
                                                   44,745            43,629               43,205
                                         -----------------    --------------     ----------------

Cost of revenue
   Licence                                            170               192                  170
   Maintenance and services                         8,290             9,143                8,283
                                         -----------------    --------------     ----------------
                                                    8,460             9,335                8,453
                                         -----------------    --------------     ----------------
Gross Margin                                       36,285            34,294               34,752
                                         -----------------    --------------     ----------------

Operating Expenses
   Selling and marketing                           13,484            15,192               14,853
   Research and development                         8,211             8,144                7,085
   General and administration                       7,539             6,763                5,672
   Stock-based compensation                           265               316                  377
   Amortization of intangibles                      1,651             2,279                2,250
                                         -----------------    --------------     ----------------
                                                   31,150            32,694               30,237
                                         -----------------    --------------     ----------------
Operating income                                    5,135             1,600                4,515
Investment income, net                                793               782                  835
Gain on sale of investment                              0             5,466                    0
Other income                                            0                 0                  203
                                         -----------------    --------------     ----------------
Income  before income taxes                         5,928             7,848                5,553
                                         -----------------    --------------     ----------------
Provision for income taxes
   Current                                          1,858             2,307                2,689
   Future                                             387             (478)                (912)
                                         -----------------    --------------     ----------------
                                                    2,245             1,829                1,777
                                         -----------------    --------------     ----------------
Net income                                          3,683             6,019                3,776
                                         -----------------    --------------     ----------------

Earnings per share
   Basic                                             0.42              0.55                 0.33
   Diluted                                           0.42              0.54                 0.32

Weighted average number of
shares [000's]
   Basic                                            8,758            11,026               11,364
   Diluted                                          8,832            11,192               11,640


Amounts presented which differ
under U.S. GAAP

Net income for the year                             3,948             6,335                4,153
Pro forma net income                                3,671             5,933                3,588
Pro forma basic earnings per share                   0.42              0.54                 0.32
</TABLE>

Notes:

         ((1)) Comparative figures for the years ended January 31, 2005 and
         January 31, 2004 were restated to reflect the effect of the change in
         accounting policy for revenue recognition as described in Note 3 to
         the Consolidated Financial Statements for the year ended January 31,
         2006.

         ((2)) See "CRITICAL ACCOUNTING POLICIES AND ESTIMATES".

                                                                              5
<PAGE>


<TABLE>
<CAPTION>
                                                     Balance Sheet Data
                                                     As at January 31,

                                               2006               2005             2004
                                               ----               ----             ----
                                                          (restated  -      (restated -
                                                                 note)            note)
<S>                                         <C>                <C>              <C>
Cash, cash equivalents                      $34,947            $46,394          $31,707
     and short term investments
Working capital                              23,905             38,178           25,101
Total assets                                 60,138             70,192           68,396
Long-term obligations                         9,388              9,887           10,162
Share capital                                31,657             42,250           45,622
Total shareholders' equity                   26,071             39,090           36,342
Number of shares outstanding                  8,291             10,556           11,365
[000's] (1)

Amounts presented which  differ
under U.S. GAAP

Total assets                                 59,992             70,089           74,143
Shareholders' equity                         25,925             38,987           41,019
</TABLE>

Notes:
((1))    The number of Common Shares outstanding as at the dates noted excludes
         options and warrants to purchase Common Shares outstanding on such
         dates.


DIVIDENDS

     The Company has not paid any dividends on its Common Shares in the last
five most recent completed financial years. The payment of any future dividends
will be at the discretion of the Company's Board of Directors and will depend
upon, among other things, the Company's future earnings, operations, capital
requirements and financial condition, general business conditions and
contractual restrictions on payment of dividends, if any.

EXCHANGE RATE INFORMATION

     Effective fiscal 2006, the Company adopted the U.S. dollar as its
reporting currency. Accordingly, for comparative purposes, financial
information has been translated into U.S. dollars for prior fiscal years. The
Company since fiscal 2006 publishes its consolidated financial statements in
U.S. dollars.

     In this annual report, except where otherwise indicated, all dollar
amounts are expressed in U.S. dollars. References to Cdn$ are to Canadian
dollars and references to U.S.$ or $ are to United States dollars.

     The following table sets forth the high and low exchange rates for each of
the previous six months, and the average rate for each of the five most
recently completed financial years, calculated by using the average of the
exchange rates on the last day of each month

                                                                              6
<PAGE>

during the year, based on the inverse of the noon buying rate in the city of
New York for cable transfers in Canadian dollars as certified for customs
purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate"):

<TABLE>
<CAPTION>
                        Monthly Data                                        Annual Data
                        ------------                                        -----------
                                 High               Low                                   Average
                                 ----               ---                                   -------
<S>         <C>                 <C>                <C>           <C>                       <C>
     April, 2006                0.8926             0.8534        2006                      0.8291
     March, 2006                0.8834             0.8531        2005                      0.7763
     February, 2006             0.8788             0.8638        2004                      0.7289
     January, 2006              0.8744             0.8528        2003                      0.6390
     December, 2005             0.8690             0.8521        2002                      0.6412
     November, 2005             0.8579             0.8361
</TABLE>

     On May 31, 2006, the inverse of the Noon Buying Rate was U.S.$0.9069 =
Cdn$1.00.

B.   Capitalization and Indebtedness.

          Information not required for annual report.

C.   Reasons for the Offer and Use of Proceeds.

          Information not required for annual report.

D.   Risk Factors.

     Forward-looking statements in this annual report, including statements
regarding the Company's business which are not historical facts, are made
pursuant to the "safe harbor" provisions of the United States Private
Securities Litigation Reform Act of 1995 and pursuant to National Instrument
51-102 and other rules, regulations and policies of Canadian securities
regulatory authorities. Forward-looking statements include statements of
estimates, expectations, objectives and plans (financial and otherwise). The
words "anticipate", "believe", "estimate", "expect" and similar expressions are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions. Numerous factors affect the
Company's operating results and could cause the Company's actual results to
differ materially from the results indicated by this annual report or by any
forward-looking statements made by, or on behalf of, the Company, and there can
be no assurance that future results will meet expectations, estimates or
projections. These factors include, but are not limited to, the following:
variability of quarterly operating results; dependence upon the continued
growth and success of the Company's software products; competition; the ability
to develop, market, support and acquire new products in an environment of
rapidly changing technology; dependence upon continued growth in the database
and enterprise data integration markets; dependence upon relationships with
complementary vendors and distribution channels; pursuing, completing and
integrating acquisitions could divert resources and may not achieve the
intended business objectives; the ability to recruit and retain key personnel;
risks of international operations, currency exchange rate fluctuations and
global economic conditions; possible software errors or defects; possible
infringement claims by third parties; and other factors discussed herein, in
the Company's Management Discussion and Analysis of Financial Conditions and
Results of Operations and other periodic filings with the United States
Securities and Exchange Commission, the Ontario Securities Commission, other
Canadian securities commissions, and other regulatory authorities. Should one
or more of these risks or uncertainties materialize, or should assumptions
underlying the forward-looking statements prove incorrect, actual results may
vary materially from those described herein as anticipated, believed, estimated
or expected. The Company does not intend, and does not assume any obligation,
to update these forward-looking statements.

     An investment in the Company's Common Shares involves certain risks and
uncertainties which should be carefully considered. The following risk factors,
each of which could have a material adverse effect on the Company's business,
results of operations and financial condition, and on the value or market price
of the Company's Common Shares, should be considered carefully in addition to
the other information contained in this annual report (including information
incorporated by reference herein).

     Limited Positive Operating History; Uncertainty of Future Operating
Results. The Company's predecessor was incorporated on November 19, 1993 and
did not earn revenue until 1995. While the Company earned operating income for
the years ended January 31, 2004, 2005 and 2006, it incurred operating losses
in some of the previous years. In addition, while the Company earned net income
for the years ended January 31, 2004, 2005, and 2006, it recorded net losses in
some of the previous years. Due to the Company's limited positive operating
history, the uncertainty of continued acceptance of the Company's products, the
rapid evolution of competitive software products, and the other risk factors
discussed herein, there can be no assurance that the Company will be able to
sustain revenue growth or to achieve or sustain profitability or positive cash
flow from operations in the future. See "Operating and Financial Review and
Prospects".

                                                                              7
<PAGE>

     Variability of Quarterly Operating Results. The Company's revenue and
results of operations have fluctuated significantly on a quarterly basis and
the Company expects substantial variability of future quarterly operating
results due to a variety of factors. These factors include: (i) the timing of
the release of new software products and enhanced versions of existing products
by the Company; (ii) the introduction of new products and product enhancements
by the Company's competitors; (iii) market acceptance of and demand for the
Company's products; (iv) the strength or weakness of global markets for the
Company's products and for computer platforms and databases with which the
Company's products operate, in particular the IBM iSeries (formerly the AS/400)
platform; (v) changes in operating expenses, including possible increases
related to the introduction of new and enhanced products; (vi) the timing or
receipt of orders from major customers; (vii) general economic factors,
including the potential negative effect of actual or perceived weakening of
global economic conditions on the level of spending by the Company's customers
and prospective customers; (viii) concentration of revenues in the last month
of each quarter and in the fourth quarter of the fiscal year; (ix) the
proportion of revenues attributable to licence fees versus service revenues;
(x) changes in pricing policies by the Company or its competitors; and (xi) the
proportion of licence revenue closed in the final week and day of each quarter.
Accordingly, the Company believes that period to period comparisons of results
of operations are not necessarily meaningful and historical results should not
be relied upon as indicative of future performance. The Company's operating
expenses are based in part on anticipated short term revenue levels and are
relatively fixed in the short term. As a result, if revenues are not realized
as expected, the Company's operating results could be materially adversely
affected. Variability of future quarterly operating results may cause
volatility in the market price of the Common Shares. In addition, due to some
or all of the foregoing factors, it is possible that in some future quarter the
Company's operating results will be below the expectations of market analysts
and investors. In such event, the price of the Company's Common Shares would
likely be materially adversely affected. See "Operating and Financial Review
and Prospects".

     Product Markets and Product Acceptance. To date, the Company has derived a
large portion of its licence revenue from its Transformation Server and
iCluster (a successor to High Availability Suite) products, particularly for
the IBM iSeries (AS/400) platform. The Company expects that sales of
Transformation Server software, and particularly Transformation Server for the
iSeries, as well as iCluster, will continue to represent a substantial portion
of its revenue for the foreseeable future. With the Company's iReflect and
Transformation Server for Oracle products, the Company believes it will see
increased revenues from products that operate in conjunction with Oracle
databases. A decline in the market for hardware platforms on which the
Company's products operate, or for applications and data management software
for such platforms, may occur as a result of new competitive products, price,
technological changes or other factors. The Company's future results of
operations will depend, in part, on achieving broader market acceptance of its
software products, as well as on its ability to continue to enhance these
products to meet the evolving needs of customers. Future results may also
depend on the strength or weakness of global markets for computer platforms and
databases with which the Company's products operate. A decline in these
markets, or the inability of the Company to achieve broader acceptance of its
products or to enhance its products as required to meet market demand, could
have a material adverse effect on the Company's business, results of operations
and financial condition. The Company's PointBase products depend on the
acceptance and use of Java and the promotion and backing of Java by Sun
Microsystems, Inc. Any adverse change on the viability or support for Java or
Sun would have an adverse effect on the market for PointBase products. See
"Business Overview - Competition".

     Product Development, Acquisition and Technological Change. The market for
integration software is characterized by rapid technological change and
frequent new product introductions and enhancements. The Company must continue
to develop, create or acquire new products and update existing products to
reflect technological changes and market developments in hardware platforms,
operating systems and database technology platforms in order to compete
effectively. Such product development or acquisition may require the Company to
invest substantial amounts in research and development on an ongoing basis.
Although the Company may seek to acquire businesses or technologies from time
to time, there can be no assurance that any such acquisition will be available
on acceptable terms or at all, or that the Company will be able to successfully
consummate or integrate any such potential acquisition. The development cycle
for new products may be significantly longer than development cycles
experienced by the Company for its prior products and upgrades. The
introduction of products embodying new technologies and the emergence of new
industry standards could render the Company's existing products, and products
currently under development, obsolete and unmarketable. Hardware, operating
system, and database vendors continually add integration and data protection
features to their products which may negatively impact the market for the
Company's products. The Company's future success will depend on its ability to
enhance its current products and to develop and introduce new products that
keep pace with technological developments, respond to customer requirements and
achieve market acceptance. In addition to decreasing revenues as products reach
the end of their natural life cycles, if the Company were unable to develop
upgrades or new products in a timely manner due to resource constraints or
technological or other reasons, the Company could experience decreases in
future sales and revenues. There can be no assurance that the Company's future
products or enhancements will keep pace with technological change or satisfy
market needs or that the Company will successfully develop, acquire or market
any future products.

     Competition. The market for integration software is continuously evolving
and highly competitive. Given the variety of uses for the Company's products
and the range of platforms, operating systems and databases on which they
operate, the Company faces competition from many competitors, including other
independent software vendors, database vendors and large hardware manufacturers
who also offer data integration tools. In the financial years ended January 31,
2005 and 2006, the Company faced increased pricing pressures from competitors
including Vision Solutions, Lakeview Technology and iTera in the iSeries High
Availability marketplace. These competitors have continued to put pricing
pressure on the Company's core High Availability suite of products which
continue to depress margins for these products. The Company also faces
significant competition from in-house development departments within businesses
that may

                                                                              8
<PAGE>

develop custom software for the specific data movement or integration
requirements of their enterprises. Current and potential competitors may have
or may in the future establish alliances or cooperative relationships among
themselves or with potential customers and may rapidly acquire significant
market share. In addition, many of the Company's competitors and potential
competitors are or may be significantly larger than the Company and have
significantly longer operating histories, greater financial resources and more
market and brand recognition than the Company. Open source software, some of
which is distributed free of charge, may also pose a competitive threat to the
Company. For example, the availability of Derby, an open source Java database,
without charge may pose a competitive threat to the Company's PointBase java
database business. The Company believes that its ability to compete depends on
many factors within and outside its control, including product functionality,
performance, price, reliability, vendor and product reputation, customer
service and support, sales and marketing efforts, product distribution and
product releases both by the Company and its competitors. As the markets for
the Company's products expand, additional competition may emerge and
competitors may commit more resources to competitive products. There can be no
assurance that the Company will be able to compete successfully in current or
future markets or that competitive pressures will not have a material adverse
effect on the Company's business, results of operations and financial
condition. See "Business Overview - Competition".

     Dependence on Continued Growth of the Database and Data Integration
Markets. The Company believes key future uses of its software will be for
integration and data and application data protection (high systems
availability) applications, such as e-business applications, data distribution
to and from data warehouses and other data stores, enterprise application
integration, workload balancing, and back-up protection against planned and
unplanned system outages. Consequently, the Company's future financial
performance will depend in part on the growth in the utilization of databases,
e-business and in the number of data warehouse installations. The database,
e-business and data warehouse markets are rapidly evolving, and there can be no
assurance that such markets will be sustained at their current size or continue
to grow. In addition, to the extent that the Company's products may be used in
electronic commerce and Internet-based applications, the Company's future
financial performance will depend in part on the reliability, growth in use and
public acceptance of the Internet, particularly for the conduct of
business-to-business and business-to-consumer commercial transactions.
Businesses continue to develop their commercial infrastructure using Internet
technologies. There can be no assurance that the Internet infrastructure will
be able to support the communications demands placed on it. In addition, there
is no assurance that the Company's products will adequately address the
requirements of customers or keep pace with changes in any of these markets.

     Dependence on Relationships with Complementary Vendors. The Company
believes that it is important to develop, maintain, and enhance close
associations with complementary hardware and software vendors. In particular,
it is important that the Company maintain its existing relationship with IBM
due to the Company's dependence on the IBM iSeries market. In the High
Availability market, the Company depends on IBM rebates and incentives offered
to IBM customers who purchase software from IBM High Availability Business
Partners to encourage customers to purchase the Company's software. There can
be no assurance that IBM will not terminate the Company's status as a High
Availability Business Partner. This would have a direct negative impact on
sales of the Company's iCluster software. The Company also depends on IBM to
market and promote the Company and its products to IBM sales employees, IBM
business and channel partners and end user customers. There can be no assurance
that IBM will continue to market and promote the Company and its products, that
IBM will not enter the market for High Availability or integration software
directly, or that the Company will be able to maintain its existing
relationships or enter into new relationships. The Company's failure to do so
could adversely affect the portability of the Company's products to, and
compatibility and integration with, existing and new platforms, software
applications and databases and the timing of the introduction of new and
enhanced products by the Company. In addition, failure to do so could affect
the Company's ability to leverage third party distribution channels and
increase its market presence. See "Business Overview - Sales and Marketing".
IBM has plans to add heterogeneous replication functionality to its WebSphere
Information Integration product. IBM has also acquired Ascential Software, a
direct competitor to the Company which may discourage purchases of the
Company's Transformation Server product which competes with the Ascential
products. IBM also has plans to continue to enhance the cross-site-mirroring
functionality (XSM) available for the iSeries platform. XSM allows iSeries
customers to implement simple High Availability solutions using switched disk
technology and may pose a competitive threat to the Company's iCluster product.

     Dependence on Distribution Channels. A portion of the Company's revenue is
derived from the sale of its products through third parties. There can be no
assurance that the direct sales model will continue to work effectively for new
products or that it will scale effectively as the Company attempts to grow its
revenue from existing products. In addition, the Company may not be able to
retain a sufficient number of its existing or future re-marketers and
distributors, such re-marketers and distributors may give higher priority to
the sale of other products (which could include products of competitors) or
that these re-marketers and distributors devote sufficient resources to
marketing of the Company's products. The Company depends on IBM business
partners to remarket and distribute its products and there can be no assurance
that IBM will continue to promote the Company to its business partners. The
Company's future success depends on the Company's ability to recruit partners
in new channels like business integration and application platform integration.
The performance and financial strength of third party re-marketers and
distributors is outside the control of the Company and the Company is unable to
predict the extent to which these parties will be successful in marketing and
selling the Company's products. A reduction in sales efforts or discontinuance
of sales of the Company's products by its re-marketers and distributors could
lead to reduced sales and could, as a result, have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, other methods of product distribution may become important in the
future, such as Internet access to products and services and other electronic
distribution. The Company's success will depend, in part, upon its ability to
attract and retain sufficient direct sales personnel, to maintain

                                                                              9
<PAGE>

and expand access to existing channels of distribution and to gain access to
new channels if and when they develop. See "Business Overview - Sales and
Marketing".

     Dependence on Key Personnel. The success of the Company depends upon the
continued contributions of key personnel including members of its senior
management, including Nigel Stokes, Chairman, President and Chief Executive
Officer, the loss of one or more of whom could have a material adverse effect
on the Company. There can be no assurance that the Company will be able to
retain these individuals or recruit other qualified personnel. The Company
believes that its future success will also depend in large part on its ability
to attract and retain highly skilled technical, managerial, and sales and
marketing personnel. Competition for such personnel is intense, and there can
be no assurance that the Company will be successful in attracting and retaining
the personnel required to continue to grow.

     Risks Associated with International Operations. The Company intends to
continue to make efforts to increase international sales and anticipates that
international sales will continue to account for a significant portion of its
revenue. These sales are subject to certain risks and costs associated with
international operations, including the difficulty and expense of staffing and
administering business abroad, difficulties in accounts receivable collection,
complications in complying with foreign laws and domestic and international
import and export laws and regulations, and costs related to localizing
products for foreign markets and translating and distributing products in a
timely manner. Significant international sales may also expose the Company to
greater risk from political and economic instability, potential adverse tax
consequences, unexpected changes in Canadian or other governmental policies
concerning import and export of goods and technology, other regulatory
requirements and tariffs and other trade barriers. In addition, while U.S. and
Canadian copyright law, international conventions and international treaties
may provide meaningful protection against unauthorized duplication of software,
the laws of some foreign jurisdictions may not protect proprietary rights to
the same extent as the laws of the United States or Canada. Software piracy has
been, and can be expected to be, a persistent problem for the software
industry. See "Business Overview - Intellectual Property". There can be no
assurance that these factors will not be experienced by the Company in the
future or that they will not have a material adverse effect on the Company's
business, results of operations and financial condition. In addition,
international earnings may be subject to taxation by more than one jurisdiction
or other adverse tax consequences, which could also materially adversely affect
the Company's results of operations.

     Currency Exchange Risk. As the Company realizes a significant portion of
its revenue in U.S. dollars and European currencies and incurs a significant
portion of its operating expenses in Canadian dollars, changes in exchange
rates between the Canadian dollar and the U.S. dollar or other foreign
currencies could affect the Company's operating results. In fiscal 2006, the
Canadian dollar appreciated significantly against the U.S. dollar as compared
to fiscal 2005. The Company's policy of hedging a portion of its foreign
currency denominated accounts receivable can provide only short-term protection
against a limited portion of the Company's foreign currency exposure. The
appreciation of the Canadian dollar requires the Company to become more
productive in order to maintain its margins. Although the Company has taken and
will continue to focus on increasing the productivity of its Canadian
operations there is no guarantee it will be successful in maintaining its
current margins. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Quantitative and Qualitative
Disclosures About Market Risk".

     Global Economic Conditions. The Company's operating results may vary
significantly based upon the impact of actual or perceived changes in global
economic conditions on its customers and their spending on information
technology related products. The global economic environment since 2001 is more
uncertain than in prior periods and has the potential to have a material
adverse effect on the Company and its operating results. The Company's revenue
and operating results depend in large part on the overall demand for
integration and data protection solutions, and related computer software and
services. A reduction of demand for integration and data protection solutions
and related computer software and services caused by actual or perceived
weakening in the global economy may result in decreased revenues and lower
growth rates for the Company. Customers may defer or reconsider purchasing
products from the Company if they experience a downturn in their business or if
there is a downturn in general economic conditions.

     Management of Growth. In recent years, the Company has experienced rapid
growth in the scope of its operations due to internal growth and the PointBase
acquisition. This growth has resulted in increased responsibilities for the
Company's existing personnel, the hiring of additional personnel and, in
general, higher levels of operating expenses. In addition, the Company may
continue to experience rapid growth in the future, due to continued internal
expansion, acquisition or other factors. In order to manage its current
operations and any future growth effectively, the Company will need to continue
to implement and improve its operational, financial and management information
systems, to hire, manage and retain its employees, to integrate acquired
businesses, technologies and personnel, if any, with existing operations and to
maintain its corporate culture including technical and customer service
standards. There can be no assurance that the Company will be able to manage
such growth effectively or that its management, personnel or systems will be
adequate to support growth in the Company's operations.

     Software Defects. The Company's products are technically complex and may
contain undetected errors or performance problems. There can be no assurance
that such errors or performance problems will not be discovered in the future,
which may cause delays in product introduction and shipments, require design
modifications or result in damage to the Company's reputation, loss of revenue,
loss of market share, delay in market acceptance or product liability or other
claims against the Company. Furthermore, there can be no assurance that the
Company will be able to correct any such errors on a timely basis, or at all.
Correction of errors or other defects may require significant expenditures by
the Company. Provisions contained in the Company's licence agreements that are
designed to limit the

                                                                             10
<PAGE>

Company's exposure to potential claims, as well as any liabilities arising from
such claims, may not effectively protect the Company against some or all of
such claims and the liability and costs associated therewith. Any of these
possible occurrences could have a material adverse effect on the Company's
business, results of operations or financial condition. See "Business Overview
- Research and Development".

     Protection of Intellectual Property. The Company relies on contractual
restrictions, such as confidentiality agreements and licences, to establish and
protect its proprietary rights. Despite any precautions that the Company takes
to protect its intellectual property: (a) laws and contractual restrictions may
be insufficient to prevent misappropriation of its technology or deter others
from developing similar technologies; (b) current laws that prohibit software
copying provide only limited protection from software "pirates," and effective
trademark, copyright and trade secret protection may be unavailable or limited
in foreign countries; (c) other companies may claim common law trademark rights
based upon state, provincial or foreign laws that precede any registrations the
Company may receive for its trademarks; and (d) policing unauthorized use of
the Company's products and trademarks is difficult, expensive and
time-consuming, and the Company may be unable to determine the extent of this
unauthorized use. It is possible that the Company's intellectual property
rights could be successfully challenged by one or more third parties, which
could result in its inability to exploit, or its loss of the right to prevent
others from exploiting, certain intellectual property. In addition, reverse
engineering, unauthorized copying or other misappropriation of the Company's
technology could enable third parties to benefit from the Company's technology
without paying the Company for it, which would significantly harm the Company's
business. See "Business Overview - Intellectual Property".

     Potential Infringement Liability. As the number of software products in
the industry increases and the functionality of these products further
overlaps, it is possible that software developers will become increasingly
subject to infringement claims. Moreover, there has been an increase in the
number of patents issued in Canada and the United States relating to computer
software, and, accordingly, the risk of patent infringements in the industry
can be expected to increase, potentially resulting in an increase in patent
infringement claims. Shopplex.com carrying on business as Teilhard Technologies
and Juxtacomm Technologies Inc. (the "Plaintiffs") filed a statement of claim
in Federal Court of Canada against the Company alleging infringement of a
Canadian patent (No. 2,241,767) and certain other related claims on July 15,
2004. The original statement of claim was amended and the Company subsequently
filed a statement of defence and counterclaim against the Plaintiffs and
certain related parties. The Company believes the claims of infringement are
without merit and intends to defend this matter vigorously. There can be no
assurance that third parties will not assert infringement claims against the
Company in the future. Such claims may result in costly litigation, diversion
of management time and resources, financial liability or a requirement that the
Company suspend licensing of its products or redesign its products, or enter
into royalty or licensing agreements. Furthermore, there can be no assurance
that the Company would be able to successfully redesign its products, if
required, or that any royalty or licensing agreements will be available on
reasonable terms, or at all. Any such claim or the results thereof could have a
material adverse effect on the Company's business, results of operations or
financial condition. See "Business Overview - Intellectual Property".

     Potential Litigation Liability. The Company may face liability claims if
its products or services fail to perform as intended. The sale, servicing, and
support of our products entails the risk of product liability, performance or
warranty claims, which may be substantial in light of the use of our products
in business-critical applications. A successful product liability claim could
seriously disrupt our business and adversely affect our financial results.
Software products are complex and may contain errors or defects, particularly
when first introduced, when new versions or enhancements are released, or when
configured to individual customer requirements. We currently have in place
procedures and staff to exercise quality control over our products and respond
to defects and errors found in current versions, new versions, or enhancements
of our products. We also attempt to contractually limit our liability in
accordance with industry practices. However, defects and errors in our products
could inhibit or prevent customer deployment and cause us to lose customers or
require us to pay penalties and damages. Westcon Inc. ("Westcon"), a specialty
distributor of networking communications and security products was a customer
of the Company and is currently in a dispute with the Company initiated in June
2004 relating to the performance of the Company's products. The dispute is
being dealt with by way of arbitration, which calls for the dispute to proceed
under the International Commercial Arbitration Act (Ontario). The Company
believes the issues under dispute by Westcon are without merit and the Company
intends to defend this matter vigorously.

     Dependence on Maintenance Renewals. The Company realises a significant
portion of its revenue from maintenance and support services provided in
connection with the products that it licences. There can be no assurance that
licencees will continue to renew their maintenance and support services or that
the Company will be able to charge its current rates for maintenance and
support services in the future.

     Risks Related to Acquisitions. Pursuing, completing, and integrating
recent and potential acquisitions could divert management's attention and
financial resources and may not produce the desired business results. In the
past the Company has made acquisitions of products and businesses. In the
future, the Company may engage in additional selective acquisitions of other
products or businesses. There can be no assurance that management will be able
to identify additional suitable acquisition candidates available for sale at
reasonable prices, consummate any acquisition, or successfully integrate any
acquired product or business into the Company's operations. Further,
acquisitions may involve a number of special risks, including: (a) diversion of
management's attention; (b) disruption to the Company's ongoing business; (c)
failure to retain key acquired personnel; (d) difficulties in assimilating
acquired operations, technologies, products,

                                                                             11
<PAGE>

and personnel; (e) unanticipated expenses, events, or circumstances; and (f)
assumption of legal and other undisclosed liabilities. If the Company does not
successfully address these risks or any other problems encountered in
connection with an acquisition, the acquisition could have a material adverse
effect on the Company's business, results of operations, and financial
condition. In addition, if the Company proceeds with an acquisition, available
cash may be used to complete the transaction, or shares may be issued which
could cause a dilution to existing shareholders.

     Enforcement of Judgements. The enforcement by investors of civil
liabilities under the federal securities laws of the United States may be
affected adversely because: the Company is incorporated under the laws of
Ontario; all of its officers and directors during fiscal 2006, with the
exception of Bryan E. Plug, are non-residents of the United States; some or all
of the experts named in this annual report, if any, are residents of Canada;
and the Company and a substantial portion of its assets are located outside the
United States.

     Seasonality. The Company depends on both direct and indirect sales for
revenues related to its iCluster and HA Suite products. The sale of these
products is often linked to the sale of IBM hardware by IBM Business Partners.
Generally, sales of these products are strongest in the calendar quarter ending
December 31st and are reflected in the Company's fourth fiscal quarter of each
year. There can no assurance that the Company will continue to be successful
with the indirect sales model or will continue to partner with motivated
distributors as the Company tries to grow revenue from these products. A weak
calendar fourth quarter for IBM hardware and IBM Business Partners will
adversely affect revenue from these products. In uncertain economic times
customers may delay purchases until the end of their budgetary years which
usually occur in the calendar fourth quarter. This may adversely affect revenue
in other quarters or for the year in the event of economic disruption in the
calendar fourth quarter.


ITEM 4.   Information on the Registrant

A. History and Development of the Registrant

     The Company's legal and commercial name is DataMirror Corporation. The
predecessor corporation to DataMirror Corporation was incorporated in Canada
under the Business Corporations Act (Ontario) on November 19, 1993. This
predecessor corporation amalgamated under the Business Corporations Act
(Ontario) on February 1, 1996 with four other corporations to form DataMirror
Corporation as it is currently constituted. The Company's articles of
amalgamation were amended on December 6, 1996 to effect a 1 for 2 share
consolidation of the Common Shares and to create a class of preferred shares
issuable in series. On December 16, 1996, the Company completed an initial
public offering of 2,000,000 Common Shares priced at Cdn$5.50 per share and
began trading on the Toronto Stock Exchange. On September 3, 1997 the Company
completed a special warrant offering, selling 1,600,000 Special Warrants of the
Company priced at Cdn$10.35 per Special Warrant. Each Special Warrant entitled
the holder thereof upon exercise to purchase one Common Share without any
additional payment. All of the Special Warrants were exercised. On April 6,
2000, the Company completed an offering of 1,305,000 Common Shares priced at
Cdn$27.00 per share. On January 18, 2001, the Company's Common Shares were
approved for listing and began trading on the NASDAQ National Market.

     The Company made an offer to shareholders of the Company dated February
11, 2005 to purchase for cancellation up to 2,000,000 (subject to increase to
avoid the creation of odd-lots as a result of proration) of the Company's
Common Shares. The offer for the Common Shares expired at 5:00 p.m. (Toronto
time) on March 21, 2005. The Company confirmed on March 29, 2005 a total of
2,002,039 Common Shares were purchased for cancellation which includes Common
Shares purchased by the Company so as to avoid the creation of odd-lots as a
result of proration. The number of common shares deposited at or below the
purchase price as at the expiration date of the offer for Common Shares was
3,113,239. The final proration factor that was applied to Common Shares
properly deposited was 0.642368. As a result, shareholders who deposited Common
Shares at or below the purchase price of Cdn$10.00 had approximately 64% of
their Common Shares bought back at the purchase price, subject to adjustments
for odd lots and to avoid the creation of fractional Common Shares and to avoid
the creation of odd lots as a result of proration. The Common Shares
repurchased comprised approximately 19% of the outstanding common shares of the
Company before giving effect to the repurchase. After giving effect to the
repurchase, there were approximately 8,556,000 Common Shares outstanding.
Payment for Common Shares tendered and accepted for purchase was made March 29,
2005.

     On November 4, 2005 the Company voluntarily delisted its Common Shares
from the NASDAQ National Market. The Company's Common Shares continue to be
listed under the symbol DMC on the Toronto Stock Exchange.

     The head office and principal place of business of the Company is located
at 3100 Steeles Avenue East, Suite 1100, Markham, Ontario, Canada L3R 8T3. The
Company's phone number is (905) 415-0310 and its fax number is (905) 415-0340.

     The Company's agent in the United States is DataMirror, Inc., 1600 Golf
Road, Suite 1200, Rolling Meadows, IL, U.S.A, 60008. The agent's telephone
number is (847) 981-5066.


                                                                             12
<PAGE>

     The Company has grown substantially over the past nine years. By expanding
its indirect sales network, direct international presence and products and
services, it has achieved substantial growth in its customer base, employees
and revenues, going from 500 customers and 135 employees for fiscal 1997 to
over 2,100 customers and 220 employees for fiscal 2006.

     In March 1998, the Company provided initial capital funding and entered
into a strategic development agreement with PointBase, Inc. ("PointBase"), a
developer and marketer of computer software products and a provider of Java
data management and synchronization products for the embedded database and data
mobility markets. PointBase's products are used in Java server applications and
are also embedded within Java applications. Subsequently the Company
participated in several rounds of PointBase financing. At January 31, 2003, the
Company owned approximately 25 percent of the outstanding shares of PointBase.
The investment was written off when it became apparent that measures taken by
the management of PointBase would not result in profitable or break-even
operations in the near future and the Company's investment had become impaired
and, accordingly, the investment was written down to the estimated fair value
of nil. In April 2003, the Company made an offer to acquire all of the issued
and outstanding shares of PointBase. PointBase determined not to proceed with
the transaction and, as a result, PointBase agreed to pay the Company an amount
of U.S.$200,000 as consideration for the cancellation of the offer, which is
included in other income for fiscal 2004. The Company ceased its efforts at
that time to purchase PointBase as conditions at the time did not warrant
further discussions. On December 18, 2003, the Company completed an agreement
and plan of merger and acquired one hundred percent control of PointBase in a
cash transaction valued at approximately Cdn$3.3 million at closing, with
certain additional amounts which would have become payable contingent on future
revenue or proceeds that could have been received in connection with the
acquired business. DataMirror accounted for the acquisition under the purchase
method. The term during which the contingent consideration could have become
payable expired in December 2004 with no additional payments becoming due. The
losses from the Company's investment in PointBase were nil in fiscal 2004
compared to an equity loss of Cdn$2,081,000 and an impairment charge of
Cdn$4,595,000 in fiscal 2003. The decrease was due to the investment in
PointBase having been fully written off at October 31, 2002. See "Operating and
Financial Review and Prospects -Acquisitions and Investments" section.

     On March 18, 2002, the Company announced its intention to make a take-over
bid for all of the shares of Idion Technology Holdings Limited ("Idion"), a
South African company listed on the JSE Securities Exchange ("JSE") under the
symbol IDI, in a cash bid valued at Cdn$9.8 million. On April 18, 2002, the bid
was increased to Cdn$18.9 million, and subsequently, on May 8, 2002, the bid
was further increased to Cdn$30.4 million. On July 4, 2002, the Company closed
its bid to acquire Idion, having not been successful in completing the
take-over. At January 31, 2004, the Company owned approximately 48,269,000 or
42.61% of Idion's outstanding common shares acquired at a cost of
Cdn$12,185,000. The Company announced on May 14, 2004 that it had sold all of
its shares of Idion in a market trade executed through the facilities of the
JSE. The Company sold 48,269,085 shares of Idion at a price of ZAR 2.10 per
share. Based on the exchange rates on settlement (ZAR1=Cdn$0.2025), the Company
received net proceeds of Cdn$19.9 million after brokerage and advisory fees,
had a pre-tax gain of approximately Cdn$7.6 million, and an after tax gain of
Cdn$6.3 million. See the "Operating and Financial Review and Prospects
-Acquisitions and Investments" section.

     On January 7, 2003, the Company acquired the technology and certain
related assets of SmartSales Inc., a developer of CRM solutions, in a cash
transaction. The Company acquired current assets valued at Cdn$15,000, capital
assets valued at Cdn$22,000 and technology valued at Cdn$362,000 for cash
consideration of Cdn$399,000. The technology acquired was amortized over a term
of one year.

     The Company will continue to pursue its strategy of developing and
marketing software solutions that allow companies to integrate, protect,
capture and audit their data. More enterprises are expected to recognize the
importance of managing data for business intelligence, enterprise application
integration and e-business applications in real-time. To establish and maintain
useful databases for these purposes, data must be captured, transformed and
flowed from the source databases that generate operational data to separate
databases such as data warehouses or web servers in real-time. Competitive
pressures are forcing more companies to be available to their customers 24
hours a day. The Company expects that companies will continue to invest in
technology to avoid having key operational systems unavailable due to planned
(system maintenance, upgrade or backup) or unexpected (hardware or
communications failure) system outages. The U.S. Food and Drug Administration
("FDA") requires that FDA-regulated firms provide electronic audit trails of
certain data, also known as E-Records, for FDA examination. The Sarbanes-Oxley
Act ("SOX") and other similar laws and regulations are driving customers to
implement audit solutions on their financial systems and integration solutions
to improve the speed and accuracy of the consolidation of financial results.
The Company's integration, audit and protection solutions are designed to help
companies address these needs.

     Some of the key growth issues the Company faces include building and
managing its direct and indirect distribution channels, increasing its
marketing efforts to enhance general market awareness of its products,
continuing to improve the efficiency and functionality of its existing
products, introducing new products, hiring quality people and maintaining
adequate management reporting and information systems. The Company continues to
invest in these areas in order to achieve its growth objectives.

                                                                             13
<PAGE>

B.   Business Overview

Description of Operations

     The Company designs, develops and markets software solutions for real-time
data integration, protection and data audit. The Company's comprehensive family
of products allows companies to capture, transform and flow data in real-time
across multi-platform computing environments. The Company's software products
provide business data integration, giving its customers the ability to keep
corporate data integrated, distributed and available within enterprises and
across the Internet. The Company's protection solutions provide disaster
recovery and avoidance ensuring highly available 24/7 business operations under
any circumstances. The Company's data audit solution allows companies to
monitor, track and report on critical information stored in their databases to
ensure the security of their data assets at all times. The Company's products
are suited to such business applications as building and replenishing data
warehouses, data distribution and workload balancing, e-commerce and the
integration of e-business applications with operational and legacy systems,
enterprise application integration ("EAI"), auditing and reporting on the
integrity and security of data assets, mobile and remote data capture for ERP
systems, high availability and back-up and recovery applications. The Company's
PointBase solutions provide relational database products and synchronization
solutions designed to help Java developers speed up and reduce the cost of
developing Java applications and facilitate the integration of back office and
legacy data information with Java and web applications.

     The Company derives its revenue from three main sources: sales of software
licences, software maintenance and support agreements, and consulting and
implementation services. Sales of software licences have historically been
primarily on a direct basis to the Company's customers in North America, Asia
Pacific and much of Europe, while also employing indirect sales channels, such
as distributors and remarketers in these territories. The Company reduced its
direct selling team in Asia in fiscal 2005 and has been using indirect
channels. In Australia, South and Central America and certain European
countries the Company sells mainly on an indirect basis through distributors or
remarketers who may also provide customer support and service to end users.

     The Company derives its revenue from three main sources: sales of
perpetual software licences, software maintenance and support agreements, and
consulting and implementation services. The sales of software licences have
historically been on a direct basis to the Company's customers in North
America, Asia Pacific and most of Europe, while also employing indirect sales
channels such as distributors and remarketers in these territories. In
Australia, South and Central America and certain European countries, the
Company sells mainly on an indirect basis through distributors or remarketers
that may also provide customer support and service to end users. The Company
sells single and multiple-year software maintenance and support agreements with
the related software licences. These agreements are generally renewed on an
annual basis after expiry of their initial term. Revenue from consulting and
implementation services is derived primarily on a time and materials basis
under a services agreement with the customer, which in some cases may be
pre-billed with the related software licences.

     The Company's predecessor was incorporated in November 1993 as a software
research and development firm focused on the problem of transformational data
replication across various hardware and database platforms. Since the
introduction of the Company's Transformation Server software in October 1994 as
an IBM iSeries (AS/400) data replication product, the Company has commercially
released several new versions and extensions of Transformation Server,
extending its functionality to become a cross-platform transformational
integration solution. Transformation Server now offers bi-directional data
capture, transformation and flow to and from a variety of mid-range servers,
mainframe processors and software databases including: DB2/UDB running on IBM
iSeries (AS/400), UNIX (HP, AIX, SUN), Linux and OS/390; Oracle databases
running on UNIX (HP, AIX, SUN), Linux and Windows NT/2000 platforms; Sybase
databases running on UNIX platforms; Microsoft SQL Server databases; XML data
sources; PointBase Java databases, and flat files.

     The Company's first data protection product, High Availability Suite for
IBM iSeries (AS/400) (also known as HA Suite), was first released in November
1998. HA Suite was an iSeries (AS/400) high availability solution that captures
objects and database transactions from primary systems, mirrors them to one or
more recovery systems, and invokes operational switching as required. HA Suite
was complemented and enhanced in mid 1999 with the introduction of DataMirror
iCluster software, an iSeries (AS/400) cluster management solution that
includes a GUI to define nodes in a cluster, determine what data and objects
are mirrored to specific nodes and monitor the entire cluster from a single
station. Transformation Server/ES is a new product introduced in fiscal 2006.
Transformation Server/ES is an event-driven data integration solution that
transforms data into a message format for immediate delivery to enterprise
application integration (EAI), complex event processing (CEP), service-oriented
architecture (SOA), or event-driven architecture (EDA) environments. It creates
useful business information from multiple sources by capturing transactions
from mission-critical applications, pulling contextual information from other
systems, and consolidating the data into a single event. Transformation
Server/ES dynamically routes data, based on content, to various message queues
to be consumed by one or more applications.

                                                                             14
<PAGE>

     The Company's EAI product, Constellar Hub, is an EAI solution which
enables data movement, transformation and integration between a wide variety of
mixed system environments. It supports over 40 data types and supports
real-time, batch and message-oriented systems.

     The Company has also developed additional software products including
iDeliver, a data integration product that delivers data from Transformation
Server sources to Windows desktop data stores.

     The Company, through its wholly owned subsidiary, DataMirror Mobile
Solutions Inc. ("PointBase"), offers a series of Java relational database,
mobility and synchronization products. PointBase has three main offerings --
PointBase Embedded, PointBase Micro and PointBase UniSync. These provide
effective Java-based data storage, enterprise mobility and data synchronization
with corporate databases.

     During the past few years the Company has introduced the following newer
     versions of the following software products:

1.   Transformation Server Version 5.3. Version first released in September
     2005. New and enhanced features include conflict detection and resolution,
     job/process termination, Unicode migration, and enhanced platform support.

2.   Transformation Server/ES Version 5.2. Version first released in November
     2005. This product consists of real-time replication technology that lets
     the user capture and transform relational database changes into XML
     documents and target these documents to the user's messaging middleware
     solution. Transformation Server/ES detects events as they occur in
     mission-critical production applications and creates useful business
     information to feed into the message queues of leading enterprise
     application integration (EAI), business process management (BPM), and
     service-oriented architecture (SOA) environments.

3.   iReflect Version 2.2. Version released in January 2006. This is a high
     availability and data distribution solution for Oracle databases, which
     can be used for data protection, disaster avoidance and recovery, and
     other business applications.

4.   iCluster Version 2.2. Version first released in December 2005. This
     product is the Company's business continuity and disaster recovery
     software for IBM iSeries (AS/400) servers. This version provides support
     for refresh-only groups, referential integrity (RI) constraints,
     user-defined SQL data types, SQL triggers, remote journaling, and offers
     failover support for any combination of supported operating system
     versions.

5.   iCluster for EMC Symmetrix Version 2.1. Version released in January 2005.
     This data protection software for the IBM iSeries (AS/400) is closely
     integrated with EMC Corporation's system and storage replication solutions
     Symmetrix Remote Data Facility (SRDF) and TimeFinder. This product
     increases application availability and workload distribution in EMC
     iSeries (AS/400) environments.

6.   iCluster for IBM TotalStorage Enterprise Storage Server. DataMirror
     iCluster for IBM TotalStorage Enterprise Storage Server (ESS) is a single
     integrated software solution for highly available business operations in
     IBM eServer iSeries environments. iCluster for IBM ESS enables high levels
     of data and application protection for Storage Area Networks (SANs)
     running on IBM iSeries and ESS systems. iCluster for IBM ESS integrates
     with IBM's Advanced Copy functions, Peer-to-Peer Remote Copy (PPRC) and
     FlashCopy to provide availability at the storage level, system level and
     application level.

7.   LiveAudit. DataMirror's LiveAudit software creates an audit trail of
     changes made to information that is stored in relational format. The
     resulting audit trail is stored in a secure database for monitoring,
     analysis, and reporting purposes. LiveAudit is based on the Company's
     flagship Transformation Server product and can also be used for real-time
     data integration and consolidation.

8.   PointBase Embedded Version 5.4. Version released in January 2006. This
     product is a platform-independent, full-featured relational database
     written entirely in Java. It can be integrated directly within a Java
     application, making it transparent to the end user from time of
     deployment. It has a small footprint, provides comprehensive security, and
     requires zero administration. Version 5.4 added performance monitoring
     tools and expanded support of expressions and functions in SQL queries.

9.   PointBase Micro Version 5.4. Version released in January 2006. PointBase
     Micro is a platform-independent Java relational database optimized to run
     on the Java 2 Micro Edition (J2ME CDC and CLDC/MIDP) and J2SE platforms.
     It has an ultra-compact footprint and can be embedded within Java
     applications, making it transparent to users from the time of deployment.

10.  Transformation Server for Mobile Version 5.4. Version released in January
     2006. This product is implemented as a Java API that allows developers to
     easily synchronize data between databases residing on mobile platforms and
     corporate back-end databases.

                                                                             15
<PAGE>

Principal Markets

     The Company operates in only one industry, the business of developing and
marketing computer software products. The Company has two reportable segments,
North America and Europe, based on the geographic location of its operations.
The Company's geographical revenue distribution has been as follows:


FOR THE YEARS ENDED
                                                  January 31,
                                      2006            2005           2004
                                  -------------------------------------------

     Canada                                5.1%            6.7%          7.6%
     United States                        60.0%           50.8%         51.6%
     United Kingdom                       14.2%           18.3%         16.2%
     Germany                               6.9%            9.7%         10.2%
     Other                                13.8%           14.5%         14.4%
                                  -------------------------------------------

                                         100.0%          100.0%        100.0%
                                  ===========================================


     Additional information about the geographic segments of the Company's
business is available in "Management's Discussion and Analysis of Financial
Condition and Results of Operations", incorporated by reference herein, and in
the Consolidated Financial Statements of the Company for the year ended January
31, 2006, Note 17, Segmented Information.

Seasonality

     Generally, the Company's sales are strongest in the calendar quarter
ending December 31st and most of these sales are reflected in the Company's
fourth fiscal quarter of each year. This seasonal factor is a result of common
budgeting practices of customers and is reflective of the general seasonality
of sales common to larger software sales in the industry.

Pricing and Licensing Practices

     A typical licensing transaction for most of the Company's two primary
software products, including Transformation Server and iCluster, includes the
purchase of at least two licences, one licence to act as a source utility for
each of the computers from which the customer intends to replicate data, and
one or more licences to act as a target utility for each computer to which the
customer intends to replicate data. The Company often sells a customer
additional licences or increased use licences as the implementation of a
customer project proceeds or as a customer undertakes additional or expanded
projects that require additional data and application integration capability
across the enterprise.

     Following mid-range software industry practice, the Company's licence
prices vary depending on a number of factors. The Company uses a pricing model
that considers the operating system and relative size and processing capability
of the computer hardware platform on which the software will operate and the
location of the purchaser. In general, licence prices are higher for multiple
processor and large-scale processor computer models than for small processors,
and for UNIX, iSeries (AS/400) and OS/390 platforms than for Windows NT
platforms. It is the Company's general practice to charge customers transfer or
upgrade fees if they want to move licenced software from one platform to
another.

     The standard U.S. dollar list pricing per licence for Transformation
Server and iReflect, ranged from as low as $6,700 to $264,700 in fiscal 2006.
DB/XML Transform licences ranged in price from $11,800 to $35,400. LiveAudit
sales in fiscal 2006 ranged from $5,000 to $198,500. The fiscal 2006 price for
a licence for HA Suite and iCluster ranged from $9,700 to $325,600. Production
licences for Constellar Hub generally ranged from $31,100 to $387,600. ERP
Gateway is a client-server solution. Pricing is based on the number of servers,
the number of clients and the number of customised ERP transactions that a
customer requires. The base price for a solution is approximately $150,000 and
increases depending on the number of customised ERP transactions, the number of
client licences required, and the power of the server on which the server
components are installed.

     Licences for the Company's PointBase products are generally sold to be
embedded or incorporated into original-equipment manufacturers ("OEM")
products. Licence prices for the PointBase products are on a per copy basis
with discounts for larger numbers of copies or on a percentage royalty basis
for OEMs. Maintenance and support are offered on a pay-as-you go basis or on an
annual enterprise basis. PointBase products are also sold through requests for
licenced copies from PointBase's website.


Sales and Marketing

     The Company markets and sells licences for its software products primarily
through its direct sales force in North America and Europe. In addition to its
direct sales activities, the Company also employs indirect sales channels, such
as distributors and resellers, in North America, Central and South America,
Europe, Asia and the Pacific Rim. In Australia, and in certain European
countries, the

                                                                             16
<PAGE>

Company sells mainly on an indirect basis through distributors and resellers,
who may also provide customer support and service to end users.

     The Company's direct sales staff consists of technically trained
salespersons and engineers who serve customers' information systems and
business management staffs. Direct sales and related support personnel are
organized by designated regional sales territories and/or product line, each
reporting directly to head office, in the case of the Americas, or DataMirror
(Europe) head office in London, England, in the case of European sales. The
Company's sales staff covers the North American market from its head office in
Markham, Ontario and from branch offices in New York, New York; Chicago,
Illinois; Dallas, Texas; and Newport Beach, California. The Company's direct
sales in Europe are conducted from the offices of DataMirror (UK) Limited in
London, England, and European branch offices in Antwerp, Frankfurt and Paris.

     The Company uses its website as a sales channel and customer service
centre. Customers and potential customers may download trial versions of
particular software products and obtain on-line access to product
demonstrations. The Company also offers certain product support assistance on
the Web, including the ability for customers to generate their own temporary
user authorization codes, download product upgrades and obtain product
information through the Company's on-line KnowledgeBase.

     In addition to the activities described above, the Company's marketing
efforts include advertising, direct mail and public relations programs,
participation in industry trade shows and individual and joint organization of
seminars, Webcasts and conferences to promote its products.

Resellers and OEMs

     The Company has focused on establishing relationships with resellers who
are well established and financially stable industry leaders. The following are
some of the key resellers with which the Company has entered into reseller or
original equipment manufacturer ("OEM") agreements within the past two fiscal
years.

     In Fiscal 2006, the Company entered into a number of partnerships. In
April 2005, the Company entered into a systems integrator agreement with The
Normandy Group to offer real-time data integration, business continuity, and
regulatory compliance solutions, and the Company also extended its marketing
and sales agreement with Montreal-based Syntax.net to offer high availability
and business continuity solutions for SMB customers.

     In June 2005 the Company formed a reseller agreement with Cork,
Ireland-based QCL Technologies to jointly offer real-time data integration and
regulatory compliance solutions to clients in the chemical, life sciences, and
pharmaceutical industries leveraging DataMirror's Integration Suite software.

     In August 2005, the Company partnered with South Korea's IIONE to sell
high availability and real-time data integration solutions in South Korea.

     In September 2005 the Company expanded its reseller deal with Australian
software developer and integration specialist Eucalypt Software Partners to
provide enterprise application solutions to customers undertaking integration
projects.

     Constant Data, a Minneapolis, MN provider of high availability software
entered into a partner agreement with the Company in November 2005 for high
availability solutions.

     In Fiscal 2005 the Company partnered with a growing number of Latin
American resellers, consultants, and systems integrators to market, support and
sell DataMirror data integration, audit and protection software solutions.
These include GPStrategy Latin America, Red Columbia, Redes y Sistemas
Integrados (Redsis), and TopManage Chile.

     In March 2004, the Company working with its UK partner Simpson Associates,
successfully implemented DataMirror Transformation Server software for Trader
Media Group for use with autotrader.co.uk.

     In April 2004, the Company's PointBase division entered into an OEM
agreement with Unify Corporation, a global enterprise software company.
PointBase Embedded will be used in the Unify NXJ Design Center in which
developers design and test applications for deployment on the Unify NXJ
platform.

     In September 2004, the Company partnered with Tokyo-based General Business
Kitakanto Solution Co. (GBKIT), a solutions provider and a division of Solpac
Co. With that partnership, the Company and GBKIT will collaboratively sell
localized DataMirror software solutions that meet the specialized needs of the
Japanese market. The partnership will allow the Company to expand the reach of
the Company's data integration, protection and auditing solutions into Japan.
As a first step, DataMirror Transformation Server,

                                                                             17
<PAGE>

LiveAudit and iCluster will be localized to support the double-byte character
set used for Japanese language, which allows the Company's products to carry
out integration, replication, and audit functions with original
Japanese-formatted products and applications.

     In November 2004, the Company entered into a strategic partnership with
BASF IT Services to address the need for updated and streamlined information
technology processes in the process manufacturing industry. In that same month,
the Company partnered with UK-based Apex Computers International to deliver the
Company's real-time data integration and protection solutions to the UK.

     December 2004 saw the Company announce its partnering relationship with
Realm Business Solutions (CTI Limited), a leading commercial real estate
software provider. This partnership allows Realm to offer sophisticated real
estate organizations a fast, secure and affordable real-time business
intelligence solution and enable stakeholders to obtain timely information from
relevant applications. This helps organizations make business decisions that
are based on current information rather than outdated sources or error-prone
spreadsheets.

Alliances

     The Company has also developed distribution and marketing channels through
alliances with vendors that offer products that are complementary to the
Company's products. The details of these arrangements vary, but they are
generally co-operative arrangements in which alliance partners may recommend
DataMirror's products directly to their customers as part of a larger systems
solution.

     Included among the key alliances that the Company entered into in the past
three years are Symbian, where the Company joined in 2004 the Symbian Platinum
Partner Program to support the growing market for smartphones; BEA Systems,
where the Company joined the BEA Star Program to provide a BEA-READY (TM)
integration Solution, and Business Objects, where the Company joined the
Business Objects Technology Partner Program.

     In April 2005 the Company joined the Eclipse Foundation, a non-profit
corporation formed to advance the creation and support of the Eclipse platform,
as an Add-In Provider. The Company announced the support of the Eclipse IDE
plugin for PointBase 5.2.

     In May 2005 the Company joined the Business Objects Technology Partner
Program which brings together DataMirror Transformation Server with
BusinessObjects XI, the Business Objects business intelligence platform. In the
third quarter of fiscal 2006, the Company completed the BEA Validation Program
and Transformation Server is now verified to integrate with BEA WebLogic
Platform 8.1.

     In October 2004, the Company entered into a sales and marketing alliance
with Panorama Software, a vendor of business intelligence solutions for the
Microsoft(R) Business Intelligence platform.

     The Company's iCluster software successfully completed interoperability
testing with IBM's TotalStorage Enterprise Storage Server (ESS) products and
earned IBM TotalStorage Proven status. DataMirror iCluster for IBM ESS extends
the capabilities of iCluster to enable a higher level of data and application
availability for Storage Area Networks (SANs) running on IBM iSeries and ESS
systems.

Customer Service and Support

     The Company offers annual maintenance and support contracts for its
software products. Customers may obtain support either (i) on business days
during certain standard business hours (depending on location), or (ii) 24
hours a day, 7 days a week for an additional charge. Product support is
delivered by a combination of telephone, fax, electronic mail and materials
available on the Company's website. If purchased, product maintenance and
support includes product revisions and updates that are commercially released
within the support period. The Company also offers its on-line knowledge base
in a variety of languages including French, German and Spanish to better serve
its worldwide customer base.

     The Company also supports its customers with a range of professional
services including education, consulting, training and implementation services.
The Company offers systems engineering expertise to assist customers with the
initial implementation of the Company's software on customers' systems. Longer
term consulting services, which generally occur less frequently than
implementation services, consist of a range of on-site engagements that are
custom designed to assist individual customers through successive phases of
their business data integration efforts. Professional services are generally
priced based on a time and materials basis depending on the customer's
requirements.

                                                                             18
<PAGE>

Products

     The Company designs, develops and markets software solutions for real-time
data integration, protection and data audit. The Company's products include:

Transformation Server

     DataMirror Transformation Server software is a flexible, high performance,
peer-to-peer data integration solution that enables users to capture, transform
and flow data in real-time throughout the enterprise and across the Internet.
Transformation Server simplifies the process of working in environments with
mixed IT systems. It enables users to easily and seamlessly move and share
information in real-time among mixed system environments.

     Transformation Server provides bi-directional data integration among
DB2/UDB running on IBM iSeries (AS/400), UNIX (HP, AIX, SUN), Linux, and
OS/390; Oracle databases running on UNIX (HP, AIX, SUN), Linux and Windows
NT/2000 platforms; Sybase databases running on UNIX platforms; Microsoft SQL
Server databases; XML data sources; and PointBase Java databases. Flat file
integration is also supported. The product's web-enabled Enterprise
Administrator interface enables administration and auditing of a complex
integration network from a single location. It also provides metadata
management capabilities.

     With flexible data selection and filtering, built-in transformation and
enhancement capabilities, and extended support for ODBC compliant subscriber
systems, Transformation Server enables the Company's customers to deploy a wide
range of business solutions including e-Business, real-time business
intelligence, enterprise application integration, CRM and a host of other
distributed data applications.

     Transformation Server licensing and related fees accounted for
approximately 62% of the Company's overall revenue in fiscal 2006. The Company
depends mainly on direct sales for revenue for its Transformation Server
product, as such, the sale of this product is not dependent on indirect sales
channels and calendar quarter seasonality to the same extent as the Company's
iCluster product. See "Risk Factors - Dependence on Distribution Channels" and
"Risk Factors - Seasonality".

iCluster

     iCluster is an iSeries (AS/400) high availability solution that captures
objects and database transactions from primary systems, mirrors them to one or
more recovery systems, and invokes operational switching as required. iCluster
software includes a high availability cluster management solution for a
`cluster' or integrated network of IBM iSeries (AS/400) systems. iCluster is
comprised of the following four integrated components:

     (i) data mirroring functionality which captures database transactions on
primary systems and mirrors them, on a continuous or periodic basis, to one or
more secondary or back-up iSeries computers;

     (ii) object mirroring functionality that provides continuous or periodic,
on-demand mirroring of non-data objects, such as user id's and security
profiles, from primary systems to one or more secondary or back-up computers;

     (iii) role switching capability to detect primary system failure and
invoke operational switching from primary iSeries (AS/400) systems to secondary
or back-up computers in the event of planned or unplanned system outages; and

     (iv) administration, monitoring and inquiry functions, allowing system
administrators to monitor and analyse both current and historical information
regarding the status of the HA Suite mirroring process.

     iCluster can be installed on distributed systems to enable
around-the-clock system availability.

     A `cluster' consists of an integrated network of iSeries (AS/400) systems
(or nodes) that work together to provide seamless iSeries (AS/400) operations.
If the node in a cluster that provides a service can no longer perform this
role, operations are automatically switched to a designated backup node. To
achieve this objective, objects and data must be replicated from the primary
system to the backup node so that operations can be easily moved to this node.
iCluster enables users to define nodes in a cluster, determine what data and
other critical objects are mirrored to specific nodes and monitor the entire
cluster from a single station. It also handles the data and object mirroring
requirements of clustered high availability environments.

     The Company depends on both direct and indirect sales for the revenue for
its iCluster product. The sale of this product is often linked to the sale of
IBM hardware by IBM Business Partners. Generally, sales of this product are
strongest in the calendar quarter ending December 31st and are reflected in the
Company's fourth fiscal quarter of each year. There can be no assurance that
the Company will continue to be successful with the indirect sales model or
will continue to partner with motivated distributors as


                                                                             19
<PAGE>

the Company tries to grow revenue from these products. A weak calendar fourth
quarter for IBM hardware and IBM Business Partners will adversely affect
revenue from this product.

iReflect

     DataMirror iReflect is a data protection and data distribution product
designed for Oracle databases. iReflect is designed to reduce system downtime
and disaster avoidance and recovery for Oracle environments and also distribute
data between Oracle databases in real-time to solve a wide variety of business
problems. iReflect uses intelligent database-level mirroring to provide a
cost-effective solution to help businesses running Oracle distribute data. It
mirrors Oracle database transactions from the primary system to the recovery
system in real-time. The software also has the ability to detect primary system
failure and invoke operational switching to enable highly available business
operations in Oracle environments. iReflect supports log-based replication of
Oracle databases.

     Customers generally can use DataMirror data protection products for 24/7
access to key databases, data distribution, disaster avoidance and recovery,
minimizing the costs of both planned and unplanned downtime, enhancing service
levels and promoting customer retention and loyalty, efficient distribution of
data processing and workload balancing and ensuring the continuity of supply
chains and e-Business environments.

     The licensing and other related fees for iCluster, iReflect and the
Company's other data protection products accounted for approximately 24% of the
Company's overall revenue in fiscal 2006.

LiveAudit

     LiveAudit is a software solution based on Transformation Server technology
that allows organisations to monitor the security of their data assets and meet
electronic records requirements imposed by regulators. For example, the
electronic records regulations of the U.S. FDA require FDA regulated companies
to use computer-generated, time stamped audit trails to ensure the integrity of
systems storing certain FDA-related records. LiveAudit captures historical
database information and transactional details that would otherwise be
overwritten. LiveAudit can track any changes made to an application database as
well as the time the change was made and the identity of the user. LiveAudit
can be deployed across a wide range of industries including financial services,
healthcare, government, e-Business and retail to monitor and detect fraud,
enhance security and accountability, and improve customer service levels. The
licensing and other related fees for LiveAudit products accounted for
approximately 1% of the Company's overall revenue in fiscal 2006.

PointBase

     PointBase Embedded is a platform-independent, full-featured relational
database written entirely in Java. It can be integrated directly within a Java
application, making it transparent to the end user from time of deployment. It
has a small footprint, provides comprehensive security and requires zero
administration. PointBase Micro is a platform-independent Java relational
database optimized to run on the Java 2 Micro Edition (J2ME CDC and CLDC/MIDP)
and J2SE platforms. It has an ultra-compact footprint and can be easily
embedded within a Java application, making it transparent to users from the
time of deployment. It supports a subset of standard SQL 92. PointBase UniSync
is a Java API that allows developers to easily synchronize data between
databases residing on mobile platforms and corporate back-end databases. It
supports platform-independent, bi-directional synchronization with Oracle(R),
Microsoft SQL(R) Server(TM) and other JDBC-compliant databases. Its powerful
and flexible publish-and-subscribe model supports either incremental delta
changes or full-snapshot changes. The licensing and other related fees for
PointBase products accounted for approximately 12% of the Company's overall
revenue in fiscal 2006.

Constellar Hub

     DataMirror Constellar Hub is an Oracle-based enterprise application
integration tool that enables the movement, transformation and integration of
data between heterogeneous system environments from a central point of control.
With Constellar Hub, organisations can integrate a wide variety of
applications. It supports over 40 data types and supports real-time, batch and
message-oriented systems. Constellar Hub options include interfaces for Oracle
Applications and PeopleSoft and connectors to MQSeries and SAP. The solution
incorporates support for XML, HTTP and FTP to allow e-business transactions to
be readily integrated with a company's other core systems including ERP and CRM
applications.

ERP Gateway

     DataMirror ERP Gateway is a client-server software solution that extends
SAP functionality to remote users by allowing them to execute ERP transactions
from mobile devices. Business applications of ERP Gateway include warehouse and
shop floor operations, time and attendance, asset management, transportation
management, service/sales force automation and CRM. The solution can be
deployed on any Windows based computer or mobile device including industry
standard PCs, PDAs, handheld computers and rugged

                                                                             20
<PAGE>

portable computers for use in industrial settings. Transactions can be executed
in on-line mode in near real-time or in batch-mode to support disconnected
devices and network interruptions.

     Transformation Server/ES is a new product introduced in FY 2006.
Transformation Server/ES is an event-driven data integration solution that
transforms data into a message format for immediate delivery to enterprise
application integration (EAI), complex event processing (CEP), service-oriented
architecture (SOA), or event-driven architecture (EDA) environments. It creates
useful business information from multiple sources by capturing transactions
from mission-critical applications, pulling contextual information from other
systems, and consolidating the data into a single event. Transformation
Server/ES dynamically routes data, based on content, to various message queues
to be consumed by one or more applications.



Competition

Overview

     The Company competes in markets that are competitive, subject to and
affected by changes in technology, product innovations and the actions of its
competitors. Based on the variety of operating systems, databases and hardware
platforms upon which the Company's products operate, the Company can expect a
number of sources of competition. The primary sources of competition are:

o    Independent Software Vendors. A number of independent software vendors
     have developed integration and protection software products for a variety
     of databases and computer platforms, including platforms supported by the
     Company's products such as DB2, Oracle, Sybase and SQL Server. These
     products may offer varying degrees of bi-directional replication
     capability, platform compatibility and continuous or periodic replication
     ability, and offer significant direct competition with the Company's
     products including in particular Transformation Server, iCluster,
     iReflect, and Constellar Hub. As with hardware and database vendors
     described below, many of these independent software vendors are
     significantly larger than the Company and have significantly longer
     operating histories, greater financial resources and more market and brand
     recognition than the Company.

o    Hardware and Database Vendors. Many hardware and database vendors,
     including IBM, Microsoft, Oracle and Sybase, also offer integration and
     protection software products, either as stand-alone products or as a
     technological component of their hardware, operating system, database or
     other software products. Such products tend to be focused on the vendors'
     core hardware or database offerings, and generally do not offer the full
     range of functionality and cross-platform compatibility of the Company's
     products. Nevertheless, such products can and do pose significant
     competition for the Company's products. Many of these vendors are
     significantly larger than the Company and have significantly longer
     operating histories, greater financial resources and more market and brand
     recognition than the Company. If IBM, Microsoft, Oracle, Sybase or other
     leading vendors were to introduce, enhance or expand cross-platform data
     integration tools designed to move or integrate data rapidly and
     seamlessly among a wide variety of different databases and computer
     platforms, such tools could represent even more significant competition to
     the Company and to a wider range of the Company's products. IBM has
     announced plans to add heterogeneous replication to its Websphere
     Information Integration product. IBM has also acquired Ascential Software,
     a competitor to the Company in integration. Although the Company has
     participated in product alliance, joint marketing, product referral and
     other co-operative arrangements with such vendors, there is no guarantee
     that any such arrangements will be available or will continue in the
     future.

o    In-house Development. Many large business organisations have sizeable
     information systems departments and software development and programming
     staff. These organisations may choose to develop their own custom software
     for their internal integration, data protection and audit requirements.
     The Company has encountered, and expects to continue to face, competition
     for the sale of its products from such in-house development efforts.


                                                                             21
<PAGE>

Integration Software Market

     In the market for integration software, the Company's Transformation
Server, Transformation Server/ES, iReflect and Constellar Hub products face
competition from specific data replication software products, designed for use
on many of the platforms between which Transformation Server, iReflect and
Constellar Hub function, including the following products from the following
vendors: DB2 Data Propagator, Websphere Information Integrator, and Websphere
MQ from IBM; Oracle Streams from Oracle; Sybase Replication Server from Sybase;
SQL Replication (DTS) from Microsoft; Symbiator from Vision Solutions; Mimix
Replicate1 from Lakeview Technology; GoldenGate Global Synchronization from
GoldenGate; DataStage from Ascential (acquired by IBM); SharePlex from Quest;
PowerCenter from Informatica/Striva; ETI-Extract from ETI; webMethods
Integration Platform from webMethods; and integration solutions from SeeBeyond
Technology (acquired by Sun Microsystems).

     The Company tries to differentiate Transformation Server from competitive
products by promoting the following product features and capabilities: (i)
unique "Capture, Transform and Flow" architecture which provides the ability to
deliver real-time, transaction based data integration solutions (ii) a
peer-to-peer architecture (as opposed to hub-and-spoke or staging) facilitating
high speed, high transaction throughput; (iii) a solution with minimal impact
on operational business applications and systems with no changes required at
the application level; (iv) rapid deployment with minimum requirement for
programming or professional services; (v) diverse platform and database
support; (vi) single Java-enabled GUI (Enterprise Administrator) which enables
administration and operational control of Transformation Server across
platforms and databases within the enterprise from a single point; and (vii)
sophisticated Enterprise Administrator Monitor which provides "Visualization"
of complex integration networks and allows the creation of user-defined network
diagrams to monitor operations status and performance.

     The Company tries to differentiate Transformation Server/ES from
competitive products by promoting the following product features and
capabilities: (i) unique log-based Change Data Capture (CDC) technology that
detects events as they occur without impacting the performance of
mission-critical systems; (ii) scalability to high data volumes; and (iii)
rapid deployment with minimum requirement for programming or professional
services.

     The Company tries to differentiate its Constellar Hub product from
competitive products by promoting the following features: (i) an advanced hub
and spoke architecture that provides a single point of contact for all data
sources; (ii) real-time data flows and full integration with Transformation
Server; (iii) pre-built application interface support for leading ERP and CRM
applications; (iv) ease of use; and (v) use of PL/SQL as its transformation
language.

     There is no assurance that competitors will not improve their products and
services to respond to the differentiators described above or that the Company
will be successful in selling its products by promoting these differentiators.

Data Protection Software Market

     In the IBM iSeries (AS/400) market for data protection software, the
Company's iCluster product competes against other system mirroring software
products that are generally designed to move data and maintain a current
back-up of an entire iSeries (AS/400) system on a second iSeries (AS/400),
perform operational switchover in the event of system failure, and mirror all
database activity as well as all non-database file and object activity. This
market space has fewer, more readily identifiable direct competitors. The
primary competitors are Lakeview Technology, which sells Mimix Suite and Vision
Solutions, which sells Vision Suite. Both of these competitors have greater
market share than the Company and have longer operating histories in the
iSeries (AS/400) data protection market. Other products in this market include
Echo2 from iTera and NOMAX from Maximum Availability. Newer entrants offer
simple data protection solutions at lower prices and on preferred terms that
has created pressure on pricing and margins. The Company tries to differentiate
iCluster from competitive products by promoting the following features and
capabilities: (i) single code based for data replication, object replication,
monitoring and switching capabilities; (ii) unique Match/Merge technology for
synchronisation on the recovery server; (iii) real-time auto registration; (iv)
object type support; and (iv) implementation methodology. The Company also
tries to differentiate itself from its competitors in terms of: (i) the
Company's publicly disclosed financial position; (ii) the Company's
partnerships and alliances; (iii) the quality of the Company's support and
professional services offerings; and (iv) the responsiveness and innovation of
the Company's development team. There is no assurance that competitors will not
improve their products and services to respond to these differentiators or that
the Company will be successful in selling its products by promoting these
differentiators. IBM continues to add features to its database and operating
systems that may make it easier for new entrants or customers to develop their
own data protection solutions. IBM may also choose to offer its own data
protection solution in the future. IBM has announced a cross-site mirroring
product (XSM) that can provide similar functionality at the hardware and
operating system level.

     In the Oracle market for data protection software, the Company's iReflect
product competes against other database replication software products that are
generally designed to move data and maintain a current back-up of an entire
Oracle database on a secondary system. The main competitor in this market space
is Quest Software which sells its SharePlex product and Oracle with its
DataGuard and Streams products. The Company tries to differentiate the iReflect
product from competitive products by promoting the following features and
capabilities: (i) real-time log-based replication; (ii) DDL (Data Definition
Language) Refresh and Mirroring support; (iii) Synch Check support; (iv) Master
to Master support; and (v) high speed operational switching. There is no
assurance that the Company will be


                                                                             22
<PAGE>

successful in selling into this market. In addition, Oracle may add features to
its database or the Oracle platform that make it easier for new entrants or
customers to develop their own data protection solutions.

Audit Software

     The Company's LiveAudit software was developed as an out-of-the-box
solution to meet the electronic records requirements of the FDA. In particular,
LiveAudit evolved from the need for a database auditing solution mandated by
the FDA's 21 CFR Part 11 regulation, and by capitalizing on the Company's
experience in the data integration market with the Company's data replication
tool, Transformation Server. Both LiveAudit and Transformation Server can be
activated on the same machines because they make use of the same data capture
engines. The Company tries to differentiate the LiveAudit product in terms of
its out-of-the-box, non-intrusive auditing capabilities as well as providing an
auditing solution complete with integration functionality. Many companies
market solutions for electronic records compliance. Most existing providers of
ERP solutions to regulated companies also offer electronic records compliance
features.

Capture Software

     There are a number of competitors in the market for SAP mobile
connectivity solutions including SAP. The Company tries to differentiate its
ERP Gateway software in terms of: (i) its ability to function in both batch and
on-line modes; (ii) its easy to use Graphical User Interface ("GUI"); and (iii)
its platform independence and the fact that it can be installed on common
industry operating systems and mobile devices. There is no assurance that
competitors will not improve their products and services to respond to these
differentiators or that the Company will be successful in selling its products
by promoting these differentiators.

PointBase Software

     There are a number of competitors to the Company's PointBase products in
the Company's two main PointBase markets. Many of these competitors such as
Oracle, Sybase, Microsoft and IBM are significantly larger than the Company.
The competitors are different for each market as few competing product sets
have the breadth of device support offered by PointBase. In the first market
(the "Embedded Market"), customers build products with PointBase Micro and
PointBase Embedded (including the server option) as the database engines in
those products. Some of the larger competitors in this market include IBM
Cloudscape, the Apache Derby open-source java database, DB2 UDB Express and
Everyplace Editions; Microsoft Access and SQL Server; and Borland JDataStore.
Some of these competing products are not 100% Java products and those vendors
have a more complex manufacturing process as they produce different packages
for each platform. In the second market (the "Mobile Market"), mobile
professionals use PointBase Micro, PointBase Embedded, and PointBase UniSync to
occasionally access corporate database or applications. Some of the larger
competitors in this market include Sybase SQL Anywhere Studio, Oracle Lite, and
IBM DB2 Everyplace. The Company tries to differentiate its PointBase database
software in terms of (i) its 100% Java composition and (ii) its ability to
support the Embedded Market and the Mobile Market with a single product set.
There is no assurance that competitors will not improve their products and
services to respond to these differentiators or that the Company will be
successful in selling its products by promoting these differentiators.

Intellectual Property

     The Company regards its software as proprietary and attempts to protect it
using copyright, trademark and trade secret laws, contractual provisions
regarding confidentiality, non-disclosure and ownership of proprietary
information and embedded software authorization routines. Despite these
precautions, it may be possible for unauthorized third parties to copy certain
portions of the Company's products and obtain and use information the Company
regards as proprietary. In addition, there is a risk that third parties may
assert infringement claims against the Company or its products. Shopplex.com
carrying on business as Teilhard Technologies and Juxtacomm Technologies Inc.
(the "Plaintiffs") filed a Statement of Claim in the Federal Court of Canada
against the Company alleging infringement of a Canadian Patent (No. 2,241,767)
and certain other related claims on July 15, 2004. The original Statement of
Claim was amended and the Company subsequently filed a Statement of Defence and
Counterclaim against the Plaintiffs and certain related parties. The Company
believes the claims of infringement are without merit and intends to defend
this matter vigorously. See "Risk Factors - Potential Infringement Liability".

     The Company licences its software products pursuant to either mutually
negotiated software licence and maintenance agreements, by having customers
sign an order form agreeing to the Company's standard terms and conditions, or
by using "shrink wrap" licences (that is, licences included as part of the
product packaging) and/or "click wrap" licences (that is, licences which appear
on a user's computer screen prior to the user being able to effectively use the
software). "Shrink wrap" or "click wrap" licences are not negotiated with or
signed by individual licencees and purport to take effect upon the opening of
the product package or upon download or an indication of acceptance by
"clicking" on an acceptance indicator or button on a web page or computer
screen. Certain provisions of such licences, including provisions protecting
against unauthorized use, copying, transfer and disclosure of the licenced
program, may be unenforceable under the laws of certain jurisdictions.


                                                                             23
<PAGE>

     While the Company is unable to determine the extent of software piracy of
its products, software piracy can be expected to be a persistent problem in the
software industry. The Company utilises software authorization routines to
provide copy protection on all platforms where hardware serial numbers are
available for this purpose. In addition, the Company uses other authorization
schemes where possible. Policing unauthorized use of the Company's products is
difficult and it may not be possible to detect an unauthorized use. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of Canada and the United
States. Accordingly, it may be possible for unauthorized parties to copy or
reverse engineer the Company's products or otherwise obtain and use information
that the Company regards as proprietary.

Government Regulations

     A number of government regulatory issues will continue to influence the
Company's products. Newer government regulations, such as the SOX, Basel II and
the Patriot Act, are driving the need for live data stores that enable a
real-time view of critical business operations.

     The Company's LiveAudit product was developed to assist organisations
regulated by the Food and Drug Administration ("FDA") to comply with 21 CFR
Part 11. There can be no assurance that the FDA will not amend or repeal this
Rule which could adversely affect sales of the LiveAudit product or result in
increased costs associated with the development, maintenance or support of the
product.

     The LiveAudit product can also be used by companies looking to comply with
the requirements of SOX. LiveAudit enables companies to monitor changes made to
corporate information at the database level, and record these changes in
another relational database for monitor and detecting fraud and data tampering.


                                                                             24
<PAGE>

C.   Organizational Structure

     As at January 31, 2006, the Company had the following significant direct
     and indirect subsidiaries:

<TABLE>
<CAPTION>
     SUBSIDIARY(1)                              JURISDICTION OF INCORPORATION

<S>                                                     <C>
     DataMirror Europe (Holdings) Limited               England
     DataMirror (UK) Limited                            England
     DMC Holdings, Inc.                                 Delaware
     DataMirror, Inc.                                   Delaware
     DataMirror Benelux NV                              Belgium
     DataMirror France SARL                             France
     DataMirror Germany(2)                              A partnership under the laws of Germany
     DM Nordic AB                                       Sweden
     DataMirror (Asia Pacific) Limited                  Hong Kong
     DataMirror Mobile Solutions, Inc.                  California
</TABLE>

(1)  Except as otherwise noted, each subsidiary is wholly owned by DataMirror
     Corporation and/or one or more wholly-owned subsidiaries of DataMirror
     Corporation.

(2)  DataMirror Germany is a partnership between two wholly-owned subsidiaries
     of DataMirror Corporation, DataMirror Deutschland GmbH, as limited partner,
     and DataMirror Deutschland Verwaltungs-GmbH, as general partner.


D.   Property, Plants and Equipment

     The Company's head office is located in a leased facility in Markham,
Ontario, where the Company currently occupies approximately 67,222 sq. ft. of
office space. The term for the leased premises was renewed on May 1, 2004 for an
additional five year period. The Company leases private office space, generally
on a short-term basis, for its sales and technical operations in Rolling
Meadows, Illinois; Newport Beach, California; and New York, New York. The
Company's UK subsidiary occupies leased office space at 39 York Road in London,
England which expired March 24, 2006 and entered into a new lease starting
January 12, 2006 until January 11, 2011. The Company also leases additional
office space for European branch offices in Antwerp, Belgium; Darmstadt,
Germany; and Paris, France. The Darmstadt office lease ends November 30, 2006.
Leases for the other European offices are generally terminable on short-term
notice. The Company believes that its existing facilities and offices are
adequate to meet its immediate requirements and that additional space in similar
facilities will be available to satisfy its requirements in the foreseeable
future.


ITEM 5. Operating and Financial Review and Prospects

A.    Operating Results

COMPARISON OF FISCAL 2006 TO FISCAL 2005 AND FISCAL 2005 TO FISCAL 2004

     The following information should be read in conjunction with the audited
Consolidated Financial Statements of the Company for the years ended January 31,
2006 ("Fiscal 2006"), January 31, 2005 ("Fiscal 2005"), and January 31, 2004
("Fiscal 2004") presented in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP") which are in all material respects in
accordance with accounting principles generally accepted in the United States
("U.S. GAAP"), except as disclosed in Note 19 of the audited Consolidated
Financial Statements. All amounts are stated in U.S. dollars unless otherwise
noted.

OVERVIEW

     The Company designs, develops and markets software solutions that enable
over 2,100 companies to integrate, protect, capture and audit their data.

SOURCES OF REVENUE

     The Company derives its revenue from three main sources: sales of perpetual
software licences, software maintenance and support agreements and consulting
and implementation services.

     The sales of software licences have historically been on a direct basis to
the Company's customers in North America, Asia Pacific and most of Europe, while
also employing indirect sales channels, such as distributors and remarketers in
these territories. The

                                                                              25
<PAGE>

Company sells directly to customers in South and Central America in addition to
its traditional use of indirect sales channels. In Asia-Pacific and certain
European countries, the Company sells mainly on an indirect basis through
distributors or remarketers who may also provide customer support and service to
end users. During fiscal 2006, licence sales through indirect sales channels
accounted for 14% of revenue, down from 22% in fiscal 2005 and down from 21% in
fiscal 2004.

     The Company sells single and multiple year software maintenance and support
agreements with the related software licences. These agreements are generally
renewed on an annual basis after expiry of their initial term.

     Revenue from consulting and implementation services is derived primarily on
a time and materials basis under a services agreement with the customer, which
in some cases may be prebilled with the related software licences.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The Company's consolidated financial statements are prepared in accordance
with Canadian GAAP which are in all material respects in accordance with U.S.
GAAP, except as disclosed in Note 19 of the audited consolidated financial
statements. The preparation of the Company's financial statements is based on
the selection and application of significant accounting policies, some of which
require management to make significant estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, the
Company evaluates its estimates, including those related to revenue, bad debts,
investment tax credits, investments, intangible assets, goodwill and income
taxes. The Company bases its estimates on historical experience and on various
other assumptions that are believed at the time to be reasonable under the
circumstances. Under different assumptions or conditions, the actual results
will differ, potentially materially, from those previously estimated. Many of
the conditions impacting these assumptions and estimates are outside of the
Company's control.

     The Company believes that the following critical accounting policies affect
its more significant judgments and estimates used in the preparation of its
consolidated financial statements.

Revenue Recognition. The Company's revenues are generated from the sale of
perpetual software licences, associated software maintenance and post-contract
customer support ["PCS"] and other services. Revenue is recognized in accordance
with Statement of Position ["SOP"] 97-2, Software Revenue Recognition, issued by
the American Institute of Certified Public Accountants ["AICPA"] in October 1997
and amended by SOP 98-9 issued in December 1998.

     Revenue is recognized when persuasive evidence of an arrangement exists,
there are no significant uncertainties surrounding product acceptance, the fees
are fixed and determinable, collection is considered probable and, in the case
of software licence revenue, the related products are shipped. Revenue from PCS
agreements is recognized on a straight-line basis over the term of the related
agreements. Revenue from services, comprised of consulting, training and/or
installation fees, is recognized at the time the services are performed.

     The Company also has multiple-element sales arrangements where software
licences, the associated PCS and services are sold together. The Company has
established vendor-specific objective evidence ["VSOE"] of the fair value of PCS
for specific customer classes based on the value of PCS when sold separately as
an optional renewal after the expiry of the initial maintenance term or based on
contracted prices for optional PCS renewals included in the original
multiple-element sales arrangement. The Company has established VSOE of the fair
value of consulting services based on the normal pricing practices for those
services when sold separately. The Company uses the residual method to determine
the fair value of the delivered software licence if VSOE of the fair value of
all undelivered elements exists. The revenues related to each element are
recognized based on the above stand-alone revenue recognition policies.

     In cases where arrangements include a software licence and PCS and the
Company is not able to establish VSOE for the undelivered elements of a sales
arrangement, the revenue from that arrangement is allocated to its components
according to the terms of the contract and all the revenue is recognized ratably
over the term of the contract.

     During 2006, the Company changed its method of revenue recognition for
multiple-element sales arrangements to adopt the residual method of determining
the fair value of a delivered software licence. Under the residual method, any
undelivered element (most commonly post contract customer support) of a
multi-element sales arrangement is valued at its fair value as determined based
on vendor-specific objective evidence, and the balance is recognized on delivery
of the software licence provided that the other criteria for revenue recognition
are met. Under the Company's prior method of revenue recognition, a greater
proportion of the arrangement consideration was assigned to the delivered
software licence.

     The Company has applied this change retroactively, and the prior years have
been restated. For the fiscal year ended January 31, 2005, the change resulted
in increases in revenues of $2,411,000 and net income of $2,317,000. The change
also resulted in an increase in deferred revenue of $9,861,000, a decrease in
accounts payable and accrued liabilities of $336,000, an increase in future


                                                                              26
<PAGE>

tax assets of $2,794,000 and a decrease in the cumulative translation adjustment
of $2,090,000, all at January 31, 2005. For the year ended January 31, 2004, the
change resulted in decreases in revenue of $496,000 and net income of $25,000.
The change also resulted in an increase in deferred revenue of $11,766,000, a
decrease in accounts payable and accrued liabilities of $345,000, an increase in
future tax assets of $3,313,000, an increase in future income tax liabilities of
$45,000 and a decrease in the cumulative translation adjustment of $1,204,000,
all at January 31, 2004. The deficit at February 1, 2003 was increased by
$6,924,000.

     Allowance for doubtful accounts. The Company maintains an allowance for
doubtful accounts for the estimated losses resulting from the inability of its
customers to make required payments. The Company performs ongoing credit
evaluations of its customers' financial condition; if the financial condition of
the Company's customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances would likely be required. Actual
collections could materially differ from our estimates.

     Investment tax credits. The Company applies for investment tax credits from
both the Canadian federal and provincial tax authorities relating to amounts
expended on scientific research and development ["R&D"]. The amount of
investment tax credits recorded represents management's best estimate based on
its interpretation of current legislation. However, the Canada Revenue Agency
has not yet assessed all the federal claims and, therefore, the amount
ultimately received could be materially different than the amount recorded.

     Investments. From time to time, the Company may hold minority interests in
companies having operations or technology in areas within its strategic focus,
some of which are publicly traded and have highly volatile share prices. The
Company records an investment impairment charge when a decline in the value of
an investment occurs that is considered to be other than a temporary impairment.
Future adverse changes in market conditions or poor operating results of the
companies in which the Company has invested could result in losses or an
inability to recover the carrying value of the investments and may possibly
require an impairment charge in the future.

     Intangible assets. The Company has intangible assets related to acquired
technology and customer lists and trademarks. The determination of the related
estimated useful lives and whether or not these assets are impaired involves
significant judgments. In assessing the recoverability of these intangible
assets, the Company must make assumptions regarding estimated future cash flows,
market conditions and other factors to determine the fair value of the asset. If
these estimates or their related assumptions change in the future, the Company
may be required to record impairment charges for these assets not previously
recorded. In fiscal 2006, the Company did not record an impairment charge
related to intangible assets.

     Goodwill. The Company has goodwill assets arising from business
acquisitions, which are comprised of the excess of amounts paid over the fair
value of net identifiable assets acquired. The Company performs an annual
assessment of the fair value of the businesses to which this goodwill relates.
In assessing the fair value of these businesses, the Company must make
assumptions regarding estimated future cash flows, market conditions and other
factors to determine the fair value of the business. If these estimates or their
related assumptions change in the future, the Company may be required to record
impairment charges for these assets not previously recorded. In fiscal 2006, the
Company did not record an impairment charge related to goodwill.

     Future income taxes. The Company has future tax assets, which are subject
to periodic recoverability assessments. Realization of the Company's future tax
assets is principally dependent upon its achievement of projected future taxable
income. The Company's judgments regarding future profitability may change due to
future market and other factors. These changes, if any, may require possible
material adjustments to these future tax asset balances by recording a valuation
allowance to reduce the future tax asset to the amount that is more likely to be
realized. While the Company has considered future taxable income and ongoing tax
planning strategies in assessing the need for valuation allowances, in the event
the Company were to determine that it would be more likely than not to be able
to realize future tax assets in excess of the recorded amount, an adjustment to
the future tax assets would increase income in the period such a determination
were made. Likewise, in the event the Company was to determine that it would not
be able to realize all or part of its net future tax assets, an adjustment to
the future tax assets would be charged against income in the period such a
determination were made.


                                                                              27
<PAGE>

RESULTS OF OPERATIONS

     The following selected consolidated financial information is derived from
the audited consolidated financial statements of the Company presented in
accordance with Canadian GAAP, and must be read in conjunction with such
consolidated financial statements and related notes thereto. Historic results
are not necessarily indicative of the results that may be expected for any
future period.

<TABLE>
<CAPTION>
                                                    For the Years Ended January 31,
                                                       (In thousands of U.S. $)

                                                                 2006        2005(1)        2004(1)
                                                           ----------    -----------     ----------
<S>                                                        <C>           <C>             <C>
        Revenue:
           Licence                                         $   18,232    $    17,444     $   18,511
           Maintenance                                         23,342         22,641         20,703
           Services                                             3,171          3,544          3,991
                                                           ----------    -----------     ----------
                                                               44,745         43,629         43,205
                                                           ----------    -----------     ----------
           Cost of revenue:
           Licence                                                170            192            170
           Maintenance and services                             8,290          9,143          8,283
                                                           ----------    -----------     ----------
                                                                8,460          9,335          8,453
                                                           ----------    -----------     ----------
        Gross margin                                           36,285         34,294         34,752
                                                           ----------    -----------     ----------
           Operating expenses:
           Selling and marketing                               13,484         15,192         14,853
           Research and development                             8,211          8,144          7,085
           General and administration                           7,539          6,763          5,672
           Stock-based compensation                               265            316            377
           Amortization of intangibles                          1,651          2,279          2,250
                                                           ----------    -----------     ----------
              Total operating expenses                         31,150         32,694         30,237
                                                           ----------    -----------     ----------
        Operating income                                        5,135          1,600          4,515
        Investment income, net                                    793            782            835
        Gain on sale of investment                                  0          5,466              0
        Other income                                                0              0            203
                                                           ----------    -----------     ----------
        Income before income taxes                              5,928          7,848          5,553
        Provision for income taxes                              2,245          1,829          1,777
                                                           ----------    -----------     ----------
        Net income                                         $    3,683    $     6,019     $    3,776
                                                           ==========    ===========     ==========

        Earnings per share
        Basic                                                   $0.42          $0.55          $0.33
        Diluted                                                 $0.42          $0.54          $0.32

        Weighted average number of shares outstanding [000s]
        Basic                                                   8,758         11,026         11,364
        Diluted                                                 8,832         11,192         11,640
</TABLE>


((1))    Comparative figures for the years ended January 31, 2005 and January
         31, 2004 were restated to reflect the effect of the change in
         accounting policy for revenue recognition as described in Note 3 to the
         Consolidated Financial Statements for the year ended January 31, 2006.


                                                                              28
<PAGE>

FISCAL YEAR ENDED JANUARY 31, 2006
COMPARED TO FISCAL YEAR ENDED JANUARY 31, 2005

REVENUE

     The Company derives its revenue from three main sources: sales of perpetual
software licences, software maintenance and support agreements, and consulting
and implementation services.

     The sales of software licences have historically been on a direct basis to
the Company's customers in North America, Asia Pacific and most of Europe, while
also employing indirect sales channels such as distributors and remarketers in
these territories. In Australia, South and Central America and certain European
countries, the Company sells mainly on an indirect basis through distributors or
remarketers that may also provide customer support and service to end users.
During fiscal 2006, licence sales through indirect sales channels accounted for
14% of revenue, down from 22% in fiscal 2005 due primarily to a decrease in
revenue from iCluster (a successor to High Availability Suite), which is sold
primarily through the Company's channel partners.

Licence sales accounted for 40.7% of total revenue in fiscal 2006 as compared to
40.0% in fiscal 2005. The Company expects that software licence revenues will
continue to account for a substantial portion of its revenues for the
foreseeable future.

Licence revenue has historically been heavily dependent on sales of
Transformation Server and iCluster software for use in connection with IBM
iSeries (AS/400) platforms. In fiscal 2006, sales of software for use on AS/400
platforms accounted for 50.3% of licence revenue, down from 64.9% in fiscal 2005
due to the decline in revenue from iCluster coupled with the increase in revenue
from Transformation Server on Unix platforms. It is expected that the Company's
future success will continue to depend on its relationship with IBM and the
success of the AS/400 platform. The Company's sales of software relating to Unix
platforms in fiscal 2006 was 29.3% of licence revenue, up significantly as a
percentage of licence revenue from 14.0% of licence revenue in fiscal 2005 due
to expanded sales of Transformation Server used in Oracle environments.

The Company sells single and multiple year software maintenance and support
agreements with the related software licences. These agreements are generally
renewed on an annual basis after expiry of their initial term. During fiscal
2006, 52.2% of the Company's revenue was derived from customer software
maintenance and support contracts, compared to 51.9% of revenue in fiscal 2005.

Revenue from consulting and implementation services is derived primarily on a
time-and-materials basis under a services agreement with the customer, which in
some cases may be pre-billed with the related software licences. During fiscal
2006, revenue from services, which includes consulting, training and other
services, accounted for 7.1% of revenue, compared to 8.1% in fiscal 2005.

Licence. Licence revenue was $18,232,000 in fiscal 2006 compared to $17,444,000
in fiscal 2005, an increase of 4.5%. The increase in licence revenue in fiscal
2006 was attributable to several factors, including the effect of stronger
revenue from the Company's PointBase products as well as increased revenue from
sales of Transformation Server in Oracle environments.

Maintenance. Maintenance revenue in fiscal 2006 was $23,342,000 compared to
$22,641,000 in fiscal 2005, an increase of 3.1%. This increase was a result of
maintenance revenue generated by additional licence sales since the end of
fiscal 2005 and the renewal of maintenance and support contracts for licence
sales completed in prior periods, offset by the effects of the stronger Canadian
currency.

Services. Services revenue in fiscal 2006 was $3,171,000 compared to $3,544,000
in fiscal 2005, a decrease of 10.5%. This decrease was primarily due to
decreased revenue from consulting services for the Company's ERP Gateway and
iCluster products.

Geographical distribution. The Company derives most of its sales revenue from
international customers, with sales outside Canada usually denominated in U.S.
dollars or European currencies, including pounds sterling and euros. For fiscal
2006, sales denominated in U.S. dollars and European currencies represented
65.8% and 29.1%, respectively (for fiscal 2005, these were 56.0% and 37.3%,
respectively) of the Company's revenues. A significant portion of the Company's
operating expenses are incurred in Canadian dollars; accordingly, changes in
exchange rates between the Company's Canadian dollar functional currency and
these foreign currencies can positively or negatively affect the Company's
operating results. The Company has a policy of hedging a portion of its foreign
currency denominated accounts receivable. Management recognizes that this policy
can provide only short-term protection against a limited portion of the
Company's currency exposure.


                                                                              29
<PAGE>

     The Company's geographical revenue distribution based on the customers'
country of residence has been as follows:

---------------------------------- ---------------- -------- ----------------
Years ended January 31                        2006                      2005
                                                 %                         %
                                   ----------------          ----------------

Canada                                         5.1                       6.7
United States                                 60.0                      50.8
United Kingdom                                14.2                      18.3
Germany                                        6.9                       9.7
Other                                         13.8                      14.5
---------------------------------- ---------------- -------- ----------------
                                             100.0                     100.0
---------------------------------- ---------------- -------- ----------------


     Transaction values in fiscal 2006 for sales of the Company's products have
been as large as $1,900,000 (2005 - $680,000), although a typical sale ranges
from $70,000 to $100,000. No single transaction accounted for more than 3.0% of
revenue in fiscal 2006 (0.9% of revenue for fiscal 2005), and no single industry
accounted for more than 17.9% of licence revenue in fiscal 2006 (29.2% of
licence revenue for fiscal 2005).

COST OF REVENUE

     Licence. Cost of licence revenue consists primarily of duplication, media,
packaging and shipping expenses. For fiscal 2006, costs of licence revenue were
$170,000 (0.9% of licence revenue), relatively unchanged from $192,000 (1.1% of
licence revenue) for fiscal 2005.

     Maintenance and services. Costs of maintenance and service revenue consist
primarily of the salaries and related costs of providing those services. For
fiscal 2006, costs of maintenance and service revenue were $8,290,000 (31.3% of
maintenance and services revenue) compared to $9,143,000 (34.9% of maintenance
and services revenue) for fiscal 2005. The gross margin on maintenance and
services increased in fiscal 2006 due to the consolidation of the Company's
European support desk into the North American operation which was completed in
July 2004.

OPERATING EXPENSES

     Due to the nature of the Company's business, salary and other
headcount-related costs comprise a large portion of the Company's operating
expenses. In order to properly understand the Company's operating expense trends
over the last two fiscal years, a summary of the ending and average headcount by
department for each of the last two fiscal years follows.

<TABLE>
<CAPTION>
----------------------------------------------------------------------- ----------- -------------
Ending headcount at January 31                                                2006          2005
                                                                        ----------- -------------

<S>                                                                            <C>           <C>
Selling and marketing                                                          111           122
Research and development                                                        70            69
General and administration                                                      39            41
----------------------------------------------------------------------- ----------- -------------
Total                                                                          220           232
----------------------------------------------------------------------- ----------- -------------
</TABLE>


Selling and marketing. Selling and marketing expenses include expenses for sales
commissions, salaries, advertising, trade shows, promotional materials and other
selling and marketing related expenses. For fiscal 2006, these expenses totaled
$13,484,000 (30.1% of revenue), down significantly from $15,192,000 (34.8% of
revenue) for fiscal 2005. The decrease was due primarily to reduced travel and
the effect of a reduction of average headcount in this area. Management expects
selling and marketing expenses to increase in fiscal 2007 as the Company expands
its sales and marketing activities.

Research and development. R&D expenses include only salaries and other direct
costs associated with the development of new products and are net of related
investment tax credits. R&D expenses were $8,211,000 (18.4% of revenue) for
fiscal 2006, up slightly from $8,144,000 (18.7% of revenue) for fiscal 2005. The
slight increase is due to the effect of the weaker U.S. currency on the

                                                                              30
<PAGE>

Company's primarily Canadian R&D expenses, offset by a decrease in the average
headcount in R&D and an increase in investment tax credits. The Company applies
for investment tax credits from both the Canadian federal and provincial tax
authorities relating to amounts expended on scientific research and development.
During fiscal 2006, $715,000 (fiscal 2005 - $109,000) in investment tax credits
were applied to reduce operating expenses. The amount of investment tax credits
recorded represents management's best estimate based on its interpretation of
current legislation. However, the Canada Revenue Agency has not yet assessed all
of the federal claims and, therefore, the amount ultimately received could be
materially different from the amount recorded.

General and administration. General and administration ["G&A"] expenses consist
primarily of administrative salaries, rent, recruiting costs and professional
fees. For fiscal 2006, general and administration expenses were $7,539,000
(16.8% of revenue) compared to $6,763,000 (15.5% of revenue) for fiscal 2005.
The increase is due mainly to increased governance costs and the effect of the
weaker U.S. dollar, as the Company's G&A expenses are largely incurred in
Canadian funds.

Stock-based compensation. For fiscal 2006, stock-based compensation was $265,000
compared to $316,000 for fiscal 2005. This decrease was due to options which
have expired since fiscal 2005, which were partly offset by the additional
expense from options issued during fiscal 2006.

Amortization of intangibles. For fiscal 2006, amortization of intangibles was
$1,651,000 compared to $2,279,000 for fiscal 2005. The decrease of $628,000 from
fiscal 2005 is due to certain technologies becoming fully amortized during the
year.

INVESTMENT INCOME, NET

     Investment income, net includes interest on cash equivalents, short- and
long-term investments and other investment income net of interest expense on
bank overdrafts and taxes. In fiscal 2006, net investment income was $793,000
compared to $782,000 in fiscal 2005.

GAIN ON SALE OF INVESTMENT

     No investment was sold in fiscal 2006. In fiscal 2005, the Company
recognized a gain of $5,466,000 on the sale of its investment in Idion
Technology Holdings Ltd. ["Idion"].

INCOME TAX EXPENSE

     During fiscal 2006, the Company recorded an income tax provision of
$2,245,000 as compared to a provision of $1,829,000 in fiscal 2005.

     The combined basic Canadian federal and provincial tax rate used in
determining the income tax provision for fiscal 2006 was 36.1%, unchanged from
fiscal 2005.

     The income tax provision is different from the amount calculated by
applying this tax rate to income before income taxes due to a combination of
factors, including the gain on the sale of the investment in Idion being partly
non-taxable, a portion of the amortization of intangibles being non-deductible
for tax purposes, stock-based compensation and certain other expenses being
non-deductible for tax purposes, the inability to benefit from certain foreign
tax losses incurred during the year, the effect of foreign tax rates, the
manufacturing and processing tax deduction, and the effect of the rate changes
on future taxes.

     The Company has foreign non-capital loss carryforwards of approximately
$4,444,000 that have no expiry date and $2,844,000 that expire over 18 years. A
valuation allowance has been recognized for all but $838,000 of the losses.

NET INCOME

     In fiscal 2006, the Company recorded net income of $3,683,000 ($0.42 per
basic share) as compared to $6,019,000 ($0.55 per basic share) in fiscal 2005.
In fiscal 2006 the level of operating profitability improved dramatically over
fiscal 2005, excluding the gain on the sale of Idion, due to the combination of
an increase in revenue, an improvement in gross margins and a reduction in
operating expenses. The improvement in profitability in fiscal 2005 was
achieved mainly through a gain on the sale of the Company's investment in
Idion.


                                                                              31
<PAGE>

FISCAL YEAR ENDED JANUARY 31, 2005
COMPARED TO FISCAL YEAR ENDED JANUARY 31, 2004

REVENUE

     The Company derived its revenue from three main sources: sales of perpetual
software licences, software maintenance and support agreements, and consulting
and implementation services.

     The sales of software licences have historically been on a direct basis to
the Company's customers in North America, Asia Pacific and most of Europe, while
also employing indirect sales channels such as distributors and remarketers in
these territories. In Australia, South and Central America and certain European
countries, the Company sells mainly on an indirect basis through distributors or
remarketers that may also provide customer support and service to end users.
During fiscal 2005, licence sales through indirect sales channels accounted for
22% of revenue, up slightly from 21% in fiscal 2004.

     Licence sales accounted for 40.0% of total revenue in fiscal 2005 as
compared to 42.8% in fiscal 2004. The Company expects that software licence
revenues will continue to account for a substantial portion of its revenues for
the foreseeable future.

     Licence revenue has historically been heavily dependent on sales of
Transformation Server and iCluster software for use in connection with IBM
iSeries (AS/400) platforms. In fiscal 2005, sales of software for use on AS/400
platforms accounted for 64.9% of licence revenue, down from 54.8% in fiscal
2004. It is expected that the Company's future success will continue to depend
on its relationship with IBM and the success of the AS/400 platform. The
Company's sales of software relating to Unix platforms in fiscal 2005 was 14.0%
of licence revenue, down slightly as a percentage of licence revenue from 16.9%
of licence revenue in fiscal 2004.

     The Company sells single and multiple year software maintenance and support
agreements with the related software licences. These agreements are generally
renewed on an annual basis after expiry of their initial term. During fiscal
2005, 51.9% of the Company's revenue was derived from customer software
maintenance and support contracts, compared to 47.9% of revenue in fiscal 2004.

     Revenue from consulting and implementation services is derived primarily on
a time-and-materials basis under a services agreement with the customer, which
in some cases may be pre-billed with the related software licences. During
fiscal 2005, revenue from services, which includes consulting, training and
other services, accounted for 8.1% of revenue, compared to 9.2% in fiscal 2004.

     Licence. Licence revenue was $17,444,000 in fiscal 2005 compared to
$18,511,000 in fiscal 2004, a decrease of 5.8%. The decrease in licence revenue
in fiscal 2005 was attributable to several factors, including price erosion due
to competitive pressures in the iSeries High Availability marketplace and slower
than anticipated adoption of the Company's newer products such as iReflect and
LiveAudit.


     Maintenance. Maintenance revenue in fiscal 2005 was $22,641,000 compared to
$20,703,000 in fiscal 2004, an increase of 9.4%. This increase was a result of
maintenance revenue generated by additional licence sales since the end of
fiscal 2004 and the renewal of maintenance and support contracts for licence
sales completed in prior periods, offset by the effects of the stronger Canadian
currency.

     Services. Services revenue in fiscal 2005 was $3,544,000 compared to
$3,991,000 in fiscal 2004, a decrease of 11.2%. This decrease was primarily due
to decreased revenue from consulting services for the Company's ERP Gateway
products.

     Geographical Distribution. The Company derives most of its sales revenue
from international customers, with sales outside Canada usually denominated in
U.S. dollars or European currencies, including pounds sterling and euros. For
fiscal 2005, sales denominated in U.S. dollars and European currencies
represented 56.0% and 37.3%, respectively (for fiscal 2004, these were 57.0% and
35.4%, respectively) of the Company's revenues. A significant portion of the
Company's operating expenses are incurred in Canadian dollars; accordingly,
changes in exchange rates between the Company's Canadian dollar functional
currency and these foreign currencies can positively or negatively affect the
Company's operating results. The Company has a policy of hedging a portion of
its foreign currency denominated accounts receivable. Management recognizes that
this policy can provide only short-term protection against a limited portion of
the Company's currency exposure.


                                                                              32
<PAGE>

     The Company's geographical revenue distribution based on the customers'
country of residence has been as follows:

-----------------------------------------------------------  -----------------
Years ended January 31                                2005               2004
                                                         %                  %
                                           ----------------  -----------------

Canada                                                 6.7                7.6
United States                                         50.8               51.6
United Kingdom                                        18.3               16.2
Germany                                                9.7               10.2
Other                                                 14.5               14.4
-----------------------------------------------------------  -----------------
                                                     100.0              100.0
-----------------------------------------------------------  -----------------




     Transaction values in fiscal 2005 for sales of the Company's products have
been as large as $680,000 (2004 - $2,440,000), although a typical sale ranges
from $70,000 to $100,000. No single transaction accounted for more than 0.9% of
revenue in fiscal 2005 (3.4% of revenue for fiscal 2004), and no single industry
accounted for more than 29.2% of licence revenue in fiscal 2005 (24.7% of
licence revenue for fiscal 2004).

COST OF REVENUE

     Licence. Cost of licence revenue consists primarily of duplication, media,
packaging and shipping expenses. For fiscal 2005, costs of licence revenue were
$192,000 (1.1% of licence revenue), relatively unchanged from $170,000 (0.9% of
licence revenue) for fiscal 2004.

     Maintenance and Services. Costs of maintenance and service revenue consist
primarily of the salaries and related costs of providing those services. For
fiscal 2005, costs of maintenance and service revenue were $9,143,000 (34.9% of
maintenance and services revenue) compared to $8,283,000 (33.5% of maintenance
and services revenue) for fiscal 2004.

OPERATING EXPENSES

      Due to the nature of the Company's business, salary and other
headcount-related costs comprise a large portion of the Company's operating
expenses. In order to properly understand the Company's operating expense trends
over the last two fiscal years, a summary of the ending and average headcount by
department for each of the last two fiscal years follows.


         ----------------------------------------------------------------------
         Ending Headcount
         at January 31,
                                                  2005               2004
                                           ------------------------------------

         Selling and Marketing                     122                168
         Research & Development                     69                 91
         General & Administrative                   41                 40
         ----------------------------------------------------------------------
         Total                                     232                299
         ----------------------------------------------------------------------


                                                                              33
<PAGE>

Average Headcount for the
Fiscal Year Ended January 31,
                                               2005              2004
                                       -------------------------------------

Selling and Marketing                           151               155
Research & Development                           80                84
General & Administrative                         41                40
-------------------------------------- -------------------------------------
Total                                           272               279
-------------------------------------- -------------------------------------


     Selling and Marketing. Selling and marketing expenses include expenses for
sales commissions, salaries, advertising, trade shows, promotional materials and
other selling and marketing related expenses. For fiscal 2005, these expenses
totaled $15,192,000 (34.8% of revenue), up slightly from $14,853,000 (34.4% of
revenue) for fiscal 2004. The increase was due primarily to effect of the weaker
U.S. currency on the Company's Canadian and European selling and marketing
expenses and termination costs related to the headcount reductions, offset by
reduced travel and the effect of a reduction of average headcount in this area.

     Research and Development. Research and development ["R&D"] expenses
include only salaries and other direct costs associated with the development of
new products and are net of related investment tax credits. R&D expenses were
$8,144,000 (18.7% of revenue) for fiscal 2005, up slightly from $7,085,000
(16.4% of revenue) for fiscal 2004. The increase is due to the effect of the
weaker U.S. currency on the Company's primarily Canadian R&D expenses, a
decrease in investment tax credits and the effect of including the R&D expenses
assumed when the Company acquired PointBase, Inc. ["PointBase"] in December
2003 for the entire fiscal year. The Company applies for investment tax credits
from both the Canadian federal and provincial tax authorities relating to
amounts expended on scientific research and development. During fiscal 2005,
$109,000 (fiscal 2004 - $586,000) in investment tax credits were applied to
reduce operating expenses. The amount of investment tax credits recorded
represents management's best estimate based on its interpretation of current
legislation. However, the Canada Revenue Agency has not yet assessed all the
federal claims and, therefore, the amount ultimately received could be
materially different from the amount recorded.

     General and Administration. General and administration ["G&A"] expenses
consist primarily of administrative salaries, rent, recruiting costs and
professional fees. For fiscal 2005, general and administration expenses were
$6,763,000 (15.5% of revenue) compared to $5,672,000 (13.1% of revenue) for
fiscal 2004. The increase is due mainly to increased governance costs, the
effect of the weaker U.S. currency, as the Company's G&A expenses are largely
incurred in Canadian funds and the effect of including the G&A expenses assumed
when the Company acquired PointBase in December 2003 for the entire fiscal year.

     Stock-based compensation. For fiscal 2005, stock-based compensation was
$316,000 compared to $377,000 for fiscal 2004. This decrease was due to options
which have expired since fiscal 2004, which were partly offset by the
additional expense from options issued during fiscal 2005.

     Amortization of Intangibles. For fiscal 2005, amortization of intangibles
was $2,279,000 consistent with $2,250,000 for fiscal 2004.

INVESTMENT INCOME, NET

     Investment income, net includes interest on cash equivalents, short- and
long-term investments and other investment income net of interest expense on
bank overdrafts and taxes. In fiscal 2005, net investment income was $782,000
compared to $835,000 in fiscal 2004. This decrease is primarily due to a
decrease in interest rates earned on invested funds, offset by an increase in
average invested cash balances resulting mainly from the funds received when the
Company sold its investment in Idion Technology Holdings Limited ("Idion") in
May 2004.

GAIN ON SALE OF INVESTMENT

     In May 2004, the Company recognized a gain of $5,466,000 on the sale of its
investment in Idion Technology Holdings Ltd. ["Idion"]. No investment was sold
in fiscal 2004.


                                                                              34
<PAGE>

OTHER INCOME

     In April 2003, DataMirror made an offer to acquire all of the issued and
outstanding shares of PointBase, Inc ("PointBase"). PointBase determined not to
proceed with the transaction and, as a result, PointBase agreed to pay
DataMirror an amount of $203,000 as consideration for the cancellation of the
offer. The Company ceased its efforts to purchase PointBase as conditions at the
time did not warrant further discussions. The Company eventually acquired
PointBase in December 2003.

INCOME TAX EXPENSE

     During fiscal 2005, the Company recorded an income tax provision of
$1,829,000 as compared to a provision of $1,771,000 in fiscal 2004.

     The combined basic Canadian federal and provincial tax rate used in
determining the income tax provision for fiscal 2005 was 36.1%, compared to
36.6% for fiscal 2004.

     The income tax provision is different from the amount calculated by
applying this tax rate to income before income taxes due to a combination of
factors, including the gain on the sale of the investment in Idion being partly
non-taxable, a portion of the amortization of intangibles being non-deductible
for tax purposes, stock-based compensation and certain other expenses being
non-deductible for tax purposes, the inability to benefit from certain foreign
tax losses incurred during the year, the effect of foreign tax rates, the
manufacturing and processing tax deduction, and the effect of the rate changes
on future taxes.

NET INCOME

     In fiscal 2005, the Company recorded net income of $6,019,000 ($0.55 per
basic share) as compared to $3,776,000 ($0.33 per basic share) in fiscal 2004.
This improvement in profitability was achieved largely through the gain
recognized on the sale of the Company's investment in Idion as the pressure of
the strengthening Canadian dollar on the Company's operations caused the level
of operating profits to drop significantly, particularly in the first half of
the year.


                                                                              35
<PAGE>


OPERATING SEGMENTS AND CURRENCY FLUCTUATIONS

     The Company operates in only one industry, that being the business of
developing and marketing computer software products. Based on the geographic
location of its operations, the Company operates in two reportable segments:
North America, which includes the Company's Asia Pacific operations, and Europe.
The accounting policies followed by these segments are the same as those
described in the summary of significant accounting policies contained in Note 1
to the Company's consolidated financial statements. The Company accounts for
intersegment sales at fair value.

     The Company's reportable segments are strategic business units. They are
managed separately because each reportable segment operates in different
economic marketplaces and, therefore, requires different investing and marketing
strategies. The Company evaluates segment performance based on profit or loss
from operations before investment income and income taxes.

     In fiscal 2006, the North American segment (which includes the Company's
Asia Pacific operations, which are currently not significant) had total revenue
of $31,706,000 compared to $27,345,000 in fiscal 2005, an increase of 15.9%. The
increase in revenue was caused largely by increased revenue from the Company's
PointBase products in North America as well as increased revenue from sales of
Transformation Server in Oracle environments. In fiscal 2006, the North American
segment had operating income of $4,805,000 compared to an operating loss of
$599,000 in fiscal 2005. The increase in operating profitability of $5,404,000
was due mainly to the revenue increase previously discussed coupled with a
reduction in operating expenses, particularly amortization of intangibles, which
decreased by $628,000.

     Revenues from the European segment were $13,039,000 in fiscal 2006 compared
to $16,284,000 in fiscal 2005, a decrease of 19.9% due mainly to reduced sales
of the Company's iCluster products, which contributed a significant portion of
the region's revenue in prior years. In fiscal 2006, the European segment's
operating income was $330,000 compared with $2,199,000 in fiscal 2005, a
decrease of $1,869,000 due mainly to the decrease in revenue.

     In fiscal 2005, the North American segment (which includes the Company's
Asia Pacific operations, which are currently not significant) had total revenue
of $27,345,000 compared to $27,919,000 in fiscal 2004, a decrease of 2.1%. The
decrease in revenue was caused largely by price erosion due to competitive
pressures in the iSeries High availability marketplace. In fiscal 2005, the
North American segment had an operating loss of $599,000 compared to operating
income of $2,013,000 in fiscal 2004. This decrease in operating profitability
was due mainly to the effect of the stronger Canadian currency on the segment's
predominantly Canadian operating costs.

     Revenues from the European segment were $16,284,000 in fiscal 2005 compared
to $15,286,000 in fiscal 2004, an increase of 6.5% due mainly to the timing of
revenue recognized from licencing contracts closed in previous years. In fiscal
2005, the European segment's operating income was $2,199,000 compared with
$2,502,000 in fiscal 2004. This decrease in operating profitability is due
mainly to the loss in profitability on the transfer of the European help desk to
North America.

ACQUISITIONS AND INVESTMENTS

     As at May 31, 2006, there are no proposed asset or business acquisitions or
dispositions that the Company's board of directors or senior management have
made a decision to proceed with. The following is a description of certain
completed acquisitions by the Company since February 1, 2000 and their impact on
the Company in fiscal 2004, 2005, and 2006.

     On December 18, 2003, the Company completed an agreement and plan of merger
and acquired one hundred percent control of PointBase, Inc. in a cash
transaction valued at approximately Cdn$3,300,300 at closing, with certain
additional amounts which would have become payable contingent on future revenue
or proceeds that could have been received in connection with the acquired
business. DataMirror is accounting for the acquisition under the purchase
method. The term during which the contingent consideration could have become
payable expired in December 2004 with no additional payments becoming due.

     On March 18, 2002, the Company announced its intention to make a take-over
bid for all of the shares of Idion, a South African company listed on the JSE
Securities Exchange ("JSE") under the symbol IDI, in a cash bid valued at
Cdn$9,800,000. On April 18, 2002, the bid was increased to Cdn$18,900,000, and
subsequently, on May 8, 2002, the bid was further increased to Cdn$30,400,000.
On July 4, 2002, the Company closed its bid to acquire Idion, having not been
successful in completing the take-over. At January 31, 2004, the Company owned
approximately 48,269,000 or 42.61% of Idion's outstanding common shares acquired
at a cost of Cdn$12,185,000. On January 31, 2004, shares of Idion were trading
at approximately Cdn$0.41 per share, which would indicate a market value of
Cdn$19,927,000 for the Company's investment at that date. The ownership of
1,119,000 shares of Idion had been subject to a dispute between the Company and
a broker acting on behalf of persons related to the CEO of Idion. In May 2003
this dispute was settled in favour of the plaintiff and as a result the Company
returned the disputed shares to the broker for the original consideration of
approximately Cdn$312,000. The cost of these shares had previously been included
in the investment on the

                                                                              36
<PAGE>

Company's balance sheet at January 31, 2003. The investment in Idion was
accounted for using the cost method, as the Company did not have significant
influence over the affairs of Idion and cannot obtain adequate financial
information from Idion to enable the Company to account for its investment in
Idion using the equity method. During the twelve months ended December 31, 2003,
Idion incurred a net loss of approximately U.S. $554,000. The Company announced
on May 14, 2004 that it had sold all of its shares of Idion in a market trade
executed through the facilities of the JSE. The Company sold 48,269,085 shares
of Idion at a price of ZAR 2.10 per share. Based on the exchange rates on
settlement (ZAR1=Cdn$0.2025), the Company received net proceeds of Cdn$19.9
million after brokerage and advisory fees, had a pre-tax gain of approximately
Cdn$7.6 million, and an after tax gain of Cdn$6.3 million. The Company believes
that the sale of the Company's shares in Idion allowed both companies to move
forward and concentrate on executing their respective business plans.

     The Company expects to continue to explore and pursue acquisitions as a
strategy to build its distribution channels, enhance its product offerings,
increase its market share in its existing markets, and achieve revenue growth.
The consideration and completion of possible acquisitions may divert significant
management time and other resources, including financial resources, of the
Company. It is not certain that future acquisitions will achieve their business
objectives.

B.   Liquidity and Capital Resources

     Since its inception, the Company has financed its cash requirements from
the sale of equity securities, funds provided by shareholders, bank lines of
credit, long-term debt and capital lease financing. In December 1996 the Company
completed an initial public offering of 2,000,000 common shares for net proceeds
of Cdn$6,865,000, and in September 1997 raised net proceeds of Cdn$11,247,000
through the issue of 1,600,000 special warrants (subsequently converted into
1,600,000 common shares). In April 2000 the Company raised net proceeds of
Cdn$23,513,000 through the issuance of 1,305,000 common shares. The proceeds
from these financings were used for general corporate purposes, including
research and development of new products and technologies, expansion of the
Company's sales and marketing organization and activities, for working capital
and for acquisitions.


     As at January 31, 2006 the Company had cash, cash equivalents and
short-term and long-term investments of $37,005,000, compared to $46,394,000 at
the end of fiscal 2005. The decrease in cash, cash equivalents and short-term
and long-term investments was primarily due to cash used to repurchase shares
under the Company's normal course and substantial issuer bids, offset by an
increase in cash flow from operations. During fiscal 2006, cash flow from
operations was $7,489,000, an increase of 82.7% over cash flow from operations
of $4,097,000 in fiscal 2005, due mainly to an increase in operating
profitability. The Company's investing activities for this period consisted
primarily of purchases of capital assets. During fiscal 2006, capital
expenditures of $580,000 (2005 - $680,000) were financed internally and none
were financed under capital lease facilities. Capital assets acquired were
primarily computer hardware and software utilized in research and development
activities and leasehold improvements to the Company's head office facilities.
The Company expects that its capital expenditures will increase in support of
higher levels of research and development activities and as its sales and
administration employee base grows. Financing activities during the year
consisted of share capital transactions. During fiscal 2006 the Company used
$19,736,000 (2005 - $7,136,000) in cash to repurchase 2,324,439 (2005 - 898,400)
of its common shares under a substantial issuer bid completed in March 2005 and
a normal course issuer bid and raised an additional $357,000 (2005 - $605,000)
through the issuance of 59,753 (2005 - 89,414) common shares pursuant to the
Company's stock option plans.

     The Company has available short-term bank credit facilities of $8,780,000
bearing interest at rates ranging from the Canadian prime rate to the prime rate
plus 1.5%. Under a general security agreement and a source code escrow
agreement, all of the Company's assets, including the source code for the
Company's software, are pledged as collateral for these credit facilities. As at
January 31, 2006 there was no outstanding indebtedness under these credit
facilities other than letters of credit of $351,000 (2005 - $137,000).
Management believes that its current cash, cash equivalents and short-term
investments together with continued positive cash flow from operations, will be
adequate to fund the Company's short-term financial requirements with the
exception of acquisition related cash requirements. The Company's short-term
financial requirements may increase substantially if the Company makes any
significant acquisitions. Short-term financial requirements related to
acquisitions may include direct and indirect costs, including restructuring and
other expenses related to integrating and refinancing the acquired businesses.
In the short term, the Company does not plan on making any acquisitions that
would result in short-term financial requirements exceeding the sources of cash
described above. In the long term, the Company may finance its long-term
requirements from the sale of equity securities, by borrowing under bank lines
of credit, by issuing long-term debt or by entering into capital lease financing
arrangements.


                                                                              37
<PAGE>


NEW ACCOUNTING RECOMMENDATIONS

     (i)  U.S. GAAP

          As permitted by SFAS No. 123, Accounting for Stock-Based Compensation,
          the Company currently accounts for share-based payments to employees
          using APB 25's intrinsic value method and, as such, generally
          recognizes no compensation cost for employee options under U.S. GAAP.
          In December 2004 an amended SFAS No. 123, Share-Based Payment ["SFAS
          No. 123(R)"], was issued, which requires all share-based payments to
          employees to be recognized in the income statement based on their fair
          value. SFAS No. 123(R) is effective for the Company's 2007 fiscal
          year.

     (ii) Canadian GAAP

          In 2005, the CICA issued section 1530, "Comprehensive Income", section
          3855, "Financial Instruments - Recognition and Measure", and section
          3865, "Hedges". The Company is currently evaluating the impact of
          these standards on its consolidated financial position and results of
          operations for future periods.


C.   Research and Development

     The Company has made significant investments in product development over
the past few years, including introducing several new internally-developed
software products and adding features and integrating acquired technologies into
existing products. The Company incurred research and development expenses
(before investment tax credits) of $8,211,000 for the twelve months ended
January 31, 2006, $8,144,000 for the twelve months ended January 31, 2005, and
$7,085,000 for the twelve months ended January 31, 2004. Such expenditures
constituted approximately 18.4%, 18.7%, and 16.4% of the Company's revenue
during fiscal 2006, 2005, and 2004, respectively. Research and development
expenses are comprised of salaries and other direct costs associated with the
development of new products and existing products.

     The Company has historically improved on its products and on the value it
has been able to deliver to customers through its ongoing efforts to continually
improve its software products through new versions and increased functionality
that responds to the needs of its customers and helps it retain its competitive
advantage in its market spaces. The Company intends to continue to make
substantial investments in research and development to enhance existing
products, develop new products and to respond to technological change and
competitive products and services. The main focus of the Company's planned
research and development activities for fiscal 2006 will be to continue to
develop and devote resources to its integration, data protection and audit
solutions and to continue to make general enhancements to its existing products.
For further detail on the Company's planned research and development activities
for fiscal 2006, see "Operating and Financial Review and Prospects - Outlook".


D.   Trend Information

     During fiscal 2006, the Company faced significant pressure on its operating
margins due to the continued strengthening of the Canadian dollar. With the
headcount realignment completed in December 2005, the Company feels it has
adjusted its overhead and business model to drive increased revenue and improved
operating margins in fiscal 2007 and beyond.

     The Company's balance sheet is strong and the business model has been
realigned to address the margin pressures caused by the stronger Canadian
currency. The Company's solutions help companies keep pace with real-time
business requirements by allowing the continuous availability of live, secure
corporate and customer data across the enterprise and beyond. By creating an
adaptive, real-time enterprise in which critical information is integrated and
available on demand, companies can adapt quickly to business and economic
volatility, address regulatory compliance requirements such as Basel II and SOX,
and address performance and accountability pressures. The Company feels these
solutions will continue to resonate in the marketplace.

     Some of the key growth issues the Company faces include building and
managing its direct and indirect sales channels, improving its marketing efforts
to enhance general market awareness of its products and continuing to improve
the efficiency and functionality of its existing products. The Company continues
to invest in these areas in order to achieve its growth objectives.

     The Company believes its near and long-term prospects for success remain
strong, and demonstrated that belief through our substantial issuer bid. The
Company remains committed to our objective of generating significant value for
our shareholders, customers, business partners and employees, and believe the
Company is well-positioned for profitable growth in the coming year.


                                                                              38
<PAGE>

E.   Off-Balance Sheet Arrangements.

     The Company does not enter into off-balance sheet financing as a matter of
practice except for operating leases as disclosed in Section F, directly below.
In accordance with GAAP, neither the lease liability nor the underlying asset is
carried on the balance sheet, as the terms of the leases do not meet the
criteria for capitalization.

F.   Tabular Disclosure of Contractual Obligations.

     As of January 31, 2006, the Company had future commitments and contractual
obligations as summarized in the following table. These commitments are
principally comprised of operating leases for the Company's leased premises and
computer equipment.

<TABLE>
<CAPTION>
(U.S. $)                                                      Payments due by period

Contractual obligations                          Less than                                       More than 5
                                   Total            1 year     1 - 3 years     4 - 5 years          years

<S>                            <C>               <C>             <C>               <C>
Operating leases               5,177,000         1,771,000       2,682,000         724,000              -

----------------------------------------------------------------------------------------------------------
Total contractual              5,177,000         1,771,000       2,682,000         724,000              -
obligations
----------------------------------------------------------------------------------------------------------
</TABLE>


                                                                              39
<PAGE>


ITEM 6.  Directors, Senior Management and Employees

A.   Directors and Senior Management

     The following table sets forth the name, municipality of residence,
principal occupation and month of election of each of the directors of the
Company on the date of this form:

<TABLE>
<CAPTION>
Name and
Municipality of Residence                   Principal Occupation                       Elected Director
-------------------------                   --------------------                       ----------------
<S>                                         <C>                                        <C>
P. KIRK DIXON(4).................           Consultant                                 November 1997
Midhurst, Ontario

DONALD L. LENZ(1)(3).............           Managing Director of Newport Partners      September 1999
Toronto, Ontario                            LP

BRYAN E. PLUG(1)(2) .............            Consultant                                October 1996
Saratoga, California

KEITH POWELL(2)(3)...............           Principal, Keith Powell Consulting         May 2001
Mississauga, Ontario                        Inc.

NIGEL W. STOKES (3)..............           Chairman, President and Chief              December 1995
Toronto, Ontario                            Executive Officer of the Company

E. HERMAN WALLENBURG.............           Chief Scientist of the Company             November 1997
Toronto, Ontario

DONALD WOODLEY(1)(2)                        President and CEO, Gennum Corporation      May 2001
Town of Mono, Ontario
</TABLE>

(1)  Member of the Audit Committee.
(2)  Member of the Compensation Committee.
(3)  Member of the Corporate Governance Committee.
(4)  Mr. Dixon held the position of Secretary and Executive Vice President,
     Business Development of the Company until the end of May 2005.

     The term of office for all directors expires at the time of the election of
their successors at the close of the next annual meeting of shareholders of the
Company.

                                                                              40
<PAGE>

Senior Management

     The following table sets forth the name, municipality of residence,
position with the Company and principal occupation of each of the senior
managers of the Company on the date of this form:

<TABLE>
<CAPTION>
Name and                                        Position with the Company
Municipality of Residence                       and Principal Occupation
-------------------------                       ------------------------

<S>                                             <C>
PETER F. CAULEY .................               Vice President, Finance and Chief Financial
Toronto, Ontario                                Officer

PAUL GILBERT(1)..................               Vice President of Sales, United States and
Mississauga, Ontario                            Canada

LUCIAN MUSTATEA(2)...............               Vice President, Research and Development
Markham, Ontario

JUDY PARKES......................               Vice President of Technical Services
Tottenham, Ontario

STEWART A. RITCHIE...............               Senior Vice President, Worldwide Sales
Newmarket, Ontario

NIGEL W. STOKES..................               Chairman, President and Chief Executive
Toronto, Ontario                                Officer

E. HERMAN WALLENBURG.............               Chief Scientist
Toronto, Ontario
</TABLE>

----------
(1)  Mr. Gilbert's employment with the Company began on January 4, 2005.
(2)  Mr. Mustatea's employment with the Company began on June 14, 2004.

     As a group, as at April 28, 2006 directors and senior officers owned,
directly or indirectly, or exercised control or direction over 3,275,788 Common
Shares of the Company (approximately 39.50% of the total Common Shares
outstanding on such date). The information as to shares owned directly or over
which control or direction is exercised by the directors and officers, but
which are not registered in their names, not being within the knowledge of the
Company, has been furnished by such directors and officers.

     The principal occupations of each of the directors and officers of the
Company for the five years preceding the date of this Form and additional
biographical information is set forth below:

     Peter F. Cauley joined the Company in November 1996 as the Company's
Corporate Controller and also served as Interim CFO from December 1999 to August
2000. In January 2001 Mr. Cauley was appointed Vice President, Finance and Chief
Financial Officer.

     P. Kirk Dixon joined the Company in November 1993, and was Secretary and
Treasurer of the Company until appointed as Executive Vice President,
Implementation in December 1995. Mr. Dixon was appointed as Executive Vice
President, Development and Support of the Company on March 16, 2000, Executive
Vice President, Global Operations and Secretary of the Company on March 12,
2001, and to the position of Executive Vice President, Business Development and
Secretary of the Company on January 14, 2004. Mr. Dixon has been a director of
the Company since November 1997. Mr. Dixon retired from his position as
Executive Vice President Business Development and as a full-time employee of the
Company in May 2005.

     Paul Gilbert joined the Company on January 4, 2005 as Vice President of
Sales, United States and Canada. Prior to joining DataMirror, Mr. Gilbert was
the Director, Eastern Operations for Blazent Inc., a US based software company
from April 2004 to December 2004. From October 2003 to March 2004 Mr. Gilbert
was the Executive-in-Residence at Jefferson Partners, a technology focused
venture capital firm. From April 2001 to October 2003 he was the Executive Vice
President of Sales at Avotus Corporation, a Canadian communications management
software company. From October 2000 to December 2000, Mr. Gilbert was the Vice
President Sales Operations with Bridge2Market Inc.

     Donald L. Lenz is a founding partner of Newport Partners LP, a personal and
corporate wealth management company based in Toronto, Canada. Mr. Lenz also sits
on several boards including those of Mad Catz Interactive Inc., Trizec Canada
Inc., ENMAX

                                                                              41
<PAGE>

Corporation, Cancer Care Ontario and The Laidlaw Foundation. Mr. Lenz has been a
director of the Company= since September 1999.

     Lucian Mustatea joined the Company on June 14, 2004 as Vice President of
Research and Development. Mr. Mustatea was the Senior Technical Consultant,
Search Technologies with Open Text Corporation from September 2003 to April
2004. Mr. Mustatea served as Chief Technology Officer and Vice President of
Research and Development at Opencola Ltd. from June 2001 to June 2003. He was
Development Director-Decision Platform for Cognos Incorporated from May 2000 to
June 2001.

     Bryan E. Plug was Chief Executive Officer of Kintana, Inc., a leading
provider of e-Business applications management software based in Sunnyvale,
California from January 2000 to August 2003. Mr. Plug was President and Chief
Executive Officer of Kontiki, Inc., a provider of on demand business video
solutions, from November 2003 to January 2005. Mr. Plug is currently a
consultant. Mr. Plug has been a director of the Company since October 1996.

     Keith Powell is currently the principal of Keith Powell Consulting Inc., an
information technology consulting firm and a Partner in XPV Capital Corp., a
venture capital company investing in early stage technology companies. Mr.
Powell also sits on several other boards including ARS Systems (Advisory Board),
electroBusiness.com Inc., ClientLogic Corporation, Diversinet Corporation,
Sumitomo Mitsui Banking Corporation of Canada and the Arthritis and Autoimmunity
Research Center Foundation. Mr. Powell was appointed as a director of the
Company in May 2001.

     Judy Parkes is currently Vice President of Technical Services. Since
joining DataMirror in 1996, Ms. Parkes has worked at both the head office in
Markham, Ontario, and at the EMEA headquarters in London, England, where she has
served as Pre-sales Engineer, Support Manager, Professional Services Manager and
Technical Director, EMEA.


     Stewart A. Ritchie commenced employment with the Company on November 16,
1998 as Channels Manager, Americas,was appointed as Vice President, Sales,
Americas in March 2000, and is currently Senior Vice President, Worldwide Sales.
Mr. Ritchie was appointed as Senior Vice President, Sales, Americas and EMEA in
November, 2003. Prior to joining the Company, Mr. Ritchie managed channel sales
and enterprise accounts for Network Associates (Canada) from February 1995 to
October 1998.

     Nigel W. Stokes founded Nidak Associates Inc. ("Nidak"), a client/server
and database consulting firm, in 1986. Mr. Stokes was President of Nidak until
the firm was sold to SHL Systemhouse Inc., a worldwide systems integration and
computer consulting firm, in 1993 at which time Mr. Stokes became a Managing
Director of that organisation. Mr. Stokes joined the Company in October 1994 and
became Chairman and Chief Executive Officer in December 1995. Mr. Stokes assumed
the role of President of the Company in August 1998.

     E. Herman Wallenburg joined the Company in November 1993, and was President
of the Company until appointed as Executive Vice President, Research and
Development in December 1995. Mr. Wallenburg was appointed to his current
position as Chief Scientist of the Company in March 2000. Mr. Wallenburg has
been a director of the Company since November 1997.

     Donald Woodley is currently the President and CEO, Gennum Corporation, a
designer and manufacturer of semi-conductors and semi-conductor based products,
and President of The Fifth Line Enterprise, a consulting firm engaged in
providing strategic advisory services to Canadian industry. Mr. Woodley was
appointed as a director of the Company in May 2001. Mr. Woodley also sits on
several boards including those of TELUS Corporation, Gennum Corporation and
Steam Whistle Brewing. Mr. Woodley is a past Chair of ITAC (Information
Technology Association of Canada), a past Chair of the Board of Governors of The
Stratford Festival of Canada, is a member of the Richard Ivey School of Business
Advisory Board, and currently serves as Chair of the Audit and Finance Committee
and Treasurer of Sick Kids Hospital Foundation.

                                                                              42
<PAGE>

B.       Compensation

1.   Summary Compensation Table

     The following table sets forth information concerning the compensation paid
during the financial year ended January 31, 2006 to the directors and senior
officers by the Company. All compensation amounts are in Canadian Dollars.

<TABLE>
<CAPTION>
                                                      Summary Compensation Table

====================================================================================================================================
                                          Annual Compensation                      Long Term Compensation
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Awards                 Payouts
------------------------------------------------------------------------------------------------------------------------------------
                                                                        Securities   Restricted
                                                          Other Annual    Under       Shares or        Long Term       All Other
            Name and             Salary(1)  Bonus(2)      Compensation   Options     Restricted     Incentive Plan    Compensation
       Principal Position           ($)        ($)            ($)        Granted     Share Units        Payouts           ($)
                                                                          (# of          ($)              ($)
                                                                          Common
                                                                         Shares)
------------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>        <C>              <C>          <C>           <C>              <C>             <C>
Nigel W. Stokes                   412,000    107,000          Nil          Nil           Nil              Nil             Nil
Chairman, President and Chief
Executive Officer
------------------------------------------------------------------------------------------------------------------------------------
Peter Cauley                      185,000    89,320           Nil         15,000         Nil              Nil             Nil
Vice President, Finance and
Chief Financial Officer
------------------------------------------------------------------------------------------------------------------------------------
Stewart Ritchie                   396,362    15,000           Nil         15,000         Nil              Nil             Nil
Senior Vice President,
Worldwide Sales
------------------------------------------------------------------------------------------------------------------------------------
Paul Gilbert                      280,284      Nil            Nil          Nil           Nil              Nil             Nil
Vice President of Sales, United
States and Canada
------------------------------------------------------------------------------------------------------------------------------------
Lucian Mustatea                   185,000    25,000           Nil          Nil           Nil              Nil             Nil
Vice President, Research &
Development
------------------------------------------------------------------------------------------------------------------------------------
All directors and senior         2,213,580   353,968          Nil         30,000         Nil              Nil             Nil
officers as a group
====================================================================================================================================

(1)  Salary payments are reported on the basis of the fiscal year in which the salary was earned and paid.

(2)   Bonus payments are reported on the basis of the fiscal year in which the bonus, if any, was paid. Bonuses paid in a fiscal
year include bonuses that were only determinable by the compensation committee after the end of the previous fiscal year as those
bonuses were pegged to previous fiscal year performance. Bonuses paid in a fiscal year may also include a quarterly performance
bonus which is paid in the quarter immediately after the quarter in respect of which the bonus was earned.
</TABLE>


                                                                              43
<PAGE>


2.    Stock Options

         Option Grants During the Most Recently Completed Financial Year

     The following table sets out the individual grants of options to purchase
or acquire securities of the Corporation during the financial year ended January
31, 2006 to the directors and senior officers of the Company.

<TABLE>
<CAPTION>
======================================= ========================= =================== ===================================
               Name and                     Securities Under        Exercise Price             Expiration Date
          Principal Position                Options Granted
--------------------------------------- ------------------------- ------------------- -----------------------------------
<S>                                            <C>                      <C>                     <C>
Nigel W. Stokes
Chairman, President and Chief                     Nil                    Nil                    Not Applicable
Executive Officer
--------------------------------------- ------------------------- ------------------- -----------------------------------
Peter Cauley
Vice President, Finance and Chief              15,000(2)                $9.88                    June 8, 2015
Financial Officer
--------------------------------------- ------------------------- ------------------- -----------------------------------
Stewart A. Ritchie
Senior Vice President, Worldwide Sales         15,000(2)                $9.88                    June 8, 2015
--------------------------------------- ------------------------- ------------------- -----------------------------------
Paul Gilbert
Vice President of Sales, United                   Nil                    Nil                    Not Applicable
States and Canada
--------------------------------------- ------------------------- ------------------- -----------------------------------
Lucian Mustatea, Vice President,
Research & Development                            Nil                    Nil                    Not Applicable
--------------------------------------- ------------------------- ------------------- -----------------------------------
All directors and senior officers as
a group                                          30,000                 $9.88                    June 8, 2015
======================================= ========================= =================== ===================================

(1)   The market value of the Common Shares on the date of the grant is determined by taking the average of the closing price of the
      Common Shares on the Toronto Stock Exchange for the 5 immediately preceding trading days.

(2)   These options were granted under the terms of the Corporation's Executive Stock Compensation Plan on June 8, 2005 and vest in
      four equal installments over a period of 4 years commencing on June 8, 2005.
</TABLE>

     The Company's directors, executive officers and senior officers are
eligible to participate in the Company's Share Purchase Plan. The purpose of
the Share Purchase Plan is to provide long-term incentives to attract, motivate
and retain key employees, officers, directors and consultants providing
services to the Company. Shares issued under the Share Purchase Plan are issued
for market consideration determined by taking the average of the closing price
of the Shares on the Toronto Stock Exchange for the five immediately preceding
trading days prior to the date of issuance. The Share Purchase Plan provides
that the Company may loan money to participants to purchase Common Shares of
the Company. The Company has not loaned money to officers or directors since
the provisions of the SOX prohibiting such loans came into effect. There was no
indebtedness in favour of the Company for all officers, directors, employees
and former officers, directors and employees in respect of the Share Purchase
Plan as at January 31, 2006.

     During the fiscal year ending on January 31, 2006, directors of the Company
who were not salaried employees of the Company were entitled to be paid an
annual fee of Cdn$25,000 for being a member of the board of directors, an
additional Cdn$2,500 annually for each committee of which they are a member and
an additional Cdn$2,500 annually for chairing the Audit Committee. Directors are
also eligible to participate in the Company's Executive Stock Compensation Plan
and Share Purchase Plan. No amounts are paid to the Company's administrative,
supervisory or management bodies solely for attending quarterly meetings of the
Board of Directors.

     The Company maintains liability insurance for its directors and officers
acting in their respective capacities. During the fiscal year ended January 31,
2006, the Company maintained directors and officers insurance coverage in an
aggregate amount of U.S.$20 million, subject to a U.S.$100,000 loss payable by
the Company. The annual premium for this coverage is $219,690 which covers the
period from August 1, 2005 to August 1, 2006.


                                                                              44
<PAGE>


C.   Board Practices

EMPLOYMENT AND SERVICE AGREEMENTS

     The Company entered into an employment agreement of indefinite duration
with Mr. Nigel Stokes, Chairman, President and Chief Executive Officer dated as
of March 25, 2002. This employment agreement provided for an annual salary of
Cdn$375,000 effective February 1, 2002 and also provided for a retroactive
salary and bonus adjustment payment of $150,000 covering the period from
September 30, 2000 to January 31, 2002 during which Mr. Stokes had continued his
employment with the Company under the terms of a previous employment agreement
that had expired on September 30, 2000. The Compensation Committee approved an
increase in annual base salary to $412,000 for fiscal 2006 and $433,000 for
fiscal 2007. Mr. Stokes' agreement also provides that he may receive an annual
performance bonus of up to $300,000, the amount to be determined by the Board of
Directors on the recommendation of the Compensation Committee based upon
consideration of the financial performance of the Company in respect of each
fiscal period. In addition, the agreement also provides that Mr. Stokes is
eligible to receive an additional annual performance bonus of up to $350,000,
the amount to be determined by the Board of Directors on the recommendation of
the Compensation Committee based upon consideration of over-achievement of the
financial performance of the Company in respect of each fiscal period. Mr.
Stokes earned a bonus of $518,000 in respect of fiscal 2006 based on fiscal
targets achieved. For fiscal 2007, the Compensation Committee approved a bonus
plan for Mr. Stokes that pays up to $350,000 based on a formula related to the
attainment of certain budgeted fiscal targets and an additional overachievement
bonus based on overachievement relative to certain budgeted fiscal targets. Mr.
Stokes is also eligible to participate in the Company's group benefit plans and
Executive Stock Compensation Plan. The employment agreement also provides that
in the event of termination of the executive's employment, he will not compete
with the Company for a period of eighteen months following that date. The
employment agreement provides that the Company may terminate Mr. Stokes'
employment without cause by making a lump sum payment of an amount equal to two
times his annual salary thereunder. The employment agreement automatically
renews each year and is subject to annual compensation review.

     The Corporation has an employment arrangement of indefinite duration with
Mr. Peter Cauley, Vice President, Finance and Chief Financial Officer. Mr.
Cauley's current annual salary for fiscal 2007 is $194,000. His fiscal 2006
salary was $185,000. Mr. Cauley is eligible to receive performance bonuses at
the discretion of senior management. Mr. Cauley is also eligible to participate
in the Corporation's group benefit plans and Executive Stock Compensation Plan.

     The Corporation has an employment arrangement of indefinite duration with
Mr. Stewart Ritchie, Senior Vice President, Worldwide Sales. Mr. Ritchie's
current annual salary for fiscal 2007 is $194,000. His fiscal 2006 salary was
$185,000 and he earned fiscal 2006 commissions of $195,950. Mr Ritchie is
eligible to receive performance bonuses at the discretion of senior management.
Mr. Ritchie is also eligible to participate in the Corporation's group benefit
plans and Executive Stock Compensation Plan.

     The Corporation has an employment arrangement of indefinite duration with
Mr. Paul Gilbert, Vice President of Sales, United States and Canada. Mr.
Gilbert's current annual salary for fiscal 2007 is $168,000. His fiscal 2006
salary was $160,000 and he earned fiscal 2006 commissions of $176,234. Mr
Gilbert is eligible to receive performance bonuses at the discretion of senior
management. Mr. Gilbert is also eligible to participate in the Corporation's
group benefit plans and Executive Stock Compensation Plan.

     The Corporation has an employment arrangement of indefinite duration with
Mr. Lucian Mustatea, Vice President, Research & Development. Mr. Mustatea's
current annual salary for fiscal 2007 is $194,000. His fiscal 2006 salary was
$185,000. Mr Mustatea is eligible to receive performance bonuses at the
discretion of senior management. Mr. Mustatea is also eligible to participate in
the Corporation's group benefit plans and Executive Stock Compensation Plan.

     Mr. Kirk Dixon retired from the Company in May 2005. The Company had
entered into an employment agreement of indefinite duration with Mr. Dixon, the
Company's former Executive Vice President, Business Development (then Executive
Vice President, Development and Global Operations) dated April 23, 2002. Mr.
Dixon was paid $83,333 in salary and $9,420 in vacation pay in fiscal 2006. The
Company also paid in fiscal 2006 vacation pay of $41,667 and a bonus to Mr.
Dixon in fiscal 2006 of $26,000.

     The Company has entered into an employment agreement dated as of June 14,
2002 with Mr. Herman Wallenburg, Chief Scientist. This employment agreement
provided for an annual salary of $170,000, retroactive to February 1, 2002. The
Company approved an increase in annual base salary to $185,000 for fiscal 2006
and to $194,000 for fiscal 2007. Mr. Wallenburg's agreement also provides that
he may receive an annual performance bonus of up to $20,000, the amount to be
determined by the CEO based upon consideration of the financial performance of
the Company in respect of each fiscal period during the duration of the
employment agreement and any extension or renewal thereof. Mr. Wallenburg will
be paid a bonus of $88,800 earned in respect of fiscal 2006 based on fiscal
targets achieved. For fiscal 2007, a bonus plan has been approved for Mr.
Wallenburg that pays up to $60,000 based on a formula related to the attainment
of certain budgeted fiscal targets and an additional overachievement bonus based
on overachievement relative to certain budgeted fiscal targets.

     There are no other agreements with directors providing for benefits upon
termination of employment.

                                                                              45
<PAGE>

AUDIT AND REMUNERATION COMMITTEES

     The Board of Directors adopted a charter for the Audit Committee and a
formal charter for the Compensation Committee at its meeting on March 3, 2003.
The Audit Committee reviewed the adequacy of the Audit Committee Charter on
March 7, 2006 and recommended that certain changes be made to the Charter. The
Company's Board of Directors adopted the recommendation of the Audit Committee
and adopted a new charter for the Audit Committee at its meeting on March 7,
2006, which is attached as Exhibit 6.1. The Compensation Committee Charter is
attached to the 2003 Form 20-F as Exhibit 6.2. The Audit Committee provides
assistance to the Board of Directors in fulfilling its oversight responsibility
to the shareholders, potential shareholders, the investment community, and
others relating to the Company's financial statements and the financial
reporting process, the systems of internal accounting and financial controls,
the internal audit function, the annual independent audit of the Company's
financial statements, and the legal compliance and ethics programs as
established by management and the Board and as required by applicable law. The
Audit Committee is currently composed of Mr. Lenz, Mr. Plug and Mr. Woodley. The
Board of Directors has determined that Mr. Lenz, Mr. Plug and Mr Woodley are
independent of management under applicable laws, rules and listing standards.
The Compensation Committee reviews and approves the compensation of the
directors and the CEO and advises the Board and management on compensation and
incentive policy. The Compensation Committee is currently composed of Mr. Plug,
Mr. Powell and Mr. Woodley. The Board of Directors has determined that Mr. Plug,
Mr. Powell and Mr. Woodley are independent of management under applicable laws,
rules and listing standards.



D.       Employees

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                      Number of Employees
--------------------------------------------------------------------------------------------------------------------------------
                                      As at January 31, 2006         As at January 31, 2005          As at January 31, 2004
--------------------------------- ------------------------------- ------------------------------ -------------------------------
<S>                                            <C>                             <C>                            <C>
North America                                  184                             184                            236
--------------------------------- ------------------------------- ------------------------------ -------------------------------
Europe                                          36                             47                              59
--------------------------------- ------------------------------- ------------------------------ -------------------------------
Other                                           0                               1                              4
--------------------------------- ------------------------------- ------------------------------ -------------------------------
Total                                          220                             232                            299
--------------------------------- ------------------------------- ------------------------------ -------------------------------

--------------------------------- ------------------------------- ------------------------------ -------------------------------
Research & Development                          70                             69                              91
--------------------------------- ------------------------------- ------------------------------ -------------------------------
Sales & Marketing                              111                             122                            168
--------------------------------- ------------------------------- ------------------------------ -------------------------------
Other                                           39                             41                              40
--------------------------------- ------------------------------- ------------------------------ -------------------------------
Total                                          220                             232                            299
--------------------------------- ------------------------------- ------------------------------ -------------------------------
</TABLE>


                                                                              46
<PAGE>


E.       Share Ownership

     The following table sets forth with respect to each director the number of
Common Shares of the Company owned beneficially, or over which control or
direction was exercised, by such person at the date of this form. No special
voting rights attach to any of the following Common Shares. Percentages are
calculated based on 8,294,140 Common Shares of the Company outstanding on April
28, 2006.

Director                              Common Shares        Percentage of Class
--------                              -------------        -------------------

Nigel W. Stokes                        2,057,063(1)               24.80%

Peter Cauley                                (*)                     (*)

Paul Gilbert                                (*)                     (*)

Lucian Mustatea                             (*)                     (*)

Stewart Ritchie                             (*)                     (*)

All directors are senior officers
as a group                             3,275,788(2)               39.50%
----------

(1)  Includes 36,000 common shares held by his spouse, 40,000 Options
     exercisable either currently or within 60 days and 37,250
     Options exercisable either currently or within 60 days granted to his
     spouse.
(2)  Includes 100,384 common shares held by their spouses, 249,515 Options
     exercisable either currently or within 60 days and 37,250 Options
     exercisable either currently or within 60 days granted to their spouses.
(*)  This director or senior officer beneficially owns less than one percent
     of the class of Common Shares.

                                                                              47
<PAGE>


<TABLE>
<CAPTION>

      The following table sets forth the outstanding options to acquire Common Shares granted to each director and senior
manager of the Company as at the date of this Form. Each option was granted at an exercise price equal to the market value of
the Common Shares on the date of the grant which was determined by taking the average of the closing price of the Common
Shares on the Toronto Stock Exchange for the 5 immediately preceding trading days. There was no purchase price in respect of
any of the options.

<S>                               <C>                             <C>                            <C>
--------------------------------- ------------------------------- ------------------------------ -------------------------------
Director                          Number of Common Shares         Exercise Price                 Expiration Date
--------------------------------- ------------------------------- ------------------------------ -------------------------------
Nigel W. Stokes                   40,000                          $11.54                         June 30, 2006
--------------------------------- ------------------------------- ------------------------------ -------------------------------

--------------------------------- ------------------------------- ------------------------------ -------------------------------
Peter Cauley                      10,000                          $11.54                         June 30, 2006
--------------------------------- ------------------------------- ------------------------------ -------------------------------
                                  7,500                           $11.93                         June 30, 2007
--------------------------------- ------------------------------- ------------------------------ -------------------------------
                                  2,500                           $10.65                         June 30, 2007
--------------------------------- ------------------------------- ------------------------------ -------------------------------
                                  15,000                          $15.89                         January 10, 2008
--------------------------------- ------------------------------- ------------------------------ -------------------------------
                                  15,000                          $9.88                          June 8, 2015
--------------------------------- ------------------------------- ------------------------------ -------------------------------

--------------------------------- ------------------------------- ------------------------------ -------------------------------
Stewart Ritchie                   10,000                          $11.54                         June 30, 2006
--------------------------------- ------------------------------- ------------------------------ -------------------------------
                                  20,000                          $8.19                          November 6, 2007
--------------------------------- ------------------------------- ------------------------------ -------------------------------
                                  15,000                          $15.89                         January 10, 2008
--------------------------------- ------------------------------- ------------------------------ -------------------------------
                                  15,000                          $9.88                          June 8, 2015
--------------------------------- ------------------------------- ------------------------------ -------------------------------

--------------------------------- ------------------------------- ------------------------------ -------------------------------
Paul Gilbert                      30,000                          $8.45                          January 3, 2015
--------------------------------- ------------------------------- ------------------------------ -------------------------------

--------------------------------- ------------------------------- ------------------------------ -------------------------------
Lucian Mustatea                   20,000                          $11.35                         June 30, 2009
--------------------------------- ------------------------------- ------------------------------ -------------------------------
                                  20,000                          $8.10                          December 1, 2009
--------------------------------- ------------------------------- ------------------------------ -------------------------------

--------------------------------- ------------------------------- ------------------------------ -------------------------------
All directors and senior          332,015                         (*)                            (*)
officers as a group
--------------------------------- ------------------------------- ------------------------------ -------------------------------

</TABLE>


EMPLOYEE STOCK OPTION PLAN

     The Company has adopted an employee stock option ("Option") plan (the
"Plan"). All bona fide full-time employees of and all others who provide
services to the Company or any of its subsidiaries and who are designated by the
Company as being eligible to participate in the Plan will be eligible to
participate in the Plan ("Eligible Participants", and actual participants
"Participants"). The Plan was originally approved by the Board and the Company's
shareholders on November 20, 1996 and December 5, 1996 respectively. The Board
and shareholders approved amendments to the Plan which were effective on May 25,
1999 and June 14, 2000 which increased the number of shares under the Plan to
2,000,000 and removed directors and officers as Eligible Participants under the
Plan, respectively. The Board may, in its absolute discretion, add to, amend,
vary, cancel, discontinue or terminate the Plan or any Options granted
thereunder, at any time without notice. Any such amendment, will, if required,
be subject to the prior approval of, or acceptance by, any stock exchange or
regulatory body having jurisdiction over the Company's securities. The Plan is
not subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended, and is not qualified under Section 401(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code").

     The purpose of the Plan is to provide long-term incentives to attract,
motivate and retain key employees and consultants providing services to the
Company. The Plan will be administered by the Board or a committee of the Board
to which such administrative authority is delegated by the Board. The Board has
the power to make rules and regulations to administer the Plan, and to interpret
the provisions and rules of the Plan. The Board's determination of all questions
arising under the Plan are final and binding on all Participants. The Company
maintains detailed records of each Option granted, including number of Options
granted, date of grant, earliest and latest exercise dates, vesting dates and
exercise price.

     The maximum number of Common Shares reserved for issuance upon the exercise
of all Options granted under the Plan may not exceed 2,000,000, provided
however, that pursuant to Section 6 of the Plan, the number of Shares subject to
Options granted will be adjusted by the Board to reflect adjustments in the
number of Common Shares arising as a result of subdivisions or consolidation of
Common Shares, capital reorganization, reclassification or change of outstanding
equity shares, mergers, consolidations, or amalgamation. If any Option is
terminated, cancelled or has expired without being fully exercised, any unissued
Common Shares which have been reserved to be issued upon the exercise of the
Option will become available to be issued upon the exercise of Options
subsequently granted under the Plan, provided that any such termination or
cancellation of Options will be conducted in accordance with the applicable
rules of any stock exchange in Canada upon which the Common Shares of the
Company are listed.

     The Board will determine, in its sole discretion, which Eligible
Participants will be granted Options pursuant to the Plan. Participation in the
Plan is entirely voluntary. An Option granted under the Plan may not be
assigned, encumbered or otherwise disposed of by the Participant, otherwise than
by will or by the laws of succession. The Board will designate the number,
price, earliest and latest exercise dates and vesting period of Common Shares
that a Participant is entitled to purchase under the Plan, as well as whether an
option granted to a U.S. holder may be an incentive stock option ("ISO"). The
number of Common Shares reserved for issuance under the Plan to any one person
may not exceed 5% of the Outstanding Issue and the number of Common Shares
reserved for issuance to Insiders under the Plan may not exceed 10% of the
Outstanding Issue. The option price per Common Share will be determined by the
Board, but may not be less than the weighted average trading price for the
Common Shares on The Toronto Stock

                                                                              48
<PAGE>

Exchange for the five (5) business days immediately preceding the date of the
Option grant. The Board may designate the earliest and latest dates upon which
an Option may be exercised, provided however, that such dates may be as early as
the grant date, but no later than ten years following the grant date. Options
under this plan generally vest over four years from the date of grant and expire
five years from the date of grant.

     Unless otherwise determined by the Board, if a Participant ceases to be an
Eligible Participant for any reason other than death, any Options held by such
Participant which have not been exercised will immediately cease and terminate
and be of no further force or effect whatsoever regardless of whether the
Options have vested or not. If a Participant ceases to be an Eligible
Participant on account of death, and at the time of death that person has not
previously had his or her rights under the Plan terminated, any Options which at
the time of death have vested and were exercisable, may be exercised for up to
180 days following the death (or the expiry date of the Option, if earlier). Any
Options which at the time of death have not vested may, at the discretion of the
Company and upon its written consent, be exercised for up to 90 days following
the death (or the expiry date of the Option, if earlier). In the event of a
take-over bid, the Board may, in its discretion, give its express consent to the
immediate exercise of any Options held by Participants, regardless of whether
such Options have vested.

     A Participant's Options will terminate and may not be exercised after the
latest exercise date, as determined by the Board, which may not be later than 10
years after the Option was granted. A Participant must provide the Company with
written notice of any intention to exercise Options. Upon satisfactory payment
of the Option, the Participant will be entitled to a certificate representing
that number of Common Shares being exercised. No Participant will have any
rights as a shareholder until the Common Shares have been paid for in full.
Subject to applicable law, the Company may, in its discretion, make loans, or
provide guarantees for loans, on terms approved of by the Company, to assist
Participants in the purchase of Common Shares upon the exercise of Options.


EXECUTIVE STOCK OPTION PLAN

     The Company has adopted an executive stock option plan (the "Executive
Plan"). The Executive Plan was approved by the Board and the Company's
shareholders on April 28 and May 30, 2000, and June 14, 2000, respectively. An
increase in the maximum number of Common Shares issuable upon exercise of
options under the Executive Plan to 800,000 was approved by the Board of
Directors and the Company's shareholder on March 3, 2003 and June 12, 2003
respectively,

     All members of the board of directors and all bona fide full-time officers
of the Company or any of its subsidiaries who are designated by the Company as
being eligible to participate in the Plan will be eligible to participate in the
Executive Plan ("Eligible Executives", and those actually participating "Plan
Executives"). The Company may, in its absolute discretion, add to, amend, vary,
cancel, discontinue or terminate the Executive Plan or any Options granted
thereunder, at any time without notice. Any such amendment, will, if required,
be subject to the prior approval of, or acceptance by, any stock exchange or
regulatory body having jurisdiction over the Company's securities. The Executive
Plan is not subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended, and is not qualified under Section 401(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code").

     The purpose of the Executive Plan is to provide long-term incentives to
attract, motivate and retain key executive officers and directors of Company.
The Executive Plan will be administered by or under the authority of the Board
or a person or committee to which such administrative authority is delegated by
the Board. The Company has the power to make rules and regulations to administer
the Executive Plan, and to interpret the provisions and rules of the Executive
Plan. The Company's determination of all questions arising under the Executive
Plan are final and binding on all Plan Executives. The Company maintains
detailed records of each Option granted, including number of Options granted,
date of grant, earliest and latest exercise dates, vesting dates and exercise
price. The maximum number of Common Shares reserved for issuance upon the
exercise of all Options granted under the Executive Plan is currently 800,000,
provided however, that pursuant to Section 7 of the Executive Plan, the number
of Common Shares subject to Options granted will be changed to reflect
adjustments in the number of Common Shares arising as a result of any
subdivisions or consolidation of Common Shares, capital reorganization,
reclassification or change of outstanding equity shares, merger, consolidation,
or amalgamation.

     The Company will determine, in its sole discretion, which Eligible
Executives will be granted Options pursuant to the Executive Plan. Participation
in the Executive Plan is entirely voluntary. An Option granted under the
Executive Plan may not be assigned, encumbered or otherwise disposed of by the
Plan Executive, otherwise than by will or by the laws of succession. The Company
will designate the number, price, earliest and latest exercise dates and vesting
periods of Common Shares that a Plan Executive is granted under the Executive
Plan, as well as whether an option granted to a U.S. holder may be an incentive
stock option ("ISO").

     The number of Common Shares reserved for issuance under the Executive Plan
to any one person may not exceed 5% of the Outstanding Issue and the number of
Common Shares reserved for issuance to Insiders under the Executive Plan may not
exceed 10% of the Outstanding Issue. The option price per Common Share will be
determined by the Company, but may not be less than the weighted average trading
price for the Common Shares on The Toronto Stock Exchange for the five (5)
business days immediately

                                                                             49
<PAGE>

preceding the date of the Option grant. The Company may designate the earliest
and latest dates upon which an Option may be exercised, provided however, that
such dates may be as early as the grant date, but no later than ten years
following the grant date. Unless specified otherwise, 25% of a Plan Executive's
Option will vest each year over a four year period.

     Unless otherwise determined by the Company, if a Plan Executive ceases to
be an Eligible Executive for any reason other than death, any Options held by
such Plan Executive which have not been exercised will immediately cease and
terminate and be of no further force or effect whatsoever regardless of whether
the Options have vested or not. If a Plan Executive ceases to be an Eligible
Executive on account of death, and at the time of death that person has not
previously had his or her rights under the Executive Plan terminated, any
Options which at the time of death have vested and were exercisable, may be
exercised for up to 180 days following the death (or the expiry date of the
Option, if earlier). Any Options which at the time of death have not vested may,
at the discretion of the Company and upon its written consent, be exercised for
up to 90 days following the death (or the expiry date of the Option, if
earlier). In the event of a take-over bid, the Board may, in its discretion,
give its express consent to the immediate exercise of any Options held by Plan
Executives, regardless of whether such Options have vested.

     A Plan Executive's Options will terminate and may not be exercised after
the latest exercise date for such options. A Plan Executive must provide the
Company with written notice of any intention to exercise Options. Upon
satisfactory payment of the Option exercise price, the Plan Executive will be
entitled to a certificate representing that number of Common Shares being
purchased upon exercise of the Option. No Plan Executive will have any rights as
a shareholder until the Common Shares have been paid for in full. Subject to
applicable law, the Company may, in its discretion, make loans, or provide
guarantees for loans, on terms approved of by the Company, to assist Plan
Executive's in the purchase of Common Shares upon the exercise of Options.

SHARE PURCHASE PLAN

     The Company has adopted a share purchase plan (the "Purchase Plan"). The
Purchase Plan was originally approved by the Board and the Company's
shareholders on December 5, 1996 and November 20, 1996 respectively. On August
27, 2001, the Directors approved amendments to the Purchase Plan effective as of
July 24, 2001. All directors, officers and employees of the Company or of any of
its subsidiaries or affiliates and others who provide services to the Company or
any of its subsidiaries or affiliates may be eligible to participate in the
Purchase Plan ("EPPP", and those participating "PPP"). Generally, the Company
may, in its absolute discretion, amend, suspend, discontinue or terminate the
Purchase Plan at any time without notice. However, any such amendment, will, if
required, be subject to the prior approval of, or acceptance by, any stock
exchange or regulatory body having jurisdiction over the Company's securities
and no such amendment or termination may be made at any time which has a
material adverse effect upon the existing rights of a PPP in respect of Common
Shares which have been acquired under the Purchase Plan, prior to the date of
such amendment or termination without his or her consent in writing. Upon
termination of the Purchase Plan, all Loans to PPPs will either (i) continue
until their termination or maturity on the terms and conditions thereof, or (ii)
at the discretion of each PPP, be paid in full. The Purchase Plan is not subject
to the provisions of the Employee Retirement Income Security Act of 1974, as
amended, and is not qualified under Section 401(a) of the United States Internal
Revenue Code of 1986, as amended (the "Code").

     The purpose of the Purchase Plan is to provide long-term incentives to
attract, motivate and retain key employees, officers, directors and consultants
providing services to the Company. The Purchase Plan will be administered by or
under the authority of the Board or a person or committee to which such
administrative authority is delegated by the Board. The Company has the power to
make rules and regulations to administer the Purchase Plan, and to interpret the
provisions and rules of the Purchase Plan. The Company undertakes to provide
each PPP with (i) a written explanation of the pertinent provisions of the
Purchase Plan (including amendments thereto applicable to the PPP), together
with a written explanation of the rights and obligations of a PPP; (ii) any
other information regarding the Purchase Plan required to be provided, and in a
manner prescribed, under any applicable laws; and (iii) a statement of the PPP's
account setting out the outstanding balance under all Loans each fiscal year.
The Company will maintain such account for each PPP in such manner that the
outstanding balance of any Loan of each PPP and/or any contribution made on
behalf of PPPs may be audited and ascertained. Such individual accounts will be
posted monthly.

     The Company will appoint a custodian (the "Custodian") to serve as the
Custodian under the Purchase Plan. The Company may not appoint itself, or any of
its directors or employees as the Custodian. The Custodian will hold the full
amount of all Loans as custodian for the respective PPPs, purchase with such
amounts Common Shares under the Purchase Plan and hold those Common Shares
pledged to the Company. The Company has the right to appoint a new Custodian.

     The maximum number of Common Shares reserved for issuance from treasury
under the Purchase Plan is currently 250,000. The number of Common Shares issued
under all Share Compensation Arrangements to any Insider may not exceed 5% of
the Outstanding Issue in any one year period and the number of Common Shares
issued to Insiders under all Share Compensation Arrangements may not exceed 10%
of the Outstanding Issue in any one year period. To become a PPP, an EPPP must
(i) be granted a Loan (as described below), (ii) execute any and all documents
determined by the Company, in its sole discretion, to be necessary or desirable
to evidence the Loan and (iii) borrow the Loan amount, and authorize the Company
in writing to regularly deduct amounts from his or her salary in repayment of
the Loan. The Company has not loaned money to officers and directors since the
provisions of the SOX

                                                                             50
<PAGE>

prohibiting such loans came into effect. As at January 31, 2006, the Company
had no such outstanding loans to any PPPs. If consented to by the Company, an
EPPP may purchase shares through a Consultant Entity, a Personal Holding
Company, an RRSP or an RRIF.

     Common Shares may be acquired, at the option of the Company, by (i)
subscription to the Company or (ii) market transactions. If acquired by
subscription, the price per Common Share will be the weighted average trading
price for the Common Shares on The Toronto Stock Exchange for the five (5)
business days immediately preceding the date of the subscription. Any
appreciation in the value of Common Shares will inure to the benefit of, and any
dividends payable in respect of the Common Shares will be paid to, the PPPs and
any depreciation in the value of the Common Shares will be borne by the PPPs.
Subject to applicable law, the Company may, in its discretion, grant Loans to
PPPs to be used exclusively for the purchase of Common Shares in accordance with
Section 5 of the Purchase Plan. In granting a Loan, the Company will determine:
(i) the amount of the Loan, (ii) the term of the Loan, which may not exceed ten
years; (iii) the interest rate of the Loan; and (iv) the amount and frequency of
the payments, which will be made by regular payroll deduction and applied to
accrued interest and outstanding principal. The Purchase Plan provides that the
Company may from time to time, at its sole discretion, establish procedures,
terms and conditions upon which it will contribute, on behalf of a PPP, an
amount of up to 15% of any Loan provided to such PPP to be used for the purchase
of Common Shares under the Purchase Plan. Repayment of Loans is to be secured by
the Common Shares purchased with the proceeds of the Loans, which Common Shares
are to be deposited with and held by a Custodian in accordance with the terms of
the Purchase Plan until the Loan has been repaid in full, provided however, that
pursuant to Section 7.2 of the Purchase Plan, if, on each six month anniversary
of the date that the Loan was granted, all amounts due and payable under the
Loan have been paid in full, then upon direction from the Company, the Custodian
will deliver to the PPP certificates representing the portion of the Common
Shares originally purchased for which the Loan has been repaid.

     The full principal amount payable together with all accrued and unpaid
interest in respect of all Loans made to a PPP will become due and immediately
payable on the date that the PPP ceases to be a bona fide full-time employee,
director or consultant of the Company, or a date which is ninety (90) days after
(i) the death of the PPP, (ii) the date on which the Company determines that the
PPP is totally and permanently disabled and unable to return to his or her
position with the Company; or (iii) the PPP has defaulted on his or her Loan and
such amount remains unpaid.


                                                                             51
<PAGE>



ITEM 7.     Major Shareholders and Related Party Transactions

A.    Major Shareholders

     The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Shares as of April 28, 2006. The
information in this table is based on the Company's records, information
provided to the Company by directors and executive officers, a review of any
reports filed under the early warning reporting system with Canadian securities
regulators and delivered to the Company, and a review of any Schedules 13D and
13G filed by shareholders with the Securities and Exchange Commission and
delivered to the Company in accordance with applicable law. Beneficial ownership
is determined in accordance with rules of the Securities and Exchange Commission
and includes shares over which the indicated beneficial owner exercises voting
and/or investment power. Common shares subject to options currently exercisable
or exercisable within 60 days are deemed outstanding for computing the
percentage ownership of the person holding the options but are not deemed
outstanding for computing the percentage ownership of any other person. This
information is based on 8,294,140 Common Shares outstanding as of April 28,
2006. Under applicable Canadian regulatory rules, shareholders are not required
to disclose an ownership interest unless it exceeds 10% of the voting rights
attached to the Common Shares of the Company. As a result, Canadian shareholders
who did not file a Schedule 13D or 13G will not be shown in this table unless
their ownership interest exceeds 10% of the voting rights attached to their
Common Shares, or unless they are otherwise known to the Company. None of the
Company's major shareholders have any special voting rights attached to their
Common Shares.

                                          Aggregate               Percentage of
                                          Number of                Outstanding
              Name                      Common Shares             Common Shares
              ----                      -------------             -------------

         Nigel W. Stokes                 2,057,063(1)                24.80 %
 Stadium Capital Management, LLC          1,370,297                  16.52%
Natcan Investment Management Inc.         1,636,546                  19.73%
TAL Global Asset Management Inc.           630,100                    7.60%
         AGF Funds Inc.                    504,576                    6.08%
          P. Kirk Dixon                  536,724((2))                 6.47%
      E. Herman Wallenburg                460,240(3)                  5.55%

Notes:
(1)  Includes 36,000 Common Shares held by his spouse, 40,000 Options
     exercisable either currently or within 60 days and 37,250 Options
     exercisable either currently or within 60 days granted to his spouse.
(2)  Includes 64,384 common shares held by his spouse. No options were
     exercisable either currently or within 60 days.
(3)  Includes 5,000 Options exercisable either currently or within 60 days.


                                                                             52
<PAGE>




    Significant changes in ownership
<TABLE>
<CAPTION>

    The following table sets forth significant changes in percentage ownership by the Company's Major Shareholders over the
previous three fiscal years, based on information available to the Company.

         ------------------------------------------- -------------------------- -----------------------------------------------
         Major Shareholder                           Date                       Transaction
         ------------------------------------------- -------------------------- -----------------------------------------------

<S>                                                  <C>                        <C>
         ------------------------------------------- -------------------------- -----------------------------------------------
         TAL Global Asset Management Inc.            Period   from  March  31,  Holdings  increased from approximately 7.7% to
                                                     2002 to March 31, 2003     13.0%
         ------------------------------------------- -------------------------- -----------------------------------------------
         TAL Global Asset Management Inc.            Period  from  October 31,  Holdings  decreased from  approximately  11.4%
                                                     2003 to March 31, 2004     to 9.7%
         ------------------------------------------- -------------------------- -----------------------------------------------
         TAL Global Asset Management Inc.            Period   from   April  1,  Holdings  decreased from approximately 9.7% to
                                                     2004 to December 31, 2004  5.5%
         ------------------------------------------- -------------------------- -----------------------------------------------
         Natcan Investment Management Inc.           September 31, 2004         Holdings increased to 14.0%
         ------------------------------------------- -------------------------- -----------------------------------------------
         Natcan Investment Management Inc.           Period  from  October  1,  Holdings  increased from  approximately  14.0%
                                                     2004 to January 31, 2005   to 17.5%
         ------------------------------------------- -------------------------- -----------------------------------------------
         Natcan Investment Management Inc.           Period  from  February 1,  Holdings  decreased from  approximately  17.5%
                                                     2005 to March 31, 2005     to 15.8%
         ------------------------------------------- -------------------------- -----------------------------------------------
         Natcan Investment Management Inc.           Period   from   April  1,  Holdings  increased from  approximately  15.8%
                                                     2005 to May 31, 2005       to 16.37%
         ------------------------------------------- -------------------------- -----------------------------------------------
         Natcan Investment Management Inc.           Period  from June 1, 2005  Holdings increased from  approximately  16.37%
                                                     to September 30, 2005      to 19.14%
         ------------------------------------------- -------------------------- -----------------------------------------------
         Natcan Investment Management Inc.           December 6, 2005           Holdings increased to approximately 19.73%
         ------------------------------------------- -------------------------- -----------------------------------------------
         Stadium Capital Management, LLC             September 15, 2004         Holdings increased to 12.5%
         ------------------------------------------- -------------------------- -----------------------------------------------
</TABLE>

    Information available to the Company indicates that, as at April 30, 2006,
there were two record holders in the U.S. holding 90,418 common shares of the
Company.

    Based on the information available to the Company, the Company is not
directly or indirectly owned or controlled by any other corporation, foreign
government or person. To the best of the Company's knowledge there are no
arrangements in existence that could lead to a subsequent change in control of
the Company.


B.    Related Party Transactions

      In the normal course of operations during fiscal 2003, the Company entered
into several different transactions with SmartSales Inc. (see further discussion
in the "Operating and Financial Review and Prospects - Acquisitions and
Investments" section of this document), a company with a common Chairman of the
Board of Directors and significant shareholder as the Company's CEO and
significant shareholder, Nigel Stokes. In fiscal 2006, 2005 and fiscal 2004,
there were no transactions with SmartSales Inc. In fiscal 2003, the related
party transactions with SmartSales Inc. consisted of rental income of $51,000.
These transactions in fiscal 2003 were made at market prices under normal trade
terms and conditions. During fiscal 2003, SmartSales Inc. entered into
receivership and the Company wrote off its rent receivable of $77,000.

      During fiscal 2003, the Company purchased certain assets of SmartSales
Inc. ("SmartSales") from the trustee in bankruptcy of the estate of SmartSales
in a cash transaction accounted for under the purchase method. The assets
acquired consisted of computer equipment, office furniture, customer lists,
accounts receivable, and software and related technology and intellectual
property. The Company did not assume any liabilities or obligations of
SmartSales pursuant to the transaction. The transaction did not have a material
impact on the Company's financial results or on its business and affairs. The
transaction was approved by the court under the Bankruptcy and Insolvency Act
(Canada). The President, CEO and Chairman of the Company, Mr. Nigel Stokes, is a
former director and Chairman of SmartSales and he held approximately 20% of the
common shares of SmartSales. Mr. Stokes did not receive any of the proceeds of
the sale from the Trustee as a result of his shareholding in SmartSales. The
former directors of SmartSales including

                                                                             53
<PAGE>


Mr. Stokes may benefit indirectly from the transaction because the Trustee's use
of the proceeds of the sale reduced certain potential liabilities of the former
directors with respect to unpaid taxes. At the request of Mr. Stokes, the nature
and extent of his interest in SmartSales was disclosed and recorded in the
minutes of the proceedings of the directors of the Company. The terms of the
transaction were reviewed and approved unanimously by the board of directors of
the Company. The board of directors was of the view that the assets to be
acquired and the immediate potential for collecting accounts receivable and
generating revenue would benefit the Company.

      The Company's directors, executive officers and senior officers are
eligible to participate in the Company's Share Purchase Plan. The purpose of
the Share Purchase Plan is to provide long-term incentives to attract, motivate
and retain key employees, officers, directors and consultants providing
services to the Company. Under the Share Purchase Plan the Company may loan
money to participants to purchase Common Shares of the Company. Repayment of
these loans is secured by a pledge of the Common Shares purchased with the
proceeds of the loan and such Common Shares are deposited with and held by a
custodian until the loan has been repaid. In the past, the Company granted
interest free loans to certain of its directors to purchase Common Shares under
the Share Purchase Plan. The aggregate indebtedness to the Company of all
participants in the Share Purchase Plan as at April 28, 2006 was nil. The
Company has not loaned money to directors since the provisions of SOX
prohibiting such loans came into effect. See Item 6: Directors, Senior
Management and Employees - Share Ownership.

C.    Interests of Experts and Counsel

Information not required for annual report.


                                                                             54
<PAGE>


ITEM 8.    Financial Information

A.    Consolidated Statements and Other Financial Information

See item 17.

LEGAL PROCEEDINGS

      The Company is not a party to any material legal proceedings other than as
outlined under this heading. Mr. Stokes was a director of SmartSales Inc. which
went bankrupt in fiscal 2003. See Item 7.B " Related Party Transactions".

      Westcon Inc. ("Westcon"), a specialty distributor of networking
communications and security products was a customer of the Company and is
currently in a dispute with the Company related to the performance of one of the
Company's software products. The dispute is being dealt with by way of
arbitration, which calls for the dispute to proceed under the International
Commercial Arbitration Act (Ontario). The Company believes the issues under
dispute by Westcon are without merit and the Company intends to defend this
matter vigorously.

      Shopplex.com carrying on business as Teilhard Technologies and Juxtacomm
Technologies Inc. (the "Plaintiffs") filed a statement of claim in the Federal
Court of Canada against the Company alleging infringement of a Canadian patent
(No. 2,241,767) and certain other related claims on July 15, 2004. The original
statement of claim was amended and the Company subsequently filed a statement
of defence and counterclaim against the Plaintiffs and certain related parties.
The Company believes the claims of infringement are without merit and intends
to defend this matter vigorously.


DIVIDENDS

      The Company has not paid any dividends on its Common Shares in the last
five completed financial years. The payment of any future dividends will be at
the discretion of the Company's Board of Directors and will depend upon, among
other things, the Company's future earnings, operations, capital requirements
and financial condition, general business conditions and contractual
restrictions on payment of dividends, if any.


B.    Significant Changes

      No significant change has occurred since the date of the annual financial
statements.


ITEM 9.    The Offer and Listing

A.    Offer and Listing Details

NATURE OF TRADING MARKET

      The Company's Common Shares are traded on the Toronto Stock Exchange under
the symbol "DMC" and were traded on the NASDAQ National Market under the symbol
"DMCX" until the Company voluntarily delisted from trading on the NASDAQ
National Market on November 4, 2005. The following tables set forth, for the
periods indicated, high and low closing prices of the Company's Common Shares as
reported on the NASDAQ National Market and on the Toronto Stock Exchange. Prices
on the Toronto Stock Exchange are shown in Canadian dollars. Prices on the
NASDAQ National Market are shown in U.S. dollars.

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------------
                                      Annual Market Prices on the Toronto Stock Exchange
------------------------------------------------------------------------------------ ---------------------- --------------------
                                                                                             High                   Low
------------------------------------------------------------------------------------ ---------------------- --------------------
<S>                                                                                      <C>                    <C>
Fiscal year ended January 31, 2006                                                          $11.70                 $8.15
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2005                                                          $19.11                 $8.00
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2004                                                          $18.00                 $9.00
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2003                                                          $13.50                 $7.50
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2002                                                          $15.49                 $4.52
------------------------------------------------------------------------------------ ---------------------- --------------------
</TABLE>



<PAGE>

<TABLE>
<CAPTION>


--------------------------------------------------------------------------------------------------------------------------------
                                      Annual Market Prices on the NASDAQ National Market
--------------------------------------------------------------------------------------------------------------------------------
                                                                                             High                   Low
------------------------------------------------------------------------------------ ---------------------- --------------------
<S>                                                                                      <C>                   <C>
Fiscal year ended January 31, 2006(*)                                                      $9.52(*)              $6.88(*)
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2005                                                          $14.40                 $6.71
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2004                                                          $13.96                 $6.63
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2003                                                           $8.56                 $4.61
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2002                                                          $10.19                 $2.70
------------------------------------------------------------------------------------ ---------------------- --------------------

(*)   The Company voluntarily delisted from trading on the NASDAQ National Market on November 4, 2005.

--------------------------------------------------------------------------------------------------------------------------------
                                     Quarterly Market Prices on the Toronto Stock Exchange
--------------------------------------------------------------------------------------------------------------------------------
                                                                                             High                   Low
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2006
------------------------------------------------------------------------------------ ---------------------- --------------------
     Fourth Quarter                                                                         $11.10                 $8.40
------------------------------------------------------------------------------------ ---------------------- --------------------
     Third Quarter                                                                          $11.00                 $8.15
------------------------------------------------------------------------------------ ---------------------- --------------------
     Second Quarter                                                                         $11.70                 $8.89
------------------------------------------------------------------------------------ ---------------------- --------------------
     First Quarter                                                                          $10.10                 $8.50
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2005
------------------------------------------------------------------------------------ ---------------------- --------------------
     Fourth Quarter                                                                          $9.74                 $8.00
------------------------------------------------------------------------------------ ---------------------- --------------------
     Third Quarter                                                                          $11.50                 $8.51
------------------------------------------------------------------------------------ ---------------------- --------------------
     Second Quarter                                                                         $16.45                 $9.33
------------------------------------------------------------------------------------ ---------------------- --------------------
     First Quarter                                                                          $20.00                $14.20
------------------------------------------------------------------------------------ ---------------------- --------------------

--------------------------------------------------------------------------------------------------------------------------------
                                     Quarterly Market Prices on the NASDAQ National Market
--------------------------------------------------------------------------------------------------------------------------------
                                                                                             High                   Low
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2006
------------------------------------------------------------------------------------ ---------------------- --------------------
     Fourth Quarter(*)                                                                     $7.57(*)              $7.35(*)
------------------------------------------------------------------------------------ ---------------------- --------------------
     Third Quarter                                                                           $9.14                 $6.88
------------------------------------------------------------------------------------ ---------------------- --------------------
     Second Quarter                                                                          $9.52                 $7.02
------------------------------------------------------------------------------------ ---------------------- --------------------
     First Quarter                                                                           $8.10                 $6.90
------------------------------------------------------------------------------------ ---------------------- --------------------
Fiscal year ended January 31, 2005
------------------------------------------------------------------------------------ ---------------------- --------------------
     Fourth Quarter                                                                          $7.86                 $6.71
------------------------------------------------------------------------------------ ---------------------- --------------------
     Third Quarter                                                                           $8.32                 $6.75
------------------------------------------------------------------------------------ ---------------------- --------------------
     Second Quarter                                                                         $11.65                 $7.27
------------------------------------------------------------------------------------ ---------------------- --------------------
     First Quarter                                                                          $14.40                $10.46
------------------------------------------------------------------------------------ ---------------------- --------------------

(*)   The Company voluntarily delisted from trading on the NASDAQ National Market on November 4, 2005.

--------------------------------------------------------------------------------------------------------------------------------
                                      Monthly Market Prices on the Toronto Stock Exchange
--------------------------------------------------------------------------------------------------------------------------------
                                                                                             High                   Low
------------------------------------------------------------------------------------ ---------------------- --------------------
April 2006                                                                                  $10.15                 $9.65
------------------------------------------------------------------------------------ ---------------------- --------------------
March 2006                                                                                  $10.20                 $8.20
------------------------------------------------------------------------------------ ---------------------- --------------------
February 2006                                                                               $10.75                $10.20
------------------------------------------------------------------------------------ ---------------------- --------------------
January 2006                                                                                $11.10                $10.20
------------------------------------------------------------------------------------ ---------------------- --------------------
December 2005                                                                               $10.80                $10.20
------------------------------------------------------------------------------------ ---------------------- --------------------
November 2005                                                                               $10.75                 $8.30
------------------------------------------------------------------------------------ ---------------------- --------------------

--------------------------------------------------------------------------------------------------------------------------------
                                      Monthly Market Prices on the NASDAQ National Market
--------------------------------------------------------------------------------------------------------------------------------
                                                                                             High                   Low
------------------------------------------------------------------------------------ ---------------------- --------------------
April 2006                                                                                    (*)                   (*)
------------------------------------------------------------------------------------ ---------------------- --------------------
March 2006                                                                                    (*)                   (*)
------------------------------------------------------------------------------------ ---------------------- --------------------
February 2006                                                                                 (*)                   (*)
------------------------------------------------------------------------------------ ---------------------- --------------------
January 2006                                                                                  (*)                   (*)
------------------------------------------------------------------------------------ ---------------------- --------------------
December 2005                                                                                 (*)                   (*)
------------------------------------------------------------------------------------ ---------------------- --------------------
November 2005(*)                                                                           $7.57(*)              $7.35(*)
------------------------------------------------------------------------------------ ---------------------- --------------------

(*)   The Company voluntarily delisted from trading on the NASDAQ National Market on November 4, 2005.
</TABLE>


                                                                             56
<PAGE>


ITEM 10.        Additional Information

A.    Share Capital

Information not required for annual report.


B.    Memorandum and Articles

ARTICLES OF INCORPORATION

      The predecessor corporation to the Company was incorporated under the
Business Corporations Act (Ontario) on November 19, 1993. This predecessor
corporation amalgamated on February 1, 1996 with four other corporations to form
the Company as it is currently constituted. The Company's articles of
amalgamation were amended on December 6, 1996 to effect a 1 - for - 2 share
consolidation of the Common Shares and to create a class of preferred shares
issuable in series. The Company's articles are on file with the Ontario Ministry
of Consumer and Business Services under the Ontario Corporation Number 1166680.
The Company's articles do not include a stated purpose.

DIRECTORS

      In accordance with the Business Corporations Act (Ontario), a director or
officer who is a party to a material contract or transaction or proposed
material contract or transaction with the Company, or is a director or officer
of, or has a material interest in, any person who is a party to a material
contract or transaction or proposed material contract or transaction with the
Company, shall disclose in writing to the Company or request to have entered in
the minutes of meetings of directors the nature and extent of his or her
interest. In such circumstances, such a director shall not vote on any
resolution to approve the contract or transaction unless the contract or
transaction is: (a) an arrangement by way of security for money lent to or
obligations undertaken by the director for the benefit of the Company or an
affiliate; (b) one relating primarily to his or her remuneration as a director,
officer, employee or agent of the Company or an affiliate; (c) one for indemnity
or insurance; or (d) one with an affiliate.

      In accordance with the Business Corporations Act (Ontario), the directors
of the Company may fix the remuneration of the directors, officers and employees
of the Company. Where a material contract or a material transaction (including a
contract involving director remuneration) is entered into between the Company
and a director or officer, or between the Company and another person of which a
director or officer of the Company is a director or officer or in which he or
she has a material interest, the director or officer is not accountable to the
Company or its shareholders for any profit or gain realised from the contract or
transaction and the contract or transaction is neither void nor voidable, by
reason only of the relationship or by reason only that the director is present
at or is counted to determine the presence of a quorum at a meeting of directors
that authorized the contract or transaction, if the director or officer
disclosed his or her interest in accordance with the Business Corporations Act
(Ontario) and the contract or transaction was reasonable and fair to the Company
at the time it was so approved.

      The directors may from time to time, in such amounts and on such terms as
they deem expedient: (a) borrow money on the credit of the Company; (b) issue,
sell or pledge debt obligations (including bonds, debentures, notes or other
similar obligations, secured or unsecured) of the Company; and (c) mortgage,
hypothecate, pledge or otherwise create a security interest in all or any of the
currently owned or subsequently acquired real or personal, movable or immovable,
property of the Company, including book debts, rights, powers, franchises and
undertaking, to secure any debt obligations or any money borrowed or other debt
or liability of the Company. The directors may from time to time delegate to
such one or more of the directors and officers of the Company as may be
designated by the directors all or any of the powers conferred on the directors
above to such extent and in such manner as the directors shall determine with
respect to each such delegation.

      Under the Business Corporations Act (Ontario), the following persons are
disqualified from being a director of the Company: (i) a person who is less than
eighteen years of age; (ii) a person who is of unsound mind and has been so
found by a court in Canada or elsewhere; (iii) a person who is not an
individual; and (iv) a person who has the status of bankrupt. Except for the
foregoing restrictions, there is no age limit requirement for directors of the
Company. Directors are not required to own shares in the Company.

      Directors of the Company are elected annually at an annual meeting of the
shareholders of the Company under the Business Corporations Act (Ontario), a
majority of the directors of the Company must be resident Canadians. Each
director holds office until the close of the next annual meeting or, if
directors are not elected at such meeting, until the successor of such director
is elected or appointed in accordance with the By-Laws of the Company and the
Business Corporations Act (Ontario), or until his or her earlier resignation.
Each Common Share of the Company entitles the holder thereof to one vote at a
meeting of shareholders.


                                                                             57
<PAGE>


COMMON SHARES

      The Company is authorized to issue an unlimited number of Common Shares.
The rights, privileges, restrictions and conditions of the Common Shares include
the rights to vote at all meetings of shareholders and to receive the remaining
property of the Company upon dissolution.

      Subject to the prior rights of the holders of Preferred Shares, the
holders of Common Shares are entitled to receive dividends, as and when declared
by the Board of Directors, out of monies properly applicable to the payment of
dividends, in such amount and in such form as the Board of Directors may from
time to time determine, and all dividends which the Board of Directors may
declare on the Common Shares shall be declared and paid in equal amounts per
share on all Common Shares outstanding as of the applicable record date.

      In the event of the dissolution, liquidation or winding-up of the Company,
whether voluntary or involuntary, or any other distribution of assets of the
Company among its shareholders for the purpose of winding up its affairs,
subject to the prior rights of the holders of Preferred Shares, the holders of
Common Shares will be entitled to receive the remaining property and assets of
the Company.

PREFERRED SHARES

      The Company is authorized to issue an unlimited number of Preferred Shares
issuable in series. Subject to the Business Corporations Act (Ontario), the
directors may fix, before the issue thereof, the number of Preferred Shares of
each series, the designation, rights, privileges, restrictions and conditions
attaching to the shares of each series, including, without limitation, any
voting rights, any right to receive dividends (which may be cumulative or
non-cumulative and variable or fixed) or the means of determining such
dividends, the dates of payment thereof, any terms and conditions of redemption
or purchase, any conversion rights, any rights on liquidation, dissolution or
winding-up of the Company, and any sinking fund or other provisions, the whole
to be subject to the issuance of a certificate of amendment setting forth the
designation, rights, privileges, restrictions and conditions attaching to the
Preferred Shares.

      Subject to the Business Corporations Act (Ontario), the holders of
Preferred Shares shall not, as such, be entitled to receive notice of or to
attend any meeting of the shareholders of the Company or to vote at any such
meeting, but shall be entitled to receive notice of and to attend, but not to
vote at, any meeting of the shareholders called for the purpose of authorizing
the dissolution of the Company or the sale, lease or exchange of all or
substantially all the property of the Company other than in the ordinary course
of business, unless the Company shall fail, for a period of eighteen consecutive
months, to pay dividends at the prescribed rate, if any, on the Preferred
Shares, whereupon and so long as any such dividends shall remain in arrears, the
holders of the Preferred Shares shall be entitled to receive notice of, to
attend and vote at all meetings of the shareholders, except meetings at which
only holders of a specified class of shares are entitled to attend.

      The Preferred Shares shall be entitled to preference over the Common
Shares of the Company and over any other shares ranking junior to the Preferred
Shares with respect to priority in the payment of dividends and in the
distribution of assets in the event of the liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, or any other
distribution of the assets of the Company among its shareholders for the purpose
of winding-up its affairs.

      The Preferred Shares of each series shall, with respect to the payment of
dividends and the distribution of assets in the event of liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary, rank
on a parity with the Preferred Shares of every other series and be entitled to
preference over the Common Shares. If any amount of cumulative dividends
(whether or not declared) or declared non-cumulative dividends or any amount
payable on any such distribution of assets constituting a return of capital in
respect of the Preferred Shares of any series is not paid in full, the Preferred
Shares of such series shall participate ratably with the Preferred Shares of
every other series in respect of all such dividends and amounts.

ACTION NECESSARY TO CHANGE RIGHTS OF SHAREHOLDERS

      In order to add to, change or remove any of the rights, privileges,
restrictions or conditions of any of the Company's shares, the articles would
need to be amended to effect the change. Such an amendment would require
approval by special resolution, which is a resolution that is submitted to a
special meeting of shareholders of the Company duly called for the purpose of
considering the resolution and passed by at least two-thirds of the votes cast,
or consented to in writing by each shareholder entitled to vote at such a
meeting. To add to, remove or change the rights, privileges, restrictions or
conditions attached to the shares of a particular class or series, the amendment
is required to be approved by special resolution of the holders of a class or
series of shares voting separately as a class or series. A shareholder who is
entitled to vote on such a resolution is entitled to dissent in respect of such
a resolution and, if the resolution is adopted and the Company implements such
changes, demand payment of the fair value of its shares in accordance with the
Business Corporations Act (Ontario).

                                                                              58
<PAGE>

MEETINGS OF SHAREHOLDERS

      An annual meeting of shareholders is held each year for the purpose of
considering the Company's financial statements and auditor's report, electing
directors, appointing auditors and for the transaction of other business as may
be brought before the meeting. The Board of Directors has the power to call a
special meeting of shareholders at any time. Subject to the Business
Corporations Act (Ontario), the holders of not less than five per cent of the
Common Shares of the Company may requisition the Board of Directors to call a
meeting of shareholders for the purposes stated in the requisition.

      NASDAQ, under Rule 4350, granted the Company an exemption from its
requirement that the minimum quorum for a shareholder meeting be 33-1/3% of the
outstanding common shares of the Company, on the basis that such requirement is
not consistent with the Company's home country practice. The Company's by-laws
provide that the quorum for a meeting of the Company's shareholders is two or
more persons present in person, each being a shareholder entitled to vote
thereat or a duly appointed proxyholder or representative for a shareholder so
entitled and together holding shares representing at least five percent of the
voting shares of the Company. The Company's quorum requirements comply with the
requirements of the Business Corporations Act (Ontario) and management believes
they are consistent with those of other Canadian companies with common shares
listed on the Toronto Stock Exchange, the principal exchange of the Company's
common shares in Canada.

      Notice of the time and place of each meeting of shareholders must be given
not less than 21 days, nor more than 50 days, before the date of each meeting to
each director, to the auditor and to each shareholder entitled to vote at the
meeting. Notice of a meeting of shareholders called for any other purpose other
than consideration of the minutes of an earlier meeting, financial statements
and auditor's report, election of directors and reappointment of the incumbent
auditor, must state the nature of the business to be transacted in sufficient
detail to permit the shareholder to form a reasoned judgment thereon and must
state the text of any special resolution or by-law to be submitted to the
meeting.

      The only persons entitled to be present at a meeting of shareholders are
those entitled to vote, the directors of the Company and the auditor of the
Company. Any other person may be admitted only on the invitation of the chairman
of the meeting or with the consent of the meeting. If a corporation is
winding-up, the Business Corporations Act (Ontario) permits a liquidator
appointed by the shareholders, during the continuance of a voluntary winding-up,
to call and attend meetings of the shareholders. In circumstances where a court
orders a meeting of shareholders, the court may direct how the meeting may be
held, including the parties entitled, or required, to attend the meeting.

LIMITATIONS ON RIGHT TO OWN SECURITIES

      There are no limitations on the rights to own Common Shares, including the
rights of non-resident or foreign shareholders to hold or exercise voting rights
on the Common Shares imposed by the laws of Canada or the laws of the Province
of Ontario or by the articles or By-Laws of the Company except as follows:

(a)   foreign investors who acquire control of the Company must comply with
      the Investment Canada Act; and
(b)   the majority of directors of the Company must be resident Canadians, as
      defined in the Business Corporations Act (Ontario).

CHANGE IN CONTROL PROVISIONS

      The Company and CIBC Mellon Trust Company (the "Rights Agent") entered
into an agreement dated as of May 7, 2002 (the "Rights Agreement") to implement
a shareholder rights plan for the Company (the "Shareholder Rights Plan"). A
shareholder rights plan creates a right (which can only be exercised when a
person acquires control of 20% or more of the Company's Common Shares) for each
shareholder, other than the 20% buyer, to acquire additional Common Shares of
the Company at one-half of the market price at the time of exercise. This
significantly dilutes the share position of the 20% buyer and practically
prevents that person from acquiring control of 20% or greater of the Company's
Common Shares unless the rights plan has been withdrawn or the buyer makes a
Permitted Bid, as that term is defined in the Shareholder Rights Plan. The
easiest way for the buyer to have a rights plan withdrawn is for it to negotiate
with the Board of Directors to have the rights plan waived or to apply to a
securities commission to order withdrawal of the rights plan if the Company
cannot develop an auction. Both of these approaches will give the Board of
Directors more time and control over any sale process and increase the
likelihood of a better offer to the Company's shareholders. The primary
objectives of the Shareholder Rights Plan are to ensure that, in the context of
a bid for control of the Company through an acquisition of the Company's Common
Shares, the Board of Directors has sufficient time to explore and develop
alternatives for maximizing shareholder value, to provide adequate time for
competing bids to emerge, to ensure that shareholders have an equal opportunity
to participate in such a bid and to give them adequate time to properly assess
the bid and lessen the pressure to tender typically encountered by a
securityholder of an issuer that is subject to a bid.

                                                                             59
<PAGE>

C.    Material contracts

      For the two years p  receding the date of this Form 20-F, the Company has
not entered into any material contracts, other than contracts entered into in
the ordinary course of business.

D.    Exchange Controls

      The Investment Canada Act generally prohibits implementation of a
reviewable investment by an individual, government or agency thereof,
corporation, partnership, trust or joint venture that is not a "Canadian" as
defined in the Investment Canada Act (a "non-Canadian"), unless after review,
the minister responsible for the Investment Canada Act is satisfied that the
investment is likely to be of net benefit to Canada. An investment in Common
Shares of the Company by a non-Canadian (other than a "WTO investor" as defined
in the Investment Canada Act) would be reviewable under the Investment Canada
Act if it was a direct investment to acquire control of the Company and the
value of the assets of the Company was Cdn$5,000,000 or more.

      An investment in Common Shares of the Company by a WTO Investor, assuming
the Company is not involved in a "cultural business", "financial service"
business or "transportation service" business, each as defined in the Investment
Canada Act or related regulations, or involved in the production of uranium,
would be reviewable under the Investment Canada Act if it was a direct
investment to acquire control of the Company and the value of the assets of the
Company equals or exceeds a specified amount (the "Review Threshold"), which is
adjusted for inflation annually. The Review Threshold is Cdn$250 million for
investments completed in 2005 and Cdn$265 million for investments completed in
2006 is indexed as of the first of January every year.

      A non-Canadian, whether a WTO Investor or otherwise, would acquire control
of the Company for the purposes of the Investment Canada Act if it acquired a
majority of the Common Shares of the Company. The acquisition of less than a
majority but one-third or more of the Common Shares of the Company would be
presumed to be an acquisition of control of the Company for the purposes of the
Investment Canada Act unless it could be established the Company was not
controlled in fact by the acquirer through the ownership of Common Shares.

      Certain transactions in relation to the Common Shares would be exempt from
the Investment Canada Act, including:

o     an acquisition of Common Shares by a person in the ordinary course of that
      person's business as a trader or dealer in securities;

o     an acquisition of control of the Company in connection with the
      realization of security granted for a loan or other financial assistance
      and not for any purpose related to the provisions of the Investment Canada
      Act; and

o     an acquisition of control of the Company by reason of an amalgamation,
      merger, consolidation or corporate reorganization following which the
      ultimate direct or indirect control in fact of the Company, through the
      ownership of voting interests, remains unchanged.


E.    Taxation

Canadian Federal Income Tax Considerations

      The following is a summary of certain material Canadian federal income tax
considerations under the Income Tax Act (Canada) (the "Tax Act") generally
applicable to a holder of Common Shares of the Company who at all times: (i) for
purposes of the Tax Act, is not and is not deemed to be resident in Canada,
deals at arm's length with and is not affiliated with the Company, holds the
Common Shares as capital property, does not use or hold and is not deemed to use
or hold Common Shares in the course of carrying on a business in Canada, and is
not a "financial institution", and (ii) for purposes of the Canada-United States
Income Tax Convention (1980), as amended (the "Convention"), is a resident of
the U.S. and not a resident of Canada and does not hold and has not held Common
Shares as part of the business property of a permanent establishment in Canada
or in connection with a fixed base in Canada (hereinafter, a "U.S. Holder").

      This summary is based upon the current provisions of the Tax Act, the
regulations thereunder, the Convention, all proposed amendments to the Tax Act,
the regulations thereunder and the Convention publicly announced by the
Department of Finance, Canada prior to the date hereof, and the administrative
policies and assessing practices of the Canada Revenue Agency made publicly
available prior to the date hereof. Except for the foregoing, this summary does
not take into account or anticipate any changes in the law or the Convention or
the administrative policies or assessing practices of the Canada Revenue Agency
whether by legislative, governmental or judicial action or decision. This
summary does not take into account provincial, territorial or foreign tax
legislation or considerations, which may differ significantly from the Canadian
federal income tax considerations described herein.

                                                                             60
<PAGE>

      Amounts in respect of Common Shares paid or credited or deemed to be paid
or credited as, on account or in lieu of payment of, or in satisfaction of,
dividends to a U.S. Holder will generally be subject to Canadian non-resident
withholding tax. Under the Tax Act, such withholding tax is levied at a rate of
25%, which may be reduced pursuant to the terms of the Convention. Under the
Convention, the rate of Canadian non-resident withholding tax on the gross
amount of dividends beneficially owned by a U.S. Holder is generally 15%.
However, where such beneficial owner is a company which owns at least 10% of the
voting stock of the Company, the rate of such withholding is 5%.

      A U.S. Holder will not be subject to tax under the Tax Act in respect of
any disposition of Common Shares (other than a disposition to the Company)
unless at the time of such disposition such Common Shares constitute "taxable
Canadian property" of the holder for purposes of the Tax Act. If the Common
Shares are listed on a prescribed stock exchange for the purposes of the Tax Act
(which currently includes the TSX and NASDAQ) at the time they are disposed of,
they will generally not constitute "taxable Canadian property" of the U.S.
Holder at the time of such disposition unless at any time during the 60-month
period immediately preceding the disposition, 25% or more of the issued shares
of any class or series of the Company was owned by the U.S. Holder, by persons
with whom the U.S. Holder did not deal at arm's length or by the U.S. Holder and
persons with whom the U.S. Holder did not deal at arm's length. The Common
Shares may also be taxable Canadian property in certain other circumstances.
Under the Convention, gains derived by a U.S. Holder from the disposition of
Common Shares that constitute "taxable Canadian property" will generally not be
taxable in Canada unless the value of the Common Shares is derived principally
from real property situated in Canada. If the Common Shares are listed on a
prescribed stock exchange for the purposes of the Tax Act at the time they are
disposed of by a U.S. Holder, the U.S. Holder will not be required to comply
with the provisions of section 116 of the Tax Act, which requires a certificate
to be obtained from the Canada Revenue Agency when certain property is disposed
of.

      The foregoing summary of certain material Canadian federal income tax
considerations is of a general nature only and is not intended to be, nor should
it be construed to be, legal or tax advice to any particular holder of Common
Shares. Holders should consult their own tax advisors with respect to their
particular circumstances.


United States Tax Consequences

      The following is a general discussion of certain material anticipated
United States federal income tax considerations relevant to U.S. holders,
defined below, of the Company's Common Shares who hold such shares as capital
assets (as defined in Section 1221 of the United States Internal Revenue Code of
1986, as amended (the "Code")). This discussion is intended to be a general
description of the United States federal income tax considerations material to a
purchase, ownership and disposition of Common Shares. Readers are cautioned that
this discussion does not address all relevant tax consequences relating to an
investment in the Common Shares, nor does it take into account tax consequences
peculiar to persons subject to special provisions of United States federal
income tax law, such as financial institutions, persons actually or
constructively owning 10% or more of the voting power of the Company's stock
entitled to vote, persons that hold Common Shares through a partnership or other
pass through entity, or persons that hold Common Shares that are a hedge
against, or that are hedged against, currency risk or that are part of a
straddle or conversion transaction, or persons whose functional currency is not
the United States dollar. Therefore, investors should consult a tax advisor
regarding the particular consequences of purchasing Common Shares.

      Except as otherwise described in this form, this discussion applies to
investors that are (i) citizens or individual residents of the United States,
(ii) corporations (or other entities taxable as corporations for United States
federal income tax purposes), that are created or organised in or under the laws
of the United States, any State of the United States or the District of
Columbia, (iii) estates, the income of which is subject to federal income
taxation, regardless of its source or (iv) trusts, if a court within the United
States is able to exercise primary supervision over the administration of such
trust and one or more United States persons as described in Section 7701(a)(30)
of the Code has the authority to control all substantial decisions of such trust
(a "U.S. Holder"). Holders that are not described in the definition of a U.S.
Holder are advised to consult their own tax advisors regarding the tax
considerations incident to the acquisition, ownership and disposition of Common
Shares.

      Except as described below if the Company is treated as a passive foreign
investment company, investors that are U.S. Holders will be required to include
the gross amount of any distribution on Common Shares (without reduction for
Canadian tax withheld) in their gross income as a taxable dividend, to the
extent such distribution is paid from the Company's current or accumulated
earnings and profits as determined under United States federal income tax
principles. U.S. Holders must include in income an amount equal to the United
States dollar value of such dividends on the date of receipt, based on the
exchange rate on such date. Provided that the Company is not treated as a
passive foreign investment company, described below, in the case of a
non-corporate U.S. Holder, including individuals, such dividends will be
eligible for a maximum rate of tax of 15% for dividends received before January
1, 2009, provided certain conditions are satisfied. To the extent that dividend
distributions paid by the Company exceed the Company's current or accumulated
earnings and profits, they will be treated first as a return of capital up to
the U.S. Holder's adjusted tax basis in the shares, and then as a gain from the
sale or exchange of the shares.

                                                                             61
<PAGE>

      U.S. Holders will generally be entitled to a foreign tax credit, or
deduction for United States federal income tax purposes, in an amount equal to
the Canadian tax withheld from a distribution on Common Shares. For taxable
years beginning on or before December 31, 2006, dividends paid by the Company
generally will constitute foreign source "passive income" or "financial services
income" for foreign tax credit purposes, which could reduce the amount of
foreign tax credit that a U.S. Holder may claim. For taxable years beginning
after December 31, 2006, such dividends generally will be treated as "passive
category income" or "general category income", for United States foreign tax
credit purposes. The United States Internal Revenue Code applies various
limitations on the amount of foreign tax credit that may be claimed by a United
States taxpayer. Because of the complexity of those limitations, U.S. Holders
should consult their own tax advisors with respect to the amount of the foreign
taxes they may claim as a credit. Dividends paid by the Company on the Common
Shares will not generally be eligible for the "dividends received" deductions.

      A U.S. Holder that sells Common Shares will generally recognise a gain or
loss in an amount equal to the difference, if any between the amount realised on
the sale and the U.S. Holder's adjusted tax basis in the shares. Unless the
Company is treated as a passive foreign investment company (described below),
any gain or loss recognised upon the sale of shares held as capital assets will
be a long-term or short-term capital gain or loss, depending on whether the
Common Shares have been held for more than one year. Such gain or loss generally
will be treated as United States source income or loss for United States foreign
tax credit purposes.

      The rules governing "passive foreign investment companies" can have
significant tax effects on U.S. Holders. The Company could be classified as a
passive foreign investment company if, for any taxable year, either:

      (a)  75% or more of the Company's gross income is "passive income", which
           generally includes interest, dividends, certain gains from the sale
           or exchange of shares or securities and some types of rents and
           royalties, or

      (b)  on average, 50% or more of the Company's assets, by fair market
           value, or, in some cases, by adjusted tax basis, produce or are held
           for the production of "passive income."

      Distributions constituting "excess distributions", as defined in Section
1291 of the Code, from a passive foreign investment company and dispositions of
shares of a passive foreign investment company are subject to the highest rate
of tax on ordinary income in effect and to an interest charge based on the value
of the tax deferred during the period during which the shares are owned.

      The Company may be a passive foreign investment company for U.S. federal
income tax purposes in the current year and may have been a passive foreign
investment company in prior years. U.S. Holders who hold shares should be aware
that the Company does not intend to provide U.S. Holders with information as to
its status as a passive foreign investment company or to comply with any record
keeping, reporting or other requirements of the Code. U.S. Holders should
consult with their own tax advisors as to the tax consequences to them of
holding stock of a passive foreign investment company.

      United States backup withholding tax and information reporting
requirements generally apply to certain payments to certain non-corporate
holders of the Common Shares. Information reporting generally will apply to
payments of dividends on, and to proceeds from the sale or disposition of,
Common Shares by a payor within the United States to a U.S. Holder (if such
person is other than an exempt recipient, including a corporation, not a United
States person that provides an appropriate certification or certain other
persons).

      A payor within the United States will be required to withhold tax
(currently at a rate of 28%) on any payments made to a Common Share holder (if
that Common Share holder is other than an exempt recipient) consisting of
dividends on, or proceeds from the sale or disposition of, the Common Shares, if
the selling Common Share holder fails to furnish a correct taxpayer
identification number on United States Internal Revenue Service Form W-9 or
otherwise fails to comply with, or establish an exemption from, such backup
withholding tax requirements. Moreover, a payor or middleman may rely on a
certification provided by a payee that is not a United States person only if
such payor or middleman does not have actual knowledge or a reason to know that
any information or certification stated in such certificate is incorrect.
Investors will be allowed a refund or a credit equal to any amounts withheld
under the United States backup withholding tax rules against their United States
federal income tax liability, provided that they furnish the required
information to the United States Internal Revenue Service.


F.    Dividends and Paying Agents

Information not required for annual report.

G.    Statements by Experts

Information not required for annual report.

H.    Documents on Display

                                                                             62
<PAGE>

      Any documents referred to in this Form 20-F shall be available for review
at the registered office of the Company located at 3100 Steeles Avenue East,
Suite 1100, Markham, Ontario, Canada, L3R 8T3. The Company is subject to certain
of the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith, files reports and
other information with the Securities and Exchange Commission (the "SEC"). As a
foreign private issuer, the Company is exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements, and its
officers, directors and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section 16 of the Exchange
Act. Under the Exchange Act, as a foreign private issuer, the Company is not
required to publish financial statements as frequently or as promptly as United
States companies. Such reports and other information filed with the SEC may be
inspected and copied at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material can also be obtained from the principal office of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates or by
visiting the SEC's website at www.sec.gov.


I.    Subsidiary information

Information not required for annual reports.


ITEM 11.   Quantitative and Qualitative Disclosures About Market Risk

INTEREST RATE RISK.

      The Company's exposure to interest rate fluctuations relates primarily to
its investment portfolio, since the Company has no borrowings outstanding under
its line of credit at January 31, 2006.

      The Company invests its cash in a variety of short- and long-term Canadian
dollar denominated financial instruments, including government and corporate
bonds, commercial paper, preferred shares and banker's acceptances. The
portfolio is diversified and consists primarily of investment grade securities
to minimize credit risk. Cash balances in foreign operations are generally
invested in term deposits in the local operating banks. The investment in
short-term financial instruments carries a degree of interest rate risk, and
consequently the Company's future investment income may fall short of
expectations due to changes in short-term interest rates. The investment in
short-term financial instruments is not for trading purposes. Management
estimates that average invested cash, cash equivalents, and short-term
investment balances should be approximately $35,000,000; therefore, a 1% change
in interest rates could affect interest income by as much as $350,000 for the
year.

FOREIGN CURRENCY RATE FLUCTUATIONS.

      In addition to Canada and the United States, the Company also operates in
the United Kingdom, Germany and other European countries, and is therefore
exposed to market risks related to foreign currency fluctuations between its
Canadian dollar functional currency and these foreign currencies. The Company
derives most of its sales revenue from international customers, with sales
outside Canada usually denominated in U.S. dollars or European currencies
including pounds sterling and euros. Accordingly, changes in exchange rates
between the Canadian dollar and these foreign currencies can positively or
negatively affect the Company's operating results. The Company has a policy of
hedging a portion of its foreign currency denominated accounts receivable.
However, management recognizes that this policy can provide only short-term
protection against a limited portion of the Company's currency exposure. The
appreciation of the Canadian dollar requires the Company to become more
productive in order to maintain its margins. Although the Company has focused
and will continue to focus on increasing the productivity of its Canadian
operations, there is no guarantee it will be successful in maintaining its
current margins. The financial instruments utilized by the Company pursuant to
its hedging policy are not purchased for trading purposes and the Company does
not enter into foreign exchange contracts for speculative purposes.

      During fiscal 2006, the Company entered into forward currency contracts to
sell U.S. dollars for Canadian dollars to hedge the future collection of its
accounts receivable denominated in U.S. dollars. At January 31, 2006, no U.S.
dollar forward currency contracts were outstanding. Subsequent to year end, U.S.
$4,000,000 of forward currency contracts were purchased at exchange rates
averaging approximately 1:1.14, maturing within 60 days of the financial year
end. These contracts hedge substantially all of the Company's U.S. dollar-based
accounts receivable. During fiscal 2006, the Company incurred a foreign exchange
gain of $203,000 compared to a gain of $126,000 in fiscal 2005.

      The following table provides a sensitivity analysis on the Company's
exposure to changes in foreign exchange rates. For foreign currencies where the
Company engages in material transactions, the following table quantifies, in
thousands of US dollars, the impact that a 10% decrease against the Canadian
dollar would have had on the Company's total revenues, operating expenses and
pre-tax net income for the year ended January 31, 2006.


                                                                             63
<PAGE>


                                        Total        Operating       Pre-tax net
                                      revenue         expenses            income
                                            $                $                 $

United States dollar                      241            2,732           (2,491)
Pound sterling                          (673)            (505)             (168)
Euro                                    (706)            (416)             (290)

           See Note 16, Financial Instruments and Hedging Activities, to the
           audited consolidated financial statements.

ITEM 12.   Description of Securities Other than Equity Securities

Information not required for annual report.


                                                                             64
<PAGE>


                                     PART II


ITEM 13.   Defaults, Dividend Arrearages and Delinquencies

None.


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

None.


ITEM 15.   Controls and Procedures

DISCLOSURE CONTROLS AND PROCEDURES

      The Chief Executive Officer and the Chief Financial Officer (the
"Executive Officers") met with the General Counsel of the Company on April 28,
2006 to review the effectiveness of the Company's disclosure controls and
procedures. The Company's disclosure controls and procedures are documented in
the Company's Disclosure Policy that has been approved by the Board of
Directors. The Disclosure Policy provides that the Executive Officers and the
General Counsel are responsible for the disclosure of material information. The
Executive Officers reviewed the terms of the Disclosure Policy and considered
how effectively its controls and procedures functioned in practice. The
Executive Officers determined that these controls and procedures were adequate
for the Company and in compliance with all applicable, laws, regulations, rules
and listing standards. On April 28, 2006, the Executive Officers evaluated the
effectiveness of the Company's disclosure controls and procedures as set out in
the Disclosure Policy and concluded that there have been no significant changes
to these controls or other factors that could significantly affect these
controls other than as described below.

      As required by the U.S. Securities and Exchange Commission and
Multilateral Instrument 52-109 issued by the Canadian Securities Administrators,
the CEO and CFO are making certifications related to the information in these
annual filings. As part of these certifications, the CEO and CFO must certify
that they are responsible for establishing and maintaining disclosure controls
and procedures, and have designed such disclosure controls and procedures to
provide reasonable assurance that material information of the Company is made
known to them and that they have evaluated the effectiveness of the disclosure
controls and procedures as of the end of the period covered by these annual
filings. The Company has documented and implemented such controls and
procedures.

      The Company's CEO and CFO evaluated the effectiveness of the Company's
disclosure controls and procedures as at January 31, 2006. In the course of that
review, the CEO and CFO identified the need to make a change in the Company's
accounting policy for revenue recognition, which is discussed further in the
"CRITICAL ACCOUNTING POLICIES AND ESTIMATES" section under Item 5 of this 20-F,
and to make related enhancements to the Company's controls and procedures with
respect to the periodic determination of VSOE of the fair value for the various
elements of its multiple-element sales arrangements. As a result the
Consolidated Financial Statements for fiscal 2004 and 2005 were restated to
reflect the effect of the change in accounting policy as described in Note 3 to
the Consolidated Financial Statements for fiscal 2006. Following the adoption of
the new accounting policy and the implementation of these enhancements, the
Company's CEO and CFO have concluded on April 28, 2006, that the Company's
disclosure controls and procedures are effective.


CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

      Except the change described in the preceding paragraph, there have been no
changes to the Company's internal control over financial reporting identified in
connection with the evaluation required by paragraph (d) of 17 CFR 240.13a-15 or
240.15d-15 that occurred during the period covered by this Form 20-F that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

ITEM 16A.  Audit Committee Financial Expert

      The three members of the Audit Committee are: Mr. Bryan Plug, Mr. Donald
Lenz and Mr. Donald Woodley. The Company's Board of Directors has determined
that Mr. Plug, an independent director of the Company, is an audit committee
financial expert. The Audit Committee has determined that all three members of
the Audit Committee are Financially Literate. "Financially Literate" means that
a member has the ability to read and understand a set of financial statements
that present a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of the issues that can
reasonably be expected to be

                                                                             65
<PAGE>


raised by the Company's financial statements. Mr. Plug was determined to be
Financially Literate based on his experience as the President and CEO of a
number of software companies where he was responsible for supervising the
preparation of financial statements of a similar breadth and complexity to the
Company's financial statements, where he was responsible for making judgments
and decisions related to accounting matters on behalf of management and where he
was accountable for internal controls and financial reporting procedures. Mr.
Lenz was determined to be Financially Literate based on his experience as an
investment banker where he analyzed and evaluated financial statements of a
similar breadth and complexity to the Company's financial statements and based
on his experience as a director of other companies where he has been responsible
for overseeing management and the preparation of financial statements in his
capacity as a director. Mr. Woodley was determined to be Financially Literate
based on his experience as the President of software and technology companies
where he was responsible for supervising the preparation of financial statements
of a similar breadth and complexity to the Company's financial statements and
where he was responsible for making judgments and decisions related to
accounting matters on behalf of management and where he was accountable for
internal controls and financial reporting procedures. The determination was also
based on Mr. Woodley's experience as a director of other companies where he has
been responsible for overseeing management and the preparation of financial
statements in his capacity as a director. The particulars of each member's
experience can be found in the biographies under Item 6A.

ITEM 16B.  Code of ethics

      Management of the Company implemented an Employee Conduct Policy in April
2002. The Employee Conduct Policy was subsequently amended to add a section
relating to the anonymous accounting complaints process adopted by the Company.
The Board of Directors formally adopted the amended Employee Conduct Policy at
its meeting on March 3, 2003. The Employee Conduct Policy applies to all
officers and employees of the Company. The Employee Conduct Policy is attached
as Exhibit 11.1 to the Company's Form 20-F filed June 5, 2003 with the
Securities and Exchange Commission. Any person may request a copy of the
Employee Conduct Policy from the General Counsel of the Company by contacting
the General Counsel at the address or telephone number of the Company's
principal executive offices set out on the first page of this Form 20-F.

ITEM 16C.  Principal Accountant Fees and Services

(a) AUDIT FEES

      Aggregate audit fees of Cdn$667,720 for fiscal 2006 and Cdn$364,400 for
fiscal 2005 were billed by the Company's principal accountant Ernst & Young to
the Company's for professional services normally provided for the audit of the
Company's annual financial statements or services in connection with statutory
and regulatory filings or engagements.

(b) AUDIT-RELATED FEES

      No fees were billed for fiscal 2006 and fiscal 2005 for assurance and
related services by the principal accountant Ernst & Young reasonably related to
the performance of the audit or review of the Company's financial statements.

(c) TAX FEES

      Cdn$348,221 in fees were billed for fiscal 2006 and Cdn$295,394 in fees
were billed for fiscal 2005 for professional services rendered by the principal
accountant Ernst & Young for Canadian tax compliance, tax advice, and tax
planning for the Company, the Company's Canadian federal and provincial tax
returns, the Company's U.S. federal income tax returns, and the Company's Q1, Q2
and Q3 fiscal 2006 and 2005 tax provisions.

(d) ALL OTHER FEES

      Other than the services reported under the subparagraphs (a) through (c)
above of this Item 16C, Cdn$8,081 in fees were billed for fiscal 2006 and
Cdn$7,789 in fees were billed for fiscal 2005 for services related to Ernst &
Young's online subscription and the CPAB levy.

(e) AUDIT COMMITTEE PRE-APPROVAL

      The Company's Audit Committee adopted on August 26, 2003 a pre-approval
process as described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X. That
pre-approval process requires the pre-approval from the Audit Committee for
audit fees and non-audit services by Ernst & Young. All services provided after
August 26, 2003 from Ernst & Young were pre-approved by the Audit Committee.

ITEM 16D.  Exemptions from the Listing Standards for Audit Committees

This disclosure item is not applicable.


                                                                             66
<PAGE>

<TABLE>
<CAPTION>

ITEM 16E.  Purchases of Equity Securities by the Issuer and Affiliated Purchasers

                                              ISSUER PURCHASE OF EQUITY SECURITIES

------------------------- ---------------------- ----------------------- -------------------------- ----------------------
Period                    (a) Total Number of    (b) Average Price Paid  (c) Total Number of        (d) Maximum Number of
                          Shares Purchased       per Share (Cdn$)        Shares Purchased as Part   Shares that May Yet Be
                                                                         of Publicly Announced      Purchased Under the
                                                                         Plans or Programs(1)(2)    Plans or Programs
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
<S>                        <C>                   <C>                     <C>                        <C>
February 1 - 28, 2005(2)              0               Not applicable                 0                    2,423,891(3)
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
March 1 -  31, 2005(2)            2,002,039               $10.28                 2,002,039                 423,891(3)
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
April 1 - 30, 2005                    0               Not applicable                 0                       423,891
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
May 1 - 31, 2005                   111,000                 $9.99                  111,000                    312,891
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
June 1 - 30, 2005                     0               Not applicable                 0                       423,891
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
July 1 - 31, 2005                     0               Not applicable                 0                       423,891
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
August 1 - 31, 2005                   0               Not applicable                 0                       423,891
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
September 1 - 30, 2005                0               Not applicable                 0                       423,891
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
October 1 - 31, 2005                  0               Not applicable                 0                       423,891
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
November 1 - 30, 2005              13,800                 $10.23                  13,800                     299,091
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
December 1 - 31, 2005              169,400                $10.64                  169,400                    129,691
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
January 1 - 31, 2006               28,200                 $11.05                  28,200                     101,491
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
Total                             2,324,439               $10.30                 2,324,439                   101,491
------------------------- ---------------------- ----------------------- -------------------------- ----------------------
</TABLE>

(1) The Company announced on September 17, 2003 ("2003 NCIB") the acceptance by
the Toronto Stock Exchange of the Notice of its Normal Course Issuer Bid
renewal, allowing the purchase from time to time, if it was considered
advisable, of up to 565,623 common shares of the Company, which represented 5%
of the Company's 11,312,471 outstanding common shares as at August 31, 2003, on
the Toronto Stock Exchange over the next 12 months. As at the beginning of
fiscal 2005, there were 46,800 common shares that had been purchased under the
2003 NCIB and there was a maximum of 518,823 common shares that could be
purchased under the 2003 NCIB at that time. The Company announced on September
17, 2004 ("2004 NCIB") the acceptance by the Toronto Stock Exchange of the
Notice of its Normal Course Issuer Bid renewal, allowing for the purchase from
time to time, if it was considered advisable, of up to 549,470 common shares of
the Company, which represented 5% of the Company's 10,989,390 outstanding common
shares as at September 2, 2004, on the Toronto Stock Exchange over the next 12
months. As at September 14, 2005 there were 549,400 common shares of the Company
purchased under the 2004 NCIB. The Company announced on September 19, 2005 the
acceptance by the Toronto Stock Exchange of the Notice of its Normal Course
Issuer Bid renewal, allowing for the purchase from time to time, if it was
considered advisable, of up to 423,891 common shares of the Company, which
represented 5% of the Company's 8,477,810 outstanding common shares as at
September 14, 2005, on the Toronto Stock Exchange over the next 12 months.

(2) On February 8, 2005, the Company announced a substantial issuer bid (the
"Bid") under which it indicated its intention to purchase for cancellation up to
2,000,000 of its Common Shares (subject to increase to avoid the creation of
odd-lots as a result of proration) at a price of not less than Cdn$8.50 and not
more than Cdn$10.00 per Common Share. The Bid was made by way of a Dutch auction
tender, which provided shareholders with the opportunity to specify the price at
which they were willing to sell their Common Shares. The actual purchase price
of Cdn$10.00 per Common Share, which was announced on March 22, 2005, was
determined through an auction mechanism and was the lowest price within the
price range at which the Company could purchase 2,000,000 of its Common Shares.
Common Shares tendered at or below Cdn$10.00 (subject to prorating and
disregarding fractions and odd-lots) were purchased at Cdn$10.00 and immediately
cancelled. A total of 2,002,039 Common Shares were purchased for cancellation
which includes additional shares purchased by the Company so as to avoid the
creation of odd-lots as a result of proration. After giving effect to the
repurchase and cancellation on March 29, 2005, there remained approximately
8,554,802 outstanding Common Shares of the Company. The total purchase price
including the costs associated with the offer was approximately Cdn$20,620,000,
and will be accounted for as a reduction in share capital of Cdn$11,432,000 and
a charge to retained earnings (deficit) of Cdn$9,188,000.

(3) The Bid's 2,000,000 Common Shares were subject to increase to avoid the
creation of odd-lots as a result of proration. Accordingly, the actual number of
Common Shares repurchased and cancelled pursuant to the Bid was greater than
2,000,000.

                                                                             67
<PAGE>



                                    PART III


ITEM 17.   FINANCIAL STATEMENTS







                                                                             68
<PAGE>



Consolidated Financial Statements

DataMirror Corporation
January 31, 2006, 2005 and 2004



                                                                             69
<PAGE>




                        REPORT OF INDEPENDENT REGISTERED
                                 ACCOUNTING FIRM





To the Directors of
DataMirror Corporation

We have audited the consolidated balance sheets of DataMirror Corporation as at
January 31, 2006 and 2005 and the consolidated statements of income,
shareholders' equity and cash flows for each of the years in the three-year
period ended January 31, 2006. 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 and the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. We were not engaged to perform an audit of the Company's
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at January 31, 2006
and 2005 and the results of its operations and its cash flows for each of the
years in the three-year period ended January 31, 2006 in accordance with
Canadian generally accepted accounting principles.

As described in note 2 to the consolidated financial statements, the Company
adopted the U.S. dollar as its reporting currency effective February 1, 2005.
Also, as described in note 3, the consolidated financial statements have been
restated for a change in accounting policy for revenue recognition.



Toronto, Canada,                                          /s/  Ernst & Young LLP
April 28, 2006.                                            Chartered Accountants


                                                                             70
<PAGE>

<TABLE>
<CAPTION>

DataMirror Corporation

                                      CONSOLIDATED BALANCE SHEETS
                                    [in thousands of U.S. dollars]

As at January 31



                                                                            2006             2005
                                                                             $                 $
-------------------------------------------------------------------------------------------------
                                                                                        [restated
                                                                                        - note 3]
<S>                                                                     <C>            <C>
ASSETS
Current
Cash and cash equivalents [note 4]                                         5,115            7,687
Short-term investments [note 5]                                           29,832           38,707
Accounts receivable                                                        9,040            8,055
Prepaid expenses                                                           1,195            1,328
Future tax assets [note 14]                                                3,401            3,616
-------------------------------------------------------------------------------------------------
Total current assets                                                      48,583           59,393
-------------------------------------------------------------------------------------------------
Capital assets, net [note 6]                                               2,471            2,754
Long-term investments [note 7]                                             2,058                -
Future tax assets [note 14]                                                1,798            1,521
Intangibles, net [note 8]                                                    802            2,344
Goodwill [note 9]                                                          4,426            4,180
-------------------------------------------------------------------------------------------------
                                                                          60,138           70,192
=================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities                                   4,685            2,653
Deferred revenue                                                          19,651           17,812
Income taxes payable                                                         342              750
-------------------------------------------------------------------------------------------------
Total current liabilities                                                 24,678           21,215
-------------------------------------------------------------------------------------------------
Deferred revenue                                                           9,389            9,887
-------------------------------------------------------------------------------------------------
Total liabilities                                                         34,067           31,102
-------------------------------------------------------------------------------------------------
Commitments and contingencies [notes 13, 15 and 16]

Shareholders' equity
Share capital [note 11]                                                   31,657           42,250
Deficit                                                                  (12,687)          (7,584)
Contributed surplus                                                        1,141              876
Cumulative translation adjustment                                          5,960            3,548
-------------------------------------------------------------------------------------------------
Total shareholders' equity                                                26,071           39,090
-------------------------------------------------------------------------------------------------
                                                                          60,138           70,192
=================================================================================================
</TABLE>

See accompanying notes


                                                                             71
<PAGE>

<TABLE>
<CAPTION>

DataMirror Corporation

                             CONSOLIDATED STATEMENTS OF INCOME
                   [in thousands of U.S. dollars, except per share data]

Years ended January 31




                                                          2006              2005             2004
                                                            $                $                 $
-------------------------------------------------------------------------------------------------
                                                                       [restated        [restated
                                                                       - note 3]        - note 3]
<S>                                                   <C>             <C>             <C>
REVENUE
Licence                                                 18,232          17,444             18,511
Maintenance                                             23,342          22,641             20,703
Services                                                 3,171           3,544              3,991
-------------------------------------------------------------------------------------------------
                                                        44,745          43,629             43,205
-------------------------------------------------------------------------------------------------

Cost of revenue
Licence                                                    170             192                170
Maintenance and services                                 8,290           9,143              8,283
-------------------------------------------------------------------------------------------------
                                                         8,460           9,335              8,453
-------------------------------------------------------------------------------------------------
Gross margin                                            36,285          34,294             34,752
-------------------------------------------------------------------------------------------------

OPERATING EXPENSES
Selling and marketing                                   13,484          15,192             14,853
Research and development [note 13]                       8,211           8,144              7,085
General and administration                               7,539           6,763              5,672
Stock-based compensation [note 12]                         265             316                377
Amortization of intangibles                              1,651           2,279              2,250
-------------------------------------------------------------------------------------------------
                                                        31,150          32,694             30,237
-------------------------------------------------------------------------------------------------
Operating income                                         5,135           1,600              4,515
Investment income, net                                     793             782                835
Gain on sale of investment [note 18]                        --           5,466                 --
Other income [note 18]                                      --              --                203
-------------------------------------------------------------------------------------------------
Income before income taxes                               5,928           7,848              5,553
-------------------------------------------------------------------------------------------------
Provision for (recovery of) income taxes [note 14]
   Current                                               1,858           2,307              2,733
   Future                                                  387            (478)              (956)
-------------------------------------------------------------------------------------------------
                                                         2,245           1,829              1,777
-------------------------------------------------------------------------------------------------
Net income for the year                                  3,683           6,019              3,776
=================================================================================================

Earnings per share
Basic                                                    $0.42           $0.55              $0.33
Diluted                                                  $0.42           $0.54              $0.32
=================================================================================================

Weighted average number of shares outstanding [000's] [note 11[c]]
Basic                                                    8,758          11,026             11,364
Diluted                                                  8,832          11,192             11,640
=================================================================================================
</TABLE>

See accompanying notes

                                                                             72
<PAGE>


73

DataMirror Corporation

<TABLE>
<CAPTION>

                                            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                    [in thousands of U.S. dollars]


Years ended January 31





                                                                                           Common shares
                                                                                     -------------------------
                                                                                     Shares            Amount         Deficit
                                                                                        #                 $              $
---------------------------------------------------------------------------------------------------------------------------------
                                                                                     [000's]
<S>                                                                               <C>               <C>            <C>
Balance, January 31, 2003 [restated - note 3]                                         11,461            45,603         (12,612)
Net income [restated - note 3]                                                            --                --           3,776
Exercise of stock options [note 12]                                                      221             1,326              --
Stock-based compensation expense included in net income                                   --                --              --
Repurchase of common shares [note 11[b]]                                                (317)           (1,307)         (1,608)
Change in cumulative translation adjustment                                               --                --              --
---------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 2004 [restated - note 3]                                         11,365            45,622         (10,444)
---------------------------------------------------------------------------------------------------------------------------------
Net income [restated - note 3]                                                            --                --           6,019
Exercise of stock options [note 12]                                                       89               605              --
Stock-based compensation expense included in net income                                   --                --              --
Repurchase of common shares [note 11[b]]                                                (898)           (3,977)         (3,159)
Change in cumulative translation adjustment                                               --                --               --
---------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 2005 [restated - note 3]                                         10,556            42,250          (7,584)
---------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                --                --           3,683
Exercise of stock options [note 12]                                                       60               357              --
Stock-based compensation expense included in net income                                   --                --              --
Repurchase of common shares [note 11[b]]                                              (2,325)          (10,950)         (8,786)
---------------------------------------------------------------------------------------------------------------------------------
Change in cumulative translation adjustment                                               --                --              --
Balance, January 31, 2006                                                              8,291            31,657         (12,687)
=================================================================================================================================
</TABLE>




(Chart Continued)


<TABLE>
<CAPTION>

                                                                               Cumulative                          Total
                                                                               translation     Contributed    shareholders'

                                                                               adjustment        surplus          equity
                                                                                    $               $                 $
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                            <C>                  <C>           <C>
Balance, January 31, 2003 [restated - note 3]                                     (4,025)              183           29,149
Net income [restated - note 3]                                                        --                --            3,776
Exercise of stock options [note 12]                                                   --                --            1,326
Stock-based compensation expense included in net income                               --               377              377
Repurchase of common shares [note 11[b]]                                              --                --           (2,915)
Change in cumulative translation adjustment                                        4,629                --            4,629
---------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 2004 [restated - note 3]                                        604               560           36,342
---------------------------------------------------------------------------------------------------------------------------
Net income [restated - note 3]                                                        --                --            6,019
Exercise of stock options [note 12]                                                   --                --              605
Stock-based compensation expense included in net income                               --               316              316
Repurchase of common shares [note 11[b]]                                              --                --           (7,136)
Change in cumulative translation adjustment                                         2,944               --            2,944
---------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 2005 [restated - note 3]                                      3,548               876           39,090
---------------------------------------------------------------------------------------------------------------------------
Net income                                                                            --                --            3,683
Exercise of stock options [note 12]                                                   --                --              357
Stock-based compensation expense included in net income                               --               265              265
Repurchase of common shares [note 11[b]]                                              --                --          (19,736)
---------------------------------------------------------------------------------------------------------------------------
Change in cumulative translation adjustment                                        2,412                --            2,412
Balance, January 31, 2006                                                          5,960             1,141           26,071
===========================================================================================================================
</TABLE>

See accompanying notes

                                                                             73
<PAGE>


DataMirror Corporation
<TABLE>
<CAPTION>

                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         [in thousands of U.S. dollars]

Years ended January 31

                                                          2006              2005             2004
                                                            $                $                 $
-------------------------------------------------------------------------------------------------
                                                                       [restated        [restated
                                                                       - note 3]        - note 3]
<S>                                                   <C>             <C>             <C>
OPERATING ACTIVITIES
Net income for the year                                 3,683            6,019              3,776
Add (deduct) items not affecting cash
   Amortization of capital assets                       1,085            1,019              1,027
   Amortization of intangibles                          1,651            2,279              2,250
   Stock-based compensation                               265              316                377
   Future income taxes                                    387             (478)              (956)
   Gain on sale of investment [note 18]                    --           (5,466)                --
   Other income [note 18]                                  --               --               (203)
   Investment tax credits recoverable                      --              760                478
   Non-cash operating expense                              --               --                 22
-------------------------------------------------------------------------------------------------
                                                        7,071            4,449              6,771
Net change in non-cash working capital balances
   related to operations                                  418             (352)               574
-------------------------------------------------------------------------------------------------
Cash provided by operating activities                   7,489            4,097              7,345
-------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Additions to capital assets                              (580)            (680)              (876)
Purchase of investments                               (31,283)         (39,391)           (24,273)
Maturity of short-term investments                     38,749           26,181             16,974
Investment in Idion Technology Holdings Limited            --              (73)            (1,839)
Proceeds from sale of investment [note 18]                 --           14,287                 --
Acquisition of intangibles                                 --               --                (20)
Acquisition of business, net of cash [note 18]             --               --             (1,010)
Other income [note 18]                                     --               --                203
-------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities         6,886              324            (10,841)
-------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Payments of capital lease obligations                      --              (24)               (64)
Exercise of stock options                                 357              605              1,326
Repurchase of share capital                           (19,736)          (7,136)            (2,915)
-------------------------------------------------------------------------------------------------
Cash used in financing activities                     (19,379)          (6,555)            (1,653)
-------------------------------------------------------------------------------------------------

Effect of exchange rate changes on cash and
-------------------------------------------------------------------------------------------------
   cash equivalents                                     2,432            2,812              3,639
-------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents
   during the year                                     (2,572)             678             (1,510)
Cash and cash equivalents, beginning of year            7,687            7,009              8,519
-------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                  5,115            7,687              7,009
-------------------------------------------------------------------------------------------------

Supplemental cash flow information
Interest paid                                               8               54                 12
Income taxes paid                                       1,756            2,198                986
-------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes

                                                                             74
<PAGE>


Notes to Consolidated Financial Statements
[expressed in U.S. dollars unless otherwise noted]
[tabular amounts in thousands, except per share dates]

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Generally accepted accounting principles

The consolidated financial statements of DataMirror Corporation [together with
its subsidiaries, the "Company"] have been prepared in U.S. dollars and in
accordance with Canadian generally accepted accounting principles ["Canadian
GAAP"]. Material differences between Canadian GAAP and accounting principles
generally accepted in the United States ["U.S. GAAP"] are disclosed in note 19.
The Company is incorporated under the laws of Ontario.

Basis of consolidation

The consolidated financial statements include the accounts of the Company
together with its wholly-owned subsidiary companies. All significant
inter-company transactions and balances have been eliminated upon consolidation.
The purchase method is used to account for acquisitions and the results of
operations of subsidiaries are included from the dates of their respective
acquisitions.

Use of estimates

The preparation of these consolidated financial statements in conformity with
Canadian GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of these consolidated financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual amounts may vary from the current estimates. In particular, significant
estimates include those related to revenue recognition, allowance for doubtful
accounts, investment tax credits, investments, intangible assets, goodwill and
future income tax assets.

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments having maturity
dates of up to three months from the date of purchase and are valued at cost,
which approximates their fair value.

Short-term investments

Short-term investments include highly liquid investments with maturity dates of
over three months and less than one year from the date of purchase. Short-term
investments are valued at the lower of cost and market.


                                                                             75
<PAGE>


Capital assets

Capital assets are recorded at cost less any related investment tax credits.
Amortization is provided over the estimated useful life of the related asset.
Computer equipment and software are amortized on a declining balance basis at
rates varying from 30% to 50%. Furniture and equipment are amortized on a
declining balance basis at 20%. Leasehold improvements are amortized on a
straight-line basis over the term of the related lease.

Long-term investments

Long-term investments include highly liquid investments with maturity dates of
over one year from the date of purchase. Long-term investments are valued at
cost and are written down to market value if there is a decline in value that is
other than temporary.

Leases

Leases are classified as either capital or operating. Those leases which
transfer substantially all the benefits and risks of ownership of property to
the Company are accounted for as capital leases. The capitalized lease
obligation reflects the present value of future lease payments, discounted at
the appropriate interest rate, and is reduced by rental payments net of imputed
interest. Assets under capital leases are amortized based on the useful life of
the asset. All other leases are accounted for as operating, with rental payments
being expensed as incurred.

Intangibles

Intangibles are comprised of acquired technology, customer lists and trademarks
which are recorded at cost. Amortization is provided for on a straight-line
basis over their estimated useful lives which are 12 to 64 months.

Impairment of long-lived assets

The Company reviews long-lived assets such as capital assets and intangible
assets whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. When indicators of impairment of the carrying
value of the assets exist, and the carrying value is greater than the net
recoverable value, an impairment loss is recognized to the extent that the fair
value is below the carrying value.


                                                                             76
<PAGE>


Goodwill

Goodwill arises on business acquisitions and comprises the excess of amounts
paid over the fair value of net identifiable assets acquired.

Goodwill is not amortized and is tested annually for impairment in value. The
Company performs annual impairment testing as of November 1. In addition to the
annual impairment test, the Company will perform an impairment test if an event
occurs or circumstances change that would reduce the fair value of goodwill
below its carrying amount.

To conduct impairment testing, the Company compares the fair values of the
reporting units to their carrying amounts. If the carrying values of the
reporting units exceed their fair values, the Company would perform the second
step of the impairment test. In the second step, the Company compares the
implied fair values of the reporting units' goodwill to their carrying amounts,
and any excess is recognized as an impairment charge.

Earnings per share

Basic earnings per share are calculated on net income for the year using the
weighted average number of shares outstanding. Diluted earnings per share
reflect the dilution that would occur if outstanding stock options were
exercised into common shares using the treasury stock method. The computation of
diluted earnings per share does not include stock options with dilutive
potential that would have an anti-dilutive effect on earnings per share.

Stock-based compensation plans

The Company has two stock-based compensation plans, which are described in note
12.

The Company uses the fair-value based method to account for all stock-based
awards to employees and non-employees granted after February 1, 2002. The
estimated fair value of options granted is determined using the Black-Scholes
option pricing model and is recorded as a charge to income over the vesting
period of the options with a corresponding credit recorded as contributed
surplus.

Research and development costs

Research costs are expensed as incurred. Development costs are expensed as
incurred unless a project meets the criteria for deferral and amortization under
Canadian GAAP. The Company has not deferred any such development costs to date.
Research and development costs are reduced by related investment tax credits.


                                                                             77
<PAGE>


Government assistance

Government assistance, consisting of investment and other tax credits, is
recorded using the cost reduction method. Such government assistance is recorded
when the qualifying expenditure is made and where there is reasonable assurance
that investment and other tax credits will be realized.

Foreign currency translation

The Company's subsidiaries are considered to be integrated operations.
Accordingly, the temporal method is used to translate the foreign operations of
the subsidiary companies into the Company's Canadian dollar functional currency.
The temporal method is also used to translate foreign currency denominated
transactions and balances. Under this method, monetary assets and liabilities
denominated in foreign currencies are translated to Canadian dollars at exchange
rates prevailing at the consolidated balance sheet dates. Non-monetary assets
and liabilities are translated at historical exchange rates. Revenue and
expenses, excluding amortization, are translated at average rates prevailing
during the year. Amortization is translated at weighted average historical
rates. The resulting net gain or loss on translation is included in the
consolidated statements of income in the year incurred.

The Company enters into foreign exchange forward contracts to minimize its
exposure to fluctuations in foreign currency exchange rates. These derivative
contracts do not qualify for hedge accounting and therefore the contracts are
recorded at fair value at each consolidated balance sheet date with the
corresponding gains and/or losses recorded in the consolidated statements of
income.

Revenue recognition and deferred revenue

The Company's revenues are generated from the sale of software licences,
associated software maintenance and post-contract customer support ["PCS"] and
other services.

Revenue is recognized in accordance with Statement of Position ["SOP"] 97-2,
Software Revenue Recognition issued by the American Institute of Certified
Public Accountants ["AICPA"] in October 1997 and amended by SOP 98-9 issued in
December 1998.

Revenue is recognized when persuasive evidence of arrangement exists, there are
no significant uncertainties surrounding product acceptance, the fees are fixed
and determinable, collection is considered probable and, in the case of software
licence revenue, the related products are shipped.

Revenue from PCS agreements is recognized on a straight-line basis over the term
of the related agreements.

Revenue from services, comprised of consulting, training and/or installation
fees, is recognized at the time the services are performed.

The Company also has multiple-element sales arrangements where software
licences, the associated PCS and services are sold together. The Company has
established vendor-specific objective evidence ["VSOE"] of the fair value of PCS
for specific customer classes based on the value of PCS when sold separately as
an optional renewal after the expiry of the initial maintenance term or based on
contracted prices for optional PCS renewals included in the original
multiple-element sales arrangement. The Company has established VSOE of the fair
value of consulting services based on the normal pricing practices for those
services when sold separately. The Company uses the residual method to determine
the fair value of the delivered software licence if VSOE of the fair value of
all undelivered elements exists. The revenues related to each element are
recognized based on the above stand-alone revenue recognition policies.

In cases where arrangements include a software licence and PCS and the Company
is not able to establish VSOE for the undelivered elements of a sales
arrangement, the revenue from that arrangement is allocated to its components
according to the terms of the contract and all the revenue is recognized ratably
over the term of the contract.

Deferred revenue is comprised of licence revenue that is being recognized
ratably, unrecognized revenue for PCS and other services which have yet to be
provided.

                                                                             78
<PAGE>

Income taxes

The Company accounts for income taxes using the liability method of tax
allocation. Under the liability method of tax allocation, future tax assets and
liabilities are determined based on the differences between financial reporting
and tax bases of assets and liabilities, and are measured using the
substantively enacted tax rates and laws that are expected to be in effect when
the differences are expected to reverse. The Company provides a valuation
allowance on future tax assets when it is more likely than not that such assets
will not be realized.

2. CHANGE OF REPORTING CURRENCY

Effective February 1, 2005, the Company adopted the U.S. dollar as its reporting
currency, but has retained the Canadian dollar as its functional currency.
Management believes that reporting in U.S. dollars will improve the
comparability of the Company's financial position and results of operations with
others in its industry.

In accordance with Canadian GAAP, the Company uses the current rate method to
translate all amounts presented to U.S. dollars. Under the current rate method,
all assets and liabilities of the Company's operations are translated from their
Canadian dollar functional currency into U.S. dollars using exchange rates in
effect at the end of the reporting period; revenue, expenses and cash flows are
translated at the average rates during the reporting period; and any associated
translation gains or losses are recorded as a separate component of
shareholders' equity. All comparative figures presented have been translated
using the same method.

For the year ended January 31, 2006, revenue, expenses and cash flows have been
translated from Canadian dollars to U.S. dollars at the average rate of $0.83
[2005 - $0.77; 2004 - $0.73] Canadian dollars per one U.S. dollar and assets and
liabilities have been translated at the year-end rate of $0.88 [January 31, 2005
- $0.81].

3. CHANGE IN ACCOUNTING POLICY

Revenue recognition

During 2006, the Company changed its method of revenue recognition for
multiple-element sales arrangements to adopt the residual method of determining
the fair value of a delivered software licence. Under the residual method, any
undelivered element [most commonly PCS] of a multi-element sales arrangement is
valued at its fair value as determined based on VSOE, and the balance is
recognized on delivery of the software licence provided that the other criteria
for revenue recognition are met. Under the Company's prior method of revenue
recognition, a greater proportion of the arrangement consideration was assigned
to the delivered software licence.

The Company has applied this change retroactively, and the prior year has been
restated. For the year ended January 31, 2005, this change resulted in increases
in revenues of $2,411,000 and net income of $2,317,000. For the year ended
January 31, 2004, this change resulted in decreases in revenues of $496,000 and
net income of $25,000. This change also resulted in an increase in deferred
revenue of $9,861,000, a decrease in accounts payable and accrued liabilities of
$336,000, an increase in future tax assets of $2,794,000 and a decrease in the
cumulative translation adjustment of $2,090,000, all as at January 31, 2005. The
deficit as at February 1, 2003 was increased by $6,924,000.

                                                                             79
<PAGE>



4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>

As at January 31,                                                         2006               2005
                                                                            $                  $
--------------------------------------------------------------------------------------------------
<S>                                                                      <C>                <C>
Cash                                                                     5,115              4,218
Bankers' acceptances                                                        --              3,469
--------------------------------------------------------------------------------------------------
                                                                         5,115              7,687
--------------------------------------------------------------------------------------------------

The bankers' acceptances for 2005 bear interest at a rate of approximately 2.5%
with expiry dates extending up to one month from January 31, 2005.

5. SHORT-TERM INVESTMENTS

Short-term investments consist of the following:

As at January 31,                                                         2006               2005
                                                                            $                  $
--------------------------------------------------------------------------------------------------

Commercial paper                                                        27,145             38,707
Marketable securities                                                    2,687                 --
--------------------------------------------------------------------------------------------------
                                                                        29,832             38,707
--------------------------------------------------------------------------------------------------

The commercial paper bears interest at effective rates of approximately 3.0%
[2005 - 2.3%] and has maturity dates of up to ten months from January 31, 2006
[2005 - two months from January 31, 2005].

6. CAPITAL ASSETS

Capital assets consist of the following:

As at January 31,                                                           2006
                                                                                              Net
                                                                           Accumulated       book
                                                             Cost         amortization      value
                                                               $                $              $
--------------------------------------------------------------------------------------------------

Computer equipment and software                              9,892           8,259          1,633
Furniture and equipment                                      1,987           1,495            492
Leasehold improvements                                       1,444           1,098            346
--------------------------------------------------------------------------------------------------
                                                            13,323          10,852          2,471
--------------------------------------------------------------------------------------------------

As at January 31,                                                           2005
                                                                                              Net
                                                                           Accumulated       book
                                                             Cost         amortization      value
                                                               $                $              $
--------------------------------------------------------------------------------------------------

Computer equipment and software                              8,844           7,076          1,768
Furniture and equipment                                      1,901           1,302            599
Leasehold improvements                                       1,319             932            387
--------------------------------------------------------------------------------------------------
                                                            12,064           9,310          2,754
--------------------------------------------------------------------------------------------------
</TABLE>


                                                                              80
<PAGE>



7. LONG-TERM INVESTMENTS

Long-term investments consist of commercial paper bearing interest at effective
rates of approximately 3.3% and maturity dates of up to fifteen months from
January 31, 2006.

8. INTANGIBLES

Intangibles consist of the following:
<TABLE>
<CAPTION>

As at January 31,                                                         2006
                                                                                              Net
                                                                       Accumulated           book
                                                         Cost         amortization          value
                                                           $                $                  $
--------------------------------------------------------------------------------------------------
<S>                                                      <C>               <C>                <C>
Acquired technology                                      7,557             7,300              257
Customer lists and trademarks                            5,599             5,054              545
--------------------------------------------------------------------------------------------------
                                                        13,156            12,354              802
--------------------------------------------------------------------------------------------------

As at January 31,                                                         2005
                                                                                              Net
                                                                       Accumulated           book
                                                         Cost         amortization          value
                                                           $                $                  $
--------------------------------------------------------------------------------------------------

Acquired technology                                      6,952             5,854            1,098
Customer lists and trademarks                            5,151             3,905            1,246
--------------------------------------------------------------------------------------------------
                                                        12,103             9,759            2,344
--------------------------------------------------------------------------------------------------
</TABLE>

9. GOODWILL

At November 1, 2005, the Company performed its annual impairment test of
goodwill. Based on the results of step one of the annual impairment test, the
Company determined that there was no potential impairment to goodwill at that
date and, therefore, was not required to perform step two of the annual
impairment test.

During 2006, the tax benefit of previously unrecognized tax losses acquired on
the acquisition of PointBase, Inc. ["PointBase"] of $102,000 was deducted from
goodwill.

                                                                             81
<PAGE>



10. BANK CREDIT FACILITIES

At January 31, 2006, the Company had available credit facilities of $8,780,000
bearing interest at rates ranging from the prime rate to the prime rate plus
1.5%. Under a general security agreement and a source code escrow agreement, all
of the Company's assets, including the source code for the Company's software,
are pledged as collateral for these credit facilities. As at January 31, 2006
and 2005, no amounts have been drawn against these facilities other than letters
of credit of $351,000 [2005 - $137,000].

11. SHARE CAPITAL

[a]  Authorized and outstanding

     The Company has authorized an unlimited number of common and preferred
     shares without par value. At January 31, 2006, the Company has 8,291,000
     common and no preferred shares outstanding [2005 - 10,556,000 and nil,
     respectively].

[b]  Shares purchased for cancellation

     Under a normal course issuer bid [the "NCIB"] effective September 21, 2004,
     the Company indicated its intention to purchase up to 549,470 of its
     outstanding common shares. The NCIB expired on September 20, 2005. Under a
     new bid [the "New NCIB"], effective September 21, 2005, the Company
     indicated its intention to purchase up to an additional 423,891 of its
     outstanding common shares. The New NCIB expires on September 20, 2006.
     During the year ended January 31, 2006, the Company purchased for
     cancellation 322,400 common shares [2005 - 898,400; 2004 - 317,500] for
     cash consideration of $2,825,000 [2005 - $7,136,000; 2004 - $2,915,000]. As
     a result, stated capital was reduced by $1,544,000 [2005 - $3,977,000; 2004
     - $1,307,000] and deficit was increased by $1,281,000 [2005 - $3,159,000;
     2004 - $1,608,000].

     On February 8, 2005, the Company announced a substantial issuer bid [the
     "Bid"] under which it indicated its intention to purchase for cancellation
     up to 2,000,000 of its common shares at a price of not less than Cdn$8.50
     and not more than Cdn$10.00 per common share. The actual purchase price of
     Cdn$10.00 per common share, which was announced on March 22, 2005, was
     determined through an auction mechanism and was the lowest price within the
     price range at which the Company could purchase 2,000,000 of its common
     shares. After making the necessary adjustments to avoid creating odd lots
     from the Bid, the actual number of shares purchased for cancellation was
     2,002,039. All common shares tendered at or below Cdn$10.00 [subject to
     prorating and disregarding fractions and odd lots] were purchased at
     Cdn$10.00 and immediately cancelled. The total purchase price including the
     costs associated with the offer was $16,911,000. As a result, stated
     capital was reduced by $9,406,000 and deficit was increased by $7,505,000.

                                                                             82
<PAGE>



[c]  Earnings per share
<TABLE>
<CAPTION>

     The reconciliation of the denominator in calculating diluted per share amounts is as follows:

     As at January 31,                                   2006             2005               2004
                                                           #                #                  #
--------------------------------------------------------------------------------------------------
<S>                                                      <C>            <C>              <C>
     Weighted average number of shares outstanding,
       basic [000's]                                    8,758           11,026             11,364
     Effect of dilutive stock options [000's]              74              166                276
--------------------------------------------------------------------------------------------------
     Weighted average number of shares
       outstanding, diluted [000's]                     8,832           11,192             11,640
--------------------------------------------------------------------------------------------------
</TABLE>

     For the years ended January 31, 2006, 2005 and 2004 respectively, 507,166,
     487,139 and 404,037 options have been excluded from the calculation of
     diluted earnings per share because the exercise price of the options was
     greater than or equal to the average price of the Company's common shares
     for the year and consequently their inclusion would have been
     anti-dilutive.

12. STOCK-BASED COMPENSATION PLANS

At January 31, 2006, the Company has two stock-based compensation plans for the
purpose of providing options to directors, officers and employees. The first
plan was established on December 12, 1996. Options under this plan generally
vest over four years from the date of grant and expire five years from the date
of grant. The second plan was established on June 14, 2000 with similar
attributes. The number of common shares reserved for issuance under the first
and second plans are 1,157,000 and 782,000, respectively.

A summary of the status of the Company's stock-based compensation plans as at
January 31, 2006 and 2005 and changes during the years then ended is presented
below:

<TABLE>
<CAPTION>

                                          2006                   2005                 2004
                                   ------------------    ------------------   -------------------
                                             Weighted              Weighted             Weighted
                                              average               average              average
                                             exercise              exercise             exercise
                                   Options    price      Options     price     Options    price
                                       #        $            #         $          #         $
------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>    <C>            <C>    <C>            <C>
Outstanding, beginning of year     856,138       9.93   1,231,234      9.59   1,118,496      7.27
Granted                            164,000       8.15     140,000      8.05     438,985      9.89
Exercised                          (59,753)      5.90     (89,414)     6.95    (221,310)     5.84
Expired                           (184,020)     12.86    (425,682)    10.47    (104,937)     8.39
------------------------------------------------------------------------------------------------------
Outstanding, end of year           776,365      10.02     856,138      9.93   1,231,234      9.59
------------------------------------------------------------------------------------------------------

Options exercisable, end of year   508,389                510,149               594,153
------------------------------------------------------------------------------------------------------

                                    Options outstanding                    Options exercisable
                                           Weighted
                         Outstanding        average      Weighted       Vested and       Weighted
                             at            remaining      average     exercisable at      average
 Range of exercise       January 31,      contractual    exercise       January 31,      exercise
      prices                2006             life          price           2006            price
         $                    #             [years]          $               #               $
------------------------------------------------------------------------------------------------------

4.94 - 7.42                 157,210           2.9           6.42           119,210           6.15
7.43 - 11.13                408,955           3.6           9.32           216,479           9.74
11.14 - 15.07               210,200           1.3          14.07           172,700          14.09
------------------------------------------------------------------------------------------------------
                            776,365           2.8          10.02           508,389          10.37
------------------------------------------------------------------------------------------------------
</TABLE>


                                                                             83
<PAGE>


The Company utilizes the Black-Scholes option valuation model to estimate the
fair value of options granted based on the following assumptions:
<TABLE>
<CAPTION>

Years ended January 31,                                       2006             2005          2004

-------------------------------------------------------------------------------------------------
<S>                                                           <C>             <C>            <C>
Risk-free interest rate                                       3.2%            3.3%           3.3%
Expected dividend yield                                         0%              0%             0%
Expected volatility                                          0.466           0.469          0.453
Expected option life [years]                                   2.0             2.0            2.1
Weighted average fair values of options granted              $2.26           $2.23          $2.88
-------------------------------------------------------------------------------------------------
</TABLE>

The Black-Scholes option valuation model used by the Company to determine fair
values was developed for use in estimating the fair value of freely traded
options that are fully transferable and have no vesting restrictions. This model
requires the use of highly subjective assumptions, including future stock price
volatility and expected time until exercise. Because the Company's outstanding
stock options have characteristics that are significantly different from those
of traded options, and because changes in any of these assumptions can
materially affect the fair value estimate, in management's opinion the existing
models may not provide a reliable single measure of the fair value of its stock
options.

13. GOVERNMENT ASSISTANCE

The Company applies for investment tax credits from both the Canadian federal
and provincial tax authorities relating to amounts expended on scientific
research and development. During the year, $715,000 [2005 - $109,000; 2004 -
$586,000] in investment tax credits were applied to reduce operating expenses.
The amount of investment tax credits recorded represents management's best
estimate based on its interpretation of current legislation. However, the Canada
Revenue Agency has not yet assessed all the federal claims and, therefore, the
amount ultimately received could be materially different from the amount
recorded.


                                                                             84
<PAGE>


14. INCOME TAXES

Significant components of the Company's future tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>

As at January 31,                                                           2006             2005
                                                                             $                 $
--------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>
FUTURE TAX ASSETS
Current
Deferred revenue                                                         3,190              3,745
Tax benefit of loss carryforwards and tax credits                          287                 --
Other                                                                      105                 78
--------------------------------------------------------------------------------------------------
                                                                         3,582              3,823
--------------------------------------------------------------------------------------------------

FUTURE TAX LIABILITIES
Current
Scientific research investment tax credits                                (110)              (207)
Other                                                                      (71)                --
--------------------------------------------------------------------------------------------------
                                                                          (181)              (207)
--------------------------------------------------------------------------------------------------
                                                                         3,401              3,616
==================================================================================================

FUTURE TAX ASSETS
Long-term
Deferred revenue                                                         1,209              1,445
Tax benefit of loss carryforwards and tax credits                        2,376              2,121
Book depreciation in excess of tax depreciation                          1,008                569
--------------------------------------------------------------------------------------------------
                                                                         4,593              4,135
Less valuation allowance                                                (2,376)            (2,121)
--------------------------------------------------------------------------------------------------
                                                                         2,217              2,014
--------------------------------------------------------------------------------------------------

FUTURE TAX LIABILITIES
Long-term
Tax depreciation in excess of book depreciation                           (419)              (493)
--------------------------------------------------------------------------------------------------
                                                                          (419)              (493)
--------------------------------------------------------------------------------------------------
                                                                         1,798              1,521
==================================================================================================
</TABLE>

Of the above valuation allowances recorded as at January 31, 2006, $967,000
[2005 - $890,000] are attributable to future tax assets for which any
subsequently recognized tax benefits will be allocated to reduce goodwill
related to the acquisition of PointBase.


                                                                             85
<PAGE>


The following table reconciles the income tax expense computed at the rates
specified in Canadian tax statutes to the reported income tax expense:
<TABLE>
<CAPTION>

Years ended January 31,                                  2006             2005               2004
                                                           $                $                  $
--------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>            <C>
Income tax expense at combined Canadian
   federal and provincial income tax rate of 36.1%
   [2005 - 36.1%; 2004 - 36.6%]                         2,141            2,835              2,034
Effect of foreign tax rate differences                    (48)            (120)              (110)
Foreign tax losses not previously benefited              (119)             (83)              (108)
Foreign tax losses not tax benefited                      116               22                 91
Manufacturing and processing profits deduction            (21)             (31)               (45)
Items not deductible for income tax purposes              181              236                163
Ontario research and development incentives               (96)             (15)                --
Non-taxable portion of gain on sale of investment          --             (987)                --
Other                                                      91              (28)              (248)
--------------------------------------------------------------------------------------------------
Provision for income taxes                              2,245            1,829              1,777
==================================================================================================

Significant components of the provision for income taxes are as follows:

Years ended January 31,                                  2006             2005               2004
                                                           $                $                  $
--------------------------------------------------------------------------------------------------

Current tax expense                                     1,858            2,307              2,733
Future income tax benefit relating to origination
--------------------------------------------------------------------------------------------------
   and reversal of temporary differences                  387             (478)              (956)
--------------------------------------------------------------------------------------------------
Income tax expense                                      2,245            1,829              1,777
==================================================================================================
</TABLE>

The Company has foreign non-capital loss carryforwards of approximately
$4,444,000, which have no expiry date, and $2,844,000, which expire over 18
years. A valuation allowance has been recognized for all but $838,000 of the
losses.


                                                                             86
<PAGE>


15. COMMITMENTS AND CONTINGENCIES

The Company has entered into agreements to lease office facilities and equipment
for which the future annual lease payments are approximately as follows:

<TABLE>
<CAPTION>

                                                                                               $
-------------------------------------------------------------------------------------------------
<C>                                                                                         <C>
2007                                                                                        1,771
2008                                                                                        1,460
2009                                                                                        1,222
2010                                                                                          476
2011                                                                                          248
-------------------------------------------------------------------------------------------------
</TABLE>

The Company may, from time to time, be involved in legal proceedings, claims and
litigation that arise in the ordinary course of business. In the event that any
such claims or litigation are resolved against the Company, such outcomes or
resolutions could have a material adverse effect on the business, financial
condition or results of the Company.

16. FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Foreign currency risk

The Company is exposed to foreign currency risk from fluctuations in foreign
currency rates. Increases and decreases in foreign currency rates could impact
the Company's net income for the year.

During the year ended January 31, 2006, the Company incurred a foreign exchange
gain of $203,000 [2005 - gain of $126,000; 2004 - gain of $67,000].

Hedging activities

During the year, the Company entered into foreign currency forward contracts to
sell U.S. dollars for Canadian dollars to hedge the future collection of its
accounts receivable denominated in U.S. dollars. At January 31, 2006, no U.S.
dollar foreign currency forward contracts were outstanding. Subsequent to year
end, U.S. $4,000,000 of foreign currency forward contracts were purchased at an
exchange rate of approximately 1:1.14, maturing within 60 days of the financial
year end. These contracts hedge substantially all of the Company's U.S. dollar
based accounts receivable. The Company does not enter into foreign currency
forward contracts for speculative purposes.

During the year ended January 31, 2006, the Company incurred a foreign exchange
gain from hedging activities of $281,000 [2005 - gain of $221,000; 2004 - gain
of $567,000], which is included in the overall foreign exchange gain/loss
disclosed above.

                                                                             87
<PAGE>


Current and long-term financial assets and liabilities

Due to the short period to maturity of these financial instruments, the carrying
values as presented in the consolidated balance sheets are reasonable estimates
of their fair values.

Risk management

Short-term investments are placed exclusively with entities having ratings of at
least R1-low by a recognized Canadian debt-rating agency.

Credit risk related to the Company's trade receivables is minimized due to its
large customer base, wide geographical distribution and diversification of
operations.

In addition to Canada and the United States, the Company also operates in the
United Kingdom, Germany and other European countries, and is therefore exposed
to market risks related to foreign currency fluctuations between these
currencies.

17. SEGMENTED INFORMATION

The Company operates in only one industry, that being the business of developing
and marketing computer software products. Based on the geographic location of
its operations, the Company has two reportable segments, North America, which
includes the Company's Asia Pacific operations, and Europe. The accounting
policies followed by these segments are the same as those described in the
summary of significant accounting policies. The Company accounts for
intersegment sales at fair value.

The Company's reportable segments are strategic business units. They are managed
separately because each reportable segment operates in different economic
marketplaces and, therefore, requires different investing and marketing
strategies. The Company evaluates segment performance based on income or loss
from operations before investment income and income taxes.


                                                                             88
<PAGE>


The following table presents certain information with respect to the reportable
segments described above:

<TABLE>
<CAPTION>

Years ended January 31,                                  2006             2005               2004
                                                           $                $                  $
-------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>               <C>
REVENUE
North American customers                               31,706           27,345             27,919
Intersegment                                            4,220            4,434              4,016
-------------------------------------------------------------------------------------------------
                                                       35,926           31,779             31,935
European customers                                     13,039           16,284             15,286
Elimination of intersegment revenue                    (4,220)          (4,434)            (4,016)
-------------------------------------------------------------------------------------------------
                                                       44,745           43,629             43,205
=================================================================================================

OPERATING INCOME (LOSS)
North America                                           4,805             (599)             2,013
Europe                                                    330            2,199              2,502
-------------------------------------------------------------------------------------------------
                                                        5,135            1,600              4,515
=================================================================================================

AMORTIZATION
North America                                           2,500            3,135              3,073
Europe                                                    236              163                204
-------------------------------------------------------------------------------------------------
                                                        2,736            3,298              3,277
=================================================================================================

CAPITAL ASSET ADDITIONS
North America                                             471              630                810
Europe                                                    109               50                 66
-------------------------------------------------------------------------------------------------
                                                          580              680                876
=================================================================================================

As at January 31,                                                         2006               2005
                                                                            $                  $
-------------------------------------------------------------------------------------------------

IDENTIFIABLE ASSETS
North America                                                           43,856             51,733
Europe                                                                  11,054             11,935
-------------------------------------------------------------------------------------------------
                                                                        54,910             63,668
Intangibles                                                                802              2,344
Goodwill                                                                 4,426              4,180
-------------------------------------------------------------------------------------------------
                                                                        60,138             70,192
=================================================================================================

GOODWILL
North America                                                            2,106              2,045
Europe                                                                   2,320              2,135
-------------------------------------------------------------------------------------------------
                                                                         4,426              4,180
=================================================================================================
</TABLE>

                                                                             89
<PAGE>


Summaries of revenue, segmented according to the customers' country of
residence, and of capital assets, intangibles and goodwill, segmented according
to the country in which the assets are located, are as follows:
<TABLE>
<CAPTION>

Years ended January 31,                                  2006             2005               2004
                                                           $                $                  $
--------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>                <C>
REVENUE
Canada                                                  2,280            2,932              3,273
United States                                          26,860           22,148             22,314
United Kingdom                                          6,361            7,980              6,990
Germany                                                 3,082            4,238              4,428
Other                                                   6,162            6,331              6,200
--------------------------------------------------------------------------------------------------
                                                       44,745           43,629             43,205
=================================================================================================

As at January 31,                                                         2006               2005
                                                                            $                  $
--------------------------------------------------------------------------------------------------

CAPITAL ASSETS, INTANGIBLES
   AND GOODWILL
Canada                                                                   5,064              6,733
Germany                                                                  2,392              2,193
Other                                                                      243                352
--------------------------------------------------------------------------------------------------
                                                                         7,699              9,278
==================================================================================================
</TABLE>



                                                                            90
<PAGE>

18. PRIOR YEAR ACQUISITIONS AND DISPOSITIONS

On May 18, 2004, the Company was successful in selling its investment in Idion
Technology Holdings Limited for net proceeds of $14,287,000, resulting in a gain
of $5,466,000.

At January 31, 2003, the Company owned approximately 25% of the outstanding
shares of PointBase, a developer and marketer of computer software products
which has developed an embedded, scaleable relational database written
completely in Java. The investment was written off in the fiscal year ended
January 31, 2003 when it became apparent that measures taken by the management
of PointBase would not result in profitable or break-even operations in the near
future.

In April 2003, the Company made an offer to acquire all of the issued and
outstanding shares of PointBase. PointBase determined not to proceed with the
transaction and, as a result, PointBase agreed to pay the Company an amount of
$203,000 as consideration for the cancellation of the offer, which is included
in other income. The Company ceased its efforts to purchase PointBase as
conditions at the time did not warrant further discussions.

Pursuant to an agreement and plan of merger effective December 12, 2003, the
Company acquired control of the remaining shares of PointBase for consideration
of $2,525,000. The acquisition has been accounted for under the purchase method
of accounting. Consequently, the results of operations of PointBase are included
in these consolidated financial statements from that date forward.

The purchase transaction is summarized as follows:
<TABLE>
<CAPTION>
                                                                                               $
--------------------------------------------------------------------------------------------------
<S>                                                                                      <C>
Assets acquired
Cash                                                                                        1,280
Other current assets                                                                          324
Capital assets                                                                                102
Intangibles                                                                                 1,190
Goodwill                                                                                    1,564
--------------------------------------------------------------------------------------------------
                                                                                            4,460
Current liabilities assumed                                                                (1,495)
Future tax liability                                                                         (440)
--------------------------------------------------------------------------------------------------
Net assets acquired                                                                         2,525
==================================================================================================

Consideration
Cash                                                                                        2,290
Amounts payable                                                                               235
--------------------------------------------------------------------------------------------------
                                                                                            2,525
--------------------------------------------------------------------------------------------------
</TABLE>

Intangibles consist of $380,000 of acquired technology and $810,000 of customer
lists and trademarks.

None of the goodwill acquired is deductible for tax purposes.

As part of the acquisition, the Company also acquired foreign non-capital loss
carryforwards of approximately $3,160,000 which expire over 20 years but for
which no value has been assigned. During 2006, the tax benefit of previously
unrecognized tax losses acquired on the acquisition of PointBase of $102,000 was
deducted from goodwill. A valuation allowance recorded as of January 31, 2006 of
$967,000 is attributable to future tax assets for which any subsequently
recognized tax benefits will be allocated to reduce goodwill related to the
acquisition of PointBase.

Under terms of the agreement and plan of merger, future payments of a portion of
the funds received from an identified current customer of PointBase could have
become due to the former shareholders of PointBase contingent upon the Company
either securing additional revenue from or selling the business or a portion
thereof to this customer. The term during which the contingent consideration
could have been earned expired in December 2004 with no additional payments
becoming due.

                                                                             91
<PAGE>

19. RECONCILIATION OF CANADIAN GAAP TO U.S. GAAP

The consolidated financial statements of the Company have been prepared in
accordance with Canadian GAAP which differ in certain material respects from
U.S. GAAP.

The material differences as they apply to the Company's consolidated financial
statements are as follows:

[a]  Balance sheet adjustments
<TABLE>
<CAPTION>

     As at January 31,                                                      2006             2005
                                                                              $                $
--------------------------------------------------------------------------------------------------
<S>                                                                       <C>            <C>
     INVESTMENTS
     Balance under Canadian GAAP                                           31,890          38,707
     Adjustment to fair value, net of tax [note 19[c][ii]]                    (34)             --
--------------------------------------------------------------------------------------------------
     Balance under U.S. GAAP                                               31,856          38,707
==================================================================================================

     GOODWILL
     Balance under Canadian GAAP                                            4,426           4,180
     Adjustment for recognition of tax loss carryforwards [i]                (112)           (103)
--------------------------------------------------------------------------------------------------
     Balance under U.S. GAAP                                                4,314           4,077
==================================================================================================

     DEFICIT
     Balance under Canadian GAAP                                          (12,687)         (7,584)
     Adjustment for stock-based compensation expense                        1,141             876
     Adjustment for recognition of tax loss carryforwards [i]                (112)           (103)
--------------------------------------------------------------------------------------------------
     Balance under U.S. GAAP                                              (11,658)         (6,811)
==================================================================================================
</TABLE>

[i]      Under U.S. GAAP, the realization of the benefit associated with
         utilizing tax losses that existed at the time of an acquisition but
         that were not recognized at the time is reflected as a reduction of
         goodwill relating to the acquisition in the period in which the Company
         determines that such realization is more likely than not. Under
         Canadian GAAP, prior to the adoption of the liability method in fiscal
         2001, such benefit was recorded as a reduction of the income tax
         provision in the period of utilization.

[b] The components of shareholders' equity under U.S. GAAP are as follows:
<TABLE>
<CAPTION>

     As at January 31,                                                    2006               2005
                                                                            $                  $
--------------------------------------------------------------------------------------------------
<S>                                                                     <C>                <C>
     Share capital                                                      31,657             42,250
     Accumulated other comprehensive income                              5,926              3,548
     Deficit                                                           (11,658)            (6,811)
--------------------------------------------------------------------------------------------------
     Balance under U.S. GAAP                                            25,925             38,987
==================================================================================================
</TABLE>

                                                                             92
<PAGE>

[c]  Reconciliation of net income under Canadian and U.S. GAAP:
<TABLE>
<CAPTION>

     Years ended January 31,                             2006             2005               2004
                                                           $                $                  $
-------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>                <C>
     Net income under Canadian GAAP                     3,683            6,019              3,776
     Stock-based compensation expense recorded
       for Canadian GAAP purposes [i]                     265              316                377
-------------------------------------------------------------------------------------------------
     Net income under U.S. GAAP                         3,948            6,335              4,153
     Unrealized gain (loss) on investments [ii]           (34)          (4,542)             1,828
-------------------------------------------------------------------------------------------------
     Comprehensive income under U.S. GAAP               3,914            1,793              5,981
=================================================================================================

     Earnings per share under U.S. GAAP
     Basic                                               0.45             0.57               0.37
     Diluted                                             0.44             0.57               0.36
=================================================================================================
</TABLE>

     [i] Under Canadian GAAP, equity instruments awarded to employees after
         February 1, 2002 are measured and expensed using the fair value method.
         Under U.S. GAAP, the Company is not currently required to record this
         compensation expense.

     [ii]Under U.S. GAAP, investments classified as available for sale are
         carried at market value with unrealized gains or losses reflected as a
         component of other comprehensive income until realized.

[d]  Other disclosures required under U.S. GAAP

     [i] Under U.S. GAAP, the Company measures compensation costs related to
         stock options granted to employees using the intrinsic value method as
         prescribed by APB Opinion No. 25, Accounting for Stock Issued to
         Employees, ["APB 25"] as permitted by SFAS No. 123, Accounting for
         Stock-Based Compensation. However, SFAS No. 123 does require the
         disclosure of pro forma net income (loss) and earnings (loss) per share
         information as if the Company had accounted for its employee stock
         options under the fair value method prescribed by SFAS No. 123 as
         follows:
<TABLE>
<CAPTION>

     Years ended January 31,                             2006             2005               2004
                                                           $                $                  $
--------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>                <C>
     Net income for the year under U.S. GAAP            3,948            6,335              4,153
     Stock-based compensation expense                    (277)            (402)              (565)
--------------------------------------------------------------------------------------------------
     Pro forma net income for the year                  3,671            5,933              3,588
==================================================================================================

     Pro forma basic earnings per share                  0.42             0.54               0.32
     Pro forma diluted earnings per share                0.42             0.53               0.31
==================================================================================================

     The Company has utilized the Black-Scholes option valuation model to
     estimate the fair value of options granted based on the following
     assumptions:

     Years ended January 31,                              2006            2005               2004
--------------------------------------------------------------------------------------------------

     Risk-free interest rate                              3.2%            3.3%               3.3%
     Expected dividend yield                                0%              0%                 0%
     Expected volatility                                 0.466           0.469              0.453
     Expected option life [years]                          2.0             2.0                2.1
     Weighted average fair values of options granted     $2.26           $2.23              $2.88
--------------------------------------------------------------------------------------------------
</TABLE>

                                                                             93
<PAGE>


[e]  Recent accounting developments

     As permitted by SFAS No. 123, the Company currently accounts for
     share-based payments to employees using APB 25's intrinsic value method
     and, as such, generally recognizes no compensation cost for employee
     options under U.S. GAAP. In December 2004, an amended SFAS No. 123,
     Share-Based Payment ["SFAS 123(R)"] was issued, which requires all
     share-based payments to employees to be recognized in the consolidated
     statements of income, based on their fair value. SFAS 123(R) is effective
     for the Company's 2007 fiscal year.

20. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

The comparative consolidated financial statements have been reclassified from
statements previously issued to conform to the current year's presentation.


                                                                             94
<PAGE>



104



                      REPORT OF REGISTERED ACCOUNTING FIRM




To the Directors of
DataMirror Corporation

In our report to the directors of DataMirror Corporation [the "Company"] dated
April 28, 2006, we reported on the consolidated balance sheets of the Company
as at January 31, 2006 and 2005 and the consolidated statements of income,
shareholders' equity and cash flows for each of the years in the three-year
period ended January 31, 2006, as included in this Form 20-F. In connection
with our audits of the aforementioned consolidated financial statements, also
included is the financial statement schedule of the Company included on page 68
of this Form 20-F. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this schedule based
on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.




Toronto, Canada,                                        /s/  Ernst & Young LLP
April 28, 2006.                                          Chartered Accountants


                                                                             95
<PAGE>


<TABLE>
<CAPTION>

                                    SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                            [in thousands of U.S. dollars]






                                                                         Write-offs
                                            Balance,        Charged          of          Balance,
                                            beginning         to          accounts          end
Description                                  of year       expenses      receivable       of year
                                                $              $              $              $
------------------------------------------------------------------------------------------------------
<S>                                        <C>             <C>            <C>            <C>
Allowances deducted
   from accounts receivable
Year ended January 31, 2006                   238             289              (221)          306
Year ended January 31, 2005                   225             110               (97)          238
Year ended January 31, 2004                   417             (66)             (126)          225
------------------------------------------------------------------------------------------------------
</TABLE>




                                                                             96
<PAGE>

<TABLE>
<CAPTION>

           ITEM 18.        FINANCIAL STATEMENTS

The Company has responded to Item 17 in lieu of responding to this Item.

ITEM 19.   EXHIBITS

      Exhibit No.                                    Description
     -------------------------------------------------------------------------------------------

<S>               <C>
     1.1 **        Articles of Amalgamation of DataMirror Corporation, as currently in effect.
     1.2 **        By-laws of DataMirror Corporation, as currently in effect.
     2.1 **        Specimen DataMirror Corporation share certificate.
     2.2 **        DataMirror Shareholder Rights Plan, dated as of May 7, 2002.
     4.1 **        Lease pursuant to which DataMirror Corporation's UK subsidiary acquired rental space in London,
                   England on November 31, 2001.
     4.2 **        DataMirror Corporation Share Purchase Plan, as currently in effect.
     4.3 **        DataMirror Corporation Executive Stock Compensation Plan, as currently in effect.
     4.4 **        Employment agreement between DataMirror Corporation and Mr. Nigel Stokes.
     4.5 **        Employment agreement between DataMirror Corporation and Mr. Kirk Dixon.
     4.6 **        Employment agreement between DataMirror Corporation and Mr. Herman Wallenburg.
     4.7 **        Pointbase, Inc. Series E Preferred Stock Purchase Agreement, dated June 14, 2000.
     6.1           Audit Committee Charter
     6.2***        Compensation Committee Charter
     8.1           List of Significant Subsidiaries contained in Item 4.C hereof
     11.1***       Employee Conduct Policy
     12.1          Certification of CEO and CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     12.2          Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

** Incorporated by reference to the Company's Annual Report on Form 20F, filed on June 20, 2002.
*** Incorporated by reference to the Company's Annual Report on Form 20F, filed on June 5, 2003.
</TABLE>


                                                                             97
<PAGE>



                                   SIGNATURES

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

                                            DATAMIRROR CORPORATION


                                            By: /s/ Peter Cauley

                                                Name: Peter Cauley
                                                Title: Chief Financial Officer

    June 2, 2006




                                                                             98
<PAGE>


<TABLE>
<CAPTION>

                                        EXHIBIT INDEX


      Exhibit No.                                    Description
      -----------  --------------------------------------------------------------------------------------------

<S>                <C>
     1.1 **        Articles of Amalgamation of DataMirror Corporation, as currently in effect.
     1.2 **        By-laws of DataMirror Corporation, as currently in effect.
     2.1 **        Specimen DataMirror Corporation share certificate.
     2.2 **        DataMirror Shareholder Rights Plan, dated as of May 7, 2002.
     4.1 **        Lease pursuant to which DataMirror Corporation's UK subsidiary acquired rental space in London,
                   England on November 31, 2001.
     4.2 **        DataMirror Corporation Share Purchase Plan, as currently in effect.
     4.3 **        DataMirror Corporation Executive Stock Compensation Plan, as currently in effect.
     4.4 **        Employment agreement between DataMirror Corporation and Mr. Nigel Stokes.
     4.5 **        Employment agreement between DataMirror Corporation and Mr. Kirk Dixon.
     4.6 **        Employment agreement between DataMirror Corporation and Mr. Herman Wallenburg.
     4.7 **        Pointbase, Inc. Series E Preferred Stock Purchase Agreement, dated June 14, 2000.
     6.1           Audit Committee Charter
     6.2***        Compensation Committee Charter
     8.1           List of Significant Subsidiaries contained in Item 4.C hereof
     11.1***       Employee Conduct Policy
     12.1          Certification of CEO and CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     12.2          Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

**  Incorporated by reference to the Company's Annual Report on Form 20F, filed on June 20, 2002.
*** Incorporated by reference to the Company's Annual Report on Form 20F, filed on June 5, 2003.
</TABLE>


                                                                             99