Commission File Number: 000-31691

~~ZIM CORPORATION~~

~~(Exact name of registrant as specified in its charter)~~

~~Canada~~

~~(Jurisdiction of incorporation or organization)~~

	ZIM CORPORATION
	(Exact name of registrant as specified in its charter)

~~150 Isabella Street, Suite 150, Ottawa, Ontario, Canada~~

~~K1S 1V7~~

~~(Address of principal executive offices)~~

	Canada
	(Jurisdiction of incorporation or organization)

	150 Isabella Street, Suite 150, Ottawa, Ontario, Canada K1S 1V7
	(Address of principal executive offices)

John A. Chapman – Chief Financial Officer

150 Isabella Street, Suite 150, Ottawa, Ontario, Canada

K1S 1V7

~~jchapman@zim.biz~~jchapman@ZIM.biz

(613) 727-1397

(Name, Telephone, E-mail and/or facsimile number and address of Company contact person)

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

Securities for which there is a reporting obligation pursuant to Section 12(g) of the Act:

~~Common shares, no par value~~

	Common shares, no par value
	(Title of Class)

Securities registered or to be registered pursuant to Section 15(d) of the Act: None

~~105,460,867~~

125,460,867 common shares outstanding as of March 31, ~~2009.~~2011.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ox No xo

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 xo No ox

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No xo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP x

International Financial Reporting Standards as issued by the International Accounting Standards Board o Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

TABLE OF CONTENTS

			FORWARD-LOOKING INFORMATION	4ii

PART ONE

ITEM 1.		IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS	51
ITEM 2.		OFFER STATISTICS AND EXPECTED TIMETABLE	51
ITEM 3.		KEY INFORMATION	51
ITEM 4.		INFORMATION ON THE COMPANY	128
ITEM 4A.		UNRESOLVED STAFF COMMENTS	1714
ITEM 5.		OPERATING AND FINANCIAL REVIEW AND PROSPECTS	1814
ITEM 6.		DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	3125
ITEM 7.		MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	4034
ITEM 7B.	RELATED PARTY TRANSACTIONS	37
ITEM 8.		FINANCIAL INFORMATION	4237
ITEM 9.		THE OFFER AND LISTING	4338
ITEM 10.		ADDITIONAL INFORMATION	4439
ITEM 11.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5048
ITEM 12.		DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	5251

PART TWO

ITEM 13.		DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	5352
ITEM 14.		MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	5352
ITEM ~~15T.~~	15.	CONTROLS AND PROCEDURES	5352
ITEM 16A.		AUDIT COMMITTEE FINANCIAL EXPERT	5453
ITEM 16B.		CODE OF ETHICS	54
ITEM 16C.		PRINCIPAL ACCOUNTANT FEES AND SERVICES	5554
ITEM 16D.		EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	5655
ITEM 16E.		PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	5655
ITEM 16F.		CHANGE IN ~~REGISTRANT'S~~REGISTRANT’S CERTIFYING ACCOUNTANT	5655
ITEM 16G.		CORPORATE GOVERNANCE	5655

PART THREE

ITEM 17.		FINANCIAL STATEMENTS	5756
ITEM 18.		FINANCIAL STATEMENTS	5756
ITEM 19.		EXHIBITS	9188

FORWARD-LOOKING INFORMATION

This Annual Report on Form 20-F contains forward-looking statements regarding our business, financial condition, results of operations, controls and procedures, and prospects that are based on our current expectations, estimates and projections. In addition, other written or oral statements which constitute forward-looking statements may be made by or on behalf of the registrant. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance, and are inherently subject to risks and uncertainties that are difficult to predict. As a result, actual outcomes and results may differ materially from the outcomes and results discussed in or anticipated by the forward-looking statements. All such statements are therefore qualified in their entirety by reference to the factors specifically addressed in the section entitled "Risk Factors" as well as those discussed elsewhere in this Annual Report on Form 20-F. We operate in a very competitive and rapidly changing environment. New risks can arise and it is not possible for management to predict all such risks, nor can it assess the impact of all such risks on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements speak only as of the date of this Annual Report on Form 20-F. We undertake no obligation to revise or update publicly any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 20-F, other than as required by law.

4ii

PART ONE

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

A. Selected Financial Data

The following selected consolidated statements of operations data for the fiscal years ended March 31, ~~2009, 2008~~2011, 2010, and ~~2007~~2009 and consolidated balance sheet data as of March 31, ~~2009~~2011 and ~~2008~~2010 have been derived from our audited consolidated financial statements that are included in this annual report beginning on page ~~57.~~52. The following selected consolidated statements of operations data for the fiscal years ended March 31, ~~2006~~2008 and ~~2005~~2007 and consolidated balance sheet data as of March 31, ~~2007, 2006~~2009, 2008 and ~~2005~~2007 have been derived from our audited consolidated financial statements that are not included in this annual report.

Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should be read in conjunction with our audited consolidated financial statements and related notes and Item 5 “Operating and Financial Review and Prospects” below. Our audited consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“US GAAP”).

As used in this Annual Report, unless the context otherwise indicates, the terms “we”, “us”, “our”, “ZIM”, the “Registrant” or the “Company” mean ZIM Corporation and its wholly-owned subsidiaries, Advanced Internet Inc. (AIS), PCI Merge Inc., and ZIM Technologies do Brazil Ltda.

All references to dollars ($) in this Annual Report are expressed in United States dollars, unless otherwise indicated.

Consolidated Statements of Operations

Year ended
March 31, 2009

Year ended
March 31, 2008

Year ended
March 31, 2007

Year ended
March 31, 2006

Year ended
March 31, 2005

$ $ $ $ $
Revenue
Mobile 367,723 843,162 1,116,740 2,356,598 2,767,011
Software 1,463,818 1,147,518 1,078,444 1,238,717 1,264,187
Total revenue 1,831,541 1,990,680 2,195,184 3,595,315 4,031,198

Operating expenses
Cost of revenue 256,694 384,166 928,818 1,975,641 2,321,318
Selling, general and administrative 1,213,709 1,654,269 2,156,049 2,475,299 2,970,315
Research and development 457,979 512,287 382,146 505,327 708,147
Amortization of intangible assets - - 972,209 2,984 359,197
Impairment of long-lived assets - - - - 232,270
Impairment of intangible assets - - - - 967,183
Impairment of goodwill - - - 2,133,197 530,270
Loss on disposal of property and equipment - - - 10,929 33,561
Total operating expenses 1,928,382 2,550,722 4,439,222 7,103,377 8,122,261

Loss from operations (96,841 ) (560,042 ) (2,244,038 ) (3,508,062 ) (4,091,063 )

Other income:
Gain on disposition of assets 247 134,267 - - -
Gain on settlement of liability - 77,385 - - -
Interest income (expense), net 10,563 (1,174 ) 5,296 5,510 5,535
Total other income 10,810 210,478 5,296 5,510 5,535

Loss before income taxes (86,031 ) (349,564 ) (2,238,742 ) (3,502,552 ) (4,085,528 )
Income tax benefit 239,544 432,100 302,555 114,059 121,421
Net income (loss) 153,513 82,536 (1,936,187 ) (3,388,493 ) (3,964,107 )

Basic and diluted income (loss) per share 0.002 0.001 (0.023 ) (0.057 ) (0.068 )

Weighted average number of shares outstanding 96,337,579 90,326,103 83,376,475 59,560,139 57,968,459

Consolidated Statements of Operations
	Year ended March 31, 2011		Year ended March 31, 2010			Year ended March 31, 2009			Year ended March 31, 2008			Year ended March 31, 2007
	$		$			$			$				$

Revenue		2,009,771		1,597,465			1,831,541			1,990,680			2,195,184
Operating expenses		2,009,556		1,708,718			1,928,382			2,550,722			4,439,222
Income (loss) from operations		215		(111,253	)		(96,841	)		(560,042	)		(2,244,038	)

Other income		108,278		202,058			10,810			210,478			5,296
Income (loss) before income taxes		108,493		90,805			(86,031	)		(349,564	)		(2,238,742	)

Income tax benefit		258,304		213,962			239,544			432,100			302,555
Net income (loss)		366,797		304,767			153,513			82,536			(1,936,187	)

Basic and diluted earnings (loss) per share		0.003		0.003			0.002			0.001			(0.023	)

Weighted average number of shares outstanding		123,125,251		113,132,100			96,337,579			90,326,103			83,376,475

Consolidated Statements of Cash Flows

Year ended
March 31, 2009

Year ended
March 31, 2008

Year ended
March 31, 2007

Year ended
March 31, 2006

Year ended
March 31, 2005

$ $ $ $ $
Cash flows provided by (used in) operating activities 430,652 (315,458 ) 198,143 (944,523 ) (1,762,459 )
Cash flows provided by (used in) investing activities (19,334 ) 137,139 (87,402 ) (111,278 ) (42,917 )
Cash flows provided by financing activities - 48,260 48,560 456,934 1,621,236
Effect of changes in exchange rates on cash (71,047 ) (11,635 ) 45,301 98,014 51,508
Increase (decrease) in cash and cash equivalents 340,271 (141,694 ) 204,602 (500,853 ) (132,632 )
Cash and cash equivalents, beginning of year 299,943 441,637 237,035 737,888 870,520
Cash and cash equivalents, end of year 640,214 299,943 441,637 237,035 737,888

Consolidated Statements of Cash Flows
	Year ended March 31,2011			Year ended March 31,2010			Year ended March 31, 2009			Year ended March 31, 2008			Year ended March 31, 2007
	$			$			$			$			$
Cash flows provided by (used in) operating activities		569,608			417,595			430,651			(315,458	)		198,143
Cash flows provided by (used in) investing activities		(72,719	)		(101,221	)		(19,334	)		137,139			(87,402	)
Cash flows provided by financing activities		-			-			-			48,260			48,560
Effect of changes in exchange rates on cash		113,220			204,293			(71,046	)		(11,635	)		45,301
Increase (decrease) in cash and cash equivalents		610,109			520,667			340,271			(141,694	)		204,602
Cash and cash equivalents, beginning of year		1,160,881			640,214			299,943			441,637			237,035
Cash and cash equivalents, end of year		1,770,990			1,160,881			640,214			299,943			441,637

Consolidated Balance Sheets
	As at March 31, 2009			As at March 31, 2008 Restated (1)			As at March 31, 2007 Restated (1)			As at March 31, 2006 Restated (1)			As at March 31, 2005 Restated (1)			As at March 31, 2011			As at March 31, 2010			As at March 31, 2009			As at March 31, 2008			As at March 31, 2007
		$			$			$			$			$		$			$			$			$			$
ASSETS
Current assets
Cash and cash equivalents		640,214			299,943			441,637			237,035			737,888			1,770,990			1,160,881			640,214			299,943			441,637
Accounts receivable, net		156,814			202,222			315,875			1,301,647			2,174,148			118,429			224,444			156,814			202,222			315,875
Investment tax credits receivable		220,075			428,772			149,512			407,766			512,337			273,096			236,235			220,075			428,772			149,512
Acquisition costs		-			-			-			37,847			-
Other tax credits																	53,107			-			-			-			-
Prepaid expenses		44,709			65,475			63,620			59,305			98,541			34,627			45,068			44,709			65,475			63,620
		1,061,812			996,412			970,644			2,043,600			3,522,914			2,250,249			1,666,628			1,061,812			996,412			970,644

Long term deposit																	9,722			-			-			-			-
Investment																	113,190			95,147			-			-			-
Intangible assets																	47,200			-			-			-			-
Property and equipment, net		95,119			162,738			230,291			280,909			211,843			38,880			65,844			95,119			162,738			230,291
Intangible assets, net		-			-			-			-			3,056
Goodwill		-			-			-			-			2,068,881
		1,156,931			1,159,150			1,200,935			2,324,509			5,806,694			2,459,241			1,827,619			1,156,931			1,159,150			1,200,935

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Line of credit		-			-			-			29,967			-
Accounts payable		17,332			40,906			296,958			612,703			1,163,586			30,974			26,858			17,332			40,906			296,958
Accrued liabilities		46,766			137,156			128,399			338,929			807,790			89,333			47,557			46,766			137,156			128,399
Deferred revenue		291,858			272,782			341,681			322,989			363,612			241,785			315,339			291,858			272,782			341,681
Due to a shareholder		-			-			43,305			430,260			-			-			-			-			-			43,305
		355,956			450,844			810,343			1,734,848			2,334,988			362,092			389,754			355,956			450,844			810,343
Deferred rent		23,785			45,872			54,447			65,425			-			-			11,317			23,785			45,872			54,447

Commitments and contingencies

Shareholders' equity:
Preferred shares, no par value, non-cumulative		-			-			-			-			-			-			-			-			-			-
Special shares, no par value, non-voting		-			-			-			-			-
Common shares, no par value		19,131,789			19,111,789			19,047,850			17,658,435			17,651,006			19,262,796			19,162,796			19,131,789			19,111,789			19,047,850
Additional paid-in capital		2,645,585			2,625,365			2,455,552			2,129,398			1,875,381			2,798,274			2,726,762			2,645,585			2,625,365			2,455,552
Accumulated deficit		(21,235,095	)		(21,388,608	)		(21,471,144	)		(19,534,957	)		(16,146,464	)		(20,563,530	)		(20,930,327	)		(21,235,095	)		(21,388,608	)		(21,471,144	)
Accumulated other comprehensive income		234,911			313,888			303,887			271,360			91,783			599,608			467,317			234,911			313,888			303,887
		777,190			662,434			336,145			524,236			3,471,706			2,097,148			1,426,548			777,190			662,434			336,145
		1,156,931			1,159,150			1,200,935			2,324,509			5,806,694			2,459,241			1,827,619			1,156,931			1,159,150			1,200,935

~~(1)~~

Prior to March 31, 2005, the Company incorrectly accrued professional fees of $67,216. The Company has corrected the error by adjusting the accumulated deficit balance as of March 31, 2005 and has also restated its accrued liabilities as at March 31, 2005, 2006, 2007 and 2008 in an amount of $67,216.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

~~This Annual Report on Form 20-F contains forward-looking statements. When considering the forward-looking statements made in this annual report, you~~You should carefully consider the risks set forth directly below, and other cautionary statements throughout this ~~report, which may cause actual~~report. If any event arising from these risks occurs, our business prospects, financial condition, results ~~to vary~~of operations and cash flows could be materially ~~from the outcomes discussed in the forward-looking statements.~~adversely affected.

RISKS RELATED TO OUR BUSINESS

BECAUSE THE REVENUE AND INCOME POTENTIAL OF OUR BUSINESS AND MARKETS ARE UNPROVEN, WE CANNOT PREDICT WHETHER WE WILL MEET INTERNAL OR EXTERNAL EXPECTATIONS OF FUTURE PERFORMANCE.

We believe that our future success depends on our ability to significantly increase revenue from our ~~operations, of which we have a limited history.~~operations. Accordingly, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by ~~companies in an early stage of development.~~technology and innovation companies. These risks include our ability to:

●

Offer competitive pricing for our services;

●

Offer new and innovative mobile ~~content;~~

products;

●

Maintain our current relationships and develop new strategic ~~relationships with content providers, mobile content designers and mobile operators;~~

relationships;

●

Attract and retain qualified employees;

	●	~~Upgrade our technology infrastructure to manage increased messaging demands and trends;~~
●	Maintain our current customer and user base of our IDE software; and

●

Offer new and innovative upgrades to our IDE software.

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDS IN A TIMELY MANNER OR ON ACCEPTABLE TERMS, WE MAY HAVE TO CURTAIL OR SUSPEND CERTAIN ASPECTS OF OUR BUSINESS OPERATIONS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS RELATIONSHIPS, FINANCIAL RESULTS, FINANCIAL CONDITION AND PROSPECTS.

We anticipate that our cash and cash equivalents balance at March 31, ~~2009~~2011 of ~~$640,214~~$1,770,990 along with cash generated from operations will be sufficient to meet our present operating and capital expenditures through fiscal ~~2010.~~2012. However, there is no guarantee that unanticipated circumstances will not require additional liquidity.

Future liquidity and cash requirements will depend on a wide range of factors; including the level of success the Company has in executing its strategic plan as well as its ability to maintain business in existing operations and to raise additional financing. Accordingly, there can be no assurance that the Company will be able to meet its working capital needs for any future period.

WE HAVE CONTRACTED WITH THIRD PARTIES TO PROVIDE MOBILE CONTENT FOR OUR ACQUIRED INTERNET PORTALS AND WE MAY LOSE USERS AND REVENUE IF THESE ARRANGEMENTS ARE TERMINATED.

We have arrangements with a number of third parties to provide mobile content to our subscriber base. Although no single third party service provider is critical to our operations, if these parties fail to develop and maintain high-quality and successful mobile content, or if a large number of our existing relationships are terminated, we could lose customers and our content may become less desirable.

WE MAY EXPERIENCE DIFFICULTIES ACCURATELY FORECASTING OUR OPERATING RESULTS, THEREBY MAKING OUR BUSINESS OPERATIONS MORE DIFFICULT TO SUSTAIN.

Due to the intense competition in the mobile ~~content~~ and database industries, we may not be able to accurately forecast our future operating results. If our gross margins from our operations fall materially short of estimated expenses, our business operations will become more difficult to sustain since we will then have to reduce our spending and/or raise additional capital over and above any current capital raising plans. It may not be possible for us to accomplish either task in a timely manner, or at all, in which event we would have to curtail or suspend certain or all of our business operations. Any action to such effect is likely to have a material adverse effect on our business relationships, financial results, financial condition and prospects.

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.

We may experience significant fluctuations in our quarterly operating results due to a variety of factors, many of which are outside of our control. Factors that may cause our quarterly operating results to fluctuate include: our ability to retain existing customers, attract new customers at a steady rate and maintain user satisfaction; technical difficulties or system downtime; the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure; and industry regulation. As a result of these and other factors, you should not place undue reliance on quarter-to-quarter comparisons of our operating results as indicators of likely future performance.

WE MAY NOT BE ABLE TO ADAPT QUICKLY ENOUGH TO TECHNOLOGICAL CHANGE AND CHANGING CUSTOMER REQUIREMENTS, THEREBY LOSING SALES.

If we are unable to adapt to the rapid changes in technology and customer needs that are inherent to technology based industries, we may lose sales and fail to grow. In order to meet these rapid changes, we will have to effectively integrate new wireless and data technologies, continue to develop our technologies and technical expertise and respond to changing customer needs.

THE LOSS OF THE SERVICES OF DR. MICHAEL COWPLAND, MR. JAMES STECHYSON AND OTHER KEY PERSONNEL COULD NEGATIVELY AFFECT OUR BUSINESS.

We currently depend heavily on the services of Dr. Michael Cowpland and Mr. James Stechyson. The loss of the services of Dr. Cowpland, ~~and~~ Mr. Stechyson ~~and~~or other key personnel could affect our performance in a material and adverse way.

OUR INTERNAL CONTROLS ARE NOT EFFECTIVE.

We did not have effective internal control procedures in place at March 31, ~~2009,~~2011, when we evaluated our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002. ~~Under~~This could affect the ~~supervision and with the participation~~reliability of our ~~management,~~financial statements. We are attempting to remedy our weaknesses but as a small company we ~~are implementing remedies~~have limited resources to ~~the inadequate controls as detailed in Item 15T. These remedies are expected~~employ for this purpose. See item 15 of this Form 20-F for additional information on our attempts to ~~be in place in the 2010 fiscal year and we will then reevaluate~~rectify our internal control systems in order to allow management to report on, and our Independent Registered Public Accounting Firm to attest to, our internal controls, as of March 31, 2010 as required by Section 404weaknesses. The reduction of the ~~Sarbanes-Oxley Act. Throughout this process, we~~risk will ~~incur~~require additional expenses and use of management's time.

OUR STRATEGIC DIRECTION IS EVOLVING, WHICH COULD NEGATIVELY AFFECT OUR FUTURE RESULTS.

Since inception, our business model has evolved and is likely to continue to evolve as we refine our offerings and market focus. Prior to 2004, we focused on developing SMS products, in 2004 through to fiscal 2007 we focused on our SMS aggregation services. ~~For~~From fiscal 2008 ~~and 2009,~~to 2011, we focused on offering mobile content, applications development and the development of new IDE software. We continue to evaluate opportunities and alternative strategies in a rapidly evolving market. We plan to leverage our intellectual capital, core technologies and other business assets to focus on new strategic directions and attempt to maximize shareholder value. Changes to our business may not prove successful in the short or long term and may negatively impact our financial results.

WE OPERATE IN NEW AND RAPIDLY EVOLVING MARKETS, AND OUR BUSINESS MODEL CONTINUES TO EVOLVE, WHICH MAKES IT DIFFICULT TO EVALUATE OUR FUTURE PROSPECTS.

Our potential for future profitability must be considered in the light of the risks, uncertainties, and difficulties encountered by companies that are in new and rapidly evolving markets and continuing to innovate with new and unproven technologies or services, as well as undergoing significant change. In addition to the other risks we describe in this section, some of these risks relate to our potential inability to attract and retain unique and sought after content; to control expenditures and to respond quickly and appropriately to industry developments, including rapid technological change; changes in customer requirements; and new products introduced into our markets by our competitors. If we do not effectively address the risks we face, we may not achieve profitability.

WE DEPEND ON THIRD PARTIES FOR CONTENT FOR OUR MOBILE CONTENT SITE AND THE LOSS OF ACCESS TO OR INCREASED COST OF THIS CONTENT COULD CAUSE US TO REDUCE OUR PRODUCT OFFERINGS TO CUSTOMERS AND COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS.

~~AIS~~

Advanced Internet Inc. (“AIS”) has the right to acquire content from numerous third-party content providers, and our future success with AIS is highly dependent upon our ability to maintain these relationships and enter into new relationships with other content providers.

We may license content under various arrangements that could require us to pay usage or fixed monthly fees or revenue sharing for the use of the content. In the future, some of our content providers may not give us access to important content or may increase the royalties, fees or percentages that they charge us for their content, which could have a negative impact on our net earnings. If we fail to enter into or maintain satisfactory arrangements with these content providers, our ability to provide a variety of products and services to our customers could be severely limited, thus harming our operating results.

IF WE ARE UNABLE TO MANAGE THE INTEGRATION OF ANY ACQUIRED BUSINESSES, OUR FINANCIAL CONDITION AND OPERATING RESULTS MAY BE ADVERSELY AFFECTED.

A failure to effectively manage the integration of any acquisitions we may make may adversely affect our business and financial condition. Any acquisition that we make will place significant demand on management, technical and other resources.

WE HAVE AFFILIATED SHAREHOLDERS WHO CAN SUBSTANTIALLY INFLUENCE THE OUTCOME OF ALL MATTERS VOTED UPON BY OUR SHAREHOLDERS AND WHOSE INTERESTS MAY NOT BE ALIGNED WITH YOURS.

The beneficial ownership of our Chief Executive Officer and related parties is approximately ~~68.5%~~58.8%. As a ~~result,~~result; they are able to substantially influence all matters requiring the approval of our shareholders, including the election of directors and the approval of significant corporate transactions such as acquisitions. This concentration of ownership could delay, defer or prevent a change in control or otherwise impede a merger or other business combination that our Board of Directors or other shareholders may view favorably.

RISKS RELATED TO THE INDUSTRIES IN WHICH WE OPERATE

INTENSE COMPETITION IN THE MOBILE CONTENT AND SERVICES MARKETS COULD PREVENT US FROM INCREASING SUBSCRIPTIONS FOR OUR SERVICES OR CAUSE US TO LOSE MARKET SHARE.

Our future business model for mobile content sales and applications depends on our ability to sell our content and service offerings in an extremely competitive and rapidly changing market. Our competitors may have substantially greater financial, technical and marketing resources, larger customer bases, longer operating histories, more developed infrastructures, greater name recognition or more established relationships in the industry than we have. Our competitors may be able to adopt more aggressive pricing policies, develop and expand their service offerings more rapidly, adapt to new or emerging technologies and changes in customer requirements more quickly, take advantage of acquisitions and other opportunities more readily, achieve greater economies of scale, and devote greater resources to the marketing and sale of their services than we can. Because of these competitive factors and due to our relatively small size and financial resources, we may be unable to compete successfully.

CONSOLIDATION IN THE INDUSTRIES IN WHICH WE OPERATE COULD LEAD TO INCREASED COMPETITION AND LOSS OF CUSTOMERS.

The mobile industry has experienced substantial consolidation. We expect this consolidation to continue. These acquisitions could adversely affect our business and results of operations in a number of ways, including the following:

●

our distribution partners could acquire or be acquired by one of our competitors and terminate their relationship with us;

●

our distribution partners could merge with each other, which could reduce our ability to negotiate favorable terms;

●

competitors could improve their competitive positions through strategic acquisitions; and

●

companies from whom we acquire content could acquire or be acquired by one of our competitors and stop licensing content to us, or gain additional negotiating leverage in their relationships with us.

ITEM 4. INFORMATION ON THE COMPANY

A. History and ~~development~~Development of the Company

ZIM’s principal place of business and registered office is located at 150 Isabella Street, Suite 150, Ottawa, Ontario, Canada, K1S 1V7 and we can be contacted at (613) 727-1397. In the United States our agent is Corporate Stock Transfer, Inc., located at 3200 Cherry Creek South Dr., #430, Denver, CO, 80209 and can be contacted at (303) 282-4800.

ZIM was incorporated under the Canadian Business Corporations Act on October 17, 2002 in order to purchase ZIM Technologies International Inc. ("ZIM Technologies"), which was formed in 1997 to acquire the software technology now called the ~~Zim~~ZIM Integrated Development Environment (the ~~"Zim~~"ZIM IDE software"). On February 10, 2004, ZIM purchased UK-based SMS service firms EPL Communications Limited and E-Promotions Limited (together referred to as "EPL"). During the year ended March 31, 2006, EPL was dissolved and all operations were transferred to ZIM Corporation in Canada. ZIM is also the sole shareholder of ZIM Technologies do Brazil Ltda., a company incorporated in Brazil that distributes the ~~Zim~~ZIM IDE Software, and PCI Merge, Inc., a Florida based holding company with no operations. Until March 31, 2004, ZIM was the sole shareholder of ZIM Technologies, a Canadian federal corporation and the chief operating company of the ZIM group of companies. On April 1, 2004, ZIM Corporation and ZIM Technologies amalgamated into ZIM Corporation. On April 1, 2006, ZIM purchased a US-based mobile content company called Advanced Internet Inc. (“AIS”).

See Item 4.B for a description of our principal capital expenditures and divestitures, including those currently in progress, since the beginning of our last three fiscal years to the date of this annual report.

B. Business Overview

ZIM started operations as a developer and provider of database software known as ZIM IDE software. ZIM IDE software is used by companies in the design, development, and management of information databases and mission critical applications. The Company continues to provide this software and ongoing maintenance services to its client base.

Beginning in 2002, the Company expanded its business strategy to include opportunities associated with mobile products. Prior to fiscal 2007, the Company focused on developing products and services for the wireless data network infrastructure known as “SMS” or “text messaging”. Although SMS will continue to provide a minimal amount of revenue within the mobile segment of operations, with the acquisition of AIS in 2007 the Company shifted its corporate focus to include offering mobile content directly to end users.

In fiscal 2008, ZIM added the ZIM TV service and in partnership with the International Table Tennis Federation (ITTF) provided development and hosting services for IPTV to ITTF end users. However, in fiscal 2009, ZIM exited the IPTV market.

In fiscal ~~2009,~~2011, ZIM continues to develop and sell enterprise database software to end users as well as maintain its SMS messaging and mobile content and service product lines. ~~However, in fiscal 2009, ZIM has exited the IPTV market.~~

The following tables show the breakdown of total revenues by category of activity and geographic market:

Revenue by category	Year ended March 31, 2009		Year ended March 31, 2008		Year ended March 31, 2007		Year ended March 31, 2011		Year ended March 31, 2010		Year ended March 31, 2009
		$		$		$	$		$		$

Mobile		367,723		843,162		1,116,740		280,339		320,784		367,723
Software		1,463,818		1,147,518		1,078,444		1,729,432		1,276,681		1,463,818
Total revenue		1,831,541		1,990,680		2,195,184		2,009,771		1,597,465		1,831,541

Revenue by geographic market	Year ended March 31, 2011		Year ended March 31, 2010		Year ended March 31, 2009
	$		$		$

United States		390,064		360,795		410,908
United Kingdom		7,914		45,663		19,713
Europe		58,583		41,944		33,891
Brazil		1,310,805		917,036		981,484
Canada		169,168		209,577		350,938
Other		73,237		22,449		34,607
Total revenue		2,009,771		1,597,465		1,831,541

Revenue by geographic market
Year ended
March 31, 2009

Year ended
March 31, 2008

Year ended
March 31, 2007

$ $ $

United States 410,908 637,665 315,130
United Kingdom 19,713 61,151 184,070
Europe 33,891 60,599 312,646
Brazil 981,484 977,240 1,109,234
Canada 350,938 232,951 260,926
Other 34,607 21,074 13,178
Total revenue 1,831,541 1,990,680 2,195,184

MOBILE

Our business strategy previously involved designing mobile data software products to take advantage of the existing wireless data network infrastructure known as Short Message Service (SMS). SMS, mobile messaging, or text messaging, as it is also known, enables users to communicate person to person and application to person through cellular handsets and other SMS-enabled devices. The expertise we gained in the SMS infrastructure and network allowed us to expand into the aggregation of SMS messages in 2004. Aggregators transmit a broad variety of messaging, content, and applications worldwide. ZIM continues to provide a high-volume delivery infrastructure that is scalable with detailed reporting available to our mobile content customers.

During the year ended March 31, 2006, it became apparent that the SMS aggregation market was becoming consolidated, which made it increasingly difficult for us to compete. We noticed a downward trend in sales of aggregation services by the end of the third quarter of fiscal 2006 and decided to expand our product and service offerings. On April 1, 2006, we acquired all of the outstanding capital stock of Advanced Internet, Inc. (“AIS”), from Advanced Telecom Services, Inc. (“ATS”). Refer to note 6 of our financial statements “ACQUISITION OF ADVANCED INTERNET INC.” for additional information on this transaction.

For fiscal 2008 we increased our pricing model for our mobile content products. This stabilized our mobile content revenues and resulted in higher gross margins for fiscal 2008 in this business segment.

On July 16, 2007, ZIM Corporation signed an agreement with SilverBirch Inc. to sell certain mobile messaging assets. The assets included ZIM’s Canadian mobile gateway technology, customer contracts and proprietary web to text applications. ~~Refer to note 5 of our financial statement “GAIN ON DISPOSITION OF ASSETS” for additional information on this transaction.~~

Mobile content continues to be a very competitive business and we do not foresee the ability to increase this business in any significant way. The management of ZIM will continue to investigate opportunities to maximize value for the company in the mobile content space. However, there are no guarantees that we will be successful at identifying new opportunities.

SOFTWARE

Historically, we were a developer and provider of the ~~Zim~~ZIM (IDE) software, which is used by companies in the design, development, and management of information databases. We now license the ~~Zim~~ZIM IDE software products to customers through direct and partner sales.

The ~~Zim~~ZIM IDE software provides an integrated development environment (IDE) for Microsoft Windows, UNIX and Linux computer operating systems. An integrated development environment is a set of programs that runs from a single user interface for use in the creation of applications and management of databases.

The ~~Zim~~ZIM IDE software was designed to handle complex data management in a more efficient manner than the database technologies historically provided by other vendors. The distinctive characteristic of the ~~Zim~~ZIM IDE software is its object dictionary which contains more than just a table of data. Instead, all relationships and data information are concurrently stored in the object dictionary, making it easier to manage and retrieve information. Furthermore, ~~Zim~~ZIM IDE software uses data sets rather than record-by-record access to manage information. This technique further simplifies the management of data.

The ~~Zim~~ZIM IDE software has been used to develop database applications that have been deployed in a wide range of industries, including finance, insurance, marketing, human resources, information and records management. Applications built with the ~~Zim~~ZIM IDE will also fully access most other major databases such as Oracle and SQL Server.

In fiscal ~~2008~~2009, 2010 and ~~2009,~~2011, we continued to support our existing customer base and users of the ZIM IDE software. In addition, we continued to allocate research and development resources to improve the performance and features of the ZIM IDE software.

In 2011 ZIM acquired the technology assets of Torch Technologies and began offering an advanced portfolio of migration services and management products that strengthen and complement ZIM's enterprise database products. The combined product portfolio is a robust solution to rapidly and cost effectively migrate existing databases to other industry databases including Oracle™ and SQL™ while retaining valuable ZIM applications and providing a simplified database management suite.

COMPETITION

ZIM operates primarily in two markets; mobile and database software, as an aggregator and a provider of mobile content and applications and enterprise software. Our competitors include mobile application providers, mobile application aggregators, entertainment and other digital media companies, and the mobile operators themselves, as they also offer mobile content directly to their end users. The database market is highly diversified and includes both small and large competitors.

All these markets are highly competitive and rapidly changing due to the respective natures of these growing markets. We have many competitors in the mobile markets, including WIN PLC, MBlox and Mobile365 in aggregation and Verisign, which owns Jamster and Monstermob in mobile content.

In the database market, our competitors include Oracle, Microsoft, SAP, MySQL and many others. These competitors have certain competitive advantages over us, including but not limited to:

●

substantially greater financial and technical resources;

●

more extensive and well-developed marketing and sales networks;

●

greater global brand recognition; and

●

larger customer bases.

We compete within the aggregation market primarily for volume of traffic and strategic relationships. However, our volumes decreased substantially in 2008 and 2009 as a result of management’s previously disclosed decision to decrease our focus in this area due to declining margins and the company’s inability to locate less expensive routes for its traffic. Since the mobile content market is aimed at consumers, rather than business customers, we compete in the mobile content market for subscribers and for the quality of the content in our offering.

Our existing competitors may in the future achieve greater market acceptance and gain additional market share. It is also possible that new competitors may emerge and acquire significant market share.

We compete in the mobile aggregation and content environment based on our ability to connect to international operators through a variety of strategic relationships with other aggregators and mobile operators. We have developed strategic relationships with a range of content and service partners in order to serve our customers more effectively and to extend our services to an international audience. We compete in the mobile content space based on existing brand recognition and our ability to offer new and intriguing content. As mentioned above, the management of ZIM will continue to investigate opportunities to maximize value for the company in the mobile content space. However there are no guarantees that we will be successful at identifying new opportunities.

CUSTOMERS

During fiscal ~~2009,~~2011, we had more than ~~240~~5 revenue generating customers in at least 94 countries in our mobile segment. In addition, we had in excess of 100 customers who utilized ZIM IDE to run their enterprise applications. Only one customer accounted for over 10% of revenue for the year ended March 31, 2009 and no customers accounted for over 10% of revenue for the year ended March 31, ~~2008.~~2010 and March 31, 2011. In the mobile content market ZIM serves thousands of customers on a monthly basis.

TECHNOLOGY INFRASTRUCTURE

We believe that our technology is essential to successfully implement our strategy of expanding and enhancing our products and services, expanding in the mobile media market and maintaining the attractiveness and competitiveness of our products and services.

Our operating infrastructure is designed to serve and deliver tens of millions of messages each week to hundreds of cell phone operators worldwide. Our aggregation partners use a system that has a scalable and redundant infrastructure located on servers at co-location hosting sites in Canada and the USA. We believe that these hosting partners provide operating advantages, including an enhanced ability to protect our systems from power loss, break-ins and other potential external causes of service interruption. They provide continuous customer service, multiple connections to the internet and a continuous power supply to our systems. In addition, we conduct online monitoring of all our systems for accessibility, load, system resources, network-server intrusion and timeliness of content.

~~This infrastructure allows us to be a high performance mobile gateway connecting large internet communities to approximately two billion cell phones worldwide through the various mobile operators.~~

Our servers run on Linux and Windows platforms using Postgres and mySQL and proprietary SMPP servers. SMPP is a short message peer-to-peer protocol for exchanging SMS messages between SMS peer entities such as short message service centers. It is used to allow third parties to submit messages, often in bulk. On July 16, 2007, ZIM Corporation signed an agreement with SilverBirch Inc. to sell certain SMS assets. The assets included our Canadian SMPP platform, which we sold for approximately $70,395.

Our database system is an advanced entity-relationship database, which also operates on Windows Unix and Linux platforms.

Through the acquisition of AIS, we now own the platform for the mobile content portals. ~~Using a third party’s hosting facilities, our~~Our portals can serve hundreds of thousands of visitors monthly. Our platform uses scalable web server and SQL database server facilities to ensure adequate support to a large number of subscribers and different types of contents.

Our platform consists of two main components, the web server and the database server. The web server is the main customer interface providing all necessary facilities for browsing, searching and purchasing mobile contents. It is hosted on a separate ~~machine~~server running Microsoft Internet Information Service (IIS) offering Search Engine Optimized (SEO) pages and content structure to ensure a high page ranking for our sites and ease of customer search and navigation.

The database server houses all the content structure and subscriber database. It is hosted on a fully redundant machine equipped with Redundant Array of Independent Disks (RAIDs) running Microsoft SQL Server. Our platform is completely data-driven and optimized for search engines to ensure direct, easy search and access to all content offered on our sites.

Our platform incorporates its own billing facilities, has direct access to credit card transactions, cheque clearing brokers, PayPal and various carriers for premium SMS charging facilities.

RESEARCH AND DEVELOPMENT

Our research and development activities focus primarily in the areas of database migration technology, IDE software, mobile content applications and ~~SMS messaging~~services. Research and development expenditures were $629,258 for 2011, $482,629 in fiscal 2010, and $457,979 in fiscal ~~2009, $512,287 in fiscal 2008 and $382,146 in fiscal 2007.~~2009.

PATENTS AND INTELLECTUAL PROPERTY PROTECTION

Intellectual property does not represent a material part of our assets or business strategy. We do not rely on patents or copyrights and, to the extent we maintain trade secrets, we rely on confidentiality agreements to protect them from misappropriation.

GOVERNMENTAL REGULATION

Because of the increasing use of the internet and mobile devices, and the public’s concern for privacy, U.S. and foreign governments have adopted, or may in the future adopt, laws and regulations relating to the internet or use of mobile devices, addressing issues such as user privacy, security, pricing, age verification, content quality, copyrights and distribution techniques. We could become subject to new laws and regulations in various countries that could limit our ability to market our products and to distribute and/or collect user information. These or other laws or regulations that may be enacted in the future could have adverse effects on our business, including higher regulatory compliance costs, limitations on our ability to provide some services in some countries, and liabilities which might be incurred through lawsuits or regulatory penalties. We take steps using industry standard tools such as firewall, VPN, encryption and antivirus to protect the security and confidentiality of the information we collect and store but there is no guarantee that third parties, partners or employees will not gain unauthorized access despite our efforts or that we will not incur costs in complying with our notification obligations under such circumstances.

C. Organizational Structure

Refer to Exhibit 8.1 for a complete list of ZIM subsidiaries.

~~EMPLOYEES~~

As at March 31, 2009, we had 14 full-time employees, with 5 employees in selling, general and administration and 9 employees in technical areas including technical support and research and development. We consider our relations with our employees to be excellent, and none of our employees are covered by a collective bargaining agreement. ZIM also contracts services from 3 consultants on a part-time basis.

~~Of these employees, 13 are based in Ottawa, Canada; one is based in Sao Paolo, Brazil.~~

D. Property, ~~Plant~~Plants and Equipment

DESCRIPTION OF ~~PROPERTY.~~PROPERTY

Our principal office is located in Ottawa, Canada. ZIM leases an office suite of approximately 3,300 square feet. The lease is currently scheduled to expire in October, ~~2010.~~2015.

We believe that our existing facilities are adequate to meet our current needs.

Refer to note 98 of our financial statements “PROPERTY AND EQUIPMENT” for additional ~~information~~.information.

~~ITEM 4A.~~

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

~~ITEM 5.~~

ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS

EXECUTIVE SUMMARY

Revenue for the fiscal year ~~2009~~2011 was ~~$1,831,541~~$2,009,771, compared with revenue of ~~$1,990,680~~$1,597,465 for fiscal year 2010 and $1,831,541 for the fiscal year ~~2008 and $2,195,184 for the fiscal year 2007.~~2009. The ~~decrease~~increase is attributable to increased consulting and software license revenue for our enterprise software segment related to our enhanced suite of database migration technologies. This increase is offset by the expected decline in revenue from our mobile segment, caused by the continued saturation of ~~the~~that market. The decline in mobile revenue is offset by gains from our enterprise software segment, which represented a 28% increase in that segment over the fiscal year 2008 and a 6% increase over the fiscal year 2007.

Net income for the fiscal year ~~2009~~2011 was ~~$153,513~~$366,797 as compared to ~~$82,536~~$304,767 for the fiscal year ~~2008~~2010 and ~~a net loss of $1,936,187~~$153,513 for the fiscal year ~~2007.~~2009. The increase in net income principally reflects ~~a reduction~~the increase in revenue, as stated above, coupled with no material increase in selling and general administrative expenses and an increase in ~~revenues~~interest income. These gains are offset by an increase in ~~the higher margin enterprise software business segment. The reduction in selling~~research and general administrative expenses is mainly related to compensation expense and professional fees due to our change in status, we have been reporting as a foreign private issuer since the second quarter of fiscal 2009.development expenses.

ZIM had cash and cash equivalents of ~~$640,214~~$1,770,990 at March 31, ~~2009~~2011 as compared to cash and cash equivalents of ~~$299,943~~$1,160,881 at March 31, ~~2008.~~2010. The Company generated a positive cash flow of ~~$340,271~~$610,109 for the fiscal year ended March 31, ~~2009, mainly~~2011, as result of normal operations.

A. Operating results

The following is an overview of our operating results for the year ended March 31, ~~2009.~~2011. A more detailed discussion of our operating results, comparing our operating results for the years ended March 31, ~~2009, 2008~~2011, 2010, and ~~2007,~~2009, is included under the heading “Results of Operations for the Year Ended March 31, ~~2009~~2011 Compared to the Year Ended March 31, ~~2008~~2010 and ~~2007”~~2009” of this “OPERATING AND FINANCIAL REVIEW AND PROSPECTS”.

Revenues for the year ended March 31, ~~2009 decreased~~2011 increased approximately $0.412 million to approximately ~~$1.8~~$2.01 million from approximately ~~$2.0~~$1.60 million for the year ended March 31, ~~2008 approximately $2.2 million for the year ended March 31, 2007.~~2010. Revenue from our mobile segment decreased from ~~$0.8~~$0.32 million, to ~~$0.4~~$0.28 million in fiscal ~~2009.~~2011. The decrease was due to reduced aggregation mobile content sales. This decrease is offset by the increase of approximately $453,000 in our software segment. In fiscal 2010, revenue from our mobile segment decreased to $0.32 million from $0.37 million, in fiscal 2009, due to reduced aggregation traffic from our customer base. This decrease is partially offset by an increase of approximately $300,000 in our software segment. In fiscal 2008, revenue from our mobile segment decreased to $0.8 million from $1.1 million, in fiscal 2007, due to reduced aggregation traffic from our customer base andAlso, revenue from our software segment ~~remained unchanged at~~decreased approximately ~~$1.1 million~~$187,000 in fiscal ~~2008.~~2010.

Total operating expenses for the year ended March 31, ~~2009~~2011 were approximately ~~$1.9~~$2.01 million, ~~a decrease~~an increase of approximately ~~$0.7~~$0.301 million from operating expenses of ~~$2.6~~$1.71 million for the year ended March 31, ~~2008~~2010 and a decrease of approximately ~~$2.5~~$0.22 million from operating expenses of ~~$4.4~~$1.93 million for the year ended March 31, ~~2007.~~2009. The decrease in fiscal ~~2009~~2010 was attributable to a decrease in costs of revenue relating to the decrease in revenues associated with SMS aggregation, and reduced operating costs as a result of reductions in compensation expense and professional fees. The ~~decrease~~increase in fiscal ~~2008 was attributable to no further amortization of intangible assets~~2011 is related to ~~the acquisition of AIS (which were fully amortized in 2007) and reduced operating costs. The decreases in fiscal 2008 were offset to some extent by an increase in~~increased research and development ~~expenditures.~~costs of $146,629, increased cost of revenue of $82,975 and increased SG&A cost of $66,983.

~~CHANGE IN~~CURRENT STRATEGIC DIRECTION

Due to the decrease in revenues from SMS aggregation services, we started exploring new opportunities both within the mobile industry and enterprise application industry.

In fiscal 2006, we began offering mobile content, but this is a very competitive business and we do not foresee increasing this business significantly. In fiscal 2007, we expanded into Internet TV. Fiscal 2008 showed an increase in revenue from IPTV over fiscal 2007. However, ~~to date~~ we ~~have~~did not ~~generated~~generate significant revenues within the IPTV space and have not been able to grow the mobile content business. As a result, management of ZIM continues to explore alternative strategies and opportunities within the mobile industries to leverage the existing technology, relationships and expertise. These may include joint ventures or sales of any or all of our assets related to either of these industries. ZIM exited the Internet TV market in fiscal 2009.

In 2011, with ZIM’s acquisition of the technology assets of Torch Technologies, we increased our focus on the enterprise software market. Torch’s advanced portfolio of migration services and management products strengthened and complemented ZIM`s enterprise database products, and the combined product portfolio is a robust solution to rapidly and cost effectively migrate existing databases to other industry databases including Oracle™ and SQL™ while retaining valuable ZIM applications and providing a simplified database management suite. ZIM believes that the new product portfolio will strengthen ZIM’s solution offering for existing and new clients.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, which requires management to make certain estimates and apply judgments that affect reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the consolidated financial statements are prepared.

Actual results could differ from our estimates, and such differences could be material. On an ongoing basis, management reviews our accounting policies and how they are applied and disclosed in our consolidated financial statements.

The following supplemental information describes significant judgments and estimates involved in our critical accounting policies, which are more fully described in Note 3 to the consolidated financial statements included in this annual report.

JUDGMENTS REGARDING TAX POSITIONS

In June 2006, FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes”, was issued, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. This InterpretationASC 740 requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of not being sustained on an audit, based on the technical merits of the position. Accordingly, management may be required to make additional judgments regarding the accounting treatment of tax positions.

~~The Company adopted the provisions of this Interpretation on April 1, 2007. No adjustment was required to the amount of the unrecognized tax benefits.~~

VALUATION ALLOWANCES

We must make certain estimates and judgments in determining the income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. Judgments regarding realization of deferred tax assets and the ultimate outcome of tax-related contingencies represent key items involved in the determination of tax expense and related balance sheet accounts. We have currently recorded a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. Should we determine that based on factors such as future profitability, a reduction in the valuation allowance is appropriate, an adjustment to our deferred tax assets would increase income in the period such determination was made.

REVENUE RECOGNITION

Revenues shown in the financial statements included with this report have been derived mainly from mobile content sales, IPTV, SMS messaging services, SMS fee-based services, and proprietary software products and licenses. The Company presents revenues net of sales tax and other sales related taxes.

Mobile content and IPTV sales

Mobile content revenues are derived primarily from credit card purchases via the internet or through premium messaging. IPTV revenues are derived from contracts to provide channels and infrastructure services. Revenue is recognized by delivery and acceptance of a download (mobile content) or service (IPTV) to the end users. We recognize revenue when (a) there is persuasive evidence of an arrangement; (b) the service has been provided to the customer; (c) the amount of the fees to be paid by the customer is fixed and determinable; and (d) the collection of the fees is reasonably assured.

Premium messaging and SMS fee-based services

SMS premium messaging services revenues are derived principally from providing mobile content providers connections to mobile operators and allowing their end users to expand on their SMS capabilities and other services. These services include news and other content subscriptions. Revenues from SMS messaging services are recognized based on fees received from the mobile operator, after all payments to the mobile content providers. Such revenues are recognized by ZIM in the period in which the service is performed, provided that no significant Company obligations remain, the collection of the receivables is reasonably assured and the amounts can be accurately estimated.

We rely on the billing statements from third party mobile operators to record revenues. These statements are reviewed for consistency with internally generated reports. Due to the time lag of receiving billing statements from third-party mobile operators, revenues in any period may have to be estimated based on our internal billing records and transmissions, adjusting for prior period confirmation rates with mobile operators and prior period discrepancies between internally estimated revenues and actual revenues confirmed by mobile operators. We apply confirmation rates based on the average of the recent actual historical rates. To date, there has been no significant adjustment to any estimates. However, our internal judgments may be incorrect in any period, which may result in our recording materially incorrect revenues.

Proprietary software products and licenses sales

ZIM records revenues from the perpetual license of the Company's software products and the sale of related maintenance and consulting. The Company's standard license agreement provides a license to use the Company's products based on the number of licensed users. The Company may license its software in multiple element arrangements if the customer purchases any combination of maintenance, consulting or training services in conjunction with the license.

The Company recognizes revenue pursuant to the requirements of the ~~American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP 97-2")~~FASB ASC 605-985 "Software Revenue Recognition"~~, as amended by SOP 98-9 "Software Revenue Recognition with Respect to Certain Transactions."~~ Revenue is recognized using the residual method when Company-specific objective evidence of fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more delivered elements. The Company allocates revenue to each undelivered element based on its respective fair value determined by the price charged when that element is sold separately. The Company defers revenue for the undelivered elements and recognizes the residual amount of the arrangement fee, if ~~any, when the basic criteria in SOP 97-2 have been met.~~any.

STOCK-BASED COMPENSATION

ZIM adopted the provisions of ASC 718 (formerly SFAS No. 123(R)) effective April 1, 2006, using the modified-prospective transition method, which requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation expense over the service period for awards expected to vest. The fair value of stock options is determined using the Black Scholes valuation model and requires judgment in establishing the volatility and option forfeiture rates. These internal judgments may be incorrect in any period, which may result in our recording materially incorrect compensation expense.

RESULTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, ~~2009~~2011 COMPARED TO THE YEAR ENDED MARCH 31, ~~2008~~2010 AND THE YEAR ENDED MARCH 31, ~~2007~~2009

REVENUES

	Year ended March 31, 2011		As a %			Year ended March 31, 2010		As a %			Year ended March 31, 2009		As a %
	$					$					$

Mobile content		98,951		5	%		136,577		9	%		223,527		12	%
Bulk SMS		170,789		8	%		135,345		8	%		115,823		6	%
Premium SMS		-		0	%		-		0	%		3,877		0	%
Other SMS services and products		10,599		1	%		48,862		3	%		14,660		1	%
Internet TV		-		0	%		-		0	%		9,836		1	%
		280,339		14	%		320,784		20	%		367,723		20	%

Software		394,366		20	%		162,964		10	%		424,855		23	%
Maintenance and consulting		1,335,066		66	%		1,113,717		70	%		1,038,963		57	%
		1,729,432		86	%		1,276,681		80	%		1,463,818		80	%

		2,009,771		100	%		1,597,465		100	%		1,831,541		100	%

Year ended
March 31, 2009
As a %
Year ended
March 31, 2008
As a %
Year ended
March 31, 2007
As a %
$ $ $

Mobile content 223,527 12 % 422,559 21 % 494,809 23 %
Bulk SMS 115,823 6 % 96,290 5 % 359,679 16 %
Premium SMS 3,877 0 % 202,356 10 % 142,774 7 %
Other SMS services and products 14,660 1 % 85,679 4 % 112,110 5 %
Internet TV 9,836 1 % 36,278 2 % 7,368 0 %
367,723 20 % 843,162 42 % 1,116,740 51 %

Software 424,855 23 % 157,310 8 % 152,093 7 %
Maintenance and consulting 1,038,963 57 % 990,208 50 % 926,351 42 %
1,463,818 80 % 1,147,518 58 % 1,078,444 49 %
1,831,541 100 % 1,990,680 100 % 2,195,184 100 %

Total revenues for the year ended March 31, ~~2009~~2011 were ~~$1,831,541~~$2,009,771 as compared to ~~$1,990,680~~$1,597,465 for the year ended March 31, ~~2008~~2010 and ~~$2,195,184~~$1,831,541 for the year ended March 31, ~~2007.~~2009. The ~~decrease in revenues~~increase is mainly due to ~~the reduction~~increased sales of software licenses and consulting services related to our ~~sales in our mobile segment, a trend that we expect to continue in the 2010 fiscal year. As a result, management is exploring strategic alternatives to maximize shareholder value from these assets.~~suite of migration technologies.

REVENUE ANALYSIS BY SERVICE/PRODUCT OFFERING

MOBILE CONTENT

~~On April 1, 2006, we acquired AIS and its two Internet portals offering mobile content.~~ As previously mentioned, consumers are able to download ring tones and wallpapers directly from our Internet sites to their mobile phones. Revenue from the sale of mobile content for the fiscal year ended March 31, ~~2009~~2011 was ~~$223,527~~$98,951 as compared to ~~$422,559~~$136,577 for fiscal year ended March 31, ~~2008~~2010 and ~~$494,809~~$223,527 for fiscal year ended March 31, ~~2007.~~2009. The decline was due to a highly competitive and saturated market resulting in a lower volume of downloads, partially offset by our pricing increases for these products.

BULK SMS

Our bulk SMS messaging revenue went from ~~$359,979 in fiscal 2007 to $96,290 in fiscal 2008 and~~ $115,823 in fiscal ~~2009.~~2009 to $135,345 in fiscal 2010 and to $170,789 in fiscal 2011. We ~~experienced~~continue to experience more customers using our routes in fiscal ~~2009,~~2011, as compared to ~~2008,~~fiscal 2010 and fiscal 2009, resulting in the increased revenue. In general, bulk messaging customers choose the aggregator that is offering the lowest cost route. ~~As a result, we~~We do not expect that the increased revenues of fiscal ~~2009~~2011 will be indicative of future performance.

The decrease in the overall level of bulk revenue from fiscal 2007 is primarily a result of not offering a cost effective route for our customers. In general, bulk messaging customers choose the aggregator that is offering the lowest cost route. Different aggregators are able to negotiate different price points based on the traffic they are able to guarantee to the mobile operators. Due to the size of our competitors, and our competitors’ ability to negotiate better terms, there can be no guarantee that we will have routes that are the most cost effective in the future.

PREMIUM SMS

Our premium SMS messaging revenue went from ~~$142,774 in fiscal 2007 to $202,356 in fiscal 2008 and to~~ $3,877 in fiscal ~~2009. The anomaly of the increase in the fiscal 2008 year is due~~2009 to the fact that our monthly reconciliation process with one of our suppliers was delayed due to inabilities to obtain the required reports and reconciliations. At the completion of this reconciliation process we had determined we over-accrued the amounts owing by approximately $120,000 and upon receiving the documentation from the supplier on our actual accrued liability we reversed this entry. Since we record revenue for this segment on a net basis, the reversal of this payable generated income in this segment. The actual trend when the above factor is removed is $142,774 for fiscal 2007 to $ 81,793$NIL in fiscal ~~2008~~2010 and to ~~$3,877~~$NIL in fiscal ~~2009.~~

~~Due to the decreasing margins and competitive nature of our premium SMS revenues, we are~~2011. We do not ~~focusing on expanding this area of the business. As a result, we~~ expect to see ~~decreases~~any revenue in our premium SMS messaging revenue for fiscal ~~2010.~~2012. As previously disclosed, we believe that the decrease in margins is attributable to the competition in the SMS aggregation market and the dominance of a few key mobile content providers.

OTHER SMS SERVICES AND PRODUCTS

Our other SMS services revenue ~~decreased~~increased from ~~$112,110 in fiscal 2007 to $85,679 for the year ended March 31, 2008 and to~~ $14,660 for the fiscal year ended March 31, 2009 ~~primarily as a result of eliminating Location Based Services (LBS)~~to $48,862 for the fiscal year ended March 31, 2010 and ~~our virtual mobile service.~~to $10,599 for the fiscal year ended March 31, 2011. All other products and services are continuing; however, due to the low and overall decreasing revenue we do not consider them part of our core business.

INTERNET TV

During the quarter ended December 31, 2006, we began offering a P2P Internet TV site, ~~www.zimtv.biz~~www.ZIMtv.biz. Through a user friendly interface on ZIMTV, consumers can watch free and/or pay-per-view channels containing sports, movies, television, news, animation and educational video content. In fiscal 2007, we were in the process of building customers and we allowed customers free trial subscriptions for the premium channels as well.

In fiscal year 2008, we conducted several trials of our live IPTV streaming service with a key customer. It was determined that P2P did not provide acceptable quality standards. As such we discontinued our partnership with PPLive and switched to Windows Media and Flash-based technologies, which resulted in superior results. The trials were paid for by the customer and resulted in approximately $36,300 in revenues in the year ended March 31, 2008 as compared to $7,368 for the year ended March 31, 2007. In 2009, we stopped providing this service to our existing IPTV customer and subsequently exited our IPTV business. Revenues for the year ended March 31, 2009 were $9,836 and ZIM has exited this line of business.

SOFTWARE, MAINTENANCE AND CONSULTING

We generate revenues from the sale of our database product as well as the subsequent maintenance and consulting fees. Software sales ~~increased~~decreased from ~~$152,093~~$424,885 in fiscal ~~2007~~2009 to ~~$157,310~~$162,964 in fiscal ~~2008~~2010 and rebounded to ~~$424,855~~$394,366 in fiscal ~~2009.~~2011. During 2009, ZIM delivered one large project contributing significantly to ~~this increase.~~the higher revenue and the increase in fiscal 2011 is related to additional projects based on our recently acquired migration technologies.

In addition to the sale of the software, we are generating revenue from software maintenance and consulting. Maintenance and consulting revenues have increased ~~slightly~~ from ~~$926,351 in fiscal 2007 to $990,208 in fiscal 2008 and to~~ $1,038,963 in fiscal ~~2009.~~2009 to $1,113,717 in fiscal 2010 and to $1,335,066 in fiscal 2011. Most of the maintenance revenue was generated in Brazil as this region represents the largest concentration of users of ZIM’s IDE product. The increase in revenues is due to more licenses being sold and also the strength of the Brazilian real compared to the United States dollar.

We will continue to allocate the appropriate resources to the maintenance and development of our database products while we continue to generate revenues from this product line. Although we do not see immediate or significant growth in this segment, we are still committed to serving our existing customers.

EXPENSES

Operating expenses

	Year ended March 31, 2009		Year ended March 31, 2008		Year ended March 31, 2007		Year ended March 31, 2011		Year ended March 31, 2010		Year ended March 31, 2009
		$		$		$	$		$		$

Cost of revenue		256,694		384,166		928,818		261,437		178,462		256,694
Selling, general and administrative		1,213,709		1,654,269		2,156,049		1,114,611		1,047,627		1,213,709
Research and development		457,979		512,287		382,146		629,258		482,629		457,979
Amortization of intangible assets		-		-		972,209		4,251		-		-
		1,928,382		2,550,722		4,439,222		2,009,557		1,708,718		1,928,382

Operating expenses ~~continued to decrease~~decreased from ~~$4,439,222 for the year ended March 31, 2007 to $2,550,722 for the year ended March 31, 2008 and to~~ $1,928,382 for the year ended March 31, ~~2009.~~2009 to $1,708,718 for the year ended March 31, 2010 and has increased to $2,009,557 for the year ended March 31, 2011. The ~~decreases are~~increase is mainly attributable to ~~a decrease~~increased research and development costs coupled with an increase in ~~costs~~the cost of revenue ~~relating to the decrease in revenues associated with SMS aggregation and lower operating costs related to compensation expenses and professional fees.~~as a result of revenue growth.

COST OF REVENUE

Included in the cost of revenue are costs related to the ~~Zim~~ZIM IDE sales and costs relating to SMS revenues.

										Year ended			Year ended			Year ended
	Year ended March 31, 2009			Year ended March 31, 2008			Year ended March 31, 2007			March 31, 2011			March 31, 2010			March 31, 2009
		$			$			$		$			$			$
Mobile
Revenue		367,723			843,162			1,116,740			280,339			320,784			367,723
Cost of revenue		(109,549	)		(232,185	)		(766,468	)		(71,902	)		(80,010	)		(109,549	)
Gross margin		258,174			610,977			350,272			208,437			240,774			258,174

Gross margin %		70	%		72	%		31	%		74	%		75	%		70	%

Software
Revenue		1,463,818			1,147,518			1,078,444			1,729,432			1,276,681			1,463,818
Cost of revenue		(147,145	)		(151,981	)		(162,350	)		(189,535	)		(98,452	)		(147,145	)
Gross margin		1,316,673			995,537			916,094			1,539,897			1,178,229			1,316,673

Gross margin %		90	%		87	%		85	%		89	%		92	%		90	%

Gross margins for the mobile segment went from ~~31% in 2007 to 72% in 2008 and~~ 70% in ~~2009. However, after accounting for~~2009 to 75% in 2010 and maintained the ~~reversal of an accrual as described earlier, the actual fluctuation~~74% level in ~~gross margin would be 31% in 2007, 68% in 2008 and 70% in 2009. The increases in gross margins are due to increases in pricing structure and our ability to decrease the cost of revenue.~~2011.

Gross margins for software, maintenance and consulting sales increased slightly ~~from 85% for the year ended March 31, 2007 to 87% for the year ended March 31, 2008 and~~ to 90% for the year ended March 31, ~~2009.~~2009 to 92% for the year ended March 31, 2010 and dropped slightly to 89% for the year ended March 31, 2011. Included in the cost of revenue for software, maintenance and consulting are salaries relating to supporting the ZIM IDE software and costs for the distribution of the software. The slight increase in gross margins in our software segment relates to ~~higher revenues while holding costs stable.~~slight cost reductions.

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses for the years ended March 31, ~~2009,~~2011, March 31, ~~2008~~2010 and March 31, ~~2007~~2009 were ~~$1,213,709, $1,654,269~~$1,114,610, $1,047,627 and ~~$2,156,049~~$1,213,709 respectively. The ~~decreases are~~decrease in fiscal 2010 is primarily attributable to reduced operating costs, reduced staff base and reduced professional fees. The decreases also related to our continued focus on reducing costs. The increases in 2011 are related to increased consulting fees and rental expense.

Management does expect to see some increased expenditures in fiscal ~~2010~~2012 as we improve our internal control over financial reporting.

~~AMORTIZATION OF INTANGIBLE ASSETS~~

Amortization of intangibles for the year ended March 31, 2007 was $972,209, representing the intangible assets acquired in the acquisition of AIS. These assets were fully amortized by March 31, 2007 resulting in no further expenses.

~~GAIN ON DISPOSITION OF ASSETS~~

On July 16, 2007, ZIM Corporation signed an agreement with SilverBirch Inc. to sell certain mobile messaging assets. The assets included ZIM’s Canadian mobile gateway technology, customer contracts and proprietary web to text applications. As consideration for the acquisition, SilverBirch paid $70,395 in cash upon signing the agreement. Additional consideration was to include $93,860 in cash and 500,000 common shares of SilverBirch, valued at approximately $86,292, based on the share price on the date of the sale. The additional consideration was to be received in installments as certain conditions of the purchase were completed, such as the transfer of source codes and customer contracts.

~~The sale consisted of four parts, each with a distinct value and payment structure:~~

1.	~~Short Message Peer to Peer Protocol (SMPP) Platform = approximately $70,395 due upon signing~~

2.	~~Pitney Bowes Contract = approximately $52,562 due upon transfer of the contract~~

3.	~~Rogers Contract = approximately $41,298 due upon transfer of the contract~~

4.	~~Ontario Lottery and Gaming Corporation Contract (OLGC) = 500,000 common shares due upon transfer of the contract~~

During 2007 the Short Message Peer to Peer Protocol (SMPP) Platform and the Pitney Bowes contract were transferred and the portion of the sale related to these items has been recognized as a gain on sale of assets. Prior to transfer of the Rogers contract, Rogers terminated its use of the desk top text services provided under the contract with the result that the contract was not transferred. A portion of the Rogers contract value, in the amount of $16,605, was received and has been recognized, as non-refundable cash towards this portion of the contract. The agreement provides that, in the event that the remaining conditions are not met, the amounts paid and the assets transferred to date, based on the conditions that have been met, will not be returned. The amount of the Rogers contract that will not be realized is $24,693.

As of March 31, 2008 OLGC informed ZIM and SilverBirch that it would not consent to the transfer of their contract to SilverBirch. Consequently this contract remains with ZIM until its completion and the 500,000 common shares of SilverBirch will not be paid to ZIM.

~~GAIN ON SETTLEMENT OF LIABILITY~~

During fiscal 2008, after a two-year period, ZIM abandoned its efforts to locate a supplier which, according to internal estimates of the Company, was owed an amount of $77,385. Management is of the opinion that it made every reasonable effort to contact this supplier, and since the statute of limitations for this liability expired December 31, 2007 the Company de-recognized the accrued liability to this supplier and recorded a gain on settlement of liabilities.

INTEREST

For the years ended March 31, ~~2008~~2011 and 2007, we incurred interest expense on the debt held by our Chief Executive Officer and on our operating line of credit with the Royal Bank of Canada. Both debts incurred interest at prime plus 1.75% per annum. Offsetting this interest expense was interest income received from the Canadian tax authority on our investment tax credit returns and interest income on our surplus cash held in Brazil.

~~For the year ended~~ March 31, ~~2009,~~2010, we did not incur any interest expense on the debt held by our Chief Executive Officer ~~and~~or on our operating line of credit with the Royal Bank of Canada as there were no draws on these facilities in fiscal ~~2009.~~2010 or 2011.

INCOME TAXES

Included in income taxes are taxes paid on revenues earned in Brazil net of investment tax credits on research and development expenditures in Canada. The ~~decrease~~increase in income taxes recoverable is due to increased research and development tax credits ~~received in the 2009 fiscal year relating~~related to ~~prior years being less than prior year tax credits received in fiscal 2008.~~database migration technologies.

The Scientific Research and Development Credits received from the Canadian federal government were assessed as filed.

B. Liquidity and Capital Resources

AtAs at March 31, 2011, we had cash and cash equivalents of $1,770,990 and working capital of $1,888,157 as compared to cash of $1,160,881 and working capital of $1,276,874 at March 31, 2010. As at March 31, 2009, we had cash and cash equivalents of $640,214 and working capital of ~~$705,857, as compared to cash of $299,943 and working capital of $545,568 at March 31, 2008. As at March 31, 2007, we had cash and cash equivalents of $441,637 and working capital of $93,085.~~$705,856.

Cash flows for the fiscal periods were as follows:

	Year ended March 31, 2009			Year ended March 31, 2008			Year ended March 31, 2007			Year ended March 31, 2011			Year ended March 31, 2010			Year ended March 31, 2009
	$			$			$			$			$			$
Cash flows provided by (used in) operating activities		430,652			(315,458	)		198,143
Cash flows provided by operating activities											569,608			417,595			430,652
Cash flows provided by (used in) investing activities		(19,334	)		137,139			(87,402	)		(72,719	)		(101,220	)		(19,334	)
Cash flows provided by financing activities		-			48,260			48,560			-			-			-

Operating activities generated ~~$430,652~~$569,608 of cash for the year ended March 31, ~~2009~~2011 as compared to consuming cash of ~~$315,458~~$417,595 for the year ended March 31, ~~2008~~2010 and generating ~~$198,143~~$430,652 during the year ended March 31, ~~2007.~~2009. The increase in cash generated arose as a result of an increase in net ~~income of approximately $70,977 and the receipt of investment tax credits related to previous years.~~income.

We used $72,719 in fiscal 2011, used $101,220 in fiscal 2010, and $19,334 in fiscal 2009 ~~received $137,139 in fiscal 2008 and used $87,402 in fiscal 2007~~ of cash from investing activities. In fiscal ~~2008,~~2011, the cash ~~received~~used mainly related to our purchase of the ~~sale~~database migration technology of ~~assets to SilverBirch.~~

~~During both 2008~~Torch Technologies, as described in Note 6 of the financial statements, and ~~2007, we made draw downs under~~computer hardware. In fiscal 2010, the ~~credit facility provided by ZIM’s Chief Executive Officer and controlling shareholder. Both of these draws were repaid~~cash used related mainly for our investment in ~~full through shares. As at June 24, 2009, the outstanding balance due under the credit facility, including principal and interest, was $NIL. During~~Seregon Solutions Inc. In fiscal 2009 the ~~largest aggregate balance under~~$19,334 was used mainly for the ~~facility was $NIL. In fiscal 2008, we paid the CEO $99,980 in principal and $3,605 in interest on advances we received under the facility by issuing 7,398,912 units, each consisting~~purchase of one common share and one warrant to purchase a common share for $0.014, through the conversion of debt and accumulated interest in the amount of $103,585. The units were priced at $0.014 per unit, which represented the closing market price of ZIM’s common stock on the OTCBB on December 3, 2007. The warrants expired on March 3, 2009.computer hardware.

At March 31, ~~2009,~~2011, the Company had access to a line of credit for approximately ~~$396,416~~$514,509 from its Chief Executive Officer and a working capital line from its principal banker for approximately ~~$39,642~~$51,451 (refer to Note 109 “Line of Credit” on the financial statements), in addition to a cash and cash equivalent balance of ~~$640,214.~~$1,770,990. Management believes that these funds, together with cash from on-going operations, will be sufficient to fund existing operations for the next 12 months. However, there is no guarantee that unanticipated circumstances will not require additional liquidity, and in any event, these funds alone may not allow for any additional expenditures or growth.

Credit terms for software, maintenance and consulting services have remained consistent from prior periods at 30 days.

As at March 31, 2011, 79% of all receivables were current. As at March 31, 2010, approximately 74% of all related receivables were current. As at March 31, 2009, approximately 89% of all related receivables ~~are current. As at March 31, 2008, 83% of all receivables~~ were current.

Cash and cash equivalents of ~~$640,214~~$1,770,990 are comprised of ~~$154,460~~$445,612 in cash and ~~$485,754~~$1,325,378 in cash equivalents. The cash equivalents of ~~$485,754~~$1,333,131 at March 31, ~~2009 ($94,169~~2011 (985,221 at March 31, ~~2008)~~2010) are comprised of:

Held in Canada:

~~30 day GIC~~Renaissance High Interest Savings at ~~0.75%~~0.70% - ~~$118,925~~$51,646 ($~~150,000~~50,190 CDN) – ~~Mature April 13, 2009~~No Maturity

Held in Brazil:

Bank Deposit Certificate (CDB) at 8% per annum plus ~~inflation- $366,829~~inflation - $1,273,732 - No ~~Maturity~~Maturity. Of these deposits R$120,000 are secured by Government Deposit Insurance.

Future liquidity and cash requirements will depend on a wide range of factors, including the level of success the Company has in executing its strategic plan as well as its ability to maintain business in existing operations and its ability to raise additional financing. Accordingly, there can be no assurance that ZIM will be able to meet its working capital needs for any future period. In addition, the Company has an accumulated deficit of ~~$21,235,095~~$20,563,530 and, during the fiscal year ended March 31, ~~2008, generated negative cash flows from operations of $315,458.~~2011. The Company also has generated negative cash flows from operations ~~during three~~for one of the previous five fiscal years.

If ZIM’s expenses surpass the funds available or if ZIM requires additional expenditures to grow the business, the Company may be unable to obtain the necessary funds and ZIM may have to curtail or suspend some or all of its business operations, which would likely have a material adverse effect on its business relationships, financial results, financial condition and prospects, as well as on the ability of shareholders to recover their investment.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company’s management believes that the impact of recently issued standards that are not yet effective will not have any significant impact on the consolidated financial statements upon adoption.

~~FSP FAS 107 and APB 28-1:~~ASC 605-25:

In ~~April 2009, FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments~~,” was issued to require, on an interim basis, disclosures about the fair value of financial instruments for public entities. FSP FAS 107-1 and APB 28-1 are effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it concurrently adopts both FSP FAS 157-4, and FSP FAS 115-2 and FAS 124-2. The Company intends to adopt FSP FAS 107-1 and APB 28-1 for its first quarter ending June 30, 2009. As a result of applying this FSP, the Company will include the required fair value disclosures on an interim basis beginning with the interim financial statements for the three months ended June 30, 2009. Adoption of this FSP will not have an effect on the Company’s financial position or results of operations. However, the Company believes its interim fair value disclosures may contain additional information compared to previous interim periods.

~~FAS 141R-1~~

~~On April 1,~~October 2009, the FASB issued ~~an amendment to Statement of Financial Accounting Standards~~ASU No. ~~141R (“SFAS 141R”), “Business Combinations.~~2009-13, “Revenue Recognition - Multiple-Deliverable Revenue Arrangements,” which amends guidance in ASC 605-25, “Revenue Recognition: Multiple-Element Arrangements.” The ~~amendment was issued~~guidance will allow companies to ~~address application issues regarding accounting and disclosure provisions for contingencies. FAS 141R-1, “Accounting for Assets Acquired and Liabilities Assumed~~allocate arrangement consideration in multiple deliverable arrangements in a ~~Business Combinations That Arise from Contingencies”, amends Statement 141R by replacing~~manner that better reflects the transaction’s economics. It also provides principles and application guidance on whether multiple deliverables exist, how the ~~initial recognition~~arrangement should be separated, and ~~measurement of assets and liabilities arising from contingencies acquired or assumed in a business combination with guidance similar to that in Statement 141, before~~ the ~~2007 revision.~~consideration allocated. It also ~~amends Statement 141R’s subsequent accounting~~requires an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of the selling price. The guidance ~~for contingent assets~~eliminates the use of the residual method, requires entities to allocate revenue using the relative-selling-price method and ~~liabilities recognized at the acquisition date and amends~~significantly expands the disclosure requirements for ~~contingencies.~~ multiple-deliverable revenue arrangements.

The ~~amendment applies~~authoritative guidance requires new and expanded disclosures and is applied prospectively to ~~business combinations for which the acquisition date is~~revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 or retrospectively for all periods presented. ZIM will adopt the ~~beginning~~authoritative guidance on April 1, 2011. Management is currently assessing the impact of the ~~first annual reporting period~~adoption of this authoritative guidance will have, if any, on the Company’s consolidated financial statements.

ASU 2010-13:

In April, 2010, the FASB issued Accounting Standards Update 2010-13 (ASU 2010-13), "Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades". This update addresses whether an employee stock option should be classified as a liability or as an equity instrument if the exercise price is denominated in the currency in which a substantial portion of the entity’s equity securities trade. That currency may differ from the entity’s functional currency and from the payroll currency of the employee receiving the option. The guidance requires equity treatment for share-based payment awards that have an exercise price denominated in the currency of the market in which a substantial portion of the company’s equity shares trade, assuming all other criteria for equity classification are met. The final consensus is consistent with the guidance in the proposed ASU on this Issue, except that it clarifies that an entity cannot choose to account for such awards as a liability if the award otherwise qualifies for equity classification. The amended guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning on or after December 15, ~~2008. ZIM will adopt and utilize the methods stipulated in FAS 141R-1 for all future transactions of this nature.~~

~~FAS 142-3~~

On April 25, 2008, the FASB issued a FASB Staff Position (FSP) “Determination of the Useful Life of Intangible Assets” that amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and2010. In the period of ~~expected cash flows used~~adoption, entities must record a cumulative effect adjustment to ~~measure~~ the ~~fair value~~opening balance of the asset under FASB Statement No. 141 (revised 2007), Business Combinations, and other U.S. generally accepted accounting principles (GAAP). ZIM does not currently have any intangible assets. However, ZIM will adopt and utilize the methods stipulated in FAS 142retained earnings for that year, presented separately for all ~~future transactions that require the establishment of the useful life of intangible assets.~~

~~EITF 03-6-1~~

On June 16, 2008 EITF 03-6-1 “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” was issued. This EITF addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in paragraphs 60 and 61 of FASB Statement No. 128, Earnings per Share. Unvested share-based paymentoutstanding awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. ZIM does not currently have any unvested share-based payments and its share based payments do not contain dividend rights. As such EITF 03-6-1 has no impact on the calculation of ZIM’s EPS. However, ZIM will adopt and utilize the methods stipulated in EITF 03-6-1 for all future EPS calculation to ensure that the appropriate impacts are recognized as per EITF 03-6-1.

~~SFAS 157:~~

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("SFAS 157"). SFAS 157 addresses standardizing the measurement of fair value for companies that are required to use a fair value measure for recognition or disclosure purposes. The FASB defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." The new standard provides a single definition of fair value, together with a framework for measuring it and requires additional disclosure about the use of fair value to measure assets and liabilities. While the statement does not require any new fair value measurements, it does change certain current practices. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007.

The effective date of SFAS 157 has been delayed for all nonfinancial assets and liabilities except those that are recognized or disclosed at fair value in the financial statements on at least annual basis, for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company has adopted SFAS 157 for financial assets and liabilities for the fiscal year beginning April 1, 2008 and its adoption did not have a material impact on its consolidated financial position results of operations or cash flows.

The Company does not anticipate that the adoption of SFAS 157, for all other nonfinancial assets and liabilities, will have a significant impact on its consolidated financial position, statement of operations or cash flows.

~~SFAS 159:~~

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits companies the option, at specified election dates, to measure financial assets and liabilities at their current fair value, with the corresponding changes in fair value from period to period recognized in the income statement. Additionally, SFAS 159 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar assets and liabilities. Statement 159 is effective as of the beginning of the ~~first~~ fiscal year ~~that begins after November 15, 2007. The Company’s adoption of SFAS 159 did not have a significant impact on its consolidated financial position, statement of operations or cash flows.~~in which the new guidance is initially applied.

~~SFAS 162~~:

~~In May 2008 the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("FASB No. 162"). The new standard identifies the sources of accounting principles~~Early adoption is permitted. If an entity elects early application and the ~~framework for selecting~~period of adoption is not the ~~principles used~~first reporting period in the ~~preparation~~entity’s fiscal year, the amended guidance must be applied through retrospective application from the beginning of ~~financial statements. The Company~~the entity’s fiscal year. Management is currently assessing the impact of the adoption of ~~SFAS No. 162 did not~~this authoritative guidance will have, ~~a material impact~~if any, on the Company's consolidated ~~results of operations, cash flows and~~ financial ~~condition.~~

~~FAS 115-2 and FAS 124-2:~~

~~In April 2009, FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments~~,” was issued to make the guidance on other-than-temporary impairments of debt securities more operational and improve the financial statement disclosures related to other-than-temporary impairments for debt and equity securities. The FSP clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. To evaluate whether a debt security is other-than-temporarily impaired, an entity must first determine whether the fair value of the debt security is less than its amortized cost basis at the balance sheet date. If the fair value is less than the amortized cost basis, then the entity must assess whether it intends to sell the security and whether it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis. If an entity determines that it will sell a debt security or that it more likely than not will be required to sell a debt security before recovery of its amortized cost basis, then it must recognize the difference between the fair value and the amortized cost basis of the debt security in earnings. Otherwise, the other-than-temporary impairment must be separated into two components: the amount related to the credit loss and the amount related to all other factors. The amount related to the credit loss must be recognized in earnings, while the other component must be recognized in other comprehensive income, net of tax.

The portion of other-than-temporary impairment recognized in earnings would decrease the amortized cost basis of the debt security, and subsequent recoveries in the fair value of the debt security would not result in a write-up of the amortized cost basis. FSP FAS 115-2 and FAS 124-2 are effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. If an entity adopts either FSP FAS 157-4 or FSP FAS 107-1 and APB 28-1 for periods ending after March 15, 2009, then it must adopt this FSP at the same time. The Company intends to adopt FSP FAS 115-2 and FAS 124-2 for the year ended March 31, 2009. The Company’s adoption of FAS 115-2 and FAS 124-2 did not have a significant impact on its consolidated financial position, statement of operations or cash flows.statements.

C. Research and development

~~7. A.1(c) Voting Rights~~

VOTING RIGHTS

Major Shareholders of the Company do not hold any special voting rights.

~~7. A.2 Location of Stock Holdings~~LOCATION OF STOCK HOLDINGS

~~56,455,035 (53.5%~~85,119,991 (67.8%) of ZIM’s common ~~stock is~~shares are held outside of the United States. The number of shareholders of record is 994.

CONTROL

The Company is not owned or controlled directly or indirectly by another corporation, foreign government or by any other natural of legal person(s) severally or jointly.

~~7. A.3~~ITEM 7B.

~~The Company is not owned or controlled directly or indirectly by another corporation, foreign government or by any other natural of legal person(s) severally or jointly.~~

RELATED PARTY TRANSACTIONS

Not Applicable

ITEM 8.

FINANCIAL INFORMATION

A.	Consolidated Statements and Other Financial Information

Refer to Item 18 for Consolidated Financial Statements

B.	Significant Changes

There have been no significant changes to our business since the fiscal year ended March 31, 2011.

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ITEM 9.

THE OFFER AND LISTING

OFFER AND LISTING DETAILS

"Bid" and "asked" offers for our common shares are quoted on the Over-the-Counter Bulletin Board ("OTCBB"). Our common shares have been quoted on the OTCBB under the symbol "ZIMCF" since October 16, 2003. The following table shows the high and low ~~bid~~closing prices of our common shares for the periods indicated as reported by the OTCBB. The OTCBB quotations reflect inter-dealer prices, are without retail markup, markdown or commission, and may not represent actual transactions.

PERIOD	HIGH	LOW

Fiscal 2007	$ 0.1400	$ 0.0200
Fiscal 2008	$ 0.0600	$ 0.0100
Fiscal 2009	$ 0.0100	$ 0.0020
Fiscal 2010	$ 0.0100	$ 0.0020
Fiscal 2011	$ 0.0200	$ 0.0040

Fiscal 2010 First Quarter	$ 0.0089	$ 0.0021
Fiscal 2010 Second Quarter	$ 0.0040	$ 0.0021
Fiscal 2010 Third Quarter	$ 0.0300	$ 0.0031
Fiscal 2010 Fourth Quarter	$ 0.0200	$ 0.0100
Fiscal 2011 First Quarter	$ 0.0200	$ 0.0050
Fiscal 2011 Second Quarter	$ 0.0200	$ 0.0100
Fiscal 2011 Third Quarter	$ 0.0200	$ 0.0045
Fiscal 2011 Fourth Quarter	$ 0.0200	$ 0.0040

Fiscal 2011 January 2011	$ 0.0200	$ 0.0040
Fiscal 2011 February 2011	$ 0.0200	$ 0.0100
Fiscal 2011 March 2011	$ 0.0100	$ 0.0100
Fiscal 2011 April 2011	$ 0.0100	$ 0.0100
Fiscal 2011 May 2011	$ 0.0100	$ 0.0100
Fiscal 2011 June 2011	$ 0.0100	$ 0.0100

PERIOD HIGH LOW

Fiscal 2005 $ 0.5100 $ 0.1600
Fiscal 2006 $ 0.2200 $ 0.0600
Fiscal 2007 $ 0.1400 $ 0.0200
Fiscal 2008 $ 0.0600 $ 0.0100
Fiscal 2009 $ 0.0100 $ 0.0020

Fiscal 2008 First Quarter $ 0.0500 $ 0.0300
Fiscal 2008 Second Quarter $ 0.0600 $ 0.0300
Fiscal 2008 Third Quarter $ 0.0400 $ 0.0100
Fiscal 2008 Fourth Quarter $ 0.0300 $ 0.0100
Fiscal 2009 First Quarter $ 0.0100 $ 0.0060
Fiscal 2009 Second Quarter $ 0.0090 $ 0.0050
Fiscal 2009 Third Quarter $ 0.0090 $ 0.0021
Fiscal 2009 Fourth Quarter $ 0.0089 $ 0.0020

Fiscal 2009 January 2009 $ 0.0069 $ 0.0020
Fiscal 2009 February 2009 $ 0.0021 $ 0.0020
Fiscal 2009 March 2009 $ 0.0089 $ 0.0021
Fiscal 2010 April 2009 $ 0.0030 $ 0.0021
Fiscal 2010 May 2009 $ 0.0089 $ 0.0030
Fiscal 2010 June 2009 $ 0.0080 $ 0.0031

Our common shares are thinly traded and, accordingly, reported sale prices may not represent a true market-based valuation of our common shares.

We have not paid any dividends on our common shares and we intend to retain all earnings for use in our operations and to finance the development and the expansion of our business. We do not anticipate paying any dividends on the common shares in the foreseeable future. The payment of dividends is within the discretion of our Board of Directors. Any future decision with respect to dividends will depend on future earnings, future capital needs and our operating and financial condition, among other factors.

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RECENT SALES OF UNREGISTERED SECURITIES

On December 4, 2007, we issued to Michael Cowpland, our Chief Executive Officer and controlling shareholder, 7,398,912 units, each consisting of one common share and one warrant to purchase a common share, for ~~$0.014.~~$0.014 per unit. Mr. Cowpland acquired the units through the conversion of debt and accumulated interest in the amount of $103,585. The units were priced at $0.014 per unit, which represented the closing market price of ZIM’s common ~~stock~~shares on the OTCBB on December 3, 2007. The warrants expired on March 3, 2009. We issued the units in reliance upon the exemption from the registration requirement of the Securities Act of 1933, as amended (the ~~“securities~~“Securities Act”), provided by Section 4(2) of the Securities Act. Dr. Cowpland is an accredited investor who was afforded full opportunity to obtain material information about the Company, and no general solicitation was involved. In addition, the securities were sold in an "offshore transaction" as defined in Regulation S, under the Securities Act, and in compliance with applicable exemptions under Canadian securities laws.

~~ITEM10.~~ITEM 10. ADDITIONAL INFORMATION

A.	~~SHARE CAPITAL~~

A. SHARE CAPITAL

Not Applicable.

B.	~~MEMORANDUM AND ARTICLES OF ASSOCIATION~~

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

ZIM was incorporated under the federal laws of Canada on October 17, 2002 in order to purchase ZIM Technologies International Inc. ("ZIM Technologies"), which was formed in 1997 to acquire the software technology now called the ~~Zim~~ZIM Integrated Development Environment (the ~~"Zim~~"ZIM IDE software"). On February 10, 2004, ZIM purchased UK-based SMS service firms EPL Communications Limited and E-Promotions Limited (together referred to as "EPL"). During the year ended March 31, 2006, EPL was dissolved and all operations were transferred to ZIM Corporation in Canada. ZIM is also the sole shareholder of ZIM Technologies do Brazil Ltda., a company incorporated in Brazil that distributes the ~~Zim~~ZIM IDE Software, and PCI Merge, Inc., a Florida based holding company with no operations. Until March 31, 2004, ZIM was the sole shareholder of ZIM Technologies, a Canadian federal corporation and the chief operating company of the ZIM group of companies. On April 1, 2004, ZIM Corporation and ZIM Technologies amalgamated into ZIM Corporation. On April 1, 2006, ZIM purchased a US-based mobile content company called Advanced Internet Inc. (“AIS”).

Other Provisions of Articles and By-laws

There are no provisions in the Articles or By-laws:

●

delaying or prohibiting a change in control of our company that operate only with respect to a merger, acquisition or corporate restructuring;

●

discriminating against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of shares;

●

requiring disclosure of share ownership; or

●

governing changes in capital, where such provisions are more stringent than those required by law.

Share Capital

The Corporation is authorized to issue an unlimited number of Common Shares and an unlimited number of Special Shares which shall have the following rights, privileges, restrictions and conditions:

COMMON SHARES

The Common Shares have attached thereto the following rights, privileges, restrictions and conditions:

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1. Voting

The holders of the Common Shares are entitled to receive notice of and to attend and shall be entitled to one (1) vote at any meeting of the shareholders of the Corporation for each Common Share held.

2. Dividends

The holders of the Common Shares are entitled to receive dividends as and when the directors shall in their discretion declare dividends on the Common Shares and pay the same.

3. Dissolution

The holders of the Common Shares are entitled to receive the remaining property of the Corporation in the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs.

SPECIAL SHARES

The Special Shares have attached thereto the following rights, privileges, restrictions and conditions:

1. Voting Rights

Except as may be required by applicable law, the holders of the Special Shares are not entitled to notice of or to attend or vote at any meeting of the shareholders of the Company.

Notwithstanding the provisions of the Act and any other provision contained herein, the holders of the Special Shares shall not be entitled to vote separately as a class upon a proposal to amend these Articles to:


	(a) increase or decrease any maximum number of authorized Special Shares, or increase any maximum number of authorized shares of a class of shares having rights or privileges equal or superior to the Special Shares; or

	(b) effect an exchange, reclassification or cancellation of the Special Shares; or

	(c) create a new class of shares equal or superior to the Special Shares.

2. Dividends

Subject to the rights of the holders of any shares ranking prior to the Special Shares or the Common Shares, the holders of the Special Shares are entitled to receive, pro rata with the holders of the Common Shares, such dividends as may be declared by the board of directors of the Corporation, out of funds legally available therefor; the holder of any Special Shares on the record date for any dividend payable on such share will be entitled to such dividend, notwithstanding that such share is converted into a Common Share as described below after such record date and before the payment date of such dividend. Dividends shall not be paid or declared or set aside for payment on the Special Shares unless dividends in an equal amount per Common Share are paid or set aside for payment at the same time on the Common Shares.

3. Rights on Dissolution

In the event of the liquidation, dissolution or winding-up of the Corporation, the holders of the Special Shares are entitled to receive on a pro rata basis and on a share-for-share basis with the holders of the Common Shares, all of the assets of the Corporation remaining after payment of all of the Corporation’s liabilities, subject to the preferential rights of any shares ranking prior to the Special Shares.

4. Conversion Rights

Any holder of Special Shares is entitled, at any time on written notice to the Corporation, to have any or all of the Special Shares held by him or it converted into Common Shares on the basis (the “Special Conversion Basis”) of one Common Share for each Special Share which such holder may desire to convert.

No fractional Common Shares will be issued upon the conversion of the Special Shares and no payment shall be made to the holders of Special Shares in lieu thereof.

5. Adjustment Rights

In the event of the Special Shares or Common Shares being at any time subdivided, consolidated, converted or exchanged for a greater or lesser number of shares of the same or another class, appropriate adjustments will be made in the rights and conditions attaching to the Special Shares and the Common Shares, respectively, so as to preserve in all respects the benefits conferred on the holders of each such class. No such adjustment will be required to be made unless the cumulative effect of such adjustment or adjustments would change the number of Common Shares issuable upon the conversion of the Special Shares by at least one-hundredth of a share, provided that such adjustment not so made shall be carried forward and taken into account at any subsequent adjustment.

In the event of any reclassification of Common Shares, any amalgamation, merger or other consolidation of the Corporation with another entity, or the transfer of all or substantially all of the Corporation’s assets, the holders of the Special Shares will be entitled to receive such securities or other property as if on the effective date of such event they were registered holders of the number of Common Shares which such holders of Special Shares were entitled to receive upon the conversion of their Special Shares. No such adjustment shall be made if the holders of the Special Shares are entitled to participate in any such event on the same terms, as though they had converted their Special Shares prior to the occurrence of such event.

6. General Rights and Attributes

Except as specifically referred to above, each Special Share and each Common Share shall have the same rights and attributes and not have any priority over the other.

Powers and Duties of Directors

The Directors shall manage or supervise the management of our affairs and business and shall have authority to exercise all such powers as are not, by the Company Act, Articles or By-laws, required to be exercised by the shareholders in a general meeting or prohibited by law.

A majority of the directors shall be resident Canadians and, if any of the issued securities of the Corporation are or were a part of a distribution to the public, at least two of the directors shall not be officers or employees of the Corporation or any affiliate of the Corporation. No director shall be required to hold shares issued by the Corporation, unless the articles otherwise provide. In exercising his powers and discharging his duties each director must (a) act honestly and in good faith with a view to the best interests of the Corporation and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Directors serve for Three (3) years, until each third annual meeting of shareholders. In general, a Director who is, in any way, directly or indirectly interested in an existing or proposed contract or transaction with us whereby a duty or interest might be created to conflict with his duty or interest as a director, shall declare the nature and extent of his interest in such contract or transaction or the conflict or potential conflict with his duty and interest as a director. Such a Director shall not vote in respect of any such contract or transaction with us if the Chairman disqualifies him. If he votes, his vote shall not be counted, but he shall be counted in the quorum present at the meeting at which such a vote is taken. The shareholders at the general meeting shall determine the remuneration of the Directors. However, notwithstanding the foregoing, Directors shall be paid all expenses incurred in attending meetings or conducting business on our behalf.

Shareholders

An Annual General Meeting of Shareholders must be held once in every year at such time and place as may be determined by the Directors. Notice of the meeting must be given not less than twenty-one (21) nor more than fifty (50) days prior to the meeting. A quorum at an Annual General Meeting and Special Meeting shall be such person or number of persons present, in person or by proxy, holding or representing a majority of the total number of issued shares of the Corporation carrying voting rights for such meeting.

In accordance with our By-laws , Directors are elected by an “ordinary resolution” which means (a) a resolution passed by our shareholders in a General Meeting by a simple majority of the votes cast in person or by proxy, or (b) a resolution that has been submitted to our shareholders who would have been entitled to vote on it in person or by proxy at our general meeting and that has been consented to in writing by all of our shareholders entitled to vote on it.

For further details refer to Exhibits:

1.1	Articles of Incorporation of the Registrant (Incorporated by reference to the Registrant's Registration Statement on Form S-4 filed on November 1, 2002 (No. 333-100920))
1.2	By-Laws of the Registrant (Incorporated by reference to the Registrant's Registration Statement on Form S-4 filed on November 1, 2002 (No. 333-100920))

C. MATERIAL CONTRACTS

The Company entered into one material contract, not in the ordinary course of business, during the last two fiscal years ended March 31, ~~2009.~~2011. See exhibit 4.16 “Surrender and Conversion Agreement by and between Michael Cowpland and ZIM Corporation dated December 4, ~~2007.”~~2007”

In the first quarter of fiscal 2010, the Company negotiated an out of court settlement of an unrecognized claim. The full amount of the settlement is $214,961, subject to certain terms. Due to the inherent uncertainty of this contingent gain it will be recorded at the time funds are received. As of June 30, 2009, $171,400 has been received and has been recorded as other income during ZIM’s first quarter ended June 30, 2009.

D. EXCHANGE CONTROLS

As of the date hereof, there are no governmental laws, decrees or regulations in Canada on the export or import of capital, or which impose foreign exchange controls or affect the remittance of interest, dividends or other payments to non-resident holders of our common stock, except as described under ITEM 10E “Taxation”.

Except as provided in the Investment Canada Act, which has provisions that restrict the holding of voting shares by non-Canadians, there are no limitations specific to the rights of non-Canadians to hold or vote the Company’s common shares under the laws of Canada or Ontario, or in its charter documents. The following summarizes the principal features of the Investment Canada Act for non-Canadian residents proposing to acquire the Company’s common shares.

This summary is of a general nature only and is not intended to be, and should not be construed to be, legal advice to any holder or prospective holder of the Company’s common shares, and no opinion or representation to any holder or prospective holder of our common shares is hereby made. Accordingly, holders and prospective holders of the Company’s common shares should consult with their own legal advisors with respect to the consequences of purchasing and owning the Company’s common shares.

The Investment Canada Act governs the acquisition of Canadian businesses by non-Canadians. Under the Investment Canada Act, non-Canadian persons or entities acquiring “control” (as defined in the Investment Canada Act) of a corporation carrying on business in Canada are required to either notify, or file an application for review with, Industry Canada, subject to certain statutory exemptions. The relevant Minister may review any transaction which constitutes an acquisition of control of a Canadian business, where the book value of the assets acquired exceeds certain thresholds (which are higher for investors from members of the World Trade Organization, including United States residents, or World Trade Organization member-controlled companies) or where the activity of the business is related to Canada’s cultural heritage or national identity, or where the investment could be injurious to Canada’s national security. For acquisitions of control of a business which do not involve a business related to Canada’s cultural heritage or national identity or present national security issues, no change of voting control will be deemed to have occurred, for purposes of the Investment Canada Act, if less than one-third of the voting control of a Canadian corporation is acquired by an investor. Different rules apply to acquisitions of control of businesses related to Canada’s cultural heritage or national identity, or present national security concerns.

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If an investment is reviewable under the Investment Canada Act, an application for review in the form prescribed is normally required to be filed with Industry Canada prior to the investment taking place, and the investment may not be implemented until the review has been completed and the Minister responsible for the Investment Canada Act is satisfied that the investment is likely to be of net benefit to Canada. If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian applicant must not implement the investment, or if the investment has been implemented, may be required to divest itself of control of the Canadian business that is the subject of the investment. Different rules apply if the Minister determines that the investment may be injurious to Canada’s national security.

Certain transactions relating to ZIM’s common stock would be exempt from the Investment Canada Act, if they are not found to be potentially injurious to Canada’s national security by the Minister responsible for the Investment Canada Act, including:

●

the acquisition of the Company’s common stock by a person in the ordinary course of that person’s business as a trader or dealer in securities;

●

the acquisition of control of the Company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Canada Act; and the 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 ownership of our common stock, remains unchanged.

These exemptions do not apply to an acquisition of control of a Canadian business that is deemed to be potentially injurious to Canada’s national security.

E. TAXATION

Material Canadian Federal Income Tax Consequences

The following general summary describes the principal Canadian federal income tax consequences applicable to a holder of the Company’s common stock who is a resident of the United States, who is not, will not be and will not be deemed to be a resident of Canada for purposes of the Income Tax Act (Canada) (the “Income Tax Act”) and any applicable tax treaty and who does not use or hold, and is not deemed to use or hold, his common stock in the capital of the Company in connection with carrying on a business in Canada (a “non-resident holder”). This summary applies only to non-resident holders who hold their ZIM common stock as capital property. This summary does not apply to non-resident holders who are financial institutions (within the meaning of the Income Tax Act) or insurers.

This summary is based upon the current provisions of the Income Tax Act, the regulations there under (the “Regulations”), the current publicly announced administrative and assessing policies of the Canada Revenue Agency and the Canada- United States Tax Convention (1980), as amended (the “Treaty”). This summary also takes into account the amendments to the Income Tax Act and the Regulations publicly announced by the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”) and assumes that all such Tax Proposals will be enacted in their present form. However, no assurances can be given that the Tax Proposals will be enacted in the form proposed, or at all. This summary is not

exhaustive of all possible Canadian federal income tax consequences applicable to a non-resident holder of the Company’s common stock and, except for the foregoing, this summary does not take into account or anticipate any changes in law, whether by legislative, administrative or judicial decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax consequences described herein.

This summary is of a general nature only and is not intended to be, and should not be construed to be, legal, business or tax advice to any particular holder or prospective holder of ZIM’s common stock, and no opinion or representation with respect to the tax consequences to any holder or prospective holder of the Company’s common stock is made. Accordingly, holders and prospective holders of the Company’s common stock should consult their own tax advisors with respect to the income tax consequences of purchasing, owning and disposing of ZIM’s common stock in their particular circumstances.

Dividends

Dividends paid on the Company’s common ~~stock~~shares to a non-resident holder will be subject under the Income Tax Act to withholding tax which tax is deducted at source by the Company. The withholding tax rate for dividends prescribed by the Income Tax Act is 25% but this rate may be reduced under the provisions of an applicable tax treaty. Under the Treaty, the withholding tax rate is reduced to 15% on dividends paid by the Company to a resident of the United States who is the beneficial owner of such dividend and is eligible to benefits under the Treaty. The rate is further reduced to 5% where the beneficial owner of the dividend is a corporation resident in the United States that is eligible for benefits under the Treaty and that owns at least 10% of the voting stock of the Company.

Capital Gains

A non-resident, of Canada, holder is not subject to tax under the ~~Canadian~~ Income Tax Act in respect of a capital gain realized upon the disposition of a common share of the Company unless such share is (or is deemed to be) “taxable Canadian property” (as defined in the Income Tax Act) of the non-resident holder. In the case of a non-resident holder resident in the United States who is eligible for benefits under the Treaty and for whom stock of the Company are taxable Canadian property, no Canadian taxes will generally be payable on a capital gain realized on such stock by reason of the Treaty unless the value of such stock is derived principally from real property situated in Canada.

United States Federal Income Tax Consequences

The following is a general discussion of the material United States federal income tax consequences, under current law, generally applicable to a U.S. Holder (as hereinafter defined) of common shares of the Company. This discussion does not address individual consequences to persons subject to special provisions of federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. (See ~~“Canadian~~“Material Canadian Federal Income Tax ~~Consequences”~~Consequence”).

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Company and no opinion or representation with respect to the United States federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of the Company are urged to consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company.

U.S. Holders

As used herein, a “U.S. Holder” means a holder of common shares of the Company who is a citizen or individual resident of the United States, a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof or a trust whose income is taxable in the United States irrespective of source. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to specific provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, individual retirement accounts and other tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, persons or entities that have a “functional currency” other than the U.S. dollar, shareholders who hold common shares as part of a straddle, hedging or a conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders who own common shares as capital assets. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.

Distribution on Common Shares of the Company

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States federal income tax purposes the gross amount of such distributions equal to the U.S. dollar value of such dividends on the date of receipt (based on the exchange rate on such date) to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from ~~distributions)~~distributions of) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign sources income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income,” “high withholding tax interest,” “financial services income,” “shipping income,” and certain other classifications of income.

Dividends distributed by the Company will generally constitute “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific, and U.S. Holders of common shares of the Company should consult their own tax advisors regarding their individual circumstances.

Disposition of Common Shares of the Company

A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company. Preferential tax rates apply to long-term capital gains of U.S. Holders who are individuals, estates or trusts. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term capital gain or loss if the common shares of the Company are held for more than one year.

Other Considerations

In the following circumstances, the above sections of this discussion may not describe the United States federal income tax consequences resulting from the holding and disposition of common shares:

Controlled Foreign Company

If more than 50% of the voting power of all classes of shares or the total value of the shares of the Company is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of shares of the Company (“United States shareholder”), the Company could be treated as a “controlled foreign corporation” under Subpart F of the Code. This classification would affect many complex results one of which is the inclusion of certain income of a ~~CFC~~(“CFC”) which is subject to current U.S. tax. The United States generally taxes a United States shareholder of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such U.S. shareholders are generally treated as having received a current distribution out of the CFC’s Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFC’s earnings invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Company who is or was a United States shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Company attributable to the shares sold or exchanged. If a foreign corporation is both a ~~PFIC~~“passive foreign investment company” (“PFIC”) and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to United States shareholders of the CFC.

This rule generally will be effective for taxable years of United States shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of United States shareholders. Special rules apply to United States shareholders who are subject to the special taxation rules under Section 1291 discussed above with respect to a PFIC. Because of the complexity of Subpart F, and because it is not clear that Subpart F would apply to U.S. Holders of common shares of the Company, a more detailed review of these rules is outside of the scope of this discussion.

F. DIVIDENDS AND PAYING AGENTS

Not Applicable.

G. STATEMENT BY EXPERTS

Not Applicable.

H. DOCUMENTS ON DISPLAY

The documents referred to in this Form 20-F may be viewed at the Company’s office located at 150 Isabella Street, Suite 150, Ottawa, Ontario, Canada, K1S 1V7.

I. SUBSIDIARY INFORMATION

I.	~~SUBSIDIARY INFORMATION~~

Not Applicable.

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN EXCHANGE RISK

The Company operates internationally, giving rise to significant exposure to market risks from changes in foreign exchange rates. The Company’s financial assets are in the form of cash and cash equivalents held at institutions with high quality credit ratings. A hypothetical 10% change in the value of one Brazilian real expressed in U.S. dollars during the year ended March 31, ~~2009~~2011 would have caused an approximate ~~$110,000~~$156,404 change in the Company’s revenue for the fiscal year ~~2009.~~2011. The Company is exposed to exchange risk due to the following financial instruments denominated in foreign currencies:

Cash and cash equivalents includes the following amounts in their source currency:

	March 31, 2009		March 31, 2008		March 31, 2007		March 31, 2011		March 31, 2010

Canadian dollars		195,128		67,532		25,235		122,614		225,807
US dollars		24,089		48,383		95,138		59,464		68,109
Brazilian reals		1,044,602		297,311		551,389		2,548,542		1,522,507
British pounds		4,425		4,569		9,326		6,319		4,520
Euros		993		4,198		18,255		7,878		4,353

Accounts receivable include the following amounts receivable in their source currency:

control of a Canadian corporation is acquired by an investor. Different rules apply to acquisitions of control of businesses related to Canada’s cultural heritage or national identity, or present national security concerns.	March 31, 2009		March 31, 2008		March 31, 2007
							March 31, 2011		March 31, 2010

Canadian dollars		31,455		51,702		60,744		16,083		37,590
US dollars		62,944		33,092		39,843		81,397		102,627
Brazilian reals		147,730		139,328		288,057		4,089		133,105
British pounds		589		14,689		8,401		774		834
Euros		2,953		7,387		37,414		11,797		6,521

ITEM 17.

FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18.

FINANCIAL STATEMENTS

REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders of ZIM Corporation

We have audited the accompanying consolidated balance sheets of ZIM Corporation ~~and subsidiaries~~ as of March 31, ~~2009 and 2008~~2011 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the ~~three years in the period~~year ended March 31, ~~2009.~~2011. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The consolidated financial statements as at March 31, 2010 and for the years ended March 31, 2010 and March 31, 2009 were audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) by other auditors who expressed an opinion without reservation on those statements in their report dated June 24, 2010.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ZIM Corporation as of March 31, 2011 and the consolidated results of its operations and its cash flows for the year ended March 31, 2011 in conformity with U.S. generally accepted accounting principles.

/s/ Ernst and Young LLP

---------------------------------------------

Ernst and Young LLP

Ottawa, Canada

July 19, 2011

REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders of ZIM Corporation

We have audited the accompanying consolidated balance sheets of ZIM Corporation and subsidiaries as of March 31, 2010 and 2009 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2010. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ZIM Corporation and subsidiaries as of March 31, ~~2009~~2010 and ~~2008~~2009 and the results of their operations and their cash flows for each of the three years in the period ended March 31, ~~2009~~2010 in conformity with accounting principles generally accepted in the United States of America.

~~As discussed in Note 2, the 2008 and 2007 consolidated financial statements have been restated to correct a misstatement.~~

/s/~~Raymond Chabot Grant Thornton LLP~~

Raymond Chabot Grant Thornton LLP

---------------------------------------------

Raymond Chabot Grant Thornton LLP

Ottawa, Canada

~~July 3, 2009~~June 24, 2010

ZIM Corporation

Consolidated Statements of Operations

(Expressed in US dollars)

	Year ended March 31, 2009			Year ended March 31, 2008			Year ended March 31, 2007			Year ended March 31, 2011		Year ended March 31, 2010			Year ended March 31, 2009
	$			$			$			$		$			$
Revenue
Mobile		367,723			843,162			1,116,740			280,339		320,784			367,723
Software		1,463,818			1,147,518			1,078,444
Software and related											1,729,432		1,276,681			1,463,818
Total revenue		1,831,541			1,990,680			2,195,184			2,009,771		1,597,465			1,831,541

Operating expenses
Cost of revenue		256,694			384,166			928,818			261,437		178,462			256,694
Selling, general and administrative		1,213,709			1,654,269			2,156,049			1,114,610		1,047,627			1,213,709
Research and development		457,979			512,287			382,146			629,258		482,629			457,979
Amortization of intangible assets		-			-			972,209			4,251		-			-
Total operating expenses		1,928,382			2,550,722			4,439,222			2,009,556		1,708,718			1,928,382

Loss from operations		(96,841	)		(560,042	)		(2,244,038	)
Income (loss) from operations											215		(111,253	)		(96,841	)

Other income:
Gain on disposition of assets		247			134,267			-			-		43			247
Gain on settlement of liability		-			77,385			-
Interest income (expense), net		10,563			(1,174	)		5,296
Gain on settlement											-		171,400			-
Interest income, net											108,278		30,615			10,563
Total other income		10,810			210,478			5,296			108,278		202,058			10,810

Loss before income taxes		(86,031	)		(349,564	)		(2,238,742	)
Income (loss) before income taxes											108,493		90,805			(86,031	)
Income tax benefit		239,544			432,100			302,555			258,304		213,962			239,544
Net income (loss)		153,513			82,536			(1,936,187	)
Net income											366,797		304,767			153,513

Basic and diluted income (loss) per share		0.002			0.001			(0.023	)
Basic and diluted income per share											0.003		0.003			0.002

Weighted average number of shares outstanding		96,337,579			90,326,103			83,376,475			123,125,251		113,132,100			96,337,579

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

ZIM Corporation

Consolidated Statements of Sharesholders' Equity

(Expressed in US dollars)


	Number of common shares issued	Common shares	Additional paid- in-capital	Accumulated Deficit		Accumulated other comprehensive income		Total shareholders' equity
		$	$	$		$		$
Balance a at March 31, 2008	95,460,867	19,111,789	2,625,365	(21,388,608)		313,888		622,434

Shares issued on debt conversion	10,000,000	20,000						20,000

Stock options granted			20,220					20,220

Comprehensive income

Net income				153,513				153,513

Cumulative translation adjustment						(78,977	)

Total comprehensive income								74,536

Balance as at March 31, 2009	105,460,867	19,131,789	2,645,585	(21,235,095	)	234,911		777,190

Shares issued in lieu of compensation	10,000,000	31,007						31,007

Stock options granted			81,177					81,177

Comprehensive income

Net income				304,767

Cumulative translation adjustment						232,407

Total comprehensive income								537,174

Balance as at March 31, 2010	115,460,867	19,162,796	2,726,762	(20,930,327	)	467,317		1,426,548

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

ZIM Corporation

Consolidated Statements of ~~Shareholders'~~Sharesholders' Equity (continued)

(Expressed in US dollars)

	Number of common shares issued	Common shares	Additional paid- in-capital	Accumulated Deficit		Accumulated other comprehensive income	Total shareholders' equity
		$	$	$		$	$
Balance a at March 31, 2010	115,460,867	19,162,796	2,726,762	(20,930,327	)	467,317	1,426,548

Shares issued in lieu of compensation	10,000,000	100,000					100,000

Stock options granted			71,513				71,513

Comprehensive income

Net income				366,797

Cumulative translation adjustment						132,291

Total comprehensive income							499,088

Balance as at March 31, 2011	125,460,867	19,262,796	2,798,275	(20,563,530	)	599,608	2,097,149

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

ZIM Corporation

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

(Expressed in US dollars)

Number of
common
shares
issued

Common
shares

Additional
paid-in-
capital

Accumulated
deficit

Accumulated
other
comprehensive
income

Total
shareholders'
equity

$ $ $ $ $
Balance as at March 31, 2006 as originally reported 59,561,569 17,658,435 2,129,398 (19,602,173 ) 271,360 457,020
Adjustment to reverse professional fee accrual (See Note 2) 67,216 67,216
Balance as at March 31, 2006 as restated 59,561,569 17,658,435 2,129,398 (19,534,957 ) 271,360 524,236
Shares issued through the exercise of options 135,000 4,800 4,800
Shares issued through private placements 18,365,386 734,615 734,615
Shares issued through private placement for a business acquisition 10,000,000 650,000 650,000
Stock options granted
326,154 326,154
Comprehensive loss

Net loss
(1,936,187 )
Cumulative translation adjustment
32,527
Total comprehensive loss
(1,903,660 )
Balance as at March 31, 2007 as restated
88,061,955 19,047,850 2,455,552 (21,471,144 ) 303,887 336,145

	Year ended March 31, 2011			Year ended March 31, 2010			Year ended March 31, 2009
	$			$				$
OPERATING ACTIVITIES
Net income		366,797			304,767			153,513
Items not involving cash:
Depreciation of property and equipment		37,943			51,038			57,183
Amortization of intangible asset		4,251			-			-
Gain on disposition of assets		-			(43	)		(247	)
Stock-based compensation		171,513			112,184			40,220
Changes in operating working capital:
Decrease (increase) in accounts receivable		106,015			(67,630	)		45,408
Decrease (increase) in investment tax credits		(36,861	)		(16,160	)		208,697
Increase in other tax credits		(53,107	)		-			-
Decrease (increase) in prepaid expenses		10,441			(359	)		20,766
(Increase) in long term deposits		(9,722	)		-			-
Increase (decrease) in accounts payable		4,116			9,526			(23,575	)
Increase (decrease) in accrued liabilities		41,776			791			(90,390	)
Increase (decrease) in deferred revenue		(73,554	)		23,481			19,076
Cash flows provided by operating activities		569,608			417,595			430,651
INVESTING ACTIVITIES
Purchase of property and equipment		(10,978	)		(6,117	)		(19,581	)
Proceeds on sale of assets		-			43			247
Purchase of intangible asset		(51,451	)		-			-
Purchase of investment		(10,290	)		(95,147	)		-
Cash flows used in investing activities		(72,719	)		(101,221	)		(19,334	)
FINANCING ACTIVITIES
Proceeds from loan from related party		-			-			-
Cash flows provided by financing activities		-			-			-
Effect of changes in exchange rates on cash		113,220			204,293			(71,046	)
Increase in cash and cash equivalents		610,109			520,667			340,271
Cash and cash equivalents, beginning of year		1,160,881			640,214			299,943
Cash and cash equivalents, end of year		1,770,990			1,160,881			640,214

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

5961

ZIM Corporation

Consolidated ~~Statements of Shareholders' Equity (Continued)~~Balance Sheets

(Expressed in US dollars)

Number of
common
shares
issued

Common
shares

Additional
paid-in-
capital

Accumulated
deficit

Accumulated
other
comprehensive
income

Total
shareholders'
equity

$ $ $ $ $
Balance as at March 31, 2007 as restated 88,061,955 19,047,850 2,455,552 (21,471,144 ) 303,887 336,145
Shares issued on debt conversion
7,398,912

63,939

63,939

Stock options granted

132,822

132,822

Warrants issued on debt conversion

36,991

36,991

Comprehensive income

Net income
82,536

Cumulative translation adjustment

10,001

Total comprehensive income

92,537

Balance as at March 31, 2008 as restated

95,460,867

19,111,789

2,625,365

(21,388,608
)
313,888

662,434

Common shares issued
10,000,000 20,000 20,000
Stock options granted
20,220 20,220
Comprehensive income

Net income
153,513
Cumulative translation adjustment
(78,977 )
Total comprehensive income
74,536
Balance as at March 31, 2009

105,460,867

19,131,7899

2,645,585

(21,235,095
)
234,911

777,190

	March 31, 2011			March 31, 2010			March 31, 2009
ASSETS
Current assets
Cash and cash equivalents	$	1,770,990		$	1,160,881		$	640,214
Accounts receivable, net		118,429			224,444			156,814
Investment tax credits receivable		273,096			236,235			220,075
Other tax credits		53,107			-			-
Prepaid expenses		34,627			45,068			44,709
		2,250,249			1,666,628			1,061,812

Long term deposits		9,722			-			-
Investments		113,190			95,147			-
Intangible assets		47,200			-			-
Property and equipment, net		38,880			65,844			95,119
		2,459,241			1,827,619			1,156,931
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable		30,974			26,858			17,332
Accrued liabilities		89,333			47,557			46,766
Deferred revenue		241,785			315,339			291,858
		362,092			389,754			355,956
Deferred rent		-			11,317			23,785

Commitments and contingencies [note 19]

Shareholders' equity:
Preferred shares, no par value, non-cumulative dividend at a rate to be determined by the Board of Directors redeemable for CDN $1 per share. Unlimited authorized shares; issued and outstanding NIL shares at March 31, 2011 and 2010.		-			-			-
Common shares, no par value,
Unlimited authorized shares; 125,460,867 shares issued and outstanding as at March 31, 2011 and 115,460,867 shares as at March 31, 2010.		19,262,796			19,162,796			19,131,789
Additional paid-in capital		2,798,275			2,726,762			2,645,585
Accumulated deficit		(20,563,530	)		(20,930,327	)		(21,235,095	)
Accumulated other comprehensive income		599,608			467,317			234,911
		2,097,149			1,426,548			777,190
		2,459,241			1,827,619			1,156,931

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

~~ZIM Corporation~~

~~Consolidated Statements of Cash Flows~~

~~(Expressed in US dollars)~~

Year ended
March 31, 2009

Year ended
March 31, 2008

Year ended
March 31, 2007

$ $ $
OPERATING ACTIVITIES
Net income (loss) 153,513 82,536 (1,936,187 )
Items not involving cash:
Depreciation of property and equipment 57,183 87,107 100,242
Amortization of intangible assets - - 972,209
Gain on disposition of assets (247 ) (134,267 ) -
Gain on settlement of liability - (77,385 ) -
Interest accrued - - 563
Stock-based compensation 40,220 132,822 313,954
Write off of accounts receivable - 21,461 -
Write off of accounts payable - (196,403 ) -
Changes in operating working capital, net of effect from acquisition:
Decrease in accounts receivable 45,408 92,192 1,014,805
Decrease (increase) in investment tax credits 208,697 (279,260 ) 266,643
Decrease (increase) in prepaid expenses 20,766 (1,855 ) (3,680 )
Increase (decrease) in accounts payable (23,575 ) 17,736 (327,339 )
Increase (decrease) in accrued liabilities (90,390 ) 8,757 (218,233 )
Increase (decrease) in deferred revenue 19,076 (68,899 ) 15,166
Cash flows provided by (used in) operating activities 430,651 (315,458 ) 198,143
INVESTING ACTIVITIES
Purchase of property and equipment (19,581 ) - (49,624 )
Proceeds on sale of assets 247 137,139 -
Business acquisition, net of cash received - - (37,778 )
Cash flows provided by (used in) investing activities (19,334 ) 137,139 (87,402 )
FINANCING ACTIVITIES
Proceeds from the exercise of options - - 4,800
Repayment of note payable - - (250,000 )
Proceeds from shares issued through a private placement - - 280,422
Payments to bank indebtedness - - (29,967 )
Proceeds from loan from related party - 48,260 43,305
Cash flows provided by financing activities - 48,260 48,560
Effect of changes in exchange rates on cash (71,046 ) (11,635 ) 45,301
Increase (decrease) in cash and cash equivalents 340,271 (141,694 ) 204,602
Cash and cash equivalents, beginning of year 299,943 441,637 237,035
Cash and cash equivalents, end of year 640,214 299,943 441,637

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

~~ZIM Corporation~~

~~Consolidated Balance Sheets~~

~~(Expressed in US dollars)~~

March 31,
2009

March 31,
2008
Restated

$ $
ASSETS
Current assets
Cash and cash equivalents 640,214 299,943
Accounts receivable, net 156,814 202,222
Investment tax credits receivable 220,075 428,772
Prepaid expenses 44,709 65,475
1,061,812 996,412
Property and equipment, net 95,119 162,738
1,156,931 1,159,150
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 17,332 40,906
Accrued liabilities 46,766 137,156
Deferred revenue 291,858 272,782
355,956 450,844
Deferred rent 23,785 45,872

Commitments and contingencies

Shareholders' equity:
Preferred shares, no par value, non-cumulative dividend at a rate to be determined by the Board of Directors redeemable for CDN $1 per share. Unlimited authorized shares; issued and outstanding NIL shares at March 31, 2009 and 2008.
- -
Special shares, no par value, non-voting, participating, convertible into common shares on a one-for-one basis at any time at the option of the holder and automatically on the earlier of (i) the fifth day following the date of issuance of a receipt for a final prospectus qualifying the common shares issuable upon conversion of the special shares; or (ii) June 1, 2004. Unlimited authorized shares; issued and outstanding NIL shares at March 31, 2009 and 2008.
Common shares, no par value, Unlimited authorized shares; 105,460,867 shares issued and outstanding as at March 31, 2009 and 95,460,867 shares as at March 31, 2008.
19,131,789 19,111,789
Additional paid-in capital 2,645,585 2,625,365
Accumulated deficit (21,235,095 ) (21,388,608 )
Accumulated other comprehensive income 234,911 313,888
777,190 662,434
1,156,931 1,159,150

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

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

1 - NATURE OF OPERATIONS

COMPANY OVERVIEW

ZIM Corporation (“~~ZIM~~ZIM” or the “Company”) is a provider of software products and services for the database and mobile markets. ZIM products and services are used by enterprises in the design, development and management of business, database and mobile applications. ZIM also provides mobile content to the consumer market.

BUSINESS DEVELOPMENT

ZIM was formed under the laws of Canada on October 17, 2002 in order to purchase ZIM Technologies International Inc. (“ZIM Technologies”), which was formed in 1997 to acquire the software technology now called the ZIM Integrated Development Environment (the ~~“Zim~~“ZIM IDE software”). On February 10, 2004, ZIM purchased UK-based short messaging service ~~(SMS)~~(“SMS”) firms EPL Communications Limited and E-Promotions Limited (together referred to as “EPL”). During the fiscal year ended March 31, 2006, EPL was dissolved and all operations were transferred to ZIM Corporation in Canada. ZIM is also the sole shareholder of ZIM Technologies do Brazil Ltda., a company incorporated in Brazil that distributes the ~~Zim~~ZIM IDE Software, and PCI Merge, Inc., a Florida based holding company with no operations. Until March 31, 2004, ZIM was the sole shareholder of ZIM Technologies, a Canadian federal corporation and the chief operating company of the ZIM group of companies. On April 1, 2004, ZIM Corporation and ZIM Technologies amalgamated into ZIM Corporation. On April 1, 2006, ZIM purchased a US-based mobile content company called Advanced Internet Inc. (“AIS”).

BUSINESS OF THE COMPANY

Beginning in 2002, the Company expanded its business to include opportunities associated with mobile products. Prior to fiscal 2007, the Company focused on developing products and services for the wireless data network infrastructure known as SMS or text messaging. Although SMS will continue to provide a minimal amount of revenue within the mobile segment of ZIM’s operations, with the acquisition of AIS, the Company shifted its corporate focus to include offering mobile content directly to end users.

In fiscal 2008, ZIM added the ZIM TV service and in partnership with the International Table Tennis Federation ~~(ITTF)~~(“ITTF”) provided development and hosting services for IPTV to ITTF end users. However, due to low sales volumes ZIM exited this market in fiscal 2009.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

~~OFF-BALANCE SHEET ARRANGEMENTS~~

~~The Company has no off-balance sheet arrangements as of March 31, 2009.~~

2 ~~- RESTATEMENT~~

Prior to March 31, 2006, the Company incorrectly accrued professional fees of $67,216. The Company has corrected the error by adjusting the accumulated deficit balance as of March 31, 2006 and has also restated its balance sheet as at March 31, 2008 in an amount of $67,216. The table below presents the impact of this restatement:

As reported Adjustment As restated
As at March 31, 2007
Accumulated deficit $ (21,538,360 ) $ 67,216 $ (21,471,144 )

As at March 31, 2008
Accrued liabilities $ 204,372 $ (67,216 ) $ 137,156
Accumulated deficit $ (21,455,824 ) $ 67,216 $ (21,388,608 )

3 - SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") ~~applied on a consistent basis.~~.

PRINCIPLES OF CONSOLIDATION

These consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. The results of operations for acquisitions are included in these consolidated financial statements from the date of acquisition. Inter-company transactions and balances are eliminated upon consolidation.

USE OF ESTIMATES

The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts ~~recorded in~~of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the ~~notes to~~reported amount of revenue and expenses during the ~~financial statements.~~period. Estimates have been made by management in several areas, including, but not limited to, the realizability of accounts receivable, the valuation allowance associated with deferred income tax assets, investment tax credits, expected useful life of property and equipment, the fair value calculation with respect to the stock options, and the accrued accounts receivable and accrued accounts payable related to our premium SMS business. ~~These estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future.~~ Actual results may differ from those estimates.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes net loss and other comprehensive income (loss) ("OCI"). OCI refers to changes in net assets from transactions and other events and circumstances other than transactions with shareholders. These changes are recorded directly as a separate component of shareholders' equity and excluded from net income. The only other comprehensive income item for the Company relates to foreign currency translation adjustments relating to the translation of the financial statements from their functional currency into the reporting currency.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable are recorded at the invoiced amount net of an allowance for doubtful accounts. The Company determines its allowance for doubtful accounts by considering a number of factors, including the age of the receivable, the financial stability of the customer, discussions that may have occurred with the customer and management's judgment as to the overall ~~collectibility~~collectability of the receivable from that customer. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to ~~the allowance for doubtful~~selling, general and administration accounts in the period of recovery.

REVENUE RECOGNITION

The Company derives revenue from two sources: enterprise software, including maintenance and consulting services and mobile services and applications. Enterprise software involves providing enterprise software for designing, developing and manipulating database systems and applications. Mobile services involve providing SMS and other content applications and services. The Company presents revenues net of sales tax and other related taxes.

ENTERPRISE SOFTWARE REVENUE RECOGNITION

The Company recognizes revenue pursuant to the requirements of the ~~American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP 97-2")~~ASC 985-605 "Software Revenue Recognition"~~, as amended by SOP 98-9 "Software Revenue Recognition with Respect to Certain Transactions."~~. Revenue is recognized using the residual method when ~~Company-specific~~Vendor-specific objective evidence of fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more delivered elements. The Company allocates revenue to each undelivered element based on its respective fair value determined by the price charged when that element is sold separately. The Company defers revenue for the undelivered elements and recognizes the residual amount of the arrangement fee, if ~~any,~~any. The separate elements of the arrangements are considered to be separate units of accounting.

Under ASC 958-605, revenue is recognized when the ~~basic~~following four criteria ~~in SOP 97-2~~ have been ~~met.~~met:

●

persuasive evidence of an arrangement exists;

●

delivery has occurred;

●

the fee is fixed and determinable; and

●

collectability is probable.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

~~Under SOP 97-2, revenue is recognized when the following four criteria have been met:~~

●	~~persuasive evidence of an arrangement exists;~~
●	~~delivery has occurred;~~
●	~~the fee is fixed and determinable; and~~
●	~~collectibility is probable.~~

The Company records revenue as earned as evidenced by contracts or invoices for its services at prices established by contract, price list and/or fee schedule less applicable discounts. If at the outset of an arrangement the Company determines that the arrangement fee is not fixed or determinable, revenue is deferred until the arrangement fee becomes due. If at the outset of an arrangement the Company determines that the ~~collectibility~~collectability is not probable, revenue is deferred until payment is received.

~~Collectibility~~Collectability is assessed based on the collection history of the client, current economic trends, customer concentrations and customer credit worthiness. Delivery of the software has occurred once the customer has accepted the product or has been provided with permanent keys to the file transfer protocol ("FTP") site. If an arrangement allows for customer acceptance of the software or services, the Company defers revenue recognition until the earlier of customer acceptance or when the acceptance right lapses.

MAINTENANCE AND CONSULTING REVENUE RECOGNITION

Maintenance revenues are recognized equally over the term of the maintenance contract. The liability relating to the received but unearned portion of maintenance revenues is recognized as deferred revenues.

Consulting revenue, which represents services provided on a per diem basis to customers, is recognized as the services are performed as there are no customer acceptance provisions involved in these types of arrangements.

In general, credit terms of 30 days are extended to customers.

MOBILE REVENUE RECOGNITION

Revenues from the Company’s mobile segment are derived principally from providing aggregation services and from ~~our~~their mobile content portals.

Aggregation services. Aggregation services occur when ZIM sends messages from its customers through mobile operators to end users on their cell phones. In this situation, the Company contracts with its customers that cannot connect directly to the mobile operators and with the third party mobile operators or other aggregators directly for the transmission of the messages. Net revenues are recognized in the month in which the service is performed, provided no significant ZIM obligations remain. ZIM relies on a number of mobile network operators and other aggregators globally to deliver ~~our~~its services. Generally, (i) within 15 to 45 days after the end of each month, ZIM receives a statement from each of the operators or aggregators confirming the amount of charges billed to that operator's mobile phone users and (ii) within 30 to 90 days after delivering a monthly statement, each operator or aggregator remits the fees for the month to ZIM. ZIM arranges to pay the mobile content provider a set amount per message under a revenue sharing arrangement. ZIM nets this revenue share fee against the revenue it receives from the mobile operators in accordance with ~~EITF 99-19.~~ASC 605.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

Revenues are recorded on a net basis as the mobile content provider is the primary obligor in the transaction as they manage and market the content, which ZIM then distributes. ZIM’s role within the transaction is limited to providing transportation and a billing mechanism for the mobile content provider.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

Mobile content portals. On April 1, 2006 ZIM acquired two internet portals offering mobile ~~content (see Note 6).~~content. Consumers are able to download ring tones and wallpapers directly from the internet sites to their mobile phones. The majority of consumers choose to pay for the content with their credit card with the balance of consumers paying through the use of a premium message. If they use a premium message to pay for their content, the charge is paid on their cell phone bill.

Revenues from all sales are recorded on a gross basis as ZIM manages and markets the content ZIM distributes. Revenue on mobile content is recognized at the point of sale, when the customer purchases content from the websites.

~~MAINTENANCE AND CONSULTING REVENUE RECOGNITION~~

~~Maintenance revenues are recognized equally over the term of the maintenance contract.~~

~~In general, credit terms of 30 days are extended to customers.~~

RESEARCH AND DEVELOPMENT EXPENSES

Costs related to research, design and development of products and applications are charged to research and development expense as incurred. Software development costs are capitalized beginning when a product's technological feasibility has been established, which generally occurs upon completion of a working model, and ending when a product is available for general release to customers. All subsequent costs are expensed as incurred. To date, completing a working model of the Company's products and the general release of the products has substantially coincided. The Company has not capitalized any software development costs since such costs have not been significant.

ADVERTISING

Advertising costs are expensed as incurred. Advertising costs amounted to $NIL for the year ended March 31, ~~2009~~2011 ($~~8,586~~NIL for the year ended March 31, ~~2008 and $26,120~~2010, $NIL for the year ended March 31, ~~2007)~~2009).

~~INVESTMENT TAX CREDITS~~

The Company qualifies for scientific research and development expenditures. Refundable investment tax credits are recorded as a reduction of income tax expense when it is more likely than not that the credits will be realized. Other non-refundable investment tax credits not utilized in the current year can be used to offset income taxes in future years.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

TRANSLATION OF FOREIGN CURRENCIES

The Company's reporting currency is the US dollar and the functional currency is the Canadian ~~dollar.~~dollar for ZIM Corporation and Brazilian Reals for ZIM do Brazil .

The accounts of the Company's subsidiaries that are recorded in the Company's functional currency, the Canadian dollar, ~~translate~~remeasure their foreign currency transactions as follows: gains or losses from foreign currency transactions such as those resulting from the settlement of receivables or payables denominated in foreign currency, are ~~translated~~remeasured at the weighted average exchange rates for the period and are included in the statement of operations of the current period. For the years ended March 31, ~~2009, 2008~~2011, 2010, and ~~2007,~~2009, the Company recognized a foreign exchange loss of ~~$37,655,~~$1,914, a foreign exchange ~~gain~~loss of ~~$22,307~~$27,167, and ana foreign exchange ~~gain~~loss of ~~$7,285~~$37,655, respectively, in the accompanying consolidated statements of ~~operations.~~operations in the selling, general and administration line.

The translation of the Company's financial statements from the functional currency to its reporting currency is performed as follows: ~~All~~all assets and liabilities are translated into US dollars at the rate of exchange in effect at the balance sheet date. Equity transactions are translated at the exchange rate in effect at the date of the transaction. Revenues, expenses and cash flow amounts are translated at the weighted average exchange rates for the period. The resulting translation adjustments are included in other comprehensive income in shareholders' equity. The translation adjustments did not result in a tax impact.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. When necessary, a valuation allowance is recorded to reduce the tax assets to an amount for which realization is more likely than not. The effect of changes in tax rates is recognized in the period in which the rate change occurs.

EARNINGS PER SHARE

Basic earnings per share are computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share are calculated giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to such shares at the later of the beginning of the period or the issuance date. This method is used to determine the dilutive effect of common shares. The treasury stock method is used to determine the dilutive effect of warrants and stock options. The treasury stock method assumes that proceeds received from the exercise of in-the-money share purchase warrants and stock options are used to repurchase common shares at the average market price during the period.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

STOCK OPTIONS AND GRANTS

ZIM ~~adopted~~utilizes the provisions of ~~SFAS No. 123(R) effective April 1, 2006, using the modified-prospective transition method, which~~ASC 718 and ASC 505 to account for stock-based awards granted to employees and consultants, respectively. ASC 718 requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation expense over the service period for awards expected to vest.

~~The company~~ Under ASC 505, stock-based awards granted to consultants are measured at fair value and compensation expense is recognized ~~the following expense relating to stock options and grants:~~

Year ended
March 31, 2009

Year ended
March 31, 2008

Year ended
March 31, 2007

$ $ $
Options compensation expense for employees 5,905 110,331 301,829
Options compensation expense for consultants 14,315 22,491 12,125
Stock grant compensation expense for executive officers 20,000 - -
Total expense 40,220 132,822 313,954

~~All options granted vested~~ on the ~~day of~~date at which the ~~grant resulting in~~consultant's performance is complete which, for the Company, ~~not having any non-vested awards as~~is on the date of ~~March 31, 2009, March 31, 2008 or March 31, 2007.~~grant.

The fair value of stock options is determined using the Black ~~Scholes valuation~~Scholes-Merton option pricing model. The expected dividend yield is based on historical dividend payouts, the expected volatility is based on historical volatilities of company stock for a period approximating the expected life; the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option; and the expected life represents the period of time the options are expected to be outstanding and is based on historical trends. The weighted average assumptions used in the computations are as follows:

Year ended
March 31, 2009

Year ended
March 31, 2008

Year ended
March 31, 2007

Risk-free interest rates 2.24 % 3.19 % 5.00 %
Expected volatility 140 % 80 % 80 %
Dividend yield - - -
Expected life of options (years) 2.0 2.0 2.0

6968

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

	Year ended March 31, 2011			Year ended March 31, 2010			Year ended March 31, 2009

Risk-free interest rates		1.00	%		0.93	%		2.24	%
Expected volatility		120	%		207	%		140	%
Dividend yield		-			-			-
Expected life of options (years)		2.5			2.0			2.0

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the underlying assets using the following methods and rates:

Computer equipment	40%	Declining balance
Software	40%	Declining balance
Office furniture and equipment	40%	Declining balance
Voice communications equipment	20%	Declining balance
Leasehold improvements	5 ~~Years~~years	Straight line over the lesser of 5 years or the term of the underlying lease

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

LEASES

Leases are classified as either capital or operating in nature. Capital leases are those that substantially transfer the benefits and risks of ownership to the Company. Assets acquired under capital leases are amortized at the same rates as those described for property and equipment. Obligations recorded under capital leases are reduced by the principal portion of lease payments. The imputed interest portion of lease payments is charged to expense. Operating leases are expensed as incurred.

~~LONG-LIVED ASSETS~~IMPAIRMENT OF PROPERTY AND EQUIPMENT

~~Long-lived assets are~~Property and equipment is tested for impairment when evidence of a decline in value exists, and ~~are adjusted~~adjustments to estimated fair value are made if the asset is impaired. ~~Financial Accounting Standards Board Statement of Financial Accounting Standards No. 144,~~ASC 360-10-35 “Accounting for the Impairment or Disposal of Long-Lived Assets” ~~(“FAS 144”)~~ requires that, whenever events and circumstances indicate that the Company may not be able to recover the net book value of its productive assets, ~~FAS 144 requires~~ that the assets are deemed impaired and are to be written down to their estimated fair value through a charge to earnings. ~~FAS 144~~The guidance states that fair values may be estimated using discounted cash flow analysis or quoted market prices, together with other available information. Under the provisions of ~~FAS 144,~~ASC 360-10-35, the Company reviewed its ~~long-lived~~property and equipment assets for impairment to determine if there were events or changes in circumstances that would indicate that the carrying amount of the assets may not be recoverable through future cash flows. It was determined that no impairment was evident.

INTANGIBLE ASSETS

Intangible assets that are determined to have finite lives are amortized on the straight-line method over their estimated useful ~~lives.~~lives, which is 60 months.

Intangible assets are tested for impairment when evidence of a decline in value exists, and adjustments to estimated fair value are made if the asset is impaired. ASC 360-10-35 “Accounting for the Impairment or Disposal of Long-Lived Assets” requires that, whenever events and circumstances indicate that the Company may not be able to recover the net book value of its productive assets, that the assets are deemed impaired and are to be written down to their estimated fair value through a charge to earnings. The guidance states that fair values may be estimated using discounted cash flow analysis or quoted market prices, together with other available information. Under the provisions of ASC 360-10-35, the Company reviewed its intangible assets for impairment to determine if there were events or changes in circumstances that would indicate that the carrying amount of the assets may not be recoverable through future cash flows. It was determined that no impairment was evident.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

On April 1, 2006, ZIM acquired intangible assets in connection with the acquisition of AIS. Given the nature of the intangible assets acquired, ZIM applied both the cost approach and the income approach to the valuation of the assets. The customer list was valued using the income approach. The projected income was based upon the most likely future revenue generated by the existing customer base, as estimated by management. The core technology and the corporate relationships were valued using the cost approach. The fair value of these assets was determined by measuring the current cost to purchase or reproduce the asset. All the intangible assets acquired were fully amortized at March 31, 2007.

In July 2001, the Financial Accounting Standards Board issued SFAS No. 142, Goodwill and Other Intangible Assets. The Company adopted SFAS No. 142. SFAS No. 142 requires intangible assets, that do not have a finite life, to be subject to an assessment of impairment on an annual basis, or more frequently if circumstances indicate that a possible impairment has occurred. The assessment of impairment involves a two-step process prescribed in SFAS No. 142, whereby an initial assessment for potential impairment is performed, followed by a measurement of the amount of impairment, if any. The Company performs an impairment test on intangible assets each year to determine if possible impairment has occurred. However, as at March 31, 2009 and March 31, 2008 all intangible assets were fully amortized therefore no impairment tests were performed.

~~OTHER~~

Except for the 5,000,000 shares of common stock, valued at $10,000, issued on February 27, 2009 (See Note 13), no remuneration has been recorded in these financial statements for the services of the Chief Executive Officer (CEO). The CEO is also a director and the controlling shareholder.

~~4 - ACCOUNTING FOR UNCERTAIN TAX POSITIONS~~

~~The Company recognizes any interest accrued related to unrecognized tax benefits in interest and penalties in income tax expense in the Consolidated Statement of Operations.~~

At March 31, 2009, the Company had $50,139 in unrecognized tax benefits, related to estimated Investment Tax Credits for research and development in Canada, which would favorably impact the Company’s effective tax rate if subsequently recognized. The unrecognized tax benefits as at March 31, 2008, that were subsequently realized in fiscal 2009, were $37,032. The unrecognized tax benefits as at March 31, 2007, related to fiscal years 2007 and 2006, that were subsequently realized in fiscal 2008, were $170,503.

~~5 - GAIN ON DISPOSITION OF ASSETS~~

On July 16, 2007, ZIM Corporation signed an agreement to sell ZIM's Canadian mobile gateway technology, proprietary web to text applications and related customer contracts. Total consideration received was $137,139 and the net book value of assets given up was $2,872. A gain of $134,267 was recognized as the conditions of the agreement have been settled.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~6 - ACQUISITION OF ADVANCED INTERNET INC.~~

Effective April 1, 2006, ZIM acquired all of the issued and outstanding common shares of Advanced Internet Inc. (“AIS”). AIS owns and operates two Internet mobile content sites and was part of ZIM’s move into offering mobile content. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has been allocated to the identifiable assets acquired and liabilities assumed using estimates of their fair value. The results of operations of AIS are included in the consolidated financial statements beginning on the acquisition date. The total purchase price of $951,434 included a note payable of $250,000, acquisition costs of $37,778, 500,000 stock options with a value of $13,656 and 10,000,000 common shares valued at $650,000. The non-interest bearing note payable had a one-year term, with payments each month of $20,833, and was paid in the one-year term.

The basis for the determination of the fair value of the common stock of $0.065 was the average daily closing price of the Company's common stock on the four days prior to and following the acquisition announcement date of April 1, 2006. 1,000,000 of the 10,000,000 common shares were held in escrow for one year and have been released. The stock options were valued using the Black-Scholes method with an option price of $0.071, a dividend yield of 0.00%, a risk free rate of 3.5%, volatility of 80% and an expected option life of 2 years. These options expired March 31, 2009.

~~The aggregate purchase price for this acquisition has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition as follows:~~

$ Useful lives (in months)

Working capital 10,000 N/A
Core technology 712,488 12
Customer list 67,449 5
Corporate relationships 161,497 12
951,434

~~The weighted average amortization period was 11 months for the intangible assets and the intangible assets were fully amortized as at March 31, 2007.~~

~~7 – GAIN ON SETTLEMENT OF LIABILITY~~

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~8 - ACCOUNTS RECEIVABLE~~

March 31, 2009 March 31, 2008
$ $
Trade accounts receivable 140,557 200,199
Unbilled trade accounts receivable 9,098 11,003
Allowance for doubtful accounts (3,913 ) (13,459 )
Other 11,072 4,479
156,814 202,222

~~9 - PROPERTY AND EQUIPMENT~~

March 31, 2009 Cost
Accumulated
depreciation
Net book value
$ $ $

Computer equipment 819,783 783,537 36,246
Software 74,688 69,692 4,996
Office furniture and equipment 176,172 165,262 10,910
Voice communications equipment 20,943 16,509 4,434
Leasehold improvements 121,683 83,150 38,533
1,213,269 1,118,150 95,119

March 31, 2008 Cost
Accumulated
depreciation
Net book value
$ $ $

Computer equipment 1,010,130 955,210 54,920
Software 92,385 82,644 9,741
Office furniture and equipment 210,442 194,906 15,536
Voice communications equipment 5,695 2,301 3,394
Leasehold improvements 154,169 75,022 79,147
1,472,821 1,310,083 162,738

~~10 – LINE OF CREDIT~~

During fiscal 2009, a working capital line of credit was available at approximately $39,641 (equivalent to $50,000 Canadian, the Company’s functional currency) from the Company’s major financial institution. This credit facility is secured by the Company’s assets. In addition, $396,410 (equivalent to $500,000 Canadian, the Company’s functional currency) was available from the Company’s CEO and principal shareholder as an unsecured revolving facility. Amounts drawn on either of these credit facilities bear interest at the prime rate, as published by the Royal Bank of Canada, plus 1.75%.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

In order maintain the working capital line of credit the Company must maintain a Tangible Net Worth of greater than $150,000 Canadian dollars and a ratio of current assets to current liabilities greater than 1.10:1.

~~As at March 31, 2008 and March 31, 2009 nothing was drawn down on these lines of credit.~~

~~11 - ACCRUED LIABILITIES~~

March 31, 2009
March 31, 2008
(Restated)

$ $

Employee related accruals 20,537 37,930
Professional fees - 15,590
Withholding tax accrual 2,442 2,499
Trade 23,787 81,137
46,766 137,156

~~12 - RELATED PARTY TRANSACTIONS~~

~~Related party transactions not disclosed elsewhere in these financial statements are:~~

On June 30, 2006, ZIM’s Chief Executive Officer and controlling shareholder participated in a private placement of common shares in which he purchased 18,024,591 units, each consisting of one common share and one warrant to purchase common shares for $0.04, through a cash investment of approximately $267,000 with the balance satisfied through the conversion of debt (due to shareholder) in the amount of $454,193. In addition, the brother of the Chief Executive Officer purchased 90,795 units. The units were priced at $0.04 per unit, which represents the closing market price on the OTCBB on June 29, 2006. The warrants expired on September 30, 2007.

On December 4, 2007, ZIM’s Chief Executive Officer and controlling shareholder acquired 7,398,912 units, each consisting of one common share and one warrant to purchase common shares for $0.014 through the conversion of debt and accumulated interest (due to shareholder) in the amount of $103,585. The debt was the accumulation of the funds loaned to the Company by the Chief Executive Officer as part of the ongoing credit facility. Refer to Note 10.

~~13 - SHAREHOLDERS' EQUITY~~

~~The Company issued 135,000 common shares for proceeds of $4,800 in the year ended March 31, 2007 pursuant to the exercise of stock options by employees and non-employees.~~

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~The Company did not issue any common shares during the year ended March 31, 2009 or March 31, 2008 pursuant to the exercise of stock options by employees.~~

Effective April 1, 2006, ZIM acquired all of the issued and outstanding common shares of Advanced Internet Inc. (“AIS”) for a total purchase price of $951,434. $650,000 of the total purchase price was paid with 10,000,000 common shares of ZIM corporation.

On June 30, 2006, the Company completed a non-brokered private placement of 18,365,386 units at market value of $0.04 per unit, for total gross proceeds of $734,615, consisting of cash of $280,422 and through the conversion of debt of $454,193. 18,024,591 of the units were purchased by the Company’s Chief Executive Officer and controlling shareholder. Each unit consists of one common share and one common share purchase warrant. Each warrant may have been exercised at $0.04 at any time prior to September 30, 2007. These warrants have now expired.

On December 4, 2007, ZIM’s Chief Executive Officer and controlling shareholder acquired 7,398,912 units through the conversion of debt and accumulated interest (due to shareholder) in the amount of $103,585. The units were priced at $0.014 per unit, which represented the closing market price of ZIM’s common stock on the OTCBB on December 3, 2007, with each unit consisting of one common share and one warrant to purchase common shares for $0.014 per share. The warrants expired on March 3, 2009. The warrants have been valued using the same Black-Scholes methodology as the Company’s stock options and have been valued at $36,991. This amount has been accounted for as additional paid in capital with the remaining amount of $63,939 being allocated to common shares.

On February 27, 2009, the Company issued 10,000,000 common shares to executive officers in lieu of compensation for services provided. 5,000,000 shares were issued to Dr. Michael Cowpland and 5,000,000 shares were issued to Mr. James Stechyson on approval of the Board of Directors. The share value at the time of the issue was $0.002 and compensation expense of $20,000 was recognized.

~~ADDITIONAL PAID IN CAPITAL~~

~~During the year ended March 31, 2009 the Company issued options to employees and non-employees, and as a result, additional paid in capital has been increased by $20,220.~~

During the year ended March 31, 2008 the Company issued options to employees and non-employees, and as a result, additional paid in capital has been increased by $132,822. In addition, $36,991 of additional paid in capital was recognized for the warrants issued on the December 4th~~, 2007 debt conversion.~~

~~During the year ended March 31, 2007, the Company issued options to non-employees, in consideration for advisory services, and as a result, additional paid in capital has been increased by $326,154.~~

~~The increase in additional paid in capital is the value associated with the vesting of options, which is recorded as compensation expense in the statement of operations.~~

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~14 - STOCK OPTIONS~~

Under ZIM’s Employee Stock Option Plan, the Company may grant options to its officers, directors and employees for up to 27,200,000 common shares. As at March 31, 2009, 21,383,073 (March 31, 2008, 23,717,089) options were outstanding under the Employee Stock Option Plan. In addition, 6,010,000 (March 31, 2008, 6,010,000) options were issued in prior periods outside of ZIM’s Employee Stock Option Plan and are outstanding. Stock options are granted with an exercise price equal to the common share’s fair market value at the date of grant. Options are granted periodically and both the maximum term of an option and the vesting period are set at the Board's discretion. All options granted vest on the day of the grant.

~~A summary of the status of the stock options is as follows:~~

March 31, 2009 March 31, 2008

Number of
options outstanding

Weighted
average
exercise price

Number of
options outstanding

Weighted average exercise price

$ $
Options outstanding, beginning of year 29,727,089 0.069 27,253,743 0.200
Granted 5,693,595 0.006 10,780,028 0.028
Exercised - - - -
Expired (8,027,611 ) 0.141 (8,306,682 ) 0.417
Options outstanding, end of year 27,393,073 0.034 29,727,089 0.069

~~The following table represents a summary of the options outstanding as at March 31, 2009:~~

Options outstanding and exercisable
Range of exercise prices Number outstanding at March 31, 2009 Weighted average remaining contractual life Weighted average exercise price
$ Years $

0.002-0.009 5,693,595 2.34 0.006
0.010-0.024 6,582,969 1.81 0.020
0.032-0.047 3,849,402 1.18 0.040
0.050-0.067 9,760,733 0.67 0.051
0.071-0.080 1,506,374 0.77 0.080
27,393,073 1.37 0.034

~~The weighted average fair value of options granted in fiscal 2009, 2008 and 2007 were $0.004, $0.012 and $0.024 respectively.~~

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~EMPLOYEE AND NON-EMPLOYEE OPTIONS~~

~~During the year ended March 31, 2009, 1,505,000 options were granted to employees. In fiscal 2008, 8,195,183 options were granted to employees.~~

~~During the year ended March 31, 2009, 4,188,595 options were granted to non-employees. In fiscal 2008, 2,584,845 options were granted to non-employees.~~

~~No options have been granted with exercise prices below the market price on the respective grant dates during the year ended March 31, 2009, March 31, 2008 or March 31, 2007.~~

During the years ended March 31, 2009 and March 31, 2008 certain employees were terminated and are no longer providing any services to ZIM. Under their termination agreements, their option grants were modified and the options were retained and extended to their original term. The options are accounted for in accordance with FASB statement No. 123 (R), Share-Based Payment. The intrinsic values of the modified options are to be recognized as compensation expense on the date of termination, which is considered the measurement date. The compensation expense recorded due to the modification of terminated employees’ options was $NIL, as all modified options had no intrinsic value.

~~WARRANTS~~

As at March 31, 2009, NIL (March 31, 2008, 8,548,918) warrants were outstanding. 1,150,006 of the warrants outstanding on March 31, 2008 were issued to investors in January 2004 as part of private placements. On December 4, 2007 the Company issued 7,398,912 warrants as part of a debt conversion. Of the 8,548,918 warrants outstanding as of March 31, 2008, 1,150,006 expired on May 30, 2008 and 7,398,912 expired on March 3, 2009.

~~No warrants have exercised in fiscal 2009 or 2008.~~

~~15- INTEREST~~

Year ended
March 31, 2009

Year ended
March 31, 2008

Year ended
March 31, 2007

$ $ $

Interest income 10,611 7,750 20,865
Interest expense (48 ) (8,924 ) (15,569 )
Total 10,563 (1,174 ) 5,296

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~16 - INCOME TAXES~~

In June 2006, FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes”, was issued, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. This Interpretation requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of not being sustained on an audit, based on the technical merits of the position.

~~The Company adopted the provisions of this Interpretation on April 1, 2007. No adjustment was required to the amount of the unrecognized tax benefits.~~

The Company and its subsidiaries file income tax returns in Canadian, Brazil and U.S. federal jurisdictions, and various provincial jurisdictions. The Company’s federal income tax returns are generally subject to examination for a period of three years after filing of the respective return in the U.S. and four years in Canada and five years in Brazil.

~~Income tax expense varies from the amount that would be computed by applying the basic federal and provincial income tax rates to loss before taxes, as follows:~~

Year ended
March 31, 2009

Year ended
March 31, 2008

Year ended
March 31, 2007

$ $ $

Tax Rate, comprised of a federal rate of 11.00% and a provincial rate of 5.5% 16.50 % 18.09 % 18.62 %

Expected Canadian Income Tax (Recovery) (14,195 ) (63,236 ) (416,854 )
Change in valuation allowance 146,724 (781,786 ) 136,146
Losses expired during the year 186,564 585,933 146,186
Permanent differences 61,677 96,127 71,283
Effect of changes in rates - 177,694 52,875
Difference between Canadian and foreign tax rates 1,171 (14,732 ) 10,364
Adjustments to deferred tax assets (363,427 ) - -
Refundable tax credits (258,058 ) (432,100 ) (302,555 )
(239,544 ) (432,100 ) (302,555 )

The change in valuation allowance for originating temporary differences and losses available for carry forward, is calculated using an effective tax rate of 16.50%, based on the application of the Small Business Deduction. The rate at which such amounts may be realized as disclosed as part of a deferred tax asset and related valuation allowance takes into account the enacted tax rate decreases over the expected period of realization.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

Income tax recoveries of $239,544, $432,100 and $302,555 for the years ended March 31, 2009, March 31, 2008 and March 31, 2007 respectively relate to refundable income tax credits for research and development in Canada, net of the tax expense on account of income in Brazil. The investment tax credits are subject to review and approval by taxation authorities and it is possible that the amounts granted will be different from the amounts recorded by the Company.

The Company’s investment tax credit recovery for the years ended March 31, 2009 and March 31, 2008 were positively affected as a result of revisions to amounts previously estimated and recorded for credits related to fiscal years ended March 31, 2007 and March 31, 2008. The investment tax credit recoveries for the year ended March 31, 2008 was increased by $124,339 and the year ended March 31, 2009 was increased by $37,032.

Deferred income taxes reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The tax effects of temporary differences that gave rise to significant portions of the deferred tax asset and deferred tax liability are as follows:

March 31,
2009

March 31,
2008

March 31,
2007

$ $ $
Temporary differences
Losses available for carry forward 714,392 1,184,576 1,931,026
Property and equipment - differences in net book value and unamortized capital cost 115,341 131,154 130,693
Intangible assets - differences in net book value and tax basis 230,685 283,456 319,877
Unused scientific research and experimental development amounts deductible and investment tax credits available for carry forward 894,830 535,048 644,483
Gross deferred tax asset 1,955,248 2,134,234 3,026,079
Valuation allowance (1,955,248 ) (2,134,234 ) (3,026,079 )
Net deferred tax asset - - -

~~The Company has federal and provincial non-capital losses available to reduce taxable income in Canada, which expire in the following years:~~

Federal Provincial
$ $

2010 583,783 583,783
2014 1,227,181 1,227,181
2015 1,299,883 1,299,883
2026 796,710 796,710
2027 and thereafter 422,094 422,094
4,329,651 4,329,651

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

As at March 31, 2009, the Company had accumulated unclaimed federal and provincial scientific research and experimental development deductions of approximately $2,729,432 and $2,729,432 respectively ($3,085,965 and $4,158,934 in 2008), ($2,513,615 and $3,541,041 in 2007). This amount can be carried forward indefinitely to reduce income taxes payable in future years.

~~The Company has federal scientific research and experimental development credits available to reduce income taxes in Canada, which expire in the following years:~~

2018 1,083
2019 5,836
2021 14,333
2022 280,838
2023 1,803
2034 2,258
Thereafter 6,578
312,729

~~17 - INCOME (LOSS) PER SHARE~~

For the purposes of the income (loss) per share computation, the weighted average number of common shares outstanding has been used. Had the treasury stock method been applied to the unexercised share options the effect on the loss per share for the year ended March 31, 2007, would be antidilutive.

The following securities are considered "in the money" and could potentially dilute basic income (loss) per share in the future but have not been included in diluted income (loss) per share because their effect was negligible:

~~March 31,~~

~~2009~~

~~March 31,~~

~~2008~~

~~March 31,~~

~~2007~~

~~Stock options~~

~~510,843~~

~~Warrants~~

Total options outstanding at March 31, 2009, 2008 and 2007 were 27,393,073, 29,727,089 and 27,253,743, respectively. Total warrants outstanding at March 31, 2009, 2008 and 2007 were NIL, 8,548,918 and 19,515,392, respectively.

~~18 - FINANCIAL RISKS~~

~~FOREIGN EXCHANGE RISK~~

The Company operates internationally, giving rise to significant exposure to market risks from changes in foreign exchange rates. The Company is exposed to exchange risk due to the following financial instruments denominated in foreign currencies.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~Cash and cash equivalents of $640,214 are comprised of $154,460 cash and $485,754 cash equivalents. The cash equivalents of $485,754 at March 31, 2009 ($94,169 at March 31, 2008) are comprised of:~~

~~Held in Canada:~~

~~30 day GIC at 0.75% - $118,925 ($150,000 CDN) – Mature April 13, 2009~~

~~Held in Brazil:~~

~~Bank Deposit Certificate (CDB) at 8% per annum plus inflation- $366,829 - No Maturity~~

~~Cash includes the following amounts in their source currency:~~

March 31, 2009 March 31, 2008

Canadian dollars 195,128 67,532
US dollars 24,089 48,383
Brazilian reals 1,044,602 297,311
British pounds 4,425 4,569
Euros 993 4,198

~~Accounts receivable include the following amounts receivable in their source currency:~~

March 31, 2009 March 31, 2008

Canadian dollars 31,455 51,702
US dollars 62,944 33,092
Brazilian reals 147,730 139,328
British pounds 589 14,689
Euros 2,953 7,387

~~Accounts payable include the following amounts payable in their source currency:~~

March 31, 2009 March 31, 2008

Canadian dollars 1,798 7,114
US dollars 3,801 5,298
Brazilian reals 27,317 23,210
British pounds 166 -
Euros - 10,469

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~Accrued liabilities include the following accruals in their source currency:~~

March 31,
2009

March 31, 2008
Restated

Canadian dollars 35,789 96,261
US dollars 10,247 10,013
Brazilian reals 18,747 31,812
British pounds - 238

~~The Company does not enter into any derivative financial instruments to partially cover the foreign exchange risk.~~

~~CREDIT RISK~~

The Company is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments. Credit exposure is minimized by dealing with only creditworthy counterparties in accordance with established credit approval policies.

~~Concentrations of credit risk in accounts receivable are indicated below by the percentage of the total balance receivable from customers in the specified geographic area:~~

March 31,
2009

March 31,
2008

Canada 16 % 25 %
North America, excluding Canada 40 % 29 %
South America 41 % 39 %
Great Britain 1 % 1 %
Europe, excluding Great Britain 2 % 6 %
100 % 100 %

~~FAIR VALUE~~

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short periods to maturity of the instruments.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~19 – COMMITMENTS AND CONTINGENCIES~~

~~OPERATING LEASE COMMITMENTS~~

~~The Company has the following lease commitments relating to facilities:~~

$
2010 58,935
2011 34,802
93,737

~~For the year ended March 31, 2009, facilities expense was $127,917 ($123,786 for the year ended March 31, 2008, $119,891 for the year ended March 31, 2007).~~

~~OTHER~~

~~The Company is committed to pay an arm's length third party $75,000 upon the listing of ZIM Corporation’s common shares on a national securities exchange.~~

~~20. SUPPLEMENTAL CASH FLOW DISCLOSURE~~

Year ended
March 31, 2009

Year ended
March 31, 2008

Year ended
March 31, 2007

$ $ $
Interest paid
(48) (8,924) (8,721)
Income taxes paid
- - 77,968
Income taxes received
360,470 204,847 247,918

~~Non-Cash Financing Activities:~~

~~On December 4, 2007, the Company’s Chief Executive Officer and majority shareholder converted debt of $99,980 and cumulative interest of $3,605 into equity.~~

~~In connection with the Company’s April 1~~st~~, 2006 acquisition of Advanced Internet Inc., the Company issued 10 million common shares, valued at $650,000, 500,000 stock options valued at $13,656 and issued a $250,000 note payable.~~

In conjunction with the private placement on June 30, 2006, the Company’s Chief Executive Officer and majority shareholder converted debt of $435,757 and cumulative interest of $18,437 into equity. On December 4, 2007, the Company’s Chief Executive Officer and majority shareholder converted debt of $99,980 and cumulative interest of $3,605 into equity.

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~21. SEGMENT REPORTING~~

Management has determined that the Company operates in two reportable segments: mobile applications and enterprise software. Mobile applications involve providing SMS and other content applications and services for mobile devices and Internet TV. Enterprise software involves providing enterprise software for designing, developing and manipulating database systems and applications.

The Company considers all revenues and expenses to be of an operating nature and accordingly, allocates them to the segments. Costs specific to a segment are charged directly to the segment. Company office expenses are allocated to either of the segments based on gross revenues. Significant assets of the Company include working capital and property and equipment. The accounting policies of the reportable segments are the same as those described in the summary of the significant accounting policies.

Our premium SMS messaging revenue went from $142,774 in fiscal 2007 to $202,356 in fiscal 2008 and to $3,877 in fiscal 2009. The anomaly of the increase in the fiscal 2008 year is due to the fact that our monthly reconciliation process with one of our suppliers was delayed due to inabilities to obtain the required reports and reconciliations. At the completion of this reconciliation process we had determined we over-accrued the amounts owing by approximately $120,000 and upon receiving the documentation from the supplier on our actual accrued liability we reversed this entry. Since we record revenue for this segment on a net basis, the reversal of this payable generated income in this segment. The actual trend when the above factor is removed is $142,774 for fiscal 2007 to $81,793 in fiscal 2008 and to $3,877 in fiscal 2009.

~~The following table sets forth external revenues, cost of revenues, operating expenses and other amounts attributable to these product lines:~~

Year ended March 31, 2009 Mobile Software Total
$ $ $

Revenue 367,723 1,463,818 1,831,541
Cost of revenue (109,549 ) (147,145 ) (256,694 )
Gross margin 258,174 1,316,673 1,574,847

Allocation of operating expenses 274,050 1,397,638 1,671,688
Gain on disposition of assets (247 ) - (247 )
Allocation of interest income, net (1,732 ) (8,831 ) (10,563 )
Income tax benefit (39,270 ) (200,274 ) (239,544 )
232,801 1,188,533 1,421,334

Net income 25,373 128,140 153,513

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

Year ended March 31, 2008
Mobile Software Total
$ $ $

Revenue 843,162 1,147,518 1,990,680
Cost of revenue (232,185 ) (151,981 ) (384,166 )
Gross margin 610,977 995,537 1,606,514

Allocation of operating expenses 964,387 1,202,169 2,166,556
Gain on disposition of assets (134,267 ) - (134,267 )
Gain on settlement of liability (77,385 ) - (77,385 )
Allocation of interest income, net 528 646 1,174
Income tax benefit (192,338 ) (239,762 ) (432,100 )
560,925 963,053 1,523,978

Net income 50,052 32,484 82,536

Year ended March 31, 2007
Mobile Software Total
$ $ $

Revenue 1,116,740 1,078,444 2,195,184
Cost of revenue (766,468 ) (162,350 ) (928,818 )
Gross margin 350,272 916,094 1,266,366

Allocation of operating expenses 1,291,237 1,246,958 2,538,195
Amortization of intangible assets 972,209 - 972,209
Allocation of interest income (expense), net (2,694 ) (2,602 ) (5,296 )
Income tax benefit (172,179 ) (130,376 ) (302,555 )
2,088,573 1,113,980 3,202,553

Net loss (1,738,301 ) (197,886 ) (1,936,187 )

~~No customers generated over 10% of revenue for the year ended March 31, 2008 and one customer generated over 10% of revenue for the year ended March 31, 2009 and 2007.~~

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~The following table sets forth segment assets used by each product line:~~

TOTAL ASSETS March 31, 2009 March 31, 2008
$ $
Mobile 232,280 515,966
Software 924,651 643,184
Total assets 1,156,931 1,159,150

March 31, 2009 March 31, 2008
$ $
Long-lived assets
Canada 89,322 154,903
Brazil 5,797 7,835
Total long-lived assets 95,119 162,738

~~The following table sets forth external revenues and long-lived assets attributable to geographic areas. External revenues are based on the location of the customer:~~

Total Revenue Year ended March 31, 2009 Year ended March 31, 2008 Year ended March 31, 2007
$ $ $

United States 410,908 637,665 315,130
United Kingdom 19,713 61,151 184,070
Europe 33,891 60,599 312,646
Brazil 981,484 977,240 1,109,234
Canada 350,938 232,951 260,926
Other 34,607 21,074 13,178
Total revenue 1,831,541 1,990,680 2,195,184

~~Management evaluates each segment’s performance based upon revenues and margins achieved.~~

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~22 -~~ RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

~~FSP FAS 107 and APB 28-1:~~ASC 605-25:

~~FAS 141R-1~~

ASU 2010-13:

In April, 2010, the FASB issued Accounting Standards Update 2010-13 (ASU 2010-13), "Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the ~~first annual reporting period~~Market in Which the Underlying Equity Security Trades". This update addresses whether an employee stock option should be classified as a liability or as an equity instrument if the exercise price is denominated in the currency in which a substantial portion of the entity’s equity securities trade. That currency may differ from the entity’s functional currency and from the payroll currency of the employee receiving the option. The guidance requires equity treatment for share-based payment awards that have an exercise price denominated in the currency of the market in which a substantial portion of the company’s equity shares trade, assuming all other criteria for equity classification are met. The final consensus is consistent with the guidance in the proposed ASU on this Issue, except that it clarifies that an entity cannot choose to account for such awards as a liability if the award otherwise qualifies for equity classification. The amended guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning on or after December 15, ~~2008. ZIM will adopt and utilize the methods stipulated in FAS 141R-1 for all future transactions of this nature.~~

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~FAS 142-3~~

~~EITF 03-6-1~~

~~SFAS 157:~~

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~SFAS 159:~~

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits companies the option, at specified election dates, to measure financial assets and liabilities at their current fair value, with the corresponding changes in fair value from period to period recognized in the income statement. Additionally, SFAS 159 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar assets and liabilities. Statement 159 is effective as of the beginning of the ~~first~~ fiscal year in which the new guidance is initially applied. Early adoption is permitted. If an entity elects early application and the period of adoption is not the first reporting period in the entity’s fiscal year, the amended guidance must be applied through retrospective application from the beginning of the entity’s fiscal year. Management is currently assessing the impact of that ~~begins after November 15, 2007. The Company’s~~ adoption of ~~SFAS 159 did not~~this authoritative guidance will have, ~~a significant impact on its consolidated financial position, statement of operations or cash flows.~~

~~SFAS 162~~:

In May 2008 the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("FASB No. 162"). The new standard identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. The Company adoption of SFAS No. 162 did not have a material impactif any, on the Company's consolidated ~~results of operations, cash flows and~~ financial ~~condition.~~

~~FAS 115-2 and FAS 124-2:~~

~~ZIM CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(EXPRESSED IN US DOLLARS)~~

~~23 – SUBSEQUENT EVENTS~~

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

3 - ACCOUNTING FOR UNCERTAIN TAX POSITIONS

The Company recognizes any interest accrued related to unrecognized tax benefits in interest and penalties in income tax benefit in the Consolidated Statement of Operations.

At March 31, 2011, the Company had $88,075 in unrecognized tax benefits, related to estimated Investment Tax Credits for research and development in Canada, which would favorably impact the Company’s effective tax rate if subsequently recognized. The unrecognized tax benefits as at March 31, 2010, that were subsequently realized in fiscal 2011, were $70,504. The unrecognized tax benefits as at March 31, 2009, that were subsequently realized in fiscal 2010, were $40,900.

The following table indicates the changes to the Company’s unrecognized tax benefits for the year ended March 31, 1010.

~~Subsequent to~~

	Unrecognized Tax Benefit
Balance at April 1, 2010	$	70,349
Foreign exchange effects	$	3,326
Settlement with taxing authorities in 2011	$	(69,531	)
Addition based on tax position in 2011	$	83,931
Balance at March 31, 2011	$	88,075

4 – GAIN ON SETTLEMENT

In the ~~end~~first quarter of fiscal ~~2009,~~2010, the Company negotiated an out of court settlement of an unrecognized claim. The full amount of the settlement ~~is $198,208,~~was $214,961, subject to certain terms. Due to the inherent uncertainty of this contingent gain, it will be recorded at the time funds are received. As of ~~May 7, 2009, $158,567~~March 31, 2010, $171,400 has been received and ~~will be~~has been recorded as other income ~~during ZIM’s first quarter ended June 30, 2009.~~. It is uncertain if the company will receive the remainder of the settlement.

245 – ~~COMPARATIVE FIGURES~~INVESTMENTS

~~Certain~~On May 31, 2010 ZIM Corporation made a $10,290 investment in LW CPI through Investpro Securities.

The LW CPI program, through the listing of a series of capital pool companies on the ~~comparative figures have been reclassified~~TSX (Toronto Stock Exchange) is aiming to ~~conform with~~become the ~~current year’s presentation.~~leading capital pool route to public capital market funding for burgeoning technology firms.

On October 21, 2009 ZIM Corporation made a $95,147 investment in Seregon Solutions Inc.

9072

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

The investment consisted of the purchase of 61,480 common shares and 69,677 warrants. Depending on the fiscal 2010 results of Seregon each warrant was convertible, at no cost to ZIM, to a portion of a common share or would have expired with no action. The warrants converted during fiscal 2011 and ZIM gained an additional 69,677 common shares to a total of 131,157. With the additional shares provided to ZIM, ZIM will not gain significant influence, nor control, over Seregon.

There have been no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment in Seregon.

6 – INTANGIBLE ASSETS

On October 27th, 2010 ZIM purchased all of the technology assets of Torch Technologies for the sum of $50,000 Canadian dollars ($51,451 United States dollars).

The Company has recorded the acquired technology assets as intangible assets on the consolidated balance sheet. This asset is being amortized over 60 months on a straight line basis. Amortization expense for fiscal 2011 was $4,251 the net book value as at March 31, 2011, was $47,200.

7 - ACCOUNTS RECEIVABLE

	March 31, 2011			March 31, 2010			March 31, 2009
	$			$			$
Trade accounts receivable		114,299			196,446			140,557
Unbilled trade accounts receivable		2,392			37,754			9,098
Allowance for doubtful accounts		(561	)		(10,654	)		(3,913	)
Other		2,299			898			11,072
		118,429			224,444			156,814

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

8 - PROPERTY AND EQUIPMENT

March 31, 2011	Cost		Accumulated depreciation		Net book value
	$		$		$

Computer equipment		1,024,046		1,004,538		19,508
Software		93,262		90,917		2,345
Office furniture and equipment		230,222		215,914		14,308
Voice communications equipment		25,167		22,448		2,719
Leasehold improvements		151,092		151,092		-
		1,523,789		1,484,909		38,880

March 31, 2010	Cost		Accumulated depreciation		Net book value
	$		$		$

Computer equipment		1,024,046		992,149		31,897
Software		93,262		89,409		3,853
Office furniture and equipment		219,244		210,166		9,078
Voice communications equipment		25,167		21,778		3,389
Leasehold improvements		151,092		133,464		17,623
		1,512,811		1,446,966		65,844

Depreciation expense for the year ending March 31, 2011 was $37,943 ($51,038 for the year ending March 31, 2010, and $57,183 for the year ending March 31, 2009). These expenses are included in the cost of sales account and the selling, general, and administration account.

9 – LINE OF CREDIT

During fiscal 2011, a working capital line of credit was available at approximately $51,451 (equivalent to $50,000 Canadian, the Company’s functional currency) from the Company’s major financial institution. This credit facility is secured by the Company’s assets. In addition, $514,509 (equivalent to $500,000 Canadian, the Company’s functional currency) was available from the Company’s CEO and principal shareholder as an unsecured revolving facility. Amounts drawn on either of these credit facilities bear interest at the prime rate, as published by the Royal Bank of Canada, plus 1.75%.

In order to maintain the working capital line of credit the Company must maintain a Tangible Net Worth of greater than $150,000 Canadian dollars (equivalent to $154,353 US dollars) and a ratio of current assets to current liabilities greater than 1.10:1. During fiscal years 2009, 2010 and 2011 the Company has not been in violation of these covenants.

As at March 31, 2009, March 31, 2010 and March 31, 2011 nothing was drawn down on these lines of credit. The lines of credit do not have defined expiration or renewal dates.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

10 - ACCRUED LIABILITIES

	March 31, 2011		March 31, 2010		March 31, 2009
	$		$		$
Employee related accruals		63,391		39,552		20,537
Withholding tax accrual		2,852		1,317		2,442
Trade		23,090		6,688		23,787
		89,333		47,557		46,766

11 – COMMON SHARE ISSUE

The Company did not issue any common shares during the years ended March 31, 2011, March 31, 2010 or March 31, 2009 pursuant to the exercise of stock options by employees.

On February 27, 2009, the Company issued 10,000,000 unrestricted common shares to executive officers in lieu of compensation for services provided. 5,000,000 shares were issued to Dr. Michael Cowpland and 5,000,000 shares were issued to Mr. James Stechyson on approval of the other members of the Board of Directors. The share value at the time of the issue was $0.002 and a compensation expense of $20,000 was recognized.

On June 24, 2009, the Company issued 10,000,000 unrestricted common shares to executive officers and consultants in lieu of compensation for services provided. 5,000,000 shares were issued to Dr. Michael Cowpland and 5,000,000 shares were issued to Mr. James Stechyson on approval of the other members of the Board of Directors. The share value at the time of the issue was $0.0031 and a compensation expense of $31,007 was recognized.

On June 24, 2010, the Company issued 10,000,000 common shares to executive officers and consultants in lieu of compensation for services provided. 5,000,000 shares were issued to Dr. Michael Cowpland and 5,000,000 shares were issued to a holding company controlled by Mr. James Stechyson on approval of the other members of the Board of Directors. The share value at the time of the issue was $0.01 and compensation expense of $100,000 was recognized.

On November 12, 2009, the Board of Directors approved a share repurchase plan. Shares may be repurchased by the company to a maximum of $200 per day and $12,000 per quarter. The repurchase program has no expiration date. As of March 31, 2011 no shares have been repurchased as part of this program.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

12 - RELATED PARTY TRANSACTIONS

Except for the 5,000,000 shares of common stock, valued at $15,504, issued on June 24, 2009 and for the 5,000,000 shares of common stock, valued at $10,000, issued on February 27, 2009 (See Note 10), no remuneration has been recorded in these financial statements for the services of the Chief Executive Officer (CEO) for the fiscal year 2010.

Except for the 5,000,000 shares of common stock, valued at $50,000 issued on June 24, 2010 (See Note 10) and for stock options issued through the year with a fair market value of $7,931 no remuneration has been recorded in these financial statements for the services of the Chief Executive Officer (CEO) for the fiscal year 2011. The CEO is also a director and the controlling shareholder.

13 - STOCK OPTIONS

During the year ended March 31, 2011, March 31, 2010 and March 31, 2009, the Company issued options to employees and non-employees, and as a result, additional paid in capital has been increased by $71,513, $81,177 and $20,220 respectively.

The increase in additional paid in capital is the value associated with the vesting of options, which is recorded as compensation expense in the statement of operations.

Under ZIM’s Employee Stock Option Plan, the Company may grant options to its officers, directors and employees for up to 27,200,000 common shares. As at March 31, 2011, 20,205,382 (March 31, 2010, 19,891,445 and March 31, 2009, 21,383,073) options were outstanding under the Employee Stock Option Plan. In addition, 6,010,000 (March 31, 2009, 6,010,000 and March 31, 2008, 6,010,000) options were issued outside of ZIM’s Employee Stock Option Plan and are outstanding. Stock options are granted with an exercise price equal to the common share’s fair market value at the date of grant. Options are granted periodically and both the maximum term of an option and the vesting period are set at the Board's discretion. All options granted in fiscal year 2011 vested on the day of the grant and have a three year term. The expected life of the grants due to forfeitures and exercise of options is estimated based on recent history and is 2.5 years.

The company recognized the following expense relating to stock options and grants:

	Year ended March 31, 2011		Year ended March 31, 2010		Year ended March 31, 2009
	$		$		$
Options compensation expense for employees		26,428		72,302		5,905
Options compensation expense for consultants		45,085		8,875		14,315
Stock grant compensation expense for executive officers		100,000		31,007		20,000
Total expense		171,513		112,184		40,220

All options granted vested on the day of the grant resulting in the Company not having any non-vested awards as of March 31, 2011, March 31, 2010 or March 31, 2009.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

A summary of the status of the stock options is as follows:

	March 31, 2011					March 31, 2010					March 31, 2009
	Number of options outstanding			Weighted average exercise price		Number of options outstanding			Weighted average exercise price		Number of options outstanding			Weighted average exercise price
				$					$					$
Options outstanding, beginning of year		25,901,445			0.015		27,393,073			0.034		29,727,089			0.069
Granted		10,311,528			0.012		10,891,822			0.009		5,693,595			0.006
Exercised		-			-		-			-		-			-
Expired		(9,997,591	)		0.027		(12,383,450	)		0.052		(8,027,611	)		0.141
Options outstanding, end of year		26,215,382			0.009		25,901,445			0.015		27,393,073			0.034

The following table represents a summary of the options outstanding as at March 31, 2011:

	Options outstanding and exercisable
Range of exercise prices	Number outstanding at March 31, 2010		Weighted average remaining contractual life		Weighted average exercise price
$			Years		$
0.002-0.004		3,040,843		1.32		0.0024
0.004-0.008		5,072,032		0.31		0.0061
0.008-0.012		14,958,412		2.32		0.0100
0.012-0.016		-
0.016-0.020		3,144,095		2.26		0.0197
		26,215,382		1.81		0.0095

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

The weighted average grant-date fair value of options granted in fiscal 2011, 2010, and 2009 were $0.0064, $0.008, and $0.004 respectively.

As at March 31, 2011 there were 8,112,875 options in the money with a total intrinsic value of $42,963.

EMPLOYEE AND NON-EMPLOYEE OPTIONS

During the year ended March 31, 2011, 2,339,183 options were granted to employees. In the year ended March 31, 2010, 9,259,319 options were granted to employees. In fiscal 2009, 1,505,000 options were granted to employees.

During the year ended March 31, 2011, 7,972,345 options were granted to non-employees. In the year ended March 31, 2010, 1,632,503 options were granted to non-employees. In fiscal 2009, 4,188,595 options were granted to non-employees.

No options have been granted with exercise prices below the market price on the respective grant dates during the year ended March 31, 2011, March 31, 2010 or March 31, 2009.

During the years ended March 31, 2011 and March 31, 2010, certain employees were terminated and are no longer providing any services to ZIM. Under their termination agreements, their option grants were modified and the options were retained and extended to their original term. The options are accounted for in accordance with ASC 718. The intrinsic values of the modified options are to be recognized as compensation expense on the date of modification, which is considered the measurement date. The compensation expense recorded due to the modification of terminated employees’ options was $NIL, as all modified options had no intrinsic value.

15 - INTEREST

	Year ended March 31, 2011			Year ended March 31, 2010			Year ended March 31, 2009
	$			$			$
Interest income		112,496			40,871			10,611
Interest expense		(4,218	)		(10,256	)		(48	)
Total		108,278			30,615			10,563

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

16 - INCOME TAXES

ASC 740 requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of not being sustained on an audit, based on the technical merits of the position.

Income tax expense varies from the amount that would be computed by applying the basic federal and provincial income tax rates to loss before taxes, as follows:

	Year ended March 31, 2011			Year ended March 31, 2010			Year ended March 31, 2009
	$			$			$
Tax Rate, comprised of a federal rate of 11.00% and a provincial rate of 4.87% (In 2010 and 2009, a federal rate of 11.00% and provincial rate of 5.5%)		15.87	%		16.50	%		16.50	%

Expected Canadian Income Tax (Recovery)		17,222			14,983			(14,195	)
Change in valuation allowance		(91,831	)		(196,532	)		146,724
Losses expired during the year		0			113,410			186,564
Permanent differences		27,744			25,860			61,677
Effect of changes in rates		(67	)		96,375			-
Difference between Canadian and foreign tax rates		29,982			(9,465	)		1,171
Adjustments to deferred tax assets		91,898			(58,475	)		(363,427	)
Refundable tax credits		(327,760	)		(200,118	)		(258,058	)
Other		(5,492	)		-			-
		(258,304	)		(213,962	)		(239,544	)

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

The change in valuation allowance for originating temporary differences and losses available for carry forward, is calculated using an expected deferred tax rate of 15.50%, based on the application of the Small Business Deduction. The rate at which such amounts may be realized as disclosed as part of a deferred tax asset and related valuation allowance takes into account the enacted tax rate decreases over the expected period of realization.

Income tax recoveries of $258,304, $213,962, and $239,544 for the years ended March 31, 2011, March 31, 2010 and March 31, 2009, respectively, relate to refundable income tax credits for research and development in Canada, net of the tax expense on account of income in Brazil. The investment tax credits are subject to review and approval by taxation authorities and it is possible that the amounts granted will be different from the amounts recorded by the Company.

	March 31, 2011			March 31, 2010			March 31, 2009
	$			$			$
Temporary differences
Losses available for carry forward		649,631			720,932			714,392
Property and equipment - differences in net book value and unamortized capital cost		145,876			143,234			115,341
Intangible assets - differences in net book value and tax basis		288,571			269,077			230,685
Unused scientific research and experimental development amounts deductible and investment tax credits available for carry forward		1,139,930			1,086,422			894,830
Gross deferred tax asset		2,223,007			2,219,665			1,955,248
Valuation allowance		(2,223,007	)		(2,219,665	)		(1,955,248	)
Net deferred tax asset		-			-			-

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

The Company has federal and provincial non-capital losses available to reduce taxable income in Canada, which expire in the following years:

	Federal & Provincial
	$

2014		915,766
2015		1,687,120
2026		1,034,050
2027 and thereafter		547,836
		4,184,714

As at March 31, 2011, the Company had accumulated unclaimed federal and provincial scientific research and experimental development deductions of approximately $3,861,735 ($3,326,074 in 2010), ($2,729,432 in 2009). This amount can be carried forward indefinitely to reduce income taxes payable in future years.

The Company has federal scientific research and experimental development credits available to reduce income taxes in Canada, which expire in the following years:

2018			1,406
2019			7,574
2021			18,602
2022			364,493
2023			2,340
2034			2,931
Thereafter			8,538
			405,884

17 - EARNINGS (LOSS) PER SHARE

For the purposes of the earnings (loss) per share computation, the weighted average number of common shares outstanding has been used. Had the treasury stock method been applied to the unexercised share options, the effect on the earnings per share for the year ended March 31, 2011, would be negligible.

The following securities are considered "in the money" and could potentially dilute the basic earnings per share in the future but have not been included in diluted earnings per share because their effect was negligible:

	March 31, 2011	March 31, 2010	March 31, 2009

Stock options	8,112,875	8,529,438	-

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

Total options outstanding at March 31, 2011, 2010 and 2009 were 26,215,382, 25,901,445, and 27,393,073 respectively.

18 - FINANCIAL RISKS

FOREIGN EXCHANGE RISK

The Company operates internationally, giving rise to significant exposure to market risks from fluctuations and the degree of volatility of foreign exchange rates. The Company is exposed to exchange risk due to the following financial instruments denominated in foreign currencies.

Cash and cash equivalents of $1,770,990 are comprised of $445,612 in cash and $1,325,378 in cash equivalents. The cash equivalents of $1,333,131 at March 31, 2011 (985,221 at March 31, 2010) are comprised of:

Held in Canada:

Renaissance High Interest Savings at 0.70% - $51,646 ($50,190 CDN) – No Maturity

Held in Brazil:

Bank Deposit Certificate (CDB) at 8% per annum plus inflation - $1,273,732 - No Maturity. Of these deposits R$120,000 are secured by Government Deposit Insurance.

Cash and cash equivalents includes the following amounts in their source currency:

	March 31, 2011		March 31, 2010

Canadian dollars		122,614		225,807
US dollars		59,464		68,109
Brazilian reals		2,548,542		1,522,507
British pounds		6,319		4,520
Euros		7,878		4,353

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

Accounts receivable include the following amounts receivable in their source currency:

	March 31, 2011		March 31, 2010

Canadian dollars		16,083		37,590
US dollars		81,397		102,627
Brazilian reals		4,089		133,105
British pounds		774		834
Euros		11,797		6,521

Accounts payable include the following amounts payable in their source currency:

	March 31, 2011		March 31, 2010

Canadian dollars		13,423		8,871
US dollars		10,003		2,893
Brazilian reals		10,855		26,964
British pounds		309		-

Accrued liabilities include the following accruals in their source currency:

	March 31, 2011		March 31, 2010

Canadian dollars		76,727		29,202
US dollars		9,938		6,622
Brazilian reals		719		21,694

The Company does not use derivative financial instruments to reduce its foreign exchange risk exposure.

CREDIT RISK

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

Concentration of credit risk in accounts receivable is indicated below by the percentage of the total balance receivable from customers in the specified geographic area:

	March 31, 2011			March 31, 2010

Canada		7	%		16	%
North America, excluding Canada		30	%		46	%
South America		56	%		33	%
Great Britain		0	%		1	%
Europe, excluding Great Britain		7	%		4	%

FAIR VALUE

19 – COMMITMENTS AND CONTINGENCIES

OPERATING LEASE COMMITMENTS

The Company has the following financial commitments related to minimum rent expenses for facilities:

		$
	2012	56,964
	2013	56,964
	2014	56,964
	2015	56,964
	2016	33,229
	Total	261,085

For the year ended March 31, 2011, facilities expense was $123,546 ($110,970 for the year ended March 31, 2010 and $127,917 for the year ended March 31, 2009). The lease was renewed for 5 years on November 1, 2010.

OTHER

The Company is committed to pay an arm's length third party $75,000 upon the listing of ZIM Corporation’s common shares on a national securities exchange.

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

20 - SUPPLEMENTAL CASH FLOW DISCLOSURE

	Year ended March 31, 2011	Year ended March 31, 2010	Year ended March 31, 2009
	$	$	$
Interest paid	$(4,218)	(10,256)	(48)
Income taxes paid	(96,539)	(26,514)	-
Income taxes received	270,886	260,433	360,470

21- SEGMENT REPORTING

The Company operates in two reportable segments based on product differentiation: mobile and enterprise software. Mobile applications involve providing SMS and other content applications and services for mobile devices. Enterprise software involves providing enterprise software for designing, developing and manipulating database systems and applications.

The Company considers all revenues and expenses to be of an operating nature and accordingly, allocates them to the segments. Costs specific to a segment are charged directly to the segment. Company operating expenses are allocated to either of the segments based on gross revenues. Significant assets of the Company include working capital, an investment and property and equipment. The accounting policies of the reportable segments are the same as those described in the summary of the significant accounting policies.

The following table sets forth external revenues, cost of revenues (including depreciation expense), operating expenses (including depreciation expense) and other amounts attributable to these product lines:

Year ended March 31, 2011	Mobile			Software			Total
	$			$			$

Revenue		280,339			1,729,432			2,009,771
Cost of revenue		71,902			189,535			261,437
Gross margin		208,437			1,539,897			1,748,334

Allocation of operating expenses		208,411			1,539,708			1,748,119
Allocation of interest income, net		(12,909	)		(95,369	)		(108,278	)
Income tax benefit		(30,795	)		(227,509	)		(258,304	)
		164,707			1,216,830			1,381,537

Net income		43,730			323,067			366,797

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

Year ended March 31, 2010	Mobile			Software			Total
	$			$			$

Revenue		320,784			1,276,681			1,597,465
Cost of revenue		80,010			98,452			178,462
Gross margin		240,774			1,178,229			1,419,003

Allocation of operating expenses		259,651			1,270,605			1,530,256
Gain on disposition of assets		(43	)		-			(43	)
Other income		(171,400	)		-			(171,400	)
Allocation of interest income, net		(5,195	)		(25,420	)		(30,615	)
Income tax benefit		(36,305	)		(177,657	)		(213,962	)
		46,708			1,067,528			1,114,236

Net income		194,066			110,701			304,767

Year ended March 31, 2009	Mobile			Software			Total
	$			$			$

Revenue		367,723			1,463,818			1,831,541
Cost of revenue		109,549			147,145			256,694
Gross margin		258,174			1,316,673			1,574,847

Allocation of operating expenses		274,050			1,397,638			1,671,688
Gain on disposition of assets		(247	)		-			(247	)
Allocation of interest income, net		(1,732	)		(8,831	)		(10,563	)
Income tax benefit		(39,270	)		(200,274	)		(239,544	)
		232,801			1,188,533			1,421,334

Net income		25,373			128,140			153,513

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

No customers generated over 10% of revenue for the years ended March 31, 2011 or 2010 and one customer generated over 10% of revenue for the year ended March 31, 2009.

The following table sets forth total assets used by each segment:

TOTAL ASSETS	March 31, 2011		March 31, 2010		March 31, 2009
	$		$		$
Mobile		343,035		367,001		232,280
Software		2,116,206		1,460,618		924,651
Total assets		2,459,241		1,827,619		1,156,931

The following tables set forth external revenues and long-lived assets attributable to geographic areas. External revenues are based on the location of the customer:

	March 31, 2011		March 31, 2010		March 31, 2009
	$		$		$
Long-lived assets
Canada		34,940		60,907		89,322
Brazil		3,940		4,937		5,797
Total long-lived assets		38,880		65,844		95,119

Total Revenue	Year ended March 31, 2011		Year ended March 31, 2010		Year ended March 31, 2009
	$		$		$

United States		390,064		360,795		410,908
United Kingdom		7,914		45,663		19,713
Europe		58,583		41,944		33,891
Brazil		1,320,805		917,036		981,484
Canada		169,168		209,578		350,938
Other		73,237		22,449		34,607
Total revenue		2,009,771		1,597,465		1,831,541

ZIM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN US DOLLARS)

Management evaluates each segment’s performance based upon revenues and gross margins achieved.

22 – SUBSEQUENT EVENT

On June 29, 2011 ZIM Corporation made a $206,079 investment in Connecting People For health Cooperative Limited. The investment consisted of the purchase of 200 common shares.

ITEM 19. EXHIBITS.

~~The exhibits filed herewith are listed in~~See the Exhibit Index ~~immediately preceding such exhibits. The Exhibit Index is incorporated herein by reference.~~hereto.

9188

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.

ZIM Corporation

(Registrant)

By ~~/s/~~/s/ Michael Cowpland

~~------------------------------------~~

Michael Cowpland (President and CEO)

Date: July ~~15, 2009~~19, 2011

9289

EXHIBIT INDEX

Exhibit Number	EXHIBIT
1.1	Articles of Incorporation of the Registrant (Incorporated by reference to the Registrant's Registration Statement on Form S-4 filed on November 1, 2002 (No. 333-100920))
1.2	By-Laws of the Registrant (Incorporated by reference to the Registrant's Registration Statement on Form S-4 filed on November 1, 2002 (No. 333-100920))
4.10 †	Employee Stock Option Plan, as amended September 22, 2005 (Incorporated by reference to Appendix A to the Registrant’s Proxy Statement filed August 19, 2005)
4.11 †	Form of Stock Option Agreement under Employee Stock Option Plan (Incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-KSB filed June 28, 2006)
4.12 †	Form of Non-Qualified Stock Option Agreement between the Registrant and each of Michael Cowpland, James Stechyson, Steve Houck and Charles Saikaley, dated, 2001 (Incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-KSB filed June 28, 2006)
4.13	ZIM SMS Gateway Agreement with SIT Consulting, dated October 27, 2004 (Incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-KSB filed June 28, 2006)
4.14	Secured Senior Promissory Note dated March 31, 2006 between ZIM Corporation and Advanced Telecom Services, Inc. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed April 4, 2006)
4.15	Loan Agreement dated August 11, 2005 between ZIM Corporation and Dr. Michael Cowpland (Incorporated by reference to Exhibit 10.11 to the Registrant’s Current Report on Form 8-K filed August 11, 2005)
4.16	Surrender and Conversion Agreement by and between Michael Cowpland and ZIM Corporation dated December 4, 2007 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2007).
4.17†	Consulting Agreement by and between Chapman CFO Resources Inc. and ZIM Corporation dated July 20, 2007 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-QSB for the quarter ended December 31, 2007).
4.18	Stock Purchase Agreement dated March 28, 2006 by and among ZIM Corporation, Advanced Telecom Services, Inc. and Advanced Internet, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 28, 2006)
8.1 *	List of subsidiaries of the Registrant ~~(*)~~
12.1 *	Certification by the Chief Executive Officer, Michael Cowpland, pursuant to Exchange Act Rules 13(a)-14(a) and 15d-14(a) ~~(*)~~
12.2 *	Certification by the Chief Financial Officer, John Chapman, pursuant to Exchange Act Rules 13(a)-14(a) and 15d-14(a) ~~(*)~~
13.1 *	Certification by the Chief Executive Officer, Michael Cowpland, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ~~(*)~~
13.2 *	Certification by the Chief Financial Officer, John Chapman, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ~~(*)~~
15.1 *	Consent of Ernst and Young LLP, an independent registered public accounting firm
15.2 *	Consent of Raymond Chabot Grant Thornton LLP, an independent registered public accounting firm ~~(*)~~
~~()~~	Filed herewith.
†	~~Management contract or compensatory plan or arrangement.~~

	Payment Due by Period
Contractual Obligations	Total		Less than 1 year		1 -3 years		3-5 years		Greater than 5 years
Long-Term Debt Obligations		-		-		-		-		-
Capital (Finance) Lease Obligations		-		-		-		-		-
Operating Lease Obligations		93,737		58,935		34,802		-		-
Purchase Obligations		-		-		-		-		-
Other Long-Term Liabilities Reflected on the Company's Balance Sheet under the GAAP of the primary financial statements		-		-		-		-		-
Total		93,737		58,935		34,802		-		-

	Payment Due by Period
	Total		Less than 1 year		1 -3 years		3-5 years		Greater than 5 years
	$		$		$		$		$
Long-Term Debt Obligations		-		-		-		-		-
Capital (Finance) Lease Obligations		-		-		-		-		-
Operating Lease Obligations		261,085		56,964		113,928		90,193		-
Purchase Obligations		-		-		-		-		-
Other Long-Term Liabilities Reflected on the Company's Balance Sheet under the GAAP of the primary financial statements		-		-		-		-		-
Total		261,085		56,964		113,928		90,193		-

NAME	AGE	POSITION WITH ZIM
Dr. Michael Cowpland	6668	President, Chief Executive Officer, and Director
John Chapman	4547	Chief Financial Officer / Consultant
Steven Houck	3941	Director
James Stechyson	4446	Director
Donald Gibbs	6365	Director

~~Name and principal position~~		~~Salary / Consulting Payments ($)~~	~~Option Awards ($)(1)~~		~~Total ($)~~
~~Name and principal position~~	~~Year~~	~~Salary / Consulting Payments ($)~~	~~Option Awards ($)(1)~~	~~Common Shares ($)~~	~~Total ($)~~
~~Michael Cowpland, President and Chief Executive Officer~~	~~2008~~ 30 ~~2009~~	- -	~~16,188~~ ~~1,299~~	~~10,000~~	~~16,188~~ ~~11,299~~
~~John Chapman, Chief Financial Officer (CHAPMAN CFO Resources Inc.)~~	~~2008~~ ~~2009~~	~~21,485~~ ~~48,074~~	~~15,589~~ ~~7,220~~	- -	~~37,074~~ ~~55,294~~
~~Roberto Campagna (2), Vice President, Sales~~	~~2008~~ ~~2009~~	~~115,824~~ ~~63,929~~	~~5,735~~ ~~853~~	- -	~~121,559~~ ~~64,782~~
~~Phil Scavo (3), Vice President Business Development~~	~~2008~~ ~~2009~~	~~115,824~~ ~~67,289~~	~~5,416~~ ~~853~~	- -	~~121,240~~ ~~68,142~~

Name and principal position		Salary / Consulting Payments ($)	Option Awards ($)(1)		Total ($)
Name and principal position	Year	Salary / Consulting Payments ($)	Option Awards ($)(1)	Common Shares ($)	Total ($)
Michael Cowpland, President and Chief Executive Officer	2009 2010 2011	- - -	1,299 67,326 7,931	10,000 15,504 50,000	11,299 82,830 57,931
John Chapman, Chief Financial Officer (CHAPMAN CFO Resources Inc.)	2009 2010 2011	48,074 45,824 46,952	7,220 - 13,657	- - -	55,294 45,824 60,609
Roberto Campagna (2), Vice President, Sales	2009 2010 2011	63,929 - -	853 - -	- -	64,782 - -
Phil Scavo (3), Vice President, Business Development	2009 2010 2011	67,289 - -	853 - -	- - -	68,142 - -

				Option Expiration Date
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date
Michael Cowpland, President and Chief Executive Officer	120,000	Nil	0.007	29-Apr-11
	100,000	Nil	0.005	18-Nov-11
	100,000	Nil	0.0051	16-Dec-11
	100,000	Nil	0.0021	21-Jul-12
	1,400,000	Nil	0.0021	21-Jul-12
	133,340	Nil	0.0040	12-Aug-12
	62,503	Nil	0.0040	12-Aug-12
	726,702	Nil	0.0190	19-Nov-12
	6,667	Nil	0.0190	19-Nov-12
Roberto Campagna, Vice President, Sales	406,650	Nil	0.0100	19-Feb-13
	5,710,000	Nil	0.0100	19-Feb-13
	47,500	Nil	0.0100	25-Jul-13
	95,000	Nil	0.0100	25-Jul-13
	100,000	Nil	0.0100	25-Jul-13
	326,683	Nil	0.0200	21-Sept-13
	66,667	Nil	0.0200	17-Nov-13
	10,000	Nil	0.0100	12-Dec-13
	263,333	Nil	0.0100	17-Feb-14
	200,000	Nil	0.0100	17-Feb-14
	130,000	Nil	0.0100	17-Feb-14
John Chapman (CHAPMAN CFO Resources Inc.) Chief Financial Officer	421,875	Nil	0.007	30-Apr-11
	332,813	Nil	0.010	1-Jun-11
	441,406	Nil	0.006	30-Jun-11
	460,938	Nil	0.006	31-Jul-11
	135,938	Nil	0.020	21-Sept-13
	60,938	Nil	0.020	17-Nov-13
	202,500	Nil	0.020	17-Nov-13
	421,875	Nil	0.010	12-Dec-13
	153,125	Nil	0.010	17-Feb-14
	660,938	Nil	0.010	17-Feb-14
	100,000	Nil	0.010	22-Feb-14
	157,031	Nil	0.010	2-Mar-14

Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Options Awards Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)		Option Expiration Date
Michael Cowpland, President and Chief Executive Officer		1,400,000	Nil		0.050	12-Jun-09
		133,340	Nil		0.035	9-Jul-09
		62,503	Nil		0.024	7-Aug-09
		6,667	Nil		0.070	8-Oct-09
		726,702	Nil		0.080	7-Nov-09
		100,005	Nil		0.075	17-Dec-09
		5,710,000	Nil		0.050	7-Feb-10
		406,650	Nil		0.050	7-Feb-10
		47,500	Nil		0.040	08-Apr-10
		95,000	Nil		0.040	07-Jun-10
		326,683	Nil		0.050	19-Sep-10
		66,667	Nil		0.050	30-Sep-10
		10,000	Nil		0.011	08-Dec-10
		263,333	Nil		0.015	30-Dec-10
		200,000	Nil		0.020	17-Feb-11
		130,000	Nil		0.020	17-Feb-11
		120,000	Nil		0.007	29-Apr-11
		100,000	Nil		0.005	18-Nov-11
		100,000	Nil		0.0051	16-Dec-11
Phil Scavo, Vice President Business Development		200,000	Nil		0.050	12-Jun-09
		40,000	Nil		0.080	7-Nov-09
		96,611	Nil		0.088	1-Jan-10
		100,000	Nil		0.040	4-Mar-10
		25,000	Nil		0.040	08-Apr-10
		100,000	Nil		0.040	10-Apr-10
		50,000	Nil		0.040	06-Jun-10
		65,000	Nil		0.020	17-Feb-11
		250,000	Nil		0.020	17-Feb-11
		100,000	Nil		0.005	18-Nov-11
		100,000	Nil		0.0051	16-Dec-11
John Chapman (CHAPMAN CFO Resources Inc.) Chief Financial Officer		135,938	Nil		0.040	30-Aug-10
		60,938	Nil		0.040	29-Sep-10
		202,500	Nil		0.025	30-Oct-10
		421,875	Nil		0.014	9-Dec-10
		153,125	Nil		0.015	30-Dec-10
		660,938	Nil		0.010	30-Jan-11
		100,000	Nil		0.020	17-Feb-11
		157,031	Nil		0.020	2-Mar-11
		351,563	Nil		0.006	31-Mar-11
		421,875	Nil		0.007	30-Apr-11
		332,813	Nil		0.010	1-Jun-11
		441,406	Nil		0.006	30-Jun-11
		460,938	Nil		0.006	31-Jul-11

Name	Option Awards ($)(1)		Common Shares ($)		Total ($)		Option Awards ($)(1)		Common Shares ($)		Total($)
Steven Houck		253		-		253		1,390		-		1,390
James Stechyson		6,672		10,000		16,672		34,692		50,000		84,692
Donald Gibbs		253		-		253		1,390		-		1,390

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans, excluding the securities reflected in the first column		Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights ($)	Number of securities remaining available for future issuance under equity compensation plans, excluding the securities reflected in the first column

Equity compensation plans approved by security holders		21,383,073	(1)		0.0296		4,604,927	20,205,382(1)	0.009	5,782,618
Equity compensation plans not approved by security holders		6,010,000	(2)		0.0500	NIL		6,010,000(2)	0.010	NIL
Total		27,393,073			0.0341		4,604,927	26,215,382	0.009	5,782,618

			Common shares
Name	Address	Title	Number		Percentage

Michael Cowpland	234 Perley Court, Ottawa, Ontario	President and CEO	69,675,041	(1)	60.3%

James Stechyson	5597 Goddard Street Manotick, Ontario	Director	12,940,000	(2)	11.5%

Advanced Telecom Services	996 Bold Eagle School Road, Suite 1105, Wayne, PA	N/A	10,000,000	(3)	9.5%

John Chapman (CHAPMAN CFO Resources Inc.)	30 Holitzner Way Ottawa, Ontario	Chief Financial Officer	3,900,940	(4)	3.6%

Steven Houck	401 Hillview Avenue, Palo Alto, CA 94304	Director	510,000	(5)	0.5%

Donald Gibbs	5 Reaney Court, Kanata, Ontario, Canada,K2K 1W7	Director	510,000	(6)	0.5%

PERIOD	HIGH		LOW

Fiscal 2005	$	0.5100	$	0.1600
Fiscal 2006	$	0.2200	$	0.0600
Fiscal 2007	$	0.1400	$	0.0200
Fiscal 2008	$	0.0600	$	0.0100
Fiscal 2009	$	0.0100	$	0.0020

Fiscal 2008 First Quarter	$	0.0500	$	0.0300
Fiscal 2008 Second Quarter	$	0.0600	$	0.0300
Fiscal 2008 Third Quarter	$	0.0400	$	0.0100
Fiscal 2008 Fourth Quarter	$	0.0300	$	0.0100
Fiscal 2009 First Quarter	$	0.0100	$	0.0060
Fiscal 2009 Second Quarter	$	0.0090	$	0.0050
Fiscal 2009 Third Quarter	$	0.0090	$	0.0021
Fiscal 2009 Fourth Quarter	$	0.0089	$	0.0020

Fiscal 2009 January 2009	$	0.0069	$	0.0020
Fiscal 2009 February 2009	$	0.0021	$	0.0020
Fiscal 2009 March 2009	$	0.0089	$	0.0021
Fiscal 2010 April 2009	$	0.0030	$	0.0021
Fiscal 2010 May 2009	$	0.0089	$	0.0030
Fiscal 2010 June 2009	$	0.0080	$	0.0031

	March 31, 2009		March 31, 2008 Restated		March 31, 2007 Restated		March 31, 2011		March 31, 2010

Canadian dollars		35,789		96,261		61,885		76,727		29,202
US dollars		10,247		10,013		20,876		9,938		6,622
Brazilian reals		18,747		31,812		26,127		719		21,694
British pounds		-		238		1,727

	Year ended March 31, 2011		Year ended March 31, 2010
Audit fees		73,060		73,029
Audit-Related Fees		-		5,971
Tax fees		11,834		9,645
Total		84,894		88,645