__________________________________________________________________________

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
  __________________________________________________________________________

                                   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, 2005

                                     -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 ______

       Commission File Number:  0-30906

       __________________________________________________________________
                            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 pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Shares,
no par value

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:  None


Indicate the number of outstanding shares of each 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, 2005, 10,555,966 Common Shares were issued and outstanding.

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

      Yes  |X|      No   |_|


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

      Item 17  |X|    Item 18  |_|



<PAGE>


                               TABLE OF CONTENTS

ITEM 1.      Identity of Directors, Senior Management and Advisors...........3

ITEM 2.      Offer Statistics and Expected Timetable.........................3

ITEM 3.      Key Information.................................................4

ITEM 4.      Information on the Registrant..................................11

ITEM 5.      Operating and Financial Review and Prospects...................24

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

ITEM 7.      Major Shareholders and Related Party Transactions..............51

ITEM 8.      Financial Information..........................................54

ITEM 9.      The Offer and Listing..........................................54

ITEM 10.     Additional Information.........................................56

ITEM 11.     Quantitative and Qualitative Disclosures About Market Risk.....62

ITEM 12.     Description of Securities Other than Equity Securities.........63

ITEM 13.     Defaults, Dividend Arrearages and Delinquencies................64

ITEM 14.     Material Modifications to the Rights of Security Holders
             and Use of Proceeds............................................64

ITEM 15.     Controls and Procedures........................................64

ITEM 16A.    Audit Committee Financial Expert...............................64

ITEM 16B.    Code of Ethics.................................................64

ITEM 16C.    Principal Accountant Fees and Services.........................65

ITEM 16D.    Exemptions from the Listing Standards for Audit Committees.....65

ITEM 16E.    Purchases of Equity Securities by the Issuer and Affiliated
             Purchasers.....................................................65

ITEM 17.     FINANCIAL STATEMENTS...........................................67

ITEM 18.     FINANCIAL STATEMENTS..........................................101

ITEM 19.     EXHIBITS......................................................101

SIGNATURES.................................................................102


                                       2
<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.


                                       3

<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 20 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 Canadian dollars, except
share and per share data which are reported in Canadian dollars per share.

<TABLE>
<CAPTION>

                                                                           Statement of Income (Loss)
                                                                        For the Years Ended January 31,

                                               2005           2004(1)            2003(1)               2002                2001
                                               ----           -------            -------               ----                ----

<S>                                         <C>               <C>                <C>                <C>                 <C>
Revenue
   Licence                                  $22,520           $29,087            $33,223            $28,592             $35,040
   Maintenance                               26,213            25,354             23,210             20,562              14,065
   Services                                   4,534             5,551              6,057              7,222               8,353
                                       -------------    --------------     --------------    ---------------    ----------------
                                             53,267            59,992             62,490             56,376              57,458
                                       -------------    --------------     --------------    ---------------    ----------------

Cost of revenue
   Licence                                      249               234                239                257                 514
   Maintenance and services                  11,862            11,389             12,605             13,464              11,184
                                       -------------    --------------     --------------    ---------------    ----------------
                                             12,111            11,623             12,844             13,721              11,698
                                       -------------    --------------     --------------    ---------------    ----------------
Gross Margin                                 41,156            48,369             49,646             42,655              45,760
                                       -------------    --------------     --------------    ---------------    ----------------

Operating Expenses
   Selling and marketing                     19,653            20,524             21,289             21,542              23,815
   Research and development                  10,528             9,753             10,459             10,895               7,742
   General and administration                 8,803             7,946              8,812              9,088               9,668
   Stock-based compensation(1)                  410               512                286                  0                   0
   Amortization of intangibles                2,951             3,098              2,740              3,244               1,570
                                       -------------    --------------     --------------    ---------------    ----------------
                                             42,345            41,833             43,586             44,769              42,795
                                       -------------    --------------     --------------    ---------------    ----------------
Operating income (loss)(1)                   (1,189)            6,536              6,060             (2,114)              2,965
Investment income, net                        1,008             1,146                611                859               1,333
Gain on sale of investment in Idion           7,611                 0                  0                  0                   0
   Other income                                   0               279                  0                  0                   0
   Dilution gain                                  0                 0             (4,595)                 0               6,186
   Equity loss                                    0                 0             (2,081)            (4,112)             (4,709)
                                       -------------    --------------     --------------    ---------------    ----------------
Income (loss) before income taxes(1)          7,430             7,961                 (5)            (5,367)              5,775
                                       -------------    --------------     --------------    ---------------    ----------------
Provision for income taxes
   Current                                    3,078             3,758              2,762                428                 877
   Future                                    (1,437)             (970)              (328)              (131)                190
                                       -------------    --------------     --------------    ---------------    ----------------
                                              1,641             2,788              2,434                297               1,067
                                       -------------    --------------     --------------    ---------------    ----------------
Net income (loss)(1)                          5,789             5,173             (2,439)            (5,664)              4,708
                                       -------------    --------------     --------------    ---------------    ----------------

Earnings per share
   Basic                                       0.53              0.46             (0.21)             (0.49)                0.41
   Diluted                                     0.52              0.44             (0.21)             (0.49)                0.40

Weighted average number of shares
[000's]
   Basic                                     11,026            11,364             11,411             11,500              11,362
   Diluted                                   11,192            11,640             11,411             11,500              11,856

Amounts presented which differ under
U.S. GAAP

Net loss                                      6,199             5,685            (2,404)            (5,643)             (1,388)
EPS                                            0.56              0.50             (0.21)             (0.49)              (0.12)

</TABLE>


                                       4

<PAGE>

Notes:
    (1)    Comparative figures for the years ended January 31, 2004 and
           January 31, 2003 have been restated to reflect the effect of
           retroactive adoption of Section 3870 "Stock-Based Compensation and
           other Stock-Based Payments" of the Canadian Institute of Chartered
           Accountants handbook.

<TABLE>
<CAPTION>

                                                                   Balance Sheet Data(1)(2)
                                                                       As at January 31,

                                               2005               2004             2003              2002              2001
                                               ----               ----             ----              ----              ----
<S>                                         <C>                <C>              <C>               <C>               <C>
Cash, cash equivalents
   and short term investments               $57,436            $42,006          $38,827           $36,495           $28,205
Working capital                              45,344             31,946           31,139            32,826            35,606
Total assets                                 83,543             86,223           81,347            79,603            88,445
Long-term obligations                           103              1,076            1,538             1,205             2,903
Share capital                                60,318             64,625           64,637            64,740            65,583
Total shareholders' equity                   56,728             58,947           55,470            58,359            65,218
Number of shares outstanding
   [000's] (3)                               10,556             11,365           11,461            11,472            11,624

Amounts presented which differ
under U.S. GAAP

Total assets                                 83,415             93,837           85,901            79,597            88,548
Shareholders' equity                         56,600             65,144           59,158            58,354            65,322
</TABLE>

Notes:
(1)    Effective February 1, 2000 the Company retroactively adopted new
       recommendations of the Canadian Institute of Chartered Accountants with
       respect to accounting for income taxes, for the years ended January 31,
       2001 and 2000. As permitted under the new rules, prior years' financial
       statements have not been restated. The cumulative effect on the opening
       deficit as of February 1, 2000 of adopting the recommendation was not
       material on current or prior periods.

(2)    Effective February 1, 2002 the Company adopted new recommendations of
       the Canadian Institute of Chartered Accountants with respect to
       accounting for goodwill. The new standards require that goodwill and
       intangible assets with indefinite lives no longer be amortized but
       instead be tested for impairment at least annually. As permitted under
       the new rules, prior years' financial statements have not been
       restated.

(3)    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.



                                      5
<PAGE>


EXCHANGE RATE INFORMATION

         The Company publishes its consolidated financial statements in
Canadian dollars. In this annual report, except where otherwise indicated, all
dollar amounts are expressed in Canadian dollars. References to $ or Cdn$ are
to Canadian dollars and references to U.S.$ 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 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"):


  Monthly Data                                       Annual Data
  ------------                                       -----------
                      High               Low                          Average
                      ----               ---                          -------
 March, 2005         0.8322             0.8024        2005            0.7763
 February, 2005      0.8134             0.7961        2004            0.7289
 January, 2005       0.8346             0.8050        2003            0.6390
 December, 2004      0.8435             0.8064        2002            0.6412
 November, 2004      0.8493             0.8155        2001            0.6707
 October 2004        0.8201             0.7858


         On April 18, 2005, the inverse of the Noon Buying Rate was U.S.$0.8012
= $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).

                                      6
<PAGE>


         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, 2001, 2003, and 2004, it incurred an operating
loss for the years ended January 31, 2002 and 2005. In addition, while the
Company earned net income for the years ended January 31, 2001, 2004, and
2005, it recorded net losses for the years ended January 31, 2002 and 2003.

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".

         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 Constellar Hub
and iReflect 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 sales of PointBase may be
affected by IBM's recent 2004 announcement of its release of Cloudscape, a
relational Java database as open source software to the Apache Software
Foundation. 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.

                                      7
<PAGE>

         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 year
ended January 31, 2005, the Company faced increased pricing pressures from
competitors including Vision 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 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. 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-commerce 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
and in the number of data warehouse installations. The database 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 High Availability 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.

         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.

                                      8
<PAGE>

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 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
2005, the Canadian dollar's appreciation against the U.S. dollar was even more
rapid than that in fiscal 2004. 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".

         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, due to internal growth and the
PointBase acquisition the Company has experienced rapid growth in the scope of
its operations. 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.

                                      9
<PAGE>

         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 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 licenses, 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 Corporation carrying on business as Teilhard
Technologies and Juxtacomm Technologies Inc. filed and served a Statement of
Claim against the Company alleging infringement of a Canadian Patent (No.
2,241,767) and certain other related claims on July 15, 2004. By Order dated
November 10, 2004, the Federal Court of Canada struck out all of the
allegations of infringement in the Statement of Claim but provided the
plaintiff with leave to amend. The Plaintiff filed an amended Statement of
Claim and the Company filed and served the plaintiff with a motion to strike
out the allegations of infringement again. The motion is scheduled to be heard
on April 26, 2005. 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".

         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, 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.


                                      10
<PAGE>

         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 2005, with the
exception of Bryan E. Plug and Rean Pretorius, 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 $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 $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 $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 $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.

         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.

         The Company has grown substantially over the past eight 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, 135 employees, and $10
million in revenue for fiscal 1997 to over 2,000 customers, 232 employees, and
$53.3 million in revenue for fiscal 2005.

         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.



                                      11
<PAGE>



         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 $279,000 (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 $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 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. The losses from the Company's investment in PointBase were nil in fiscal
2004 compared to an equity loss of $2,081,000 and an impairment charge of
$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 $9.8 million. On April
18, 2002, the bid was increased to $18.9 million, and subsequently, on May 8,
2002, the bid was further increased to $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 $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.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 $15,000, capital
assets valued at $22,000 and technology valued at $362,000 for cash
consideration of $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. Having key operational systems unavailable due
to planned (system maintenance, upgrade or backup) or unexpected (hardware or
communications failure) system outages is no longer acceptable. The U.S. Food
and Drug Administration ("FDA") is requiring that all FDA-regulated firms
provide electronic audit trails, also known as E-Records, for FDA examination.
The Sarbanes-Oxley Act 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.


                                      12
<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, 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 has reduced
its direct selling team in Asia and expects to generate more revenue through
indirect channels going forward. 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 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 major data protection product, High Availability Suite
for IBM iSeries (AS/400) (also known as HA Suite), was first released in
November 1998. HA Suite 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. 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.

         The Company's major EAI product, DataMirror 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:


                                      13
<PAGE>


     1.   Transformation Server Version 5.2. Released in September 2004, this
          product is the flagship data integration software solution of the
          Company and a core component of the Company's Integration Suite
          2005. New and enhanced features include extended data apply options,
          Oracle redo log capture, role-based security, and enhanced platform
          support for IBM i5/OS V5R3 and Microsoft Windows 2003.

     2.   iReflect Version 2.0. Released in December 2004, 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.

     3.   iCluster Version 2.1. Released January 2005, version 2.1 enhances
          the Company's business continuity and disaster recovery software for
          IBM iSeries servers. This version provides fully integrated IASP
          mirroring, autonomic management features to self-protect and
          self-optimize business systems, performance auditing, and offers
          failover support for any combination of supported operating system
          versions.

     4.   iCluster for EMC Symmetrix Version 2.1. Released 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(TM)) and
          TimeFinder(TM). This product increases application availability and
          workload distribution in EMC iSeries (AS/400) environments.

     5.   iCluster for IBM TotalStorage(TM) Enterprise Storage Server(TM).
          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(R) to
          provide availability at the storage level, system level and
          application level.

     6.   iDeliver Version 2.6. Released in November 2003 (as packaged with
          Pervasive Gateway version 3.1), this client-server product allows
          organizations to publish, filter, and replicate business critical
          information securely to their employees, business partners, and
          customers.

     7.   Pervasive Gateway Version 3.1. Released in November 2003, this
          product 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 Pervasive
          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 DOS, Windows or Windows CE based computer or mobile device
          including industry standard PCs, PDAs, handheld computers and rugged
          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.

     8.   DB/XML Transform Version 2.8. Released in October 30, 2003, this
          product is an engine for bi-directional replication and data
          transformation between XML, database and text formats.

     9.   High Availability Suite Version 3.7. Released in November 2004, this
          product is a high availability and replication tool intended
          primarily for environments that want to replicate OS/400 files and
          objects to other systems for high availability, thereby ensuring
          data integrity.

     10.  Transformation Server for Teradata Relational Database Management
          System Version 4.6. Released in September 2003, this product
          replicates data from supported databases to Teradata databases.
          Teradata is a relational, SQL compatible database, supported on
          Microsoft Windows and UNIX servers.

     11.  Constellar Hub Version 3.7. Released April 2003, Constellar Hub
          provides a centrally managed, high-performance, scalable engine for
          data movement, data transformation and interface management across
          all enterprise applications. This product can access, transform,
          integrate, and deliver data using databases, messages queues, and
          flat files. Databases can be accessed through ODBC or Oracle
          networking, and structured data can be read from and written to MQ
          Series and Oracle AQ message queues, files accessible through the
          local file system, and files on remote systems accessible through
          FTP, HTTP, and other file transfer methods.


                                      14
<PAGE>


     12.  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.

     13.  LiveConnector. An integration solution that enables information flow
          between CRM, ERP or packaged software applications. LiveConnector
          uses application-specific adapters to capture, transform and flow
          business transactions in real-time between various applications
          within the organization.

     14.  PointBase Embedded Version 5.2. 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. Released in February 2005
          Version 5.2 added per column statistics for improved cost estimates
          in the query optimizer, updateable cursors for index organized
          tables, and made index organization the default table organization.

     15.  PointBase Micro Version 5.2. 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. It supports a subset of standard SQL 92.

     16.  PointBase UniSync Version 5.2. 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. Released in February 2005, Version 5.2 improves PointBase
          UniSync by allowing multiple instances of a UniSync server to access
          a single database.


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:

<TABLE>
<CAPTION>

FOR THE YEARS ENDED
                                                                   January 31,
                                                     2005              2004          2003
                                                     ----              ----          ----

<S>                                                   <C>              <C>            <C>
        Canada                                        7.0%             7.8%           6.9%
        United States                                53.3             53.2           53.6
        United Kingdom                               16.8             17.4           18.7
        Germany                                       7.7              8.3            8.1
        Other                                        15.2             13.4           12.7
                                                    -----            -----          -----
                                                    100.0%           100.0%         100.0%
                                                    ======           =====          =====
</TABLE>

         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, 2005, 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.


                                      15
<PAGE>


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 U.S.$6,700 to U.S.$264,700 in
fiscal 2005. DB/XML Transform licenses ranged in price from U.S.$11,800 to
U.S.$35,400. LiveAudit sales in fiscal 2005 ranged from U.S.$5,000 to
U.S$198,500. The fiscal 2005 price for a licence for HA Suite and iCluster
ranged from U.S.$9,700 to U.S.$325,600. Production licences for Constellar Hub
generally ranged from U.S.$31,100 to U.S.$387,600. Pervasive 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 U.S.$78,750 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, Central and South
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 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; Santa Clara, California 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.

                                      16
<PAGE>

         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. March 2004 also saw
partner Andrews Consulting Group announce that its RapidDecision(TM) business
intelligence solution which uses DataMirror Transformation Server is expanding
to include support for BPCS, MAPICS, and PeopleSoft applications.

         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, 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.

         Fiscal year 2004 saw the Company enter into a number of reseller
relationships that heightened the Company's reach in various parts of the
world.

         In September 2003, the Company signed a reseller agreement with
Logical, an international IT integration solutions provider and one of the
largest Hewlett-Packard resellers in the world to market, sell and support the
Company's products to customers throughout North America. The Company also
entered into a reseller agreement for Australia with Classic Blue Computers
Pty Ltd., a leading Australian solution provider.

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) XML Solution, and Business Objects to help position the Company in the
data integration marketplace.

         In October 2004, the Company entered into a sales and marketing
alliance with Panorama Software, a leading innovator of high performance
intelligence solutions for the Microsoft(R) Business Intelligence platform.
The Company expects to combine its expertise with that of Panorama to help
organizations realize more value from their information.

         The Company is also part of the Siebel Alliance Program and
successfully validated the integration of the software portion of the
LiveConnector version 2.0 packaged service with Siebel 2000. Siebel Systems,
Inc. (Nasdaq: SEBL) is a leading provider of multichannel eBusiness
applications software.

         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 the highest levels
of data and application availability for Storage Area Networks (SANs) running
on IBM iSeries and ESS systems.


                                      17
<PAGE>

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.

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 52% of the Company's overall revenue in fiscal 2005. 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
HA Suite and iCluster products. See "Risk Factors - Dependence on Distribution
Channels" and "Risk Factors - Seasonality".

iCluster and High Availability Suite

         The Company's data protection product line includes, High
Availability Suite for IBM iSeries (AS/400) (also known as HA Suite), released
in November 1998 and iCluster, released in 1999. HA Suite 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. HA Suite was
complemented and enhanced with the introduction of DataMirror iCluster
software, a high availability cluster management solution for a `cluster' or
integrated network of IBM iSeries (AS/400) systems. HA Suite 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;


                                      18
<PAGE>


         (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.

         In mid-1999, DataMirror released its iCluster cluster management
product for IBM iSeries (AS/400). iCluster is a solution for ensuring the
continuous availability of business-critical applications such as e-Business,
ERP and customer-facing applications. iCluster can be installed on distributed
systems to maintain 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. DataMirror iCluster software complements HA Suite for
clustered iSeries servers. 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 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

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 36% of
the Company's overall revenue in fiscal 2005.

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 all FDA
regulated companies to use computer-generated, time stamped audit trails to
ensure the integrity of systems storing 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.

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.



                                      19
<PAGE>

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 DataMirror 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. DataMirror 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.

Pervasive Gateway

         DataMirror Pervasive 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 Pervasive 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 DOS, Windows or Windows CE based computer
or mobile device including industry standard PCs, PDAs, handheld computers and
rugged 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.

Other Products

         The Company's other software products include:

         (i)      iDeliver. A data integration product that delivers data from
                  Transformation Server sources to Windows desktop data
                  stores;
         (ii)     Transformation Server for XML. An addition to DataMirror's
                  Transformation Server software family, which enables
                  companies to capture, transform and flow data in real-time
                  to and from common database formats and XML;
         (iii)    iCluster for EMC Symmetrix. An application-aware technology
                  that is closely integrated with EMC Corporation's system and
                  storage replication solutions Symmetrix Remote Data Facility
                  (SRDF(TM)) and TimeFinder(TM). iCluster for EMC Symmetrix
                  provides higher levels of application availability and
                  workload distribution in EMC iSeries environments;
         (iv)     DB/XML Transform. An engine for bi-directional data
                  transformation between XML, database and text formats;
         (v)      LiveConnector. An integration solution that enables
                  information flow between CRM, ERP or packaged software
                  applications. LiveConnector uses application-specific
                  adapters to capture, transform and flow business
                  transactions in real-time between various applications
                  within the organization; and
         (vi)     iCluster for IBM TotalStorage(TM) Enterprise Storage
                  Server(TM). 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.

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 IBM DB2 on
          various platforms, 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
          products including in particular Transformation Server, HA Suite,
          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.

                                      20
<PAGE>


     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 capture requirements. The Company has encountered,
          and expects to continue to face, competition for the sale of its
          products from such in-house development efforts.

Integration Software Market

         In the market for integration software, the Company's Transformation
Server, 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 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.

         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 its Constellar Hub product from
the competitors 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 add these or similar
features to their products or that the Company will be successful in selling
its products by promoting these features and differentiators.

Data Protection Software Market

         In the IBM iSeries (AS/400) market for data protection software, the
Company's HA Suite and iCluster products compete 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, who sell Mimix
Suite and Vision Solutions, who sell 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.


                                      21
<PAGE>


         The Company tries to differentiate HA Suite and 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.

         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. 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 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. Oracle
may also choose to offer a data protection solution that competes directly
with iReflect in the future.

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.

         The Company expects that competitors will also develop solutions for
electronic records compliance. The Company also expects that existing
providers of ERP solutions to regulated companies will add electronic records
compliance features to their existing solutions.

Capture Software

         There are a number of competitors in the market for SAP mobile
connectivity solutions including SAP. The Company tries to differentiate its
Pervasive Gateway software in terms of: (i) its ability to function in both
batch and on-line modes; (ii) its easy to use GUI interface; 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.

XML Software

         There are a large number of competitors in the market for XML
transformation software. Many of these competitors are larger than the
Company. Many of these competitors provide their software free of charge. The
Company tries to differentiate its DB/XML Transform product in terms of: (i)
its advanced structured query technology; (ii) its built-in support for
back-end database functionality; and (iii) its portability and platform
independence. There can be no assurance that competitors won't 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) products as the database
engines in those products. The main competitors in this market include IBM
Cloudscape, 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. The main competitors in this market are 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.


                                      22
<PAGE>

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 Corporation carrying on business as Teilhard Technologies and
Juxtacomm Technologies Inc. filed and served a Statement of Claim against the
Company alleging infringement of a Canadian Patent (No. 2,241,767) and certain
other related claims on July 15, 2004. By Order dated November 10, 2004, the
Federal Court of Canada struck out all of the allegations of infringement in
the Statement of Claim but provided the plaintiff with leave to amend. The
Plaintiff filed an amended Statement of Claim and the Company filed and served
the plaintiff with a motion to strike out the allegations of infringement
again. The motion is scheduled to be heard on April 26, 2005. 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.

         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
Sarbanes-Oxley Act ("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, the Final Rule of the FDA with respect to electronic records and
electronic signatures. 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 monitoring and detecting fraud and data
tampering.



                                      23
<PAGE>

C.       Organizational Structure

         As at January 31, 2005, the Company had the following significant
direct and indirect subsidiaries:


         SUBSIDIARY(1)                            JURISDICTION OF INCORPORATION

         DataMirror Europe (Holdings) Limited            England
         DataMirror (UK) Limited                         England
         DataMirror Hub Company (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 Hub Company (Canada) Inc.            Ontario
         DataMirror Mobile Solutions, Inc.               California

(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; Santa Clara, California;
and New York, New York. The Company's UK subsidiary occupies leased office
space in London, England (expiry March 2006) and additional office space is
leased for European branch offices in Antwerp, Belgium; Frankfurt, Germany;
and Paris, France. Leases for the 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 2005 TO FISCAL 2004 AND FISCAL 2004 TO FISCAL 2003

         The following information should be read in conjunction with the
audited Consolidated Financial Statements of the Company for the years ended
January 31, 2005 ("Fiscal 2005"), January 31, 2004 ("Fiscal 2004"), and
January 31, 2003 ("Fiscal 2003") 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 20 of the
audited Consolidated Financial Statements. All amounts are stated in Canadian
dollars unless otherwise noted.

OVERVIEW

         The Company designs, develops and markets software solutions that
enable over 2,000 companies to integrate, protect, capture and audit their
data.

SOURCES OF REVENUE

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


                                      24
<PAGE>


         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 Company recently began selling 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 2005, licence sales through indirect sales channels accounted
for 22% of revenue, up slightly from 21% in fiscal 2004 and down slightly from
24% in fiscal 2003.

         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 20 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 software licences, software maintenance and support fees and 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 98-4,
"Deferral of the Effective Date of a Provision of SOP 97-2", issued in March
1998. Software licence revenue is recognized when persuasive evidence of an
arrangement exists, the related products are shipped, there are no significant
uncertainties surrounding product acceptance, the fees are fixed and
determinable and collection is considered probable. Revenue from software
maintenance and support agreements is recognized on a straight-line basis over
the term of the related agreements. Revenue from services is comprised of
consulting, training and installation fees and is recognized at the time the
services are performed.

         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 and 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. 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.

         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 which 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 fiscals 2005, 2004 and 2003, the Company
did not record an impairment charge related to intangible assets.


                                      25
<PAGE>


         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
2005, 2004, and 2003, 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 judgements 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 considered or estimated to be more likely to be realized. While the
Company has considered projected 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 were to determine
that it would not be able to realize all or part of its future tax assets, an
adjustment to the future tax assets would reduce income in the period such a
determination were made.

                                      26
<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 CDN $)

                                                                   2005           2004(1)           2003(1)
                                                                   ----           -------           -------

<S>                                                          <C>              <C>               <C>

        Revenue:
           Licence                                           $   22,520       $   29,087        $   33,223
           Maintenance                                           26,213           25,354            23,210
           Services                                               4,534            5,551             6,057
                                                             ----------       ----------        ----------
                                                                 53,267           59,992            62,490
                                                             ----------       ----------        ----------
           Cost of revenue:
           Licence                                                  249              234               239
           Maintenance and services                              11,862           11,389            12,605
                                                             ----------       ----------        ----------
                                                                 12,111           11,623            12,844
                                                             ----------       ----------        ----------
        Gross margin                                             41,156           48,369            49,646
                                                             ----------       ----------        ----------
           Operating expenses:
           Selling and marketing                                 19,653           20,524            21,289
           Research and development                              10,528            9,753            10,459
           General and administration                             8,803            7,946             8,812
           Stock-based compensation                                 410              512               286
           Amortization of intangibles                            2,951            3,098             2,740
                                                             ----------       ----------        ----------
              Total operating expenses                           42,345           41,833            43,586
                                                             ----------       ----------        ----------
        Operating income (loss)                                  (1,189)           6,536             6,060

        Investment income, net                                    1,008            1,146               611
        Gain on sale of investment                                7,611                0                 0
        Other income                                                  0              279                 0
        Gain (loss) from investment in PointBase, Inc.
           Impairment of equity investment                            0                0            (4,595)
           Equity loss                                                0                0            (2,081)
                                                             ----------       ----------        ----------
        Income (loss) before income taxes                         7,430            7,961                (5)
        Provision for income taxes                                1,641            2,788             2,434
                                                             ----------       ----------        ----------
        Net income (loss)                                    $    5,789       $    5,173        $   (2,439)
                                                             ==========       ==========        ==========

</TABLE>

    (1)    Comparative figures for the years ended January 31, 2004 and
           January 31, 2003 have been restated to reflect the effect of
           retroactive adoption of Section 3870 "Stock-Based Compensation and
           Other Stock-Based Payments" of the Canadian Institute of Chartered
           Accountants handbook.


                                      27
<PAGE>


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

REVENUE

         The Company's revenue is derived primarily from sales of licences for
its software products. Licence sales accounted for 42.3% of total revenue in
fiscal 2005 as compared to 48.5% 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 the sale of Transformation Server and iCluster (a
successor to High Availability Suite) software for use in connection with IBM
iSeries (AS/400) platforms, and this trend continued in fiscal 2005,
accounting for 64.9% of licence revenue, compared to 54.8% in fiscal 2004. The
Company expects that its future success will continue to depend on its
relationship with IBM and the success of the iSeries platform. The Company's
sales of software relating to Unix platforms in fiscal 2005 represented 14.0%
of licence revenue, down slightly as a percent of licence revenue from the
16.9% of licence revenue in fiscal 2004. There was a significant decrease in
the Company's sales of software relating to MVS platforms in fiscal 2005 which
accounted for 4.0% of fiscal 2005 licence revenue and which as a category
shrank from 11.5% of fiscal 2004 licence revenue. Growth occurred in sales of
software relating to Intel platforms which increased moderately from 16.8% of
fiscal 2004 licence revenue to 17.1% of fiscal 2005 licence revenue.

         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, 49.2% of the Company's revenue was derived from customer
software maintenance and support contracts, compared to 42.3% 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 prebilled with the related software
licences. During fiscal 2005, revenue from services, which includes
consulting, training and other services, accounted for 8.5% of revenue,
compared to 9.3% in fiscal 2004.

         Licence. Licence revenue in fiscal 2005 was $22,520,000 compared to
$29,087,000 in fiscal 2004, a decrease of 22.6%. The decrease in licence
revenue in fiscal 2005 was attributable to several offsetting factors
including the strengthening of the Canadian currency, 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 $26,213,000
compared to $25,354,000 in fiscal 2004, an increase of 3.4%. 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 $4,534,000 compared to
$5,551,000 in fiscal 2004, a decrease of 18.3%. This decrease was primarily
due to the effects of the stronger Canadian currency and a decrease in demand
for consulting services for the Company's Pervasive Gateway software.

         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 58.7% and 34.3% of the Company's revenues respectively
(for fiscal 2004, these were 58.8% and 33.5% respectively), while a
significant portion of the Company's operating expenses are incurred in
Canadian dollars and the Company reports its financial results in Canadian
dollars. 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. Management recognizes that
this policy can provide only short-term protection against a limited portion
of the Company's currency exposure.


                                      28
<PAGE>

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

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

        Canada                                       7.0%             7.8%
        United States                               53.3             53.2
        United Kingdom                              16.8             17.4
        Germany                                      7.7              8.3
        Other                                       15.2             13.4
                                                  -------          -------
                                                   100.0%           100.0%

         Transaction values in fiscal 2005 for sales of the Company's products
have been as large as U.S.$680,000 (U.S.$2,440,000 in 2004), although the
typical sale amount ranged from U.S.$70,000 to U.S.$100,000. No single
customer accounted for more than 0.9% of revenue in fiscal 2005 (3.4% in
fiscal 2004), and no single industry accounted for more than 29.2% of licence
revenue in fiscal 2005 (24.7% in 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 $249,000 (1.1% of licence revenue), relatively unchanged from
$234,000 (0.8% of licence revenue) for fiscal 2004.

         Maintenance and Services. Costs of maintenance and services revenue
consist primarily of the salary and related costs of providing those services.
For fiscal 2005, costs of maintenance and services revenue were $11,862,000
(38.6% of maintenance and service revenue) compared to $11,389,000 (36.9% of
maintenance and services revenue) for fiscal 2004. The gross margin on
maintenance and services revenue improved significantly, as the Company
realized economies of scale in the cost of providing support to its growing
customer base.

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. To assist the reader to properly understand the Company's operating
expense trends, a summary of the ending and average headcount by department
for fiscal 2004 and fiscal 2005 follows (See "Fiscal Year Ended January 31,
2004 Compared to Fiscal Year Ended January 31, 2003" for a comparison of
fiscal 2004 and fiscal 2003).


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

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


                                      29
<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, tradeshows, promotional
materials and other selling and marketing related activities. For fiscal 2005,
these expenses totalled $19,653,000 (36.9% of revenue), down slightly in
dollar amount from $20,524,000 (34.2% of revenue) for fiscal 2004. The
decrease is due primarily to reduced travel, the effect of a reduction of the
average headcount in this area, as well as the impact of the stronger Canadian
currency on the Company's U.S. and European expenses. Management expects
selling and marketing expenses to increase in fiscal 2006 as the Company
expands its sales and marketing activities.

         Research and Development. Research and development expenses include
only salaries and other direct costs associated with the development of new
products and are net of related investment tax credits. Research and
development expenses were $10,528,000 (19.8% of revenue) for fiscal 2005, up
slightly from $9,753,000 (16.3% of revenue) for fiscal 2004 due mainly to the
addition of the PointBase research and development team in late December 2003
and a decrease in the amount of investment tax credits recognized during the
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, $141,000 ($806,000 in
fiscal 2004) 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
than the amount recorded.

         General and Administration. General and administration expenses
consist primarily of administrative salaries, rent, recruiting costs and
professional fees. For fiscal 2005, general and administration expenses were
$8,803,000 (16.5% of revenue) compared to $7,946,000 (13.2% of revenue) for
fiscal 2004, an increase due mainly to the additional administrative expenses
assumed as a result of the acquisition of PointBase in December 2003 and an
increase in professional and other governance related fees.

         Stock-based compensation. In November 2003, the CICA made changes to
Section 3870, "Stock-Based Compensation and Other Stock-Based Payments",
requiring equity instruments awarded to employees be measured and expensed
using the fair value method. The main impact for the Company is to record
compensation expense relating to the award of stock options to employees that
the Company had previously chosen to disclose.

The Company has adopted these changes effective February 1, 2004 on a
retroactive basis with a restatement of prior periods. This change resulted in
a decrease to net income of $512,000 for the year ended January 31, 2004 and
$286,000 for the year ended January 31, 2003, and an increase to deficit and
increase to contributed surplus of $798,000 as at January 31, 2004. There was
no effect on retained earnings at February 1, 2002.

For fiscal 2005, stock-based compensation was $410,000 compared to $512,000
for fiscal 2004. This decrease was due to options that expired in fiscal 2004
and were partly offset by the additional expense from options issued during
fiscal 2005.

         Amortization of Intangibles. For fiscal 2005, amortization of
intangibles was $2,951,000 compared to $3,098,000 for fiscal 2004. The
decrease of $147,000 from fiscal 2004 is due to certain technologies becoming
fully-amortized during the year, offset by additional amortization of
technology acquired late in fiscal 2004.

INVESTMENT INCOME, NET

         Investment income, net includes interest on cash equivalents,
short-term investments and other investment income net of interest expense on
long-term liabilities and lease obligations. In fiscal 2005, net investment
income was $1,008,000 compared to $1,146,000 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 was successful in selling its investment in Idion for
net proceeds of $19,894,000, resulting in a gain on sale of $7,611,000.



                                      30
<PAGE>

INCOME TAX EXPENSE

         During fiscal 2005, the Company recorded an income tax provision of
$1,641,000 as compared to a provision of $2,788,000 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 a
rate of 36.6% for fiscal 2004.

         The income tax provision is different from the amount calculated by
applying this tax rate to the 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 $3,749,000 which have no expiry date and $3,106,000 which expire
at various times over 20 years. A valuation allowance has been recognized for
all but $161,000 of the losses.

NET INCOME (LOSS)

         In fiscal 2005, the Company recorded net income of $5,789,000 ($0.53
per share) as compared to $5,173,000 ($0.46 per 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.



                                      31
<PAGE>


FISCAL YEAR ENDED JANUARY 31, 2004
COMPARED TO FISCAL YEAR ENDED JANUARY 31, 2003

REVENUE

         The Company's revenue is derived primarily from sales of licences for
its software products. Licence sales accounted for 48.5% of total revenue in
fiscal 2004 as compared to 53.2% in fiscal 2003. 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 (a
successor to High Availability Suite) software for use in connection with IBM
iSeries (AS/400) platforms, and this trend continued in fiscal 2004,
accounting for 54.8% of licence revenue, a drop compared to 66.5% in fiscal
2003. The Company expects that its future success will continue to depend on
its relationship with IBM and the success of the iSeries platform. The
Company's sales of software relating to Unix platforms in fiscal 2004 was
16.9% of licence revenue, relatively unchanged as a percent of licence revenue
from the 16.5% of licence revenue in fiscal 2003. There was a significant
increase in the Company's sales of software relating to MVS platforms in
fiscal 2004 which accounted for 11.5% of fiscal 2004 licence revenue and which
as a category grew 3.2% from fiscal 2003 licence revenue. Growth also occurred
in sales of software relating to Intel platforms which increased moderately
from 13.8% of fiscal 2003 licence revenue to 16.8% of fiscal 2004 licence
revenue.

         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 2004, 42.3% of the Company's revenue was derived from customer
software maintenance and support contracts, compared to 37.1% of revenue in
fiscal 2003.

         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. During fiscal 2004, revenue from services, which includes
consulting, training and other services, accounted for 9.3% of revenue,
compared to 9.7% in fiscal 2003.

         Licence. Licence revenue in fiscal 2004 was $29,087,000 compared to
$33,223,000 in fiscal 2003, a decrease of 12.4%. The decrease in licence
revenue in fiscal 2004 was attributable to several offsetting factors, with
the increased revenue from new products such as iReflect and LiveAudit and
increased demand for the Company's mainframe data integration solutions being
more than offset by factors such as the strengthening of the Canadian
currency, increased price pressure from competitors in the iSeries High
Availability marketplace and the effects of global political events on the
North American, European and Middle East markets.

         Maintenance. Maintenance revenue in fiscal 2004 was $25,354,000
compared to $23,210,000 in fiscal 2003, an increase of 9.2%. This increase was
a result of maintenance revenue generated by additional licence sales since
the end of fiscal 2003 and the renewal of maintenance and support contracts
for licence sales completed in prior periods, partially offset by the effects
of the stronger Canadian currency.

         Services. Services revenue in fiscal 2004 was $5,551,000 compared to
$6,057,000 in fiscal 2003, a decrease of 8.4%. This decrease was primarily due
to the effects of the stronger Canadian currency.

         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 2004, sales denominated in U.S. dollars and European
currencies represented 58.8% and 33.5% respectively of the Company's revenues
(for fiscal 2003, these were 58.9% and 34.2% respectively), while a
significant portion of the Company's operating expenses are incurred in
Canadian dollars and the Company reports its financial results in Canadian
dollars. 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. 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:

      FOR THE YEARS ENDED
                                                            January 31,
                                                        2004              2003
                                                        ----              ----

        Canada                                           7.8%             6.9%
        United States                                   53.2             53.6
        United Kingdom                                  17.4             18.7
        Germany                                          8.3              8.1
        Other                                           13.4             12.7
                                                      --------        --------
                                                       100.0%           100.0%
                                                      ========        ========

         Transaction values in fiscal 2004 for sales of the Company's products
have been as large as U.S.$2,440,000 (U.S. $1,400,000 in fiscal 2003),
although the typical sale ranged from U.S.$70,000 to U.S.$100,000. No single
customer accounted for more than 3.4% of revenue in fiscal 2004 (1.8% in
fiscal 2003), and no single industry accounted for more than 24.7% of licence
revenue in fiscal 2004 (23.3% in fiscal 2003).

COST OF REVENUE

         Licence. Cost of licence revenue consists primarily of duplication,
media, packaging and shipping expenses. For fiscal 2004, costs of licence
revenue were $234,000 (0.8% of licence revenue), relatively unchanged from
$239,000 (0.7% of licence revenue) for fiscal 2003.

         Maintenance and Services. Costs of maintenance and services revenue
consist primarily of the salary and related costs of providing those services.
For fiscal 2004, costs of maintenance and services revenue were $11,389,000
(36.9% of maintenance and service revenue) compared to $12,605,000 (43.1% of
maintenance and services revenue) for fiscal 2003. The gross margin on
maintenance and services revenue improved significantly, as the Company
realized economies of scale in the cost of providing support to its growing
customer base.

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. To assist the reader to properly understand the Company's operating
expense trends, a summary of the ending and average headcount by department
for fiscal 2003 and fiscal 2004 follows (See "Fiscal Year Ended January 31,
2003 Compared to Fiscal Year Ended January 31, 2002" for a comparison of
fiscal 2003 and fiscal 2002). The headcount increase from the end of fiscal
2003 to fiscal 2004 occurred late in the 2004 fiscal year, mainly through the
additional employees taken on as a result of the acquisition of PointBase in
mid-December 2003, and had a limited impact on fiscal 2004's operating
expenses.


                   -----------------------------------------------------------
                   Ending Headcount
                   at January 31,
                                                     2004             2003
                                                --------------    ------------

                   Selling and Marketing             168             151
                   Research & Development             91              82
                   General & Administrative           40              43
                   ----------------------------------------------------------
                   Total                             299             276
                   ----------------------------------------------------------


                                      33
<PAGE>

                   -----------------------------------------------------------
                   Average Headcount for the
                   Fiscal Year Ended January 31,
                                                   2004              2003
                                              -------------      -------------

                   Selling and Marketing           155               166
                   Research & Development           84                92
                   General & Administrative         40                45
                   -----------------------------------------------------------
                   Total                           279               303
                   -----------------------------------------------------------


         Selling and Marketing. Selling and marketing expenses include
expenses for sales commissions, salaries, advertising, tradeshows, promotional
materials and other selling and marketing related activities. For fiscal 2004,
these expenses totaled $20,524,000 (34.2% of revenue), down slightly in dollar
amount from $21,289,000 (34.2% of revenue) for fiscal 2003. The decrease is
due primarily to reduced travel, a reduction of the average headcount in this
area, as well as the impact of the stronger Canadian currency on the Company's
U.S. and European expenses. Management expects selling and marketing expenses
to increase in fiscal 2005 as the Company expands its sales and marketing
activities.

         Research and Development. Research and development expenses include
only salaries and other direct costs associated with the development of new
products and are net of related investment tax credits. Research and
development expenses were $9,753,000 (16.3% of revenue) for fiscal 2004, down
slightly from $10,459,000 (16.7% of revenue) for fiscal 2003 due mainly to a
reduction in average headcount in research and development from fiscal 2003 to
fiscal 2004 and an increase in the amount of investment tax credits recognized
during the 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 2004, $806,000 ($590,000
in fiscal 2003) 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
than the amount recorded.

         General and Administration. General and administration expenses
consist primarily of administrative salaries, rent, recruiting costs and
professional fees. For fiscal 2004, general and administration expenses were
$7,946,000 (13.2% of revenue) compared to $8,812,000 (14.1% of revenue) for
fiscal 2003, a decrease of 9.8%. The Company initiated a series of cost saving
measures during fiscal 2004 with the goal of increasing operating
profitability which, combined with a reduction in overhead expenses as a
result of the headcount reductions and the impact of the stronger Canadian
currency on the Company's U.S. and European expenses, resulted in this
reduction.

         Stock-based compensation. In November 2003, the CICA made changes to
Section 3870, "Stock-Based Compensation and Other Stock-Based Payments",
requiring equity instruments awarded to employees be measured and expensed
using the fair value method. The main impact for the Company is to record
compensation expense relating to the award of stock options to employees that
the Company had previously chosen to disclose.

         The Company has adopted these changes effective February 1, 2004 on a
retroactive basis with restatement of prior periods. This change resulted in a
decrease to net income of $512,000 for the year ended January 31, 2004 and
$286,000 for the year ended January 31, 2003, and an increase to deficit and
increase to contributed surplus of $798,000 as at January 31, 2004. There was
no effect on retained earnings at February 1, 2002.

         For fiscal 2004, stock-based compensation was $512,000 compared to
$286,000 for fiscal 2003. This increase was due to the additional expense from
options issued during fiscal 2004.

         Amortization of Intangibles. For fiscal 2004, amortization of
intangibles was $3,098,000 compared to $2,740,000 for fiscal 2003. The
increase of $358,000 from fiscal 2003 is due to additional amortization of
technology acquired late in fiscal 2003.

INVESTMENT INCOME, NET

         Investment income, net includes interest on cash equivalents,
short-term investments and other investment income net of interest expense on
long-term liabilities and lease obligations. In fiscal 2004, net investment
income was $1,146,000 compared to $611,000 in fiscal 2003. This increase is
primarily due to an increase in average invested cash balances resulting from
positive cash flow from operations over the course of fiscal 2004.

OTHER INCOME

         In April 2003, DataMirror 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 DataMirror an amount
of $279,000 (U.S.$200,000) as consideration for the cancellation of the offer.
The Company at that time ceased its efforts to purchase PointBase as
conditions at the time did not warrant further discussions. The Company
subsequently purchased the remaining shares of PointBase in late fiscal 2003.
For further discussions of the Company's eventual acquisition of PointBase in
December 2003 please refer to the "Acquisition and Investments" section of
this document.


                                      34
<PAGE>

LOSSES FROM INVESTMENT IN POINTBASE, INC.

         In June 2002, PointBase started a downsizing of its business, with
the intent of achieving break-even operations in the short term. In October
2002 it became apparent that these measures 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 value of nil. The loss from the Company's investment in PointBase
was nil in fiscal 2004 compared to an equity loss of $2,081,000 and an
impairment charge of $4,595,000 in fiscal 2003. The decrease was due to the
investment in PointBase having been fully written off at October 31, 2002. The
Company acquired the remaining shares of PointBase in December 2003 as
outlined in the "Acquisition and Investments" section of this document.

INCOME TAX EXPENSE

         During fiscal 2004, the Company recorded an income tax provision of
$2,788,000 as compared to a provision of $2,434,000 in fiscal 2003.

         The combined basic Canadian federal and provincial tax rate used in
determining the income tax provision for fiscal 2004 was 36.6% as compared to
38.6% for fiscal 2003. The decrease in the combined rate is due to the
announced reduction in the federal and provincial tax rates coming into effect
during the year.

         The income tax provision is different from the amount that would be
obtained by multiplying the Company's income before income taxes by this tax
rate due to a combination of factors including: the equity loss and impairment
charge of PointBase being non-deductible for tax purposes, certain 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.

         As at January 31, 2004, the Company had foreign non-capital loss
carryforwards of approximately $3,285,000 which have no expiry date and
$3,100,000 which expire at various times over 20 years. A valuation allowance
has been recognized for all but $167,000 of the losses.

NET INCOME (LOSS)

         In fiscal 2004, the Company recorded net income of $5,173,000 ($0.46
per share) as compared to a loss of $2,439,000 ($(0.21) per share) in fiscal
2003. This marked improvement in profitability was achieved despite pressures
on revenue caused by the stronger Canadian currency and generally weaker
global economic conditions, by increasing the gross margin on maintenance and
services through operating efficiencies in providing those services, by
reducing operating expenses through headcount reductions and by continued
focus on controlling non-headcount operating costs, together with an increase
in investment income due to higher invested cash balances and the elimination
of losses from the investment in PointBase.

OPERATING SEGMENTS AND CURRENCY FLUCTUATIONS

         The Company operates in only one industry, that being the business of
developing and marketing computer software products. The Company operates in
two reportable segments, North America, which includes the Company's Asia
Pacific operations, and Europe, based on the geographic location of its
operations. The accounting policies followed by these segments are the same as
those described in the summary of significant accounting policies in Note 1 of
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 2005, the North American segment (which includes the
Company's Asia Pacific operations, which are currently not significant) had
total revenue of $35,021,000 compared to $39,918,000 in fiscal 2004, a
decrease of 12.3%. The drop in revenue was largely caused by the effect on
revenue of the stronger Canadian dollar which dramatically impacted the U.S.
dollar based North American revenue, as well as 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. During that same period, the North American segment had an
operating loss of $2,149,000 compared to operating income of $3,732,000 in
fiscal 2004, with the reduction in operating profitability of $5,881,000 being
caused mainly by the revenue decrease with a slight impact from the increase
in operating expenses caused by the acquisition of PointBase in December 2003.


                                      35
<PAGE>

         Revenues from the European segment were $18,246,000 in fiscal 2005
compared to $20,074,000 in fiscal 2004, a decrease of 9.1% due mainly to 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. During that same period, European
segment operating income was $960,000 compared with $2,804,000 in fiscal 2004,
a decrease of $1,844,000 due mainly to the revenue decreases.

ACQUISITIONS AND INVESTMENTS

         As at April 18, 2005, 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 and 2005.

         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 $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 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 $15,000, capital
assets valued at $22,000 and technology valued at $362,000 for cash
consideration of $399,000. The technology acquired is being amortized over a
term of one year.

         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 $9,800,000. On April 18, 2002, the bid was increased to $18,900,000,
and subsequently, on May 8, 2002, the bid was further increased to
$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 $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 $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 $312,000. The cost of these shares had
previously been included in the investment on the 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.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.

         Effective September 1, 2000, the Company acquired certain assets and
liabilities of Constellar Corporation, a company engaged in the business of
developing and marketing computer software products. The acquisition has been
accounted for under the purchase method of accounting. As part of the purchase
agreement, further cash payments of up to U.S. $3,000,000 were payable
contingent on certain revenue targets being generated from the acquired
technology during the three-year period ending August 31, 2003. In November
2001, a payment of $724,000 was made in payment of contingent consideration of
$856,000 for the period ended August 31, 2001 less a holdback of $132,000
related to assets purchased which were not realized. The additional contingent
payment has been added to the value of the technology acquired, bringing the
total value of technology acquired to $12,382,000. No payment of contingent
consideration was due for the periods ended August 31, 2002 and August 31,
2003.

         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


                                      36
<PAGE>


         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 $9,377,000, and in September 1997 raised net proceeds of
$15,721,000 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 $34,151,000 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, 2005 the Company had cash, cash equivalents and
short-term investments of $57,436,000, compared to $42,006,000 at the end of
fiscal 2004. The increase in cash, cash equivalents and short-term investments
was primarily due to increased cash flow from operations and cash received
from the sale of the Company's investment in Idion less funds used to
repurchase shares under the Company's normal course issuer bid. For the year
ended January 31, 2005, cash flow from operations was $4,959,000, a decrease
of $5,204,000 over cash flow from operations of $10,163,000 in fiscal 2004 due
mainly to a decrease in the level of operating profitability. The Company's
investing activities consisted primarily of purchases of capital assets and
transactions regarding the Company's investment in Idion. During fiscal 2005,
capital expenditures of $874,000 ($1,190,000 in fiscal 2004) 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 capital lease
payments and share capital transactions. During fiscal 2005 the Company used
$9,223,000 ($3,987,000 in fiscal 2004) in cash to repurchase 898,400 (317,500
in fiscal 2004) of its common shares under a normal course issuer bid and
raised an additional $804,000 ($1,779,000 in fiscal 2004) through the issuance
of 89,414 (221,310 in fiscal 2004) common shares pursuant to the Company's
stock option plans.

         The Company has available short-term bank credit facilities of
$3,000,000 bearing interest at the prime rate plus 0.5% and (pound)150,000
($350,000) bearing interest at the prime rate in the United Kingdom plus
3.00%. 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, 2005 there was no outstanding indebtedness under these credit facilities
other than letters of credit of $170,000 ($181,000 in fiscal 2004). 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 in the event 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 business.
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.

         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 $8.50 and not more than $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 $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
$10.00 (subject to prorating and disregarding fractions and odd-lots) were
purchased at $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 $20,620,000, and will be accounted for as a reduction
in share capital of $11,432,000 and a charge to retained earnings (deficit) of
$9,188,000.


NEW ACCOUNTING RECOMMENDATIONS

     (i) U.S. GAAP

         As permitted by Statement 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 Statement 123
         "Share-Based Payment" ("Statement 123(R)") was issued, which requires
         all share-based payments to employees to be recognized in the income
         statement based on their fair value.

                                      37
<PAGE>


         The Company expects to adopt Statement 123(R) for U.S. GAAP purposes
         on August 1, 2005. While Statement 123(R) requires, on a prospective
         basis, the recognition of compensation cost for all employee awards
         that are outstanding and unvested on the effective date, the Company
         is permitted to choose whether it restates prior periods. The Company
         is currently reviewing these alternatives and has not yet determined
         the methodology for implementation.

         The impact of adopting Statement 123(R) cannot be predicted at this
         time because it will depend on the levels of share-based payments
         granted in the future, however, had the Company adopted Statement
         123(R) in prior periods, the impact would have approximated the
         impact of Statement 123 as described in the disclosure of proforma
         net income (loss) and earnings (loss) per share in note 20 (d) to the
         consolidated financial statements.

         The Financial Accounting Standards Board issued Interpretation No.
         46, "Consolidation of Variable Interest Entities" ("Interpretation
         46") in December 2003. Similar to AcG-15 in Canadian GAAP,
         Interpretation 46 provides criteria and guidelines to determine
         whether an entity is a variable interest entity to the Company for
         consolidation purposes. The Company has reviewed its policies and
         determined that there is no impact on the consolidated financial
         statements as a result of the Company adopting these pronouncements.

    (ii) Canadian GAAP

         In November 2003, the CICA made changes to Section 3870, "Stock-Based
         Compensation and Other Stock-Based Payments", requiring equity
         instruments awarded to employees be measured and expensed using the
         fair value method. The main impact for the Company is to record
         compensation expense relating to the award of stock options to
         employees that the Company had previously chosen to disclose.

         The Company has adopted these changes effective February 1, 2004 on a
         retroactive basis with restatement of prior periods. This change
         resulted in a decrease to net income of $512,000 for the year ended
         January 31, 2004 and $286,000 for the year ended January 31, 2003,
         and an increase to deficit and increase to contributed surplus of
         $798,000 as at January 31, 2004. There was no impact on retained
         earnings at February 1, 2002.

         In March 2003, the CICA issued handbook section 3110, "Asset
         Retirement Obligations". The new standard establishes the requirement
         for the recognition, measurement and disclosure of the legal and
         contractual obligations for the retirement of long-lived assets. The
         standard requires that the fair value of the liabilities related to
         the asset retirement be recognized in the period in which they are
         incurred. The liability is accreted over time through periodic
         changes to income. In addition, the asset retirement cost is
         capitalized as part of the carrying value of the related long-lived
         assets and depreciated over the asset's useful life. The adoption of
         section 3110, effective February 1, 2004, had no financial impact on
         the Company.

         In November 2001, the Accounting Standards Board ("AcSB") approved
         AcG-13, an accounting guideline establishing conditions which must be
         satisfied in order to apply hedge accounting. The Company adopted
         these guidelines effective February 1, 2004. There was no impact on
         the Company upon adoption of this guideline.


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 $10,528,000 for
the twelve months ended January 31, 2005, $9,753,000 for the twelve months
ended January 31, 2004, and $10,459,000 for the twelve months ended January
31, 2003. Such expenditures constituted approximately 19.8%, 16.3%, and 16.7%
of the Company's revenue for fiscals 2005, 2004, and 2003, 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".


                                      38
<PAGE>

D.   Trend Information

         During fiscal 2005, the Company faced significant pressure on its
operating margins due to the continued strengthening of the Canadian currency.
With the headcount realignment completed in January 2005, the Company feels it
has adjusted its overhead and business model to drive increased revenue and
improved operating margins in fiscal 2006 and beyond. The Company intends to
adopt the US dollar as its reporting currency for fiscal 2006, as it better
reflects the Company's true revenue growth and enhances comparability of the
Company's results against its US based competitors.

         The Company's balance sheet is strong and the business model had been
realigned to address the margin pressures caused by the stronger Canadian
currency. Our 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
Sarbanes-Oxley, and address performance and accountability pressures. We feel
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 the Company recently demonstrated that belief through its
substantial issuer bid. We remain 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.

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, 2005, 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 capital leases for computer equipment.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
(Cdn$)                                                              Payment Due by Period
Contractual Obligations               Total         Less than 1 year      1 - 3 years       4- 5 years      More than 5
                                                                                                              years
                               ----------------------------------------------------------------------------------------
<S>                                 <C>                <C>                <C>               <C>                 <C>
Operating Leases                  $ 5,974,000       $ 2,410,000        $ 2,345,000       $ 1,219,000         $ 0
                                  -----------       -----------        -----------       ------------      -----------

Total Contractual Obligations     $ 5,974,000       $ 2,410,000        $ 2,345,000       $ 1,219,000         $ 0
-----------------------------------------------------------------------------------------------------------------------
</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).................         Secretary and Executive Vice               November 1997
Midhurst, Ontario                         President, Business Development of
                                          the Company

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

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 of The Fifth Line Enterprise     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 will be retiring from his position as Executive Vice
         President of Business Development and as a full-time employee of the
         Company by approximately the end of May 2005. It is expected that Mr.
         Dixon will continue to provide services to the Company as a
         consultant in addition to serving on the Board of Directors.

         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:

Name and                                Position with the Company
Municipality of Residence               and Principal Occupation
-------------------------               ------------------------


PETER F. CAULEY ..............          Vice President, Finance and Chief
Toronto, Ontario                        Financial Officer

MARK DEEP(1) .................          Vice President of Marketing
Markham, Ontario

P. KIRK DIXON.................          Secretary and Executive Vice President,
Midhurst, Ontario                       Business Development

PAUL GILBERT(2)...............          Vice President of Sales, United States
Mississauga, Ontario                    and Canada

LUCIAN MUSTATEA(3)............          Vice President, Research and Development
Markham, Ontario

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

REAN PRETORIUS(4).............          Senior Vice President, Global Channel
Irvine, California                      and Alliances

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

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

DONALD G. SYMONDS.............          Vice President, Sales, EMEA
London, United Kingdom

E. HERMAN WALLENBURG..........          Chief Scientist
Toronto, Ontario

         As a group, as at January 31, 2005 directors and senior officers
owned, directly or indirectly, or exercised control or direction over
2,968,474 Common Shares of the Company (approximately 28.1% 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.

         Mark Deep joined the Company as Director of Marketing on March 17,
2004 and completed his employment with the Company February 18, 2005. Mr. Deep
was promoted on November 15, 2004 to the position of Vice President of
Marketing.

_________________________
(1) Mr. Deep's employment with the Company began on March 17, 2004 and ended
    February 18, 2005.
(2) Mr. Gilbert's employment with the Company began on January 4, 2005.
(3) Mr. Mustatea's employment with the Company began on June 14, 2004.
(4) Mr Pretorius' employment with the Company began on October 20, 2003 and
    ended January 12, 2005.


                                      41
<PAGE>
         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 his current position as 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 will be retiring
from his position as Executive Vice President Business Development and as a
full-time employee of the Company by approximately the end of May 2005. It is
expected that Mr. Dixon will continue to provide services to the Company as a
consultant in addition to serving on the Board of Directors.

         Paul Gilbert joined the Company on January 4, 2005 as Vice President
of Sales, United States and Canada. Mr. Gilbert has previously served in
senior sales roles at Avotus, SAS, NCR, Forte/Sun Microsystems, and Blazent
Inc.

         Donald L. Lenz is a founding partner of Newport Partners Inc., 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 Corporation, Ontario Genomics Institute and The
Laidlaw Foundation. From 1986 to 1999, Mr. Lenz was a senior partner with the
Investment Banking Division of RBC Dominion Securities Inc. 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 has served as Chief Technology
Officer and Vice President of Research and Development at Opencola. He has
also worked at IBM and Open Text Corporation, and held senior management
positions at Corel Corporation and Cognos.

         Bryan E. Plug was President of SAP Canada Inc., an integrated
business applications software vendor, from 1991 until July 1997. Mr. Plug was
the first President and Chief Executive Officer of Pandesic LLC (the Internet
company from SAP and Intel) from July 1997 to May 1998. Mr. Plug was
President, Chief Executive Officer and Chairman of the Board of SMART
Technologies, Inc., a developer and supplier of customer-driven Enterprise
Relationship Management software, from June 1998 to July 1999. Mr. 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 the 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 communications
companies. Mr. Powell also sits on several other boards including DMTI Spatial
Inc., electroBusiness.com Inc., ClientLogic Corporation, Diversinet
Corporation, Sumitomo Mitsui Banking Corporation of Canada and the Arthritis
and Autoimmunity Research Center Foundation. From 1980 to 2000, Mr. Powell held
a number of positions with Nortel Networks, including Senior Vice President,
Information Services & Chief Information Officer from 1996 to 2000. 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.

         Rean Pretorius was previously the Company's Senior Vice President,
Global Channel and Alliances. Mr. Pretorius joined the Company in 2003 and
completed his employment with the Company January 12, 2005. Prior to joining
DataMirror, Mr. Pretorius was Executive Vice President of Worldwide Sales at
Vision Solutions. He also co-founded and served as Chief Executive Officer at
Silverlake Technology Solutions.

         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.

                                      42
<PAGE>


         Donald G. Symonds was named Vice President, Sales, EMEA of the
Company in September 1999. From April 1996 to September 1999 Mr. Symonds held
other positions with the Company including Director, Business Planning, EMEA,
Director, Channel Operations (EMEA) and Channel Consultant. Prior to joining
the Company, Mr. Symonds held a variety of professional and senior management
positions with IBM Canada and also was employed independently as a marketing
consultant.

         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 of The Fifth Line
Enterprise, a private firm engaged in providing strategic advisory services to
Canadian industry. From February 1997 to October 1999, Mr. Woodley was
President of Oracle Corporation Canada Inc. From September 1987 to January
1997, Mr. Woodley was President of Compaq Canada Inc. Mr. Woodley was
appointed as a director of the Company in May 2001. Mr. Woodley also sits on
the boards of TELUS Corporation, OnX Enterprise Solutions Inc., Gennum
Corporation, and Steam Whistle Brewing. Mr. Woodley is a past Chair of ITAC
(Information Technology Association of Canada), the immediate past Chair of
the Board of Governors of The Stratford Festival of Canada and currently
serves as Treasurer of Sick Kids Hospital Foundation.

B.    Compensation

1. Summary Compensation Table

     The following table sets forth information concerning the compensation
earned during the financial years ended January 31, 2005, 2004, and 2003 by
the three directors who are employed by the Company.

<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          Financial  Salary(1)    Bonus(2)   Compensation    Options     Restricted     Incentive    Compensation
   Principal Position        Year       ($)         ($)          ($)         Granted     Share Units  Plan Payouts       ($)
                                                                              (# of          ($)           ($)
                                                                              Common
                                                                             Shares)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>      <C>         <C>            <C>           <C>           <C>           <C>           <C>
Nigel W. Stokes              2005     400,000     261,300        Nil           Nil           Nil           Nil           Nil
Chairman, President and
Chief Executive Officer      2004     390,000     453,000        Nil           Nil           Nil           Nil           Nil

                             2003     375,000     150,000        Nil          40,000         Nil           Nil           Nil


-----------------------------------------------------------------------------------------------------------------------------------
P. Kirk Dixon                2005     250,000     108,875        Nil           Nil           Nil           Nil           Nil
Secretary and Executive
Vice President, Business     2004     249,600     188,750        Nil           Nil           Nil           Nil           Nil
Development
                             2003     240,000      50,000        Nil          10,000         Nil           Nil           Nil


-----------------------------------------------------------------------------------------------------------------------------------
Herman Wallenburg            2005     180,000       Nil          Nil           Nil           Nil           Nil           Nil
Chief Scientist
                             2004     176,800       Nil          Nil           Nil           Nil           Nil           Nil

                             2003     170,000       Nil          Nil          5,000          Nil           Nil           Nil


===================================================================================================================================
</TABLE>

(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. Bonus payments earned in respect of
the fiscal years 2005, 2004, and 2003 were, respectively, for Mr. Stokes:
$107,000, $261,300, and $453,000, Mr. Dixon: $26,000, $108,875, and $188,750
and Mr. Wallenburg: $8,000, nil, and nil.

                                      43
<PAGE>


2. Stock Options

        Option Grants During the Most Recently Completed Financial Year

           No options were granted during the year ended January 31, 2005 to
the three directors employed by the Company.


                                      44
<PAGE>




 Aggregated Option Exercised During the Most Recently Completed Financial Year
                      and Financial Year-End Option Values

     The following table sets out the number of options exercised during the
year ended January 31, 2005 and the number of exercisable/unexercisable
options held as at January 31, 2005 by the three directors employed by the
Company.

<TABLE>
<CAPTION>
========================== ============= ============== =================================== ====================================
                             Securities    Aggregate
                            Acquired on      Value       Number of Unexercised Options at    Value of Unexercised in-the-Money
         Name and             Exercise     Realised            January 31, 2005(1)            Options at January 31, 2005(2)
     Principal Position         (#)           ($)
                                                        ----------------- ----------------- ----------------- ------------------
                                                          Exercisable      Unexercisable      Exercisable       Unexercisable
                                                              (#)               (#)               ($)                ($)
-------------------------- ------------- -------------- ----------------- ----------------- ----------------- ------------------
<S>                            <C>            <C>          <C>               <C>               <C>                  <C>
Nigel W. Stokes
Chairman, President and         Nil           Nil          54,250(3)         24,250(4)         12,700(5)            0(6)
Chief Executive Officer
-------------------------- ------------- -------------- ----------------- ----------------- ----------------- ------------------
P. Kirk Dixon
Secretary and Executive         Nil           Nil            7,500             2,500               0                  0
Vice President, Business
Development
-------------------------- ------------- -------------- ----------------- ----------------- ----------------- ------------------
Herman Wallenburg
Chief Scientist                 Nil           Nil            3,750             1,250               0                  0
========================== ============= ============== ================= ================= ================= ==================
</TABLE>

Notes:
(1) Includes options that become exercisable within 60 days of January 31, 2005.
(2) Based on the closing trading price of the Common Shares on The Toronto
    Stock Exchange on January 30, 2005 of $8.50.
(3) Includes 24,250 options exercisable of Mr. Stoke's spouse.
(4) Includes 14,250 options unexercisable of Mr. Stoke's spouse.
(5) Includes $12,700 value of exercisable options of Mr. Stoke's spouse.
(6) Includes $0 value of unexercisable options of Mr. Stoke's spouse.

     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
participants since the provisions of the Sarbanes-Oxley Act 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, 2005.

     During the fiscal year ending on January 31, 2005, directors of the
Company who were not salaried employees of the Company were entitled to be
paid an annual fee of $25,000 for being a member of the board of directors, an
additional $2,500 annually for each committee of which they are a member and
an additional $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, 2005, 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 U.S.$223,916 which
covers the period from August 1, 2004 to August 1, 2005.

C.       Board Practices

EMPLOYMENT AND SERVICE AGREEMENTS


                                      45
<PAGE>

         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 $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 $400,000 for fiscal
2005 and to $412,000 for fiscal 2006. 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. The Compensation Committee set the amount of
annual performance bonus that Mr. Stokes may receive at $325,000 for fiscal
2005. Based on the performance targets set by the board of directors for Mr.
Stokes and the performance of the Company for fiscal 2005, Mr. Stokes would
have been ineligible to receive any of this bonus. The Compensation Committee
believes that the failure of the Company to meet the performance targets for
fiscal 2005 was largely the result of a much stronger Canadian currency than
initially anticipated. The Compensation Committee believed it was fair in the
circumstances to adjust the bonus plan so that Mr. Stokes was paid $107,000 of
the $325,000 in respect of fiscal 2005 during fiscal 2006. The Compensation
Committee approved an increase in the amount of annual performance bonus that
Mr. Stokes may receive at $350,000 beginning fiscal 2006. In addition, Mr.
Stokes is eligible to receive an additional 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
over-achievement of the financial performance of the Company in respect of
each fiscal period. 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 Company has entered into an employment agreement of indefinite
duration with Mr. Kirk Dixon, Executive Vice President, Business Development
(then Executive Vice President, Development and Global Operations) dated April
23, 2002. This employment agreement provided for an annual salary of $240,000
effective February 1, 2002 and also provided for a retroactive bonus payment
of $50,000 covering the period from May 8, 2001 to January 31, 2002 during
which Mr. Dixon had continued his employment with the Company under the terms
of a previous employment agreement that had expired on May 8, 2001. The
Company approved an increase in annual base salary to $250,000 for fiscal
2005. Mr. Dixon's agreement also provides that he may receive an annual
performance bonus of up to $125,000, 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. The Company set the amount of annual performance bonus that Mr.
Dixon may receive to $80,000 for fiscal 2005. Based on the performance targets
set by the board of directors for Mr. Dixon and the performance of the Company
for fiscal 2005, Mr. Dixon would have been ineligible to receive any of this
bonus. The Compensation Committee believes that the failure of the Company to
meet the performance targets for fiscal 2005 was largely the result of a much
stronger Canadian currency than initially anticipated. The Compensation
Committee believed it was fair in the circumstances to adjust the bonus plan
so that Mr. Dixon was paid $26,000 of the $80,000 in respect of fiscal 2005
during fiscal 2006. Mr. Dixon is also eligible to participate in the Company's
group benefit plans and Executive Stock Compensation Plan. The 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. Dixon's employment without cause by making a lump sum payment of an amount
equal to one times his annual salary thereunder. The employment agreement
automatically renews each year and is subject to annual compensation review.
Mr. Dixon will be retiring from his position as Executive Vice President,
Business Development and as a full-time employee of the Company by
approximately the end of May 2005. It is expected that Mr. Dixon will continue
to provide services to the Company as a consultant in addition to serving on
the Board of Directors.

     The Company has entered into an employment agreement dated as of June 14,
2002 with Mr. Herman Wallenburg, Chief Scientist. This employment agreement
provides for an annual salary of $170,000, retroactive to February 1, 2002.
The Company approved an increase in annual base salary to $180,000 for fiscal
2005 and to $185,000 for fiscal 2006. 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.
Based on the performance targets set by the Company for Mr. Wallenburg and the
performance of the Company for fiscal 2005, Mr. Wallenburg would have been
ineligible to receive any of this bonus. The Compensation Committee believes
that the failure of the Company to meet the performance targets for fiscal
2005 for Mr. Wallenburg was largely the result of a much stronger Canadian
currency than initially anticipated. The Compensation Committee believed it
was fair in the circumstances to adjust the bonus plan so that Mr. Wallenburg
was paid $8,000 of the $20,000 in respect of fiscal 2005 during fiscal 2006.
Mr. Wallenburg is also eligible to participate in the Company's group benefit
plans and Executive Stock Compensation Plan. This 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. Wallenburg's
employment without cause by making a lump sum payment of an amount equal to
one half his annual salary thereunder.

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

                                      46
<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 November 23, 2004 and determined that no changes were required. The Audit
Committee Charter and the Compensation Committee Charter are incorporated by
reference to the Company's annual report Form 20-F, filed on June 5, 2003 as
Exhibits 6.1 and 6.2, respectively. 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, 2005     As at January 31, 2004       As at January 31, 2003
-------------------------- ------------------------- --------------------------- -----------------------------
<S>                                   <C>                         <C>                         <C>
North America                         184                         236                         212
-------------------------- ------------------------- --------------------------- -----------------------------
Europe                                 47                         59                           59
-------------------------- ------------------------- --------------------------- -----------------------------
Other                                  1                           4                           5
-------------------------- ------------------------- --------------------------- -----------------------------
Total                                 232                         299                         276
-------------------------- ------------------------- --------------------------- -----------------------------

-------------------------- ------------------------- --------------------------- -----------------------------
Research & Development                 69                         91                           82
-------------------------- ------------------------- --------------------------- -----------------------------
Sales & Marketing                     122                         168                         151
-------------------------- ------------------------- --------------------------- -----------------------------
Other                                  41                         40                           43
-------------------------- ------------------------- --------------------------- -----------------------------
Total                                 232                         299                         276
-------------------------- ------------------------- --------------------------- -----------------------------
</TABLE>


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 the Common Shares of the Company outstanding on April 18,
2005.

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

P. Kirk Dixon                       551,724(1)                 6.44%

Donald L. Lenz                       26,833(2)                 0.31%

Bryan E. Plug                        40,000(3)                 0.47%

Keith Powell                         15,000(4)                 0.18%

Nigel W. Stokes                   2,034,963(5)                23.64%

E. Herman Wallenburg                455,990(6)                 5.33%

Donald Woodley                       21,663(7)                 0.25%
__________

(1)  Includes 64,384 common shares held by his spouse and 7,500 Options
     exercisable either currently or within 60 days.
(2)  No Options were exercisable either currently or within 60 days.
(3)  Includes 20,000 Options exercisable either currently or within 60 days.
(4)  Includes 12,015 Options exercisable either currently or within 60 days.
(5)  Includes 36,000 common shares held by his spouse, 30,000 Options
     exercisable either currently or within 60 days and 24,250 Options
     exercisable either currently or within 60 days granted to his spouse.
(6)  Includes 3,750 Options exercisable either currently or within 60 days.
(7)  Includes 15,000 Options exercisable either currently or within 60 days.

                                      47
<PAGE>


      The following table sets forth the outstanding options to acquire Common
Shares granted to each director 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.

------------------- ------------------------- --------------- ------------------
Director            Number of Common Shares   Exercise Price  Expiration Date
------------------- ------------------------- --------------- ------------------
P. Kirk Dixon       10,000                    $11.54          March 18, 2007
------------------- ------------------------- --------------- ------------------

------------------- ------------------------- --------------- ------------------
Nigel W. Stokes     40,000                    $11.54          March 18, 2007
------------------- ------------------------- --------------- ------------------

------------------- ------------------------- --------------- ------------------
Herman Wallenburg   5,000                     $11.54          March 18, 2007
------------------- ------------------------- --------------- ------------------

------------------- ------------------------- --------------- ------------------
Keith Powell        17,015                    $6.28           June 30, 2006
------------------- ------------------------- --------------- ------------------

------------------- ------------------------- --------------- ------------------
Bryan E. Plug       20,000                    $9.06           December 31, 2005
------------------- ------------------------- --------------- ------------------

------------------- ------------------------- --------------- ------------------
Donald Woodley      20,000                    $6.28           June 30, 2006
------------------- ------------------------- --------------- ------------------



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 December 5, 1996 and November 20, 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.

                                      48
<PAGE>


     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 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. Unless specified
otherwise, 20% of a Participant's Options will vest each year over a five year
period.

    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.
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
500,000, 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. On March 3, 2003, the Board of Directors,
subject to approval of shareholders and the Toronto Stock Exchange, adopted an
amendment to the Executive Plan to increase the maximum number of Common
Shares issuable upon exercise of options under the Executive Plan to 800,000.
The Company's shareholders approved the amendment at the Annual and Special
Meeting of the shareholders held on June 12, 2003.

     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").

                                      49
<PAGE>


     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 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.

                                      50
<PAGE>


     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 PPPs
since the provisions of the Sarbanes-Oxley Act prohibiting such loans came
into effect. As at January 31, 2004, the Company had no such outstanding loans
to PPPs. Prior to the coming into effect of the Sarbanes-Oxley Act, the
Company granted interest free loans to certain of its directors under the
Purchase Plan. Loans made prior to the coming into effect of the
Sarbanes-Oxley Act are grandfathered. 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.


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 the date of this
Form. 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
8,555,432 Common Shares outstanding as of April 18, 2005. 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               2,034,963(1)                23.64 %

  Stadium Capital Management, LLC         1,370,297                 16.02 %
 Natcan Investment Management Inc.        1,350,546                 15.79 %
 TAL Global Asset Management Inc.          630,100                  7.36 %

       Guardian Capital Inc.               550,200                  6.43 %
          AGF Funds Inc.                   504,576                  5.90 %

Notes:
(1) Includes 36,000 Common Shares held by his spouse, 30,000 Options
    exercisable either currently or within 60 days and 24,240 Options
    exercisable either currently or within 60 days granted to his spouse.

                                       51
<PAGE>

    Significant changes in ownership

    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.

<TABLE>
<CAPTION>
 ------------------------------------  --------------------------   -----------------------------------------
 Major Shareholder                     Date                         Transaction
 ------------------------------------  --------------------------   -----------------------------------------

 ------------------------------------  --------------------------   -----------------------------------------
<S>                                    <C>                          <C>
 TAL Global Asset Management Inc.      Period from March 31,        Holdings  increased from approximately
                                       2002 to March 31, 2003       7.7% to 13.0%
 ------------------------------------  --------------------------   -----------------------------------------
 TAL Global Asset Management Inc.      Period from October 31,      Holdings  decreased from  approximately
                                       2003 to March 31, 2004       11.4% to 9.7%
 ------------------------------------  --------------------------   -----------------------------------------
 TAL Global Asset Management Inc.      Period from April 1,         Holdings decreased from approximately
                                       2004 to December 31, 2004    9.7% to 5.5%
 ------------------------------------  --------------------------   -----------------------------------------
 Guardian Capital Inc.                 Period from January 1,       Holdings decreased from approximately
                                       2004 to December 31, 2004    8.1% to5.0%
 ------------------------------------  --------------------------   -----------------------------------------
 Natcan Investment Management Inc.     September 31, 2004           Holdings increased to 14.0%
 ------------------------------------  --------------------------   -----------------------------------------
 Natcan Investment Management Inc.     Period from October 1,       Holdings increased from approximately
                                       2004 to January 31, 2005     14.0% to 17.5%
 ------------------------------------  --------------------------   -----------------------------------------
 Natcan Investment Management Inc.     Period from Feburary 1,      Holdings decreased from approximately
                                       2005 to March 31, 2005       17.5% to 15.8%
 ------------------------------------  --------------------------   -----------------------------------------
 Stadium Capital Management, LLC       September 15, 2004           Holdings increased to 12.5%
 ------------------------------------  --------------------------   -----------------------------------------
</TABLE>

    Information available to the Company indicates that, as at April 18, 2005,
there were five record holders in the U.S. holding 3,131,762 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 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 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.


                                       52
<PAGE>


     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. The Company has granted
interest free loans to certain of its directors to purchase Common Shares
under the Share Purchase Plan. The loans are to be repaid from quarterly
directors' fees due to such persons as they are earned, and may also be repaid
in whole or in part at any time without penalty. The full principal amount of
a director's loan is immediately due and payable on the date a director ceases
to be a director of the Company. The aggregate indebtedness to the Company of
all participants in the Share Purchase Plan as at April 18, 2005 was nil. The
Company has not loaned money to directors since the provisions of the
Sarbanes-Oxley Act prohibiting such loans came into effect. Loans made prior
to the coming into effect of the Sarbanes-Oxley Act are grandfathered. See
Item 6. "Directors, Senior Management and Employees - Share Ownership."

C.    Interests of Experts and Counsel

Information not required for annual report.

                                      53
<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".

     Shopplex.com Corporation carrying on business as Teilhard Technologies
and Juxtacomm Technologies Inc. filed and served a Statement of Claim against
the Company alleging infringement of a Canadian Patent (No. 2,241,767) and
certain other related claims on July 15, 2004. By Order dated November 10,
2004, the Federal Court of Canada struck out all of the allegations of
infringement in the Statement of Claim but provided the plaintiff with leave
to amend. The Plaintiff filed an amended Statement of Claim and the Company
filed and served the plaintiff with a motion to strike out the allegations of
infringement again. The motion is scheduled to be heard on April 26, 2005. The
Company believes the claims of infringement are without merit and intends to
defend this matter vigorously.

     Westcon Inc. ("Westcon"), a specialty distributor of networking
communications and security products is a customer of the Company and is
currently in a dispute with the Company. No Statement of Claim has been filed
by Westcon against the Company. 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.


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 Nasdaq National Market
under the symbol "DMCX" and on the Toronto Stock Exchange under the symbol
"DMC". 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. The Company's shares began trading on the Nasdaq
National Market on January 18, 2001.

--------------------------------------------------------------------------------
               Annual Market Prices on the Toronto Stock Exchange
--------------------------------------- -------------------- ------------------
                                                High                 Low
--------------------------------------- -------------------- ------------------
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
--------------------------------------- -------------------- ------------------
Fiscal year ended January 31, 2001             $29.90              $11.75
--------------------------------------- -------------------- ------------------

                                       54
<PAGE>

------------------------------------------------------------------------------
               Annual Market Prices on the Nasdaq National Market
----------------------------------------- ------------------ -----------------
                                                High               Low
----------------------------------------- ------------------ -----------------
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
----------------------------------------- ------------------ -----------------


-------------------------------------------------------------------------------
             Quarterly Market Prices on the Toronto Stock Exchange
-------------------------------------------------------------------------------
                                                    High              Low
--------------------------------------------- ----------------- ---------------
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
--------------------------------------------- ----------------- ---------------
Fiscal year ended January 31, 2004
--------------------------------------------- ----------------- ---------------
     Fourth Quarter                                $18.00           $14.50
--------------------------------------------- ----------------- ---------------
     Third Quarter                                 $14.48           $11.42
--------------------------------------------- ----------------- ---------------
     Second Quarter                                $12.30            $9.00
--------------------------------------------- ----------------- ---------------
     First Quarter                                 $12.75           $10.75
--------------------------------------------- ----------------- ---------------


--------------------------------------------------------------------------------
             Quarterly Market Prices on the Nasdaq National Market
--------------------------------------------------------------------------------
                                                  High               Low
------------------------------------------- ------------------ -----------------
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
------------------------------------------- ------------------ -----------------
Fiscal year ended January 31, 2004
------------------------------------------- ------------------ -----------------
     Fourth Quarter                              $13.96             $11.15
------------------------------------------- ------------------ -----------------
     Third Quarter                               $10.65              $8.15
------------------------------------------- ------------------ -----------------
     Second Quarter                               $8.65              $6.63
------------------------------------------- ------------------ -----------------
     First Quarter                                $8.77              $7.00
------------------------------------------- ------------------ -----------------


--------------------------------------------------------------------------------
               Monthly Market Prices on the Toronto Stock Exchange
--------------------------------------------------------------------------------
                                            High                   Low
----------------------------------- ---------------------- --------------------
March 2005                                 $10.10                 $9.50
----------------------------------- ---------------------- --------------------
February 2005                               $9.81                 $8.50
----------------------------------- ---------------------- --------------------
January 2005                                $8.59                 $8.25
----------------------------------- ---------------------- --------------------
December 2004                               $8.76                 $8.00
----------------------------------- ---------------------- --------------------
November 2004                               $9.74                 $7.75
----------------------------------- ---------------------- --------------------
October 2004                               $10.25                 $8.60
----------------------------------- ---------------------- --------------------


--------------------------------------------------------------------------------
              Monthly Market Prices on the Nasdaq National Market
--------------------------------------------------------------------------------
                                             High                   Low
------------------------------------ ---------------------- --------------------
March 2005                                   $8.10                 $7.66
------------------------------------ ---------------------- --------------------
February 2005                                $7.89                 $6.90
------------------------------------ ---------------------- --------------------
January 2005                                 $7.00                 $6.76
------------------------------------ ---------------------- --------------------
December 2004                                $7.11                 $6.71
------------------------------------ ---------------------- --------------------
November 2004                                $7.86                 $6.79
------------------------------------ ---------------------- --------------------
October 2004                                 $8.32                 $7.18
------------------------------------ ---------------------- --------------------


                                       55
<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.


                                       56
<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).

                                       57
<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.

                                       58
<PAGE>


C.    Material contracts

      For the two years preceding 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 $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, 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
$237 million for investments completed in 2004 and $250 million for
investments completed in 2005 and 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.


                                       59
<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 or they do not constitute "taxable
Canadian property", 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), 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.


                                       60
<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

                                       61
<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, 2005.

      The Company invests its cash in a variety of short-term Canadian dollar
denominated financial instruments, including government bonds, commercial
paper 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 investments balances should be approximately
$40,000,000, therefore a 1% change in interest rates could affect interest
income by as much as $400,000 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. 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
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 2005, 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, 2005, 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 of approximately US$1.00 = Cdn$1.24, maturing within sixty days
of the financial year end. These contracts hedge substantially all of the
Company's U.S. dollar based accounts receivable. During fiscal 2005, the
Company incurred a foreign exchange gain of $75,000 compared to a loss of
$85,000 in fiscal 2004.

      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
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, 2005.

                                       62
<PAGE>


      ----------------------- -------------- --------------- ---------------
      (in thousands of Cdn$)      Total         Operating       Pre-tax
                                 Revenue        Expenses       Net Income

                              -------------- --------------- ---------------
      United States Dollar         $(3,130)          $(811)        $(2,319)
      British Pound                   (864)           (717)           (147)
      Euro                            (960)           (535)           (425)
      ----------------------- -------------- --------------- ---------------

      See Note 15, 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.

                                      63
<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 14,
2005 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 14, 2005, 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.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

      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 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

                                       64
<PAGE>

     Management of the Company implemented an Employee Conduct Policy in
April 2002. The Employee Conduct Policy was amended in the past year 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 $364,400 for fiscal 2005 and $323,054 for fiscal
2004 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 2005 and fiscal 2004 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

      $295,394 in fees were billed for fiscal 2005 and $285,636 in fees were
billed for fiscal 2004 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 2005 tax provisions.

(d) ALL OTHER FEES

      Other than the services reported under the subparagraphs (a) through (c)
above of this Item 16C, $7,789 in fees were billed for fiscal 2005 and $2,230
in fees were billed for fiscal 2004 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.

ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
           PURCHASERS

<TABLE>
<CAPTION>
                                       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                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 - 29, 2004                 0                Not applicable                  0                      518,823
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
March 1 -  31, 2004                40,800                  $12.28                   40,800                    478,023
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
April 1 - 30, 2004                 12,600                  $12.59                   12,600                    465,423
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
May 1 - 31, 2004                      0                Not applicable                  0                      465,423
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
June 1 - 30, 2004                  54,100                  $10.78                   54,100                    411,323
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
July 1 - 31, 2004                  81,900                  $11.51                   81,900                    329,423
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
August 1 - 31, 2004                22,500                  $12.37                   22,500                    306,923
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
September 1 - 30, 2004              2,900                  $14.20                    2,900                    304,023
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
October 1 - 31, 2004               85,500                  $14.10                   85,500                    218,523
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
November 1 - 30, 2004                 0                Not applicable                  0                      218,523
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
December 1 - 31, 2004              17,200                  $16.10                   17,200                    201,323
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
January 1 - 31, 2005                  0                Not applicable                  0                      201,323
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
Total                              317,500                 $12.56                   317,500                   201,323
------------------------- ----------------------- ------------------------ ------------------------- -----------------------
</TABLE>

                                    65
<PAGE>

(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 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.

(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 $8.50 and
not more than $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 $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 $10.00 (subject to prorating
and disregarding fractions and odd-lots) were purchased at $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
$20,620,000, and will be accounted for as a reduction in share capital of
$11,432,000 and a charge to retained earnings (deficit) of $9,188,000.


                                    66
<PAGE>




                                   PART III


ITEM 17.   FINANCIAL STATEMENTS







                                    67
<PAGE>





CONSOLIDATED FINANCIAL STATEMENTS

DATAMIRROR CORPORATION
January 31, 2005






                                    68

<PAGE>





                               AUDITORS' REPORT




To the Shareholders of
DataMirror Corporation

We have audited the consolidated balance sheets of DataMirror Corporation as
at January 31, 2005 and 2004 and the consolidated statements of income (loss),
shareholders' equity and cash flows for each of the years in the three-year
period ended January 31, 2005. 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,
2005 and 2004 and the results of its operations and its cash flows for each of
the years in the three-year period ended January 31, 2005 in accordance with
Canadian generally accepted accounting principles.

As described in note 2 to the consolidated financial statements, the Company
changed its accounting policy for stock-based compensation effective February
1, 2004.




Toronto, Canada,
March 4, 2005. [except as to note 21,                         ERNST & YOUNG LLP
   which is as of March 22, 2005].                        Chartered Accountants



                                    69
<PAGE>
<TABLE>
<CAPTION>

DataMirror Corporation

                                 CONSOLIDATED BALANCE SHEETS
                             [in thousands of Canadian dollars]


As at January 31

                                                                   2005               2004
                                                                     $                  $
----------------------------------------------------------------------------------------------
                                                                                 [restated
                                                                                  - note 2]
ASSETS
Current
<S>                                                               <C>                <C>
Cash and cash equivalents [note 3]                                9,517              9,286
Short-term investments [note 4]                                  47,919             32,720
Accounts receivable                                               9,972             11,797
Prepaid expenses                                                  1,644              1,803
Future tax assets [note 14]                                       3,004              2,540
----------------------------------------------------------------------------------------------
Total current assets                                             72,056             58,146
----------------------------------------------------------------------------------------------
Capital assets, net [note 5]                                      3,410              3,845
Investment tax credits recoverable [note 13]                         --              1,019
Investment [note 6]                                                  --             12,185
Intangibles, net [note 7]                                         2,902              5,853
Goodwill [note 8]                                                 5,175              5,175
----------------------------------------------------------------------------------------------
                                                                 83,543             86,223
==============================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities                          3,700              5,544
Deferred revenue                                                 22,083             18,839
Capital lease obligations [note 10]                                  --                 32
Income taxes payable                                                929              1,785
----------------------------------------------------------------------------------------------
Total current liabilities                                        26,712             26,200
----------------------------------------------------------------------------------------------
Future tax liabilities [note 14]                                    103              1,076
----------------------------------------------------------------------------------------------
Total liabilities                                                26,815             27,276
----------------------------------------------------------------------------------------------
Commitments and contingencies [notes 13, 15, 16 and 18]

Shareholders' equity
Share capital [note 11]                                          60,318             64,625
Deficit                                                          (4,300)            (5,978)
Contributed surplus                                               1,208                798
Cumulative translation adjustment                                  (498)              (498)
----------------------------------------------------------------------------------------------
Total shareholders' equity                                       56,728             58,947
----------------------------------------------------------------------------------------------
                                                                 83,543             86,223
==============================================================================================
</TABLE>

See accompanying notes

On behalf of the board:             NIGEL STOKES                DONALD LENZ

                                    Director                    Director



                                    70
<PAGE>
<TABLE>
<CAPTION>

DataMirror Corporation

                               CONSOLIDATED STATEMENTS OF INCOME (LOSS)
                      [in thousands of Canadian dollars, except per share data]


Years ended January 31


                                                               2005            2004          2003
                                                                 $               $             $
-------------------------------------------------------------------------------------------------------
                                                                           [restated    [restated
                                                                          - note 2]      - note 2]
<S>                                                            <C>            <C>          <C>
REVENUE
Licence                                                        22,520         29,087       33,223
Maintenance                                                    26,213         25,354       23,210
Services                                                        4,534          5,551        6,057
-------------------------------------------------------------------------------------------------------
                                                               53,267         59,992       62,490
-------------------------------------------------------------------------------------------------------

Cost of revenue
Licence                                                           249            234          239
Maintenance and services                                       11,862         11,389       12,605
-------------------------------------------------------------------------------------------------------
                                                               12,111         11,623       12,844
-------------------------------------------------------------------------------------------------------
Gross margin                                                   41,156         48,369       49,646
-------------------------------------------------------------------------------------------------------

OPERATING EXPENSES
Selling and marketing                                          19,653         20,524       21,289
Research and development [note 13]                             10,528          9,753       10,459
General and administration                                      8,803          7,946        8,812
Stock-based compensation [notes 2 and 12]                         410            512          286
Amortization of intangibles                                     2,951          3,098        2,740
-------------------------------------------------------------------------------------------------------
                                                               42,345         41,833       43,586
-------------------------------------------------------------------------------------------------------
Operating income (loss)                                        (1,189)         6,536        6,060
Investment income, net [note 10]                                1,008          1,146          611
Gain on sale of investment [note 6]                             7,611             --           --
Other income [note 18]                                             --            279           --
Losses from investment in PointBase, Inc. [note 18]
   Impairment of equity investment                                 --             --       (4,595)
   Equity loss                                                     --             --       (2,081)
-------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                               7,430          7,961           (5)
-------------------------------------------------------------------------------------------------------
Provision for (recovery of) income taxes [note 14]
   Current                                                      3,078          3,758        2,762
   Future                                                      (1,437)          (970)        (328)
-------------------------------------------------------------------------------------------------------
                                                                1,641          2,788        2,434
-------------------------------------------------------------------------------------------------------
Net income (loss) for the year                                  5,789          5,173       (2,439)
=======================================================================================================

Earnings (loss) per share
Basic                                                           $0.53          $0.46       $(0.21)
Diluted                                                         $0.52          $0.44       $(0.21)
=======================================================================================================

Weighted average number of shares outstanding [000's]
[note 11[c]]
Basic                                                          11,026         11,364       11,411
Diluted                                                        11,192         11,640       11,411
=======================================================================================================

See accompanying notes
</TABLE>

                                    71
<PAGE>
<TABLE>
<CAPTION>


DataMirror Corporation

                                     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                           [in thousands of Canadian dollars]


Years ended January 31

                                                          Common shares       Retained     Cumulative                      Total
                                                       -------------------    earnings     translation   Contributed   shareholders
                                                    Shares        Amount     (deficit)     adjustment      surplus        equity
                                                       #             $           $             $              $              $
-----------------------------------------------------------------------------------------------------------------------------------
                                                    [000's]

-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>          <C>            <C>                       <C>
Balance, January 31, 2002                            11,472        64,740       (5,883)        (498)          --         58,359
-----------------------------------------------------------------------------------------------------------------------------------
Net loss for the year, [restated - note 2]               --            --       (2,439)          --           --         (2,439)
Exercise of stock options [note 12]                     153           821           --           --           --            821
Stock-based compensation expense
  included in net loss [note 2]                          --            --           --           --          286            286
Repurchase of common shares [note 11[b]]               (164)         (924)        (633)          --           --         (1,557)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 2003, [restated - note 2]       11,461        64,637       (8,955)        (498)         286         55,470
-----------------------------------------------------------------------------------------------------------------------------------
Net income for the year, [restated -note 2]              --            --        5,173           --           --          5,173
Exercise of stock options [note 12]                     221         1,779           --           --           --          1,779
Stock-based compensation expense included
  in net income [note 2]                                 --            --           --           --          512            512
Repurchase of common shares [note 11[b]]               (317)       (1,791)      (2,196)          --           --         (3,987)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 2004, [restated - note 2]       11,365        64,625       (5,978)        (498)         798         58,947
-----------------------------------------------------------------------------------------------------------------------------------
Net income for the year                                  --            --        5,789           --           --          5,789
Exercise of stock options [note 12]                      89           805           --           --           --            805
Stock-based compensation expense
  included in net income [note 2]                        --            --           --           --          410            410
Repurchase of common shares [note 11[b]]               (898)       (5,112)      (4,111)          --           --         (9,223)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 2005                            10,556        60,318       (4,300)        (498)       1,208         56,728
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes


                                    72
<PAGE>
<TABLE>
<CAPTION>

DataMirror Corporation

                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    [in thousands of Canadian dollars]

Years ended January 31

                                                               2005            2004          2003
                                                                 $               $             $
------------------------------------------------------------------------------------------------------
                                                                          [restated     [restated
                                                                           - note 2]     - note 2]
<S>                                                             <C>           <C>          <C>
OPERATING ACTIVITIES
Net income (loss) for the year                                  5,789         5,173        (2,439)
Add (deduct) items not affecting cash
   Amortization of capital assets                               1,310         1,410         1,630
   Amortization of intangibles                                  2,951         3,098         2,740
   Stock-based compensation [note 2]                              410           512           286
   Future income taxes                                         (1,437)         (970)         (328)
   Gain on sale of investment [note 6]                         (7,611)           --            --
   Other income [note 18]                                          --          (279)           --
   Impairment of investment in PointBase, Inc.                     --            --         4,595
   Equity loss from investment in PointBase, Inc.                  --            --         2,081
   Non-cash interest expense                                       --            --            63
   Non-cash foreign exchange loss                                  --            --            59
   Non-cash operating expense                                      --            32           186
Investment tax credits recoverable                              1,019           645           776
------------------------------------------------------------------------------------------------------
                                                                2,431         9,621         9,649
Net change in non-cash working capital balances
   related to operations                                        2,528           542         6,259
------------------------------------------------------------------------------------------------------
Cash provided by operating activities                           4,959        10,163        15,908
------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Additions to capital assets                                      (875)       (1,190)       (1,859)
Purchase of short-term investments                            (50,125)      (32,720)      (25,802)
Maturity of short-term investments                             34,926        25,802        27,422
Investment in Idion Technology Holdings Limited                   (98)       (2,417)       (8,949)
Proceeds from sale of investment [note 6]                      19,894            --            --
Acquisition of intangibles                                         --           (30)         (332)
Acquisition of business, net of cash [note 18]                     --        (1,328)           --
Other income [note 18]                                             --           279            --
------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities                 3,722       (11,604)       (9,520)
------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Repayment of long-term debt                                        --            --        (1,586)
Payments of capital lease obligations                             (32)          (90)         (114)
Exercise of stock options                                         805         1,779           821
Repurchase of share capital                                    (9,223)       (3,987)       (1,557)
------------------------------------------------------------------------------------------------------
Cash used in financing activities                              (8,450)       (2,298)       (2,436)
------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and equivalents
   during the year                                                231        (3,739)        3,952
Cash and cash equivalents, beginning of year                    9,286        13,025         9,073
------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                          9,517         9,286        13,025
======================================================================================================

Supplemental cash flow information
Interest paid                                                      70            16           119
Income taxes paid                                               2,840         1,354           238
======================================================================================================
</TABLE>

See accompanying notes



                                    73
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Generally accepted accounting principles

The consolidated financial statements of DataMirror Corporation [the
"Company"] have been prepared 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 20. 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 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.

Cash and cash equivalents

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

                                      74

<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

Capital assets

Capital assets are recorded at cost less accumulated amortization and 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.

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.

Investment

The Company's investment in Idion Technology Holdings Limited ["Idion"] was
recorded at cost as the Company did not have significant influence over the
affairs of Idion and was not able to obtain adequate financial information
from Idion to enable the Company to account for its investment using the
equity method.

A decline in the value of an investment which is considered to be other than a
temporary impairment in value is charged against income in the period that
such determination is made.

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 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.


                                      75
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

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 accomplish 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 value, 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 (loss) per share

Basic earnings (loss) per share are calculated on net income (loss) 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 (loss)
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 under Canadian GAAP for deferral
and amortization. The Company has not deferred any such development costs to
date. Research and development costs are reduced by related investment tax
credits.


                                      76
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

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. 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 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 (loss) 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 (loss).

Revenue recognition and deferred revenue

The Company's revenues are generated from the sale of software licences,
software maintenance and support fees and 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 98-4 issued in
March 1998. Software licence revenue is recognized when persuasive evidence of
an arrangement exists, the related products are shipped, there are no
significant uncertainties surrounding product acceptance, the fees are fixed
and determinable and collection is considered probable. Revenue from software
maintenance and support agreements is recognized on a straight-line basis over
the term of the related agreements. Revenue from services is comprised of
consulting, training and installation fees and is recognized at the time the
services are performed.

Deferred revenue is comprised of software maintenance and support fees and
consulting revenue for which services have yet to be provided.


                                      77
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

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 not more likely than not that such
assets will be realized.

2. NEW ACCOUNTING PRONOUNCEMENTS

Stock-based compensation and other stock-based payments

In November 2003, the CICA made changes to Section 3870, "Stock-Based
Compensation and Other Stock-Based Payments", requiring equity instruments
awarded to employees be measured and expensed using the fair value method. The
main impact for the Company is to record compensation expense relating to the
award of stock options to employees that the Company had previously chosen to
disclose.

The Company has adopted these changes effective February 1, 2004 on a
retroactive basis with restatement of prior periods. This change resulted in a
decrease to net income of $512,000 for the year ended January 31, 2004 and
$286,000 for the year ended January 31, 2003, and an increase to deficit and
increase to contributed surplus of $798,000 as at January 31, 2004. There was
no effect on retained earnings at February 1, 2002.

Asset retirement obligations

Effective February 1, 2004, the Company adopted CICA Handbook Section 3110,
"Asset Retirement Obligations". The new standard establishes the requirement
for the recognition, measurement and disclosure of the legal and contractual
obligations for the retirement of long-lived assets. The standard requires
that the fair value of the liabilities related to the asset retirement be
recognized in the period in which they are incurred. The liability is accreted
over time through periodic changes to income. In addition, the asset
retirement cost is capitalized as part of the carrying value of the related
long-lived assets and depreciated over the asset's useful life. The adoption
of this standard had no financial impact on the Company.


                                      78
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:

As at January 31,                                          2005           2004
                                                             $              $
-------------------------------------------------------------------------------

Cash                                                      5,222          6,689
Bankers' acceptances                                      4,295          2,597
-------------------------------------------------------------------------------
                                                          9,517          9,286
===============================================================================

The bankers' acceptances for 2005 bear interest at a rate of approximately
2.5% [2004 - 2.6%] with expiry dates extending up to one month from January
31, 2005 [2004 - one month from January 31, 2004].

4. SHORT-TERM INVESTMENTS

Short-term investments consist of the following:

As at January 31,                                          2005           2004
                                                             $              $
-------------------------------------------------------------------------------

Commercial paper                                         47,919         32,720
===============================================================================

Short-term investments consist of commercial paper bearing interest at a rate
of approximately 2.3% [2004 - 2.5%] and maturity dates of up to two months
from January 31, 2005 [2004 - one month from January 31, 2004].

5. CAPITAL ASSETS

Capital assets consist of the following:

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

Computer equipment and software          10,949           8,760          2,189
Furniture and equipment                   2,353           1,612            741
Leasehold improvements                    1,633           1,153            480
-------------------------------------------------------------------------------
                                         14,935          11,525          3,410
===============================================================================


                                      79
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

As at January 31,                                        2004
                                         --------------------------------------
                                                                           Net
                                                        Accumulated       book
                                          Cost         amortization      value
                                            $                $              $
-------------------------------------------------------------------------------

Computer equipment and software          10,271           7,793          2,478
Furniture and equipment                   2,278           1,411            867
Leasehold improvements                    1,523           1,023            500
-------------------------------------------------------------------------------
                                         14,072          10,227          3,845
===============================================================================

Capital assets include assets under capital leases of approximately nil
[accumulated amortization of nil] as at January 31, 2005 and $165,000
[accumulated amortization of $128,000] as at January 31, 2004.

6. INVESTMENT

The investment is as follows:

As at January 31,                                         2005            2004
                                                            $               $
-------------------------------------------------------------------------------

Idion Technology Holdings Limited                           --          12,185
===============================================================================

On May 18, 2004, the Company was successful in selling its investment in Idion
for net proceeds of $19,894,000, resulting in a gain of $7,611,000.

7. INTANGIBLES

Intangibles consist of the following:

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

Acquired technology                       8,607           7,247          1,360
Customer lists and trademarks             6,377           4,835          1,542
Deferred compensation                       307             307             --
-------------------------------------------------------------------------------
                                         15,291          12,389          2,902
===============================================================================


                                      80
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

As at January 31,                                        2004
                                         --------------------------------------
                                                                           Net
                                                        Accumulated       book
                                          Cost         amortization      value
                                            $                $              $
-------------------------------------------------------------------------------

Acquired technology                       8,607           5,564          3,043
Customer lists and trademarks             6,377           3,567          2,810
Deferred compensation                       307             307             --
-------------------------------------------------------------------------------
                                         15,291           9,438          5,853
===============================================================================

8. GOODWILL

Goodwill consists of the following:

As at January 31,                                          2005          2004
                                                       ------------------------
                                                             $             $
-------------------------------------------------------------------------------

Opening balance                                           5,175         3,118
Additions [note 18]                                          --         2,057
-------------------------------------------------------------------------------
                                                          5,175         5,175
===============================================================================

At November 1, 2004, 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.

9. BANK CREDIT FACILITIES

At January 31, 2005 and 2004, the Company had available credit facilities of
$3,000,000 bearing interest at the prime rate plus 0.5% and (pound)150,000
[$350,000] bearing interest at the prime rate in the United Kingdom plus 3.0%.
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, 2005
and 2004, no amounts have been drawn against these facilities other than
letters of credit of $170,000 [2004 - $181,000].


                                      81
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

10. CAPITAL LEASE OBLIGATIONS

Future minimum annual lease payments with imputed interest rates ranging from
7.3% to 8.4% and expiry dates to June 21, 2004 are as follows:

As at January 31,                                          2005            2004
                                                            $               $
-------------------------------------------------------------------------------

2005                                                        --              36
-------------------------------------------------------------------------------
                                                            --              36
Less amount representing imputed interest                   --              (4)
-------------------------------------------------------------------------------
                                                            --              32
Less current portion                                        --             (32)
-------------------------------------------------------------------------------
                                                            --              --
===============================================================================

Included in investment income, net is interest expense relating to capital
lease obligations of $4,000 [2004 - $8,000; 2003 - $13,000].

11. SHARE CAPITAL

[a]  Authorized and outstanding

     The Company has authorized an unlimited number of common and preferred
     shares. At January 31, 2005, the Company has 10,556,000 common and no
     preferred shares outstanding [2004 - 11,365,000 and nil, respectively].

[b] Shares purchased for cancellation

     Under a normal course issuer bid [the "Bid"] effective September 21, 2003
     the Company indicated its intention to purchase up to 565,623 of its
     outstanding common shares. The Bid expired on September 20, 2004. Under a
     new bid [the "New Bid"], effective September 21, 2004, the Company
     indicated its further intention to additionally purchase up to 549,470 of
     its outstanding common shares. The New Bid expires on September 20, 2005.
     During the year ended January 31, 2005, the Company purchased for
     cancellation 898,400 common shares [2004 - 317,500; 2003 - 163,600] for
     cash consideration of $9,223,000 [2004 - $3,987,000; 2003 - $1,557,000].
     As a result, stated capital was reduced by $5,112,000 [2004 - $1,791,000;
     2003 - $924,000] and deficit was increased by $4,111,000 [2004 -
     $2,196,000; 2003 - $633,000].


                                      82
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

[c]  Earnings (loss) per share

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

     As at January 31,                          2005       2004           2003
                                                  #         #              #
-------------------------------------------------------------------------------

     Weighted average number of shares
       outstanding, basic [000's]             11,026     11,364         11,411
     Effect of dilutive stock options [000's]    166        276             --
-------------------------------------------------------------------------------
     Weighted average number of shares
       outstanding, diluted [000's]           11,192     11,640         11,411
===============================================================================

[d]  Share purchase plan

     Under a share purchase plan the Company issued nil shares [2004 - nil;
     2003 - nil] for consideration of nil [2004 - nil; 2003 - nil].

12. STOCK-BASED COMPENSATION PLANS

At January 31, 2005, the Company has two stock-based compensation plans for
the purpose of providing shares 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 1,208,000 and 793,000, respectively.


                                      83
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

A summary of the status of the Company's stock-based compensation plans as at
January 31, 2005, 2004 and 2003 and changes during the years then ended is
presented below:
<TABLE>
<CAPTION>

                                   2005                      2004                    2003
                            -------------------     -------------------        ------------------
                                       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        1,231,234     12.71      1,118,496      11.32     1,267,661     10.89
Granted                       140,000     10.43        438,985      13.62       273,792     10.98
Exercised                     (89,414)     9.00       (221,310)      8.04      (152,715)     5.38
Expired                      (425,682)    13.57       (104,937)     11.55      (270,242)    12.33
----------------------------------------------------------------------------------------------------
Outstanding,
   end of year                856,138     12.29      1,231,234      12.71     1,118,496     11.32
====================================================================================================

Options exercisable,
   end of year                510,149                  594,153                  506,400
====================================================================================================

                                      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                2005             life          price           2005            price
         $                    #             [years]          $               #               $
----------------------------------------------------------------------------------------------------

    5.63 - 8.45             216,188           3.3           7.13           118,143           6.61
   8.46 - 12.68             329,345           2.3          10.99           183,051          11.04
  12.69 - 19.02             246,930           2.2          16.13           145,280          16.18
  19.03 - 27.97              63,675           0.7          21.66            63,675          21.66
----------------------------------------------------------------------------------------------------
   5.63 - 27.97             856,138           2.4          12.29           510,149          12.80
====================================================================================================
</TABLE>


                                      84
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

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,                                     2005             2004            2003
----------------------------------------------------------------------------------------------------
<S>                                                       <C>                <C>             <C>
Risk-free interest rate                                   3.3%               3.3%            4.3%
Expected dividend yield                                     0%                 0%              0%
Expected volatility                                      0.469              0.453           0.742
Expected option life [years]                               2.0                2.1             2.2
Weighted average fair values of options granted          $2.89              $3.96           $4.92
====================================================================================================
</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, $141,000 [2004 - $806,000; 2003 -
$590,000] 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 than
the amount recorded.


                                      85
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

14. INCOME TAXES

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

As at January 31,                                          2005           2004
                                                            $               $
-------------------------------------------------------------------------------

FUTURE TAX ASSETS
Current
Deferred revenue                                          2,909          2,451
Other                                                        95             89
-------------------------------------------------------------------------------
                                                          3,004          2,540
Less valuation allowance                                     --             --
-------------------------------------------------------------------------------
                                                          3,004          2,540
===============================================================================

FUTURE TAX ASSETS
Long-term
Tax benefit of loss carryforwards and tax credits         2,626          2,480
Book depreciation in excess of tax depreciation             704            --
Share issue costs                                            --            155
-------------------------------------------------------------------------------
                                                          3,330          2,635
Less valuation allowance                                 (2,568)        (2,387)
-------------------------------------------------------------------------------
                                                            762            248
===============================================================================

FUTURE TAX LIABILITIES
Long-term
Tax depreciation in excess of book depreciation            (609)          (809)
Scientific research investment tax credits                 (256)          (513)
Other                                                        --             (2)
-------------------------------------------------------------------------------
                                                           (865)        (1,324)
-------------------------------------------------------------------------------
                                                           (103)        (1,076)
===============================================================================

Of the above valuation allowances recorded as at January 31, 2005, $1,102,000
[2004 - $1,150,000] 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, Inc. ["PointBase"].


                                      86
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

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,                                       2005            2004           2003
                                                                $               $              $
---------------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>            <C>
Income tax expense (recovery) at combined
Canadian federal and provincial income tax
  rate of 36.1% [2004 - 36.6%; 2003 - 38.6%]                 2,684           2,914             (2)
Effect of foreign tax rate differences                         (80)           (183)          (141)
Foreign tax losses not tax benefited                           211             150            137
Manufacturing and processing profits deduction                 (21)            (81)          (283)
Items not deductible for income tax purposes                   306             227            377
Ontario research and development incentives                    (20)             --             --
Non-taxable portion of gain on sale of investment           (1,374)             --             --
Non-taxable loss from investment in PointBase                   --              --          2,578
Benefit of foreign tax losses not previously recognized         --              --           (282)
Effect of rate changes on future income taxes                   --             (11)          (315)
Other                                                          (65)           (228)           365
---------------------------------------------------------------------------------------------------
Income tax expense                                           1,641           2,788          2,434
===================================================================================================

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

Years ended January 31,                                       2005            2004           2003
                                                                $               $              $
---------------------------------------------------------------------------------------------------

Current tax expense                                          3,078           3,758          2,762
Future income tax benefit relating to origination
  and reversal of temporary differences                     (1,437)           (959)           (13)
Future income tax recovery resulting
   from rate changes                                            --             (11)          (315)
---------------------------------------------------------------------------------------------------
Income tax expense                                           1,641           2,788          2,434
===================================================================================================
</TABLE>

The Company has foreign non-capital loss carryforwards of approximately
$3,749,000 which have no expiry date and $3,106,000 which expire over 20
years. A valuation allowance has been recognized for all but $161,000 of the
losses.


                                      87
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

15. LEASE COMMITMENTS

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

                                                                           $
-------------------------------------------------------------------------------

2006                                                                     2,410
2007                                                                     1,281
2008                                                                     1,064
2009                                                                       975
2010                                                                       244
===============================================================================

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 (loss) for the year.

During the year ended January 31, 2005, the Company incurred a foreign
exchange gain of $75,000 [2004 - loss of $85,000; 2003 - loss of $326,000].

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, 2005, 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 1.24, 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, 2005, the Company incurred a foreign
exchange gain from hedging activities of $285,000 [2004 - gain of $781,000;
2003 - gain of $134,000], which is included in the overall foreign exchange
gain/loss disclosed above.

Current 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.


                                      88
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

The Company's short-term investments consist of commercial papers. At January
31, 2005, the weighted average effective interest rate was 2.3% [2004 - 2.5%].

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, 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. The Company has two
reportable segments, North America, which includes the Company's Asia Pacific
operations, and Europe, based on the geographic location of its operations.
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.


                                      89
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

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

Years ended January 31,                    2005            2004           2003
                                             $               $              $
-------------------------------------------------------------------------------

REVENUE
North American customers                 35,021          39,918         41,107
Intersegment                              4,758           5,077          5,100
-------------------------------------------------------------------------------
                                         39,779          44,995         46,207
European customers                       18,246          20,074         21,383
Elimination of intersegment revenue      (4,758)         (5,077)        (5,100)
-------------------------------------------------------------------------------
                                         53,267          59,992         62,490
===============================================================================

OPERATING INCOME (LOSS)
North America                            (2,149)          3,732          4,294
Europe                                      960           2,804          1,766
-------------------------------------------------------------------------------
                                         (1,189)          6,536          6,060
===============================================================================

AMORTIZATION
North America                             4,051           4,228          3,949
Europe                                      210             280            421
-------------------------------------------------------------------------------
                                          4,261           4,508          4,370
===============================================================================

CAPITAL ASSET ADDITIONS
North America                               811           1,100          1,696
Europe                                       64              90            163
-------------------------------------------------------------------------------
                                            875           1,190          1,859
===============================================================================


                                      90
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

As at January 31,                                          2005           2004
                                                             $              $
-------------------------------------------------------------------------------

IDENTIFIABLE ASSETS
North America                                            64,138         66,184
Europe                                                   11,328          9,011
-------------------------------------------------------------------------------
                                                         75,466         75,195
Intangibles                                               2,902          5,853
Goodwill                                                  5,175          5,175
-------------------------------------------------------------------------------
                                                         83,543         86,223
===============================================================================

GOODWILL
North America                                             2,532          2,532
Europe                                                    2,643          2,643
-------------------------------------------------------------------------------
                                                          5,175          5,175
===============================================================================

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:

Years ended January 31,                    2005            2004           2003
                                             $               $              $
-------------------------------------------------------------------------------

REVENUE
Canada                                    3,725           4,662          4,285
United States                            28,403          31,918         33,498
United Kingdom                            8,942          10,414         11,675
Germany                                   4,093           4,977          5,092
Other                                     8,104           8,021          7,940
-------------------------------------------------------------------------------
                                         53,267          59,992         62,490
===============================================================================

As at January 31,                                          2005           2004
                                                             $              $
-------------------------------------------------------------------------------
CAPITAL ASSETS, INTANGIBLES AND GOODWILL
Canada                                                    8,335         11,575
Germany                                                   2,715          2,711
Other                                                       437            587
-------------------------------------------------------------------------------
                                                         11,487         14,873
===============================================================================


                                      91
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

18. PRIOR YEAR ACQUISITIONS

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
$279,000 [U.S. $200,000] 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 approximately U.S. $2,500,000. 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:

                                                                           $
-------------------------------------------------------------------------------

Assets acquired
Cash                                                                     1,684
Other current assets                                                       426
Capital assets                                                             134
Intangibles                                                              1,565
Goodwill                                                                 2,057
-------------------------------------------------------------------------------
                                                                         5,866
Current liabilities assumed                                             (1,966)
Future tax liability                                                      (579)
-------------------------------------------------------------------------------
Net assets acquired                                                      3,321
===============================================================================

Consideration
Cash                                                                     3,012
Amounts payable                                                            309
-------------------------------------------------------------------------------
                                                                         3,321
===============================================================================

Intangibles consist of $500,000 of acquired technology and $1,065,000 of
customer lists and trademarks.

None of the goodwill acquired is deductible for tax purposes.


                                      92
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

As part of the acquisition, the Company also acquired foreign non-capital loss
carryforwards of approximately $2,979,000 which expire over 20 years but for
which no value has been assigned. The valuation allowance recorded as of
January 31, 2005 of $1,102,000 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.

On January 7, 2003, the Company acquired the technology and certain related
assets of SmartSales Inc. [note 19], a developer of CRM solutions, in a cash
transaction. The Company acquired current assets valued at $15,000, capital
assets valued at $22,000 and technology valued at $332,000 for cash
consideration of $369,000. The technology acquired was amortized over a term
of one year. The Company recorded $30,000 of additional expenses related to
the acquisition during the year ended January 31, 2004, bringing the total
value of the technology to $362,000 and cash consideration to $399,000.

Effective September 1, 2000, the Company acquired certain assets and
liabilities of Constellar, a company engaged in the business of developing and
marketing computer software products. The acquisition has been accounted for
under the purchase method of accounting.

As part of the purchase agreement, further cash payments of up to U.S.
$3,000,000 were payable contingent on certain revenue targets being generated
from the acquired technology during the three-year period ending August 31,
2003. In November 2001, a payment of $724,000 was made in payment of
contingent consideration of $856,000 for the period ended August 31, 2001 less
a holdback of $132,000 related to assets purchased which were not realized.
The additional contingent payment has been added to the value of the
technology acquired, bringing the total value of technology acquired to
$12,382,000. No payment of contingent consideration is due for the periods
ended August 31, 2002 and August 31, 2003.


                                      93
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

19. RELATED PARTY TRANSACTIONS

In the normal course of operations during the year ended January 31, 2003, the
Company entered into several transactions with SmartSales Inc., a company with
a common Chairman of the Board of Directors and significant shareholder. The
transactions consisted of rental income of $51,000. These transactions 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.

20. 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

     As at January 31,                                     2005           2004
                                                             $              $
     --------------------------------------------------------------------------

     INVESTMENT
     Balance under Canadian GAAP                             --         12,185
     Unrealized gain on investment [i]                       --          7,742
     --------------------------------------------------------------------------
     Balance under U.S. GAAP                                 --         19,927
     ==========================================================================

     GOODWILL
     Balance under Canadian GAAP                          5,175          5,175
     Adjustment for recognition of tax loss
       carryforwards [ii]                                  (128)          (128)
     --------------------------------------------------------------------------
     Balance under U.S. GAAP                              5,047          5,047
     ==========================================================================

     FUTURE TAX LIABILITIES
     Balance under Canadian GAAP                            103          1,076
     Adjustment for future tax liability on
       unrealized gain [i]                                   --          1,417
     --------------------------------------------------------------------------
     Balance under U.S. GAAP                                103          2,493
     ==========================================================================

     DEFICIT
     Balance under Canadian GAAP                         (4,300)        (5,978)
     Adjustment for stock-based compensation expense      1,208            798
     Adjustment for recognition of tax loss
       carryforwards [ii]                                  (128)          (128)
     --------------------------------------------------------------------------
     Balance under U.S. GAAP                             (3,220)        (5,308)
     ==========================================================================


                                      94
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

     [i]  Under U.S. GAAP, investments classified as available for sale are
          carried at market value with unrealized gains or losses, net of tax,
          reflected as a component of other comprehensive income. The
          Company's investment in Idion was classified as available for sale.

     [ii] Under U.S. GAAP, the realization of the benefit associated with
          utilizing tax losses which existed at the time of an acquisition but
          which were not recognized at that time is reflected as a reduction
          of goodwill relating to the acquisition in the period upon 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:

     As at January 31,                                     2005           2004
                                                             $              $
     --------------------------------------------------------------------------

     Share capital                                       60,318         64,625
     Accumulated other comprehensive income (loss)         (498)         5,827
     Deficit                                             (3,220)        (5,308)
     --------------------------------------------------------------------------
     Balance under U.S. GAAP                             56,600         65,144
     ==========================================================================


                                      95
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

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

     Years ended January 31,                                  2005            2004           2003
                                                                $               $              $
----------------------------------------------------------------------------------------------------
<S>                                                          <C>             <C>           <C>
     Net income (loss) under Canadian GAAP                   5,789           5,173         (2,439)
     Stock-based compensation expense recorded
       for Canadian GAAP purposes  [i]                         410             512            286
     Impairment charge recorded for Canadian
       GAAP purposes                                            --              --          4,595
     Impairment charge recorded for U.S.
       GAAP purposes [ii]                                       --              --         (4,846)
----------------------------------------------------------------------------------------------------
     Net income (loss) under U.S. GAAP                       6,199           5,685         (2,404)
     Unrealized gain (loss) on investments                  (6,325)          2,509          3,946
----------------------------------------------------------------------------------------------------
     Comprehensive income (loss) under
       U.S. GAAP                                              (126)          8,194          1,542
====================================================================================================

     Earnings (loss) per share under U.S. GAAP
     Basic                                                    0.56           0.50           (0.21)
     Diluted                                                  0.55           0.49           (0.21)
====================================================================================================
</TABLE>

     [i] Effective February 1, 2004, the Company retroactively adopted the
         changes that the CICA made to Section 3870, "Stock-Based Compensation
         and Other Stock-Based Payments", which requires equity instruments
         awarded to employees to be measured and expensed using the fair value
         method. The main impact for the Company was to record compensation
         expense relating to the award of stock options to employees. Under
         U.S. GAAP, the Company is not required to record this compensation
         expense [note 2].

     [ii]Included in the equity loss recorded for U.S. GAAP purposes is an
         amount for acquired in-process research and development. Under U.S.
         GAAP, specifically Statement of Financial Accounting Standard
         ["SFAS"] No. 2, "Accounting for Research and Development Costs",
         acquired in-process research and development having no alternative
         future use must be written off at the time of acquisition. The
         adjustment represents the value of the acquired in-process research
         and development capitalized under Canadian GAAP.


                                      96
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

[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", 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:
<TABLE>
<CAPTION>

     Years ended January 31,                                  2005            2004           2003
                                                                $               $              $
---------------------------------------------------------------------------------------------------
<S>                                                          <C>             <C>           <C>
     Net income (loss) for the year under U.S. GAAP          6,199           5,685         (2,404)
     Stock-based compensation expense                         (519)           (775)          (826)
---------------------------------------------------------------------------------------------------
     Pro forma net income (loss) for the year                5,680           4,910         (3,230)
===================================================================================================

     Effect of stock-based compensation expense              (0.05)         (0.07)          (0.07)
     Pro forma basic earnings (loss) per share                0.52           0.43           (0.28)
     Pro forma diluted earnings (loss) per share              0.51           0.42           (0.28)
===================================================================================================

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,                                  2005            2004           2003
---------------------------------------------------------------------------------------------------

     Risk-free interest rate                                  3.3%            3.3%           4.3%
     Expected dividend yield                                    0%              0%             0%
     Expected volatility                                     0.469           0.453          0.742
     Expected option life [years]                              2.0             2.1            2.2
     Weighted average fair values of options granted         $2.89           $3.96          $4.92
===================================================================================================
</TABLE>


                                      97
<PAGE>


[e] Recent accounting developments

     As permitted by Statement 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 Statement 123 "Share-Based Payment" ["Statement 123(R)"]
     was issued, which requires all share-based payments to employees to be
     recognized in the consolidated statements of income (loss), based on
     their fair value.

     The Company expects to adopt Statement 123(R) for U.S. GAAP purposes on
     August 1, 2005. While Statement 123(R) requires, on a prospective basis,
     the recognition of compensation cost for all employee awards that are
     outstanding and unvested on the effective date, the Company is permitted
     to choose whether it restates prior periods. The Company is currently
     reviewing these alternatives and has not yet determined the methodology
     for implementation.

     The impact of adoption of Statement 123(R) cannot be predicted at this
     time because it will depend on levels of share-based payments granted in
     the future, however, had the Company adopted Statement 123(R) in prior
     periods, the impact would have approximated the impact of Statement 123
     as described in the disclosure of proforma net income (loss) and earnings
     (loss) per share in note 20 [d] to the consolidated financial statements.

     The Financial Accounting Standards Board issued Interpretation No. 46
     "Consolidation of Variable Interest Entities" ["Interpretation 46"] in
     December 2003. Similar to AcG-15 in Canadian GAAP, Interpretation 46
     provides criteria and guidelines to determine whether an entity is a
     variable interest entity to the Company for consolidation purposes. The
     Company has reviewed its policies and determined that there is no impact
     on the consolidated financial statements as a result of the Company
     adopting these pronouncements.

     In November 2001, the CICA approved Accounting Guideline No. 13, "Hedging
     Relationships", an accounting guideline establishing conditions which
     must be satisfied in order to apply hedge accounting. The Company adopted
     these guidelines effective February 1, 2004. There was no impact to the
     Company upon adoption of this guideline.


                                      98
<PAGE>

DataMirror Corporation


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   [Tabular amounts in thousands of Canadian dollars, except per share data]

January 31, 2005

21. SUBSEQUENT EVENT

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 $8.50 and not
more than $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 $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 $10.00 (subject to prorating and
disregarding fractions and odd lots) were purchased at $10.00 and immediately
cancelled. The total purchase price including the costs associated with the
offer was approximately $20,620,000, and will be accounted for as a reduction
in share capital of $11,432,000 and an increase in retained earnings (deficit)
of $9,188,000.


                                      99
<PAGE>



                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                      [in thousands of Canadian dollars]





<TABLE>
<CAPTION>

                                                                         Write-offs
                                             Balance,      Charged           of           Balance,
                                            beginning         to          accounts          end
Description                                  of year       expenses      receivable       of year
                                                $              $              $              $
---------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>            <C>           <C>
Allowance for doubtful accounts,
   deducted from accounts receivable
Year ended January 31, 2005                   223              76              (129)          170
Year ended January 31, 2004                   263             135              (175)          223
Year ended January 31, 2003                   612             (48)             (301)          263
===================================================================================================
</TABLE>


                                      100
<PAGE>


ITEM 18.        FINANCIAL STATEMENTS

The Company has responded to Item 17 in lieu of responding to this Item.
<TABLE>
<CAPTION>

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
     13.1          Consent of Ernst & Young LLP

**   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>


                                     101
<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

    April 22, 2005


                                      102
<PAGE>



                                 EXHIBIT INDEX

<TABLE>
<CAPTION>

      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
     13.1          Consent of Ernst & Young LLP

**   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>