10-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K/A


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2007

		or

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

Commission File Number: 000-20562

COREL CORPORATION

(Exact name of registrant as specified in its charter)

Canada

(State or other jurisdiction of incorporation and organization)

98-0407194

(I.R.S. Employer Identification No.)

1600 Carling Avenue

Ottawa, Ontario

Canada K1Z 8R7

(Address of principal executive offices, including zip code)

(613) 728-0826

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act: Common Shares, no par value (together with associated rights to purchase additional Common Shares) (Title of class)		Name of exchange on which registered: The Nasdaq Global Market

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

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 þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this Chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes þ No o

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

Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of the Registrant’s common shares on May 31, 2007 of $13.80, as reported on the Nasdaq Global Market, was approximately $101.6 million. Common shares held as of May 31, 2007 by each executive officer and director and by each person who owns 5% or more of the outstanding common shares have been excluded from this computation, in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for any other purpose.

As of January 22, 2008 the Registrant had outstanding 25,459,451 common shares, no par value.

EXPLANATORY NOTE

This Form 10-K/A amends Items 7, 9A and 11 of the Annual Report on Form 10-K filed by Corel Corporation (the “Registrant”) on February 8, 2008, to provide additional disclosure as requested by the SEC.

No amendments have been made to this Form 10-K/A to reflect events occurring after the filing of the original Annual Report on Form 10-K or modify or update those disclosures affected by subsequent events.

This Form 10-K/A is being filed to amend the Annual Report on Form 10-K as follows:


	•	The Registrant’s Annual Report on Form 10-K is hereby amended to revise the “Off-Balance Sheet Arrangements” section in Item 7.

	•	The Registrant’s Annual Report on Form 10-K is hereby amended to revise the second paragraph in Item 9A.

	•	The Registrant’s Annual Report on Form 10-K is hereby amended to revise the table in the “Option Grants During the Fiscal Year Ended November 30, 2007, to Named Executive Officers” section in Item 11.

	•	The Registrant’s Annual Report on Form 10-K is hereby amended to replace the text of Footnote 1 in the “Option Grants During the Fiscal Year Ended November 30, 2007, to Named Executive Officers” section in Item 11.

	•	The Registrant’s Annual Report on Form 10-K is hereby amended to revise the text of Footnote 2 in the “Option Grants During the Fiscal Year Ended November 30, 2007, to Named Executive Officers” section in Item 11.

	•	The Registrant’s Annual Report on Form 10-K is hereby amended to revise the text of the “Compensation of Directors and Executive Officers” section in Item 11.

	•	The Registrant’s Annual Report on Form 10-K is hereby amended to correct the middle initial of Daniel T. Ciporin.


ITEM 7.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*

The following discussion and analysis should be read together with our audited consolidated financial statements for the years ended November 30, 2007, 2006 and 2005 and accompanying notes set forth elsewhere in this report. All financial information is presented in U.S. dollars.

Some of the statements set forth in this section are forward-looking statements relating to our future results of operations. Our actual results may vary from the results anticipated by these statements. Please see “Information Regarding Forward-Looking Statements”.

OVERVIEW

We are a leading global packaged software company with an estimated installed base of over 100 million current users in over 75 countries. We provide high quality, affordable and easy-to-use Graphics and Productivity and Digital Media software. Our products enjoy a favorable market position among value-conscious consumers and small businesses benefiting from the widespread, global adoption of personal computers, or PCs, and digital capture devices. The functional departments within large companies and governmental organizations are also attracted to the industry-specific features and technical capabilities of our software. Our products are sold through a scalable distribution platform comprised of OEMs, our global e-Stores, and our international network of resellers and retail vendors. We have broad geographic representation with dedicated sales and marketing teams based in the Americas, EMEA/ANSEAK and Japan. Our product portfolio includes well-established, globally recognized brands.

An important element of our business strategy is to grow revenues through acquisitions of companies or product lines. We intend to focus our acquisition activities on companies or product lines with proven and complementary products and established user bases that we believe can be accretive to our earnings shortly after completion of the acquisition. While we review acquisition opportunities on an ongoing basis, we currently have no binding obligations with respect to any particular acquisition.

Graphics and Productivity

Our primary Graphics and Productivity products include: CorelDRAW Graphics Suite, Corel Painter, Corel DESIGNER, WinZip, iGrafx and WordPerfect Office Suite. CorelDRAW Graphics Suite is a leading vector illustration, page layout, digital image editing and bitmap conversion software suite used by design professionals and small businesses. Corel Painter is a Natural-Media^® painting and illustration software featuring digital brushes, art materials and textures that mirror the look and feel of their traditional counter parts. Corel DESIGNER Technical Suite offers users a graphics application for creating or updating complex technical illustrations. WinZip is a compression utility developed in 1991, and purchased by us in May 2006 is the most widely used aftermarket compression utility, with more than 40 million licenses sold to date. Our iGrafx products allow enterprises to analyze, streamline and optimize their business processes. WordPerfect Office Suite was first developed in 1982 and marketed by Corel since 1996, is the leading Microsoft-alternative productivity software and includes Microsoft-compatible word processing, spreadsheet and presentation functionality

Digital Media

Our primary Digital Media products include: Corel Paint Shop Pro, Corel Media One and various products acquired in December 2006 as part of the purchase of InterVideo. These products include WinDVD, VideoStudio, DVD Movie Factory, DVD Copy and PhotoImpact. Corel Paint Shop Pro digital image editing and management applications are used by novice and professional photographers and photo editors. Corel Media One is a multimedia software program for organizing and enhancing photos and video clips. WinDVD, is the world’s leading DVD player software for use on PCs. VideoStudio is our video editing and DVD authoring software for users who want to produce professional-looking videos, slideshows and DVDs. DVD Movie Factory is a consumer DVD authoring software. DVD Copy is an application that copies and backs up DVDs and CDs in multiple device formats. Photo Impact is an image editing software.

Corporate History

Corel was founded in 1985. In January 1989, we released our flagship product, CorelDRAW, a market-leading full-featured graphics software suite. In November 1989, we completed an initial public offering of our common shares. In January 1996, we acquired the WordPerfect family of software products. In August 2003, we were acquired by Vector Capital and became a private company. We divested certain underperforming product lines, discontinued speculative research and development activities and refocused our business on our core products and customers. At the same time we reviewed all of our business functions and implemented company-wide cost reduction measures. Between August 2003 and May 2004, we reduced our staff from 708 to 480. The staff reduction contributed to reducing our annual operating expenses from $113.2 million in the year ended November 30, 2003 to $71.5 million in our fiscal year ended November 30, 2004.

In October 2004, we acquired Jasc, a leading Digital Media packaged software company, for total consideration of $36.7 million, consisting of $34.3 million in cash and 379,677 of our common shares valued at $2.4 million. Through the Jasc

acquisition, we added Corel Paint Shop Pro and Corel Photo Album to our Digital Media offerings. As a result of synergies realized through the integration of Jasc, we eliminated 38 full-time positions and substantially reduced staffing and distribution costs in our fiscal year ended November 30, 2005.

In May 2006, concurrent with the completion of our initial public offering, we purchased WinZip from Vector Capital. As consideration for the acquisition, we issued to Vector Capital 4,322,587 of our common shares and repaid all of WinZip’s outstanding indebtedness. Vector Capital acquired WinZip in January 2005. Through this acquisition, we added the WinZip file compression utility to our Graphics and Productivity software offerings. On December 12, 2006, we completed the acquisition of InterVideo and on December 28, 2006 we completed the acquisition of the remaining interest in Ulead, in transactions totaling approximately $220.4 million. This acquisition expanded our position in the fast growing Digital Media market with the addition of authoring and video playback software focused on high-definition and DVD technologies.

In November 2007, management initiated a restructuring plan to centralize much of our Digital Media operations in Greater China and Fremont, California. Additionally, further changes have been made to our staff to align and balance our global teams. This has resulted in the planned closure of our Minneapolis location in fiscal 2008 as well as the termination of certain individuals. We incurred restructuring charges of $1.4 million in the current period as a result of this plan. Additional charges of $0.8 million are expected to be incurred in fiscal 2008.

An important element of our business strategy is to grow revenues through acquisitions of companies or product lines. We intend to focus our acquisition activities on companies or product lines with proven and complementary products and established user bases that we believe can be accretive to our earnings shortly after completion of the acquisition. While we review acquisition opportunities on an ongoing basis, we have no binding obligations with respect to any particular acquisition.

Our functional currency is the U.S. dollar and our financial statements are prepared in accordance with generally accepted accounting principles in the United States, and have been consistently applied for our fiscal years ended November 30, 2007, 2006 and 2005.

Industry and Business Trends

Our largest competitors, Microsoft Corporation and Adobe Systems Incorporated, hold the majority of the markets in both Productivity and Graphics and in Digital Media. Microsoft Corporation’s Microsoft Office and Adobe Systems hold most of the North American and global market for packaged Graphics and Productivity software. Adobe Systems holds much of the Digital Media software market. Growth rates of packaged software sales in emerging economies are expected to be higher than for the global packaged software market as a whole resulting from more rapidly increasing PC adoption rates in these markets. Additionally, higher growth rates are expected within the Digital Media software market thanks to the proliferation of capturing devices, the introduction of high definition formats, and finally the expansion of Digital Media content creation and sharing through social networking websites and email. Because the prices we charge for our packaged software are generally substantially less than those charged by Microsoft and Adobe for products with similar functionality, we believe we are well positioned to take advantage of the emerging market for lower cost software. However, if any of our more established competitors decide to compete with us based on price in this market, we may be unable to successfully compete with the more widely accepted software applications these competitors sell. Similarly, the markets for low-cost personal computers and Digital Media software are only newly emerging. If these markets do not develop as we expect, our business could be adversely affected.

We believe there is a significant market opportunity for us in countries where the markets for PCs are newly emerging, both because our software is more attractively priced than that of our larger competitors and because we believe first time users in these markets do not have established brand loyalties.

The packaged software industry continues to change with new revenue sharing models and types of business relationships. We will seek to continue to develop relationships with industry leading companies to establish new sources of revenues for our existing and future products. If we are unsuccessful in establishing such relationships, our operating results could be materially and adversely affected.

Acquisition of InterVideo

On December 12, 2006, we completed the acquisition of InterVideo, a provider of Digital Media authoring and video playback software with a focus on high-definition and DVD technologies. In 2005, InterVideo acquired a majority interest in Ulead, a leading developer of video imaging and DVD authoring software for desktop, server, mobile and Internet platforms. On December 28, 2006 we completed the acquisition of the remaining interest in Ulead. The acquisitions of InterVideo and Ulead (“InterVideo”) were completed in cash transactions totaling approximately $220.4 million. We purchased InterVideo for $13.00 per share of InterVideo common stock. We financed the acquisitions through a combination of our cash reserves, InterVideo’s cash reserves and debt financing which included an amendment to our existing credit agreement to increase available term borrowings by $70.0 million. In addition, outstanding stock options held by InterVideo employees were converted into options to purchase our common shares and we assumed pension obligations under benefit plans for various InterVideo employees.

This acquisition substantially expanded our presence in the Digital Media software market by creating a broad portfolio of Digital Media and DVD video products. The main products acquired from InterVideo are WinDVD, the world’s leading DVD player software for use on PC’s, VideoStudio, a video editing and DVD authoring software DVD Movie Factory, a consumer DVD authoring software, Photo Impact, an image editing software, and DVD Copy, an application that copies and backs up DVD’s and CDs in multiple device formats.. These products contributed $73.0 million of revenue in fiscal 2007. With the combination of our Digital Imaging software and InterVideo’s Digital Media products, we now deliver an expanded portfolio of easy-to-use, multi-purpose high-definition video, imaging, and DVD creation products to consumers and enterprises worldwide. In addition, the acquisition has enabled us to further extend our presence in emerging markets.

The acquisition combined our key strengths — business model innovation, understanding of end user requirements and established distribution in the Americas and Europe — with InterVideo’s core assets, which include video technology innovation, established partnerships with the world’s leading PC OEM partners, such as Hewlett Packard, Toshiba and Lenovo and strong market presence in the Asia Pacific region. We now have significant development offices in Fremont, California, Taipei and Shanghai and a sales and marketing office in Yokohama, Japan.

Cost synergies were realized from this acquisition, which have resulted in a reduction of the combined Company’s sales and marketing, research and development and general and administrative expenses as compared to what those expenses would have been if the companies had continued to operate as stand-alone entities. We have completed the process of executing our integration and restructuring actions to achieve these cost reductions in the current and future fiscal years. This included the integration of financial systems, information technology and human resource processes.

We were unable to recognize certain revenue from many InterVideo OEM customers due to acquisition accounting. This impacted our first quarter revenues in that we did not recognize revenue of approximately $11.0 million on any InterVideo or Ulead products that were physically sold to OEM partners and distributed by them prior to December 12, 2006, for which the related sell through reports were received subsequent to the date of acquisition. We would normally recognize such revenues when we receive a sell through report from our partners.

Operating Performance

Results for the year ended November 30, 2007 include the results from our acquisition of InterVideo as of December 12, 2006.

Revenue for fiscal 2007 was $250.5 million, up 41.4% from fiscal 2006. Excluding InterVideo revenue of $73.0 million during the year, revenue from the Corel business was $177.5 million, an increase of 0.2% year over year. Gains from several products in our Corel portfolio including Corel Draw, Painter, WinZip, and iGrafx, were offset by a decrease in revenue from our WordPerfect and Digital Imaging products, including Paint Shop Pro Photo and Photo Album. WordPerfect and the Digital Imaging products declined by $12.0 million and $3.6 million, respectively in fiscal 2007, and the rest of the Corel portfolio, excluding InterVideo products, grew by $16.0 million or by 15.5% year over year

Our net loss for 2007 was $13.1 million, or a loss of $0.52 per basic common share, compared to a net income of $9.3 million, or $0.41 per basic common share in 2006. Cash provided by operations was $26.5 million in the year. The fiscal 2007 results were impacted by a number of items resulting from the acquisition of InterVideo, primarily related to the inability to recognize certain revenues, as discussed above, and acquisition charges, including the write-off of $7.8 million in acquired in-process research and development.

OPERATIONS

Revenues

We derive revenues principally from the sale of our software, and associated maintenance and support services. Maintenance and services revenues have historically constituted between 8.0% and 11.0% of our total revenues. We distribute our software through OEMs, the Internet, retailers and resellers around the world. Our products are focused on two primary software markets — the Graphics and Productivity market and the Digital Media market. Our primary Graphics and Productivity products are CorelDRAW Graphics Suite, Corel Painter, Corel Designer Technical Suite, WinZip, iGrafx Flow Charter and WordPerfect Office Suite. Our primary Digital Media products consist of Paint Shop Pro, Media One and the InterVideo family of products we acquired, including WinDVD, VideoStudio, DVD Movie Factory, DVD Copy and PhotoImpact. In our fiscal year ended November 30, 2007, approximately 50.3% of our revenues came from the Americas, 29.1% came from Europe, the Middle East and Africa and 20.6% came from the Asia Pacific region. During fiscal 2007, there has been a significant increase in our Asia Pacific sales due to the acquisition of InterVideo, and our positioning in this market.

Our products generally have release cycles of between 12 and 24 months, and we typically earn the largest portion of revenues for a particular product during the first half of its release cycle. The fiscal quarter of the most recent release of each of our major products is set forth below:

Current

Quarter of

Version

Current Release

Prior Release

Product

Graphics and Productivity:

CorelDRAW Graphics Suite

Q1 2008

Q1 2006

Corel Painter

Q1 2007

Q4 2004

Corel Designer Technical Suite

Q2 2005

Q3 2003

WinZip

Q4 2006

Q4 2005

iGrafx FlowCharter

Q2 2007

Q1 2006

WordPerfect Office Suite

Q1 2006

Q2 2004

Digital Media

Paint Shop Pro

Q4 2007

Q4 2006

MediaOne

Q4 2007

Q4 2006

WinDVD

Q4 2006

Q2 2005

VideoStudio

Q2 2007

Q2 2006

DVD Movie Factory

Q1 2007

Q1 2006

DVD Copy

Q3 2006

Q1 2006

PhotoImpact

Q3 2006

Q4 2005

We have typically released new versions of our Digital Media products on an annual basis during the second half of our fiscal year in preparation for the December holiday shopping season. While we expect to do so in our fiscal year ending November 30, 2008 as well, it should be noted that release dates are subject to a number of uncertainties and variables, many of which are beyond our control. See “Item 1A — Risk Factors — Our quarterly operating results may fluctuate depending on the timing and success of product releases”.

Cost of Revenues

Cost of product revenues primarily consists of:


	•	royalties paid and costs of licensing third party intellectual property;

	•	salaries, benefits, stock-based compensation and related costs of the manufacturing oversight staff;

	•	the cost of packaging and distribution of our packaged software products;

	•	the cost of related customer and technical support functions;

	•	credit card fees; and

	•	allocated facilities, depreciation and amortization and other related overhead.

Our cost of product revenues varies depending on the format in which our products are delivered. Products delivered in electronic format, such as through OEMs or our e-Store, involve minimal packaging cost, as compared to products delivered in fully packaged format, such as through retail outlets, which involve substantially higher packaging and distribution expense.

Cost of maintenance and services revenues consists of:


	•	salaries, benefits, stock-based compensation and related costs of customer and technical support functions; and

	•	allocated facilities, depreciation and amortization and other related overhead.

Amortization of intangible assets represents the amortization of intellectual property and other intangible assets arising from purchases of other companies such as Jasc and InterVideo is included in the calculation of our gross margin.

Sales and Marketing

Sales and marketing expenses consist primarily of:


	•	salaries, commissions, benefits and stock-based compensation related to sales and marketing personnel;

	•	travel and living expenses;

	•	marketing, such as co-marketing programs with our resellers and OEMs, trade shows and advertising; and


	•	allocated facilities, depreciation and amortization and other related overhead.

Research and Development

Research and development expenses consist primarily of:


	•	salaries, benefits and stock-based compensation related to research and development personnel;

	•	allocated facilities, depreciation and amortization and other related overhead; and

	•	localization and contract development expenses.

Our research and development investments are primarily focused on maintaining competitive functionality of our software products, responding to customer requirements and expanding the geographic reach of our products. We limit research and development spending to areas that we believe will provide an attractive return on investment and have eliminated spending on speculative or high risk projects. Our research and development costs are expensed as incurred since the cost and time between technical feasibility and release is insignificant.

General and Administrative

General and administrative expenses consist primarily of:


	•	salaries, benefits and stock-based compensation related to general and administrative personnel;

	•	accounting, legal and other professional fees;

	•	allocated facilities, depreciation and amortization and other related overhead; and

	•	insurance costs.

Taxes

We have tax loss carryforwards available to offset future taxable income of approximately $233.5 million as of November 30, 2007. As of November 30, 2007 we also had approximated $220.0 million of tax depreciation that would be available to offset taxable income in future years. Our tax loss carryforwards and our pools of various deductions against taxable income existed prior to our acquisition by Vector Capital in fiscal 2003. To the extent that we used pre-acquisition tax carryforwards to reduce taxes otherwise payable in fiscal 2004 through 2006, the benefit was applied first to reduce goodwill and then intangible assets recognized in connection with our acquisition by Vector Capital. As at November 30, 2006 the related goodwill and intangibles have been fully written off. Consequently, to the extent we use tax loss carryforwards subsequent to 2007, we expect to record the benefit as a reduction in income tax expense.

The remaining tax loss carryforwards expire between the tax years 2008 and 2027 and have not been fully audited by relevant authorities. We have not recorded a financial statement benefit for these attributes as we have limited history of profitability.

Due to the international scope of our business, our income tax expense includes the tax provisions calculated for the various tax jurisdictions in which we operate and foreign withholding tax on certain license income. As a result, income tax expense is affected by the profitability of our operations in all locations, as well as local tax rates.

RESULTS OF OPERATIONS

Comparison of Fiscal Year Ended November 30, 2007 to Fiscal Year Ended November 30, 2006

Our consolidated financial statements for our fiscal year ended November 30, 2007 have been prepared in accordance with U.S. generally accepted accounting principles.

On December 12, 2006, we acquired all of the outstanding shares of InterVideo. Accordingly, because the financial information for year ended November 30, 2006 does not include InterVideo operations, they are not directly comparable to the consolidated financial information presented for the year ended November 30, 2007. In the analysis, “Corel products” refers to the revenues and expenses related to the products which were owned by Corel prior to the acquisition of InterVideo.

The following table sets forth certain consolidated statements of operations data in dollars and expressed as a percentage of revenues for the periods indicated, as well as the percentage change on a year-over-year basis.


	November 30,												Percentage
	2006			2007			2006			2007			Change
	(Dollars in thousands)

Revenues
Product	$	157,319		$	228,274			88.8	%		91.1	%		45.1	%
Maintenance and services		19,872			22,206			11.2			8.9			11.7

Total revenues		177,191			250,480			100.0			100.0			41.4

Cost of revenues
Cost of product(1)		21,339			49,775			13.6			21.8			133.3
Cost of maintenance and services(1)		1,142			796			5.7			3.6			(30.3	)
Amortization of intangible assets		14,366			26,119			8.1			10.4			81.8

Total cost of revenues		36,847			76,690			20.8			30.6			108.1

Gross margin		140,344			173,790			79.2			69.4			23.8

Operating expenses
Sales and marketing		54,851			70,587			31.0			28.2			28.7
Research and development		25,883			44,712			14.6			17.9			72.7
General and administrative		24,285			37,083			13.7			14.8			52.7
Acquired in-process research and development		—			7,831			0.0			3.1			n/a
Integration expense		358			5,220			0.2			2.1			1358.1
Restructuring		810			1,447			0.5			0.6			78.6

Total operating expenses		106,187			166,880			59.9			66.6			57.2

Income from operations		34,157			6,910			19.3	%		2.8	%		(79.8	)%

Other expenses (income)
Loss on debt retirement		8,292			—				*			*			*
Interest expense, net		11,331			16,254				*			*			*
Amortization of deferred financing fees		1,180			1,074				*			*			*
Other non-operating (income) expense		(565	)		(799	)			*			*			*

Income (loss) before income tax expense (recovery)		13,919			(9,619	)			*			*			*
Income tax expense		4,668			3,443				*			*			*

Net income (loss)	$	9,251		$	(13,062	)			*			*			*


(1)		Percentage reflects percentage of related revenues.

*		Not Meaningful

Revenues


	Year Ended November 30,						Percentage
	2006			2007			Change
	(Dollars in thousands)

Product	$	157,319		$	228,274			45.1	%
As a percent of revenue		88.8	%		91.1	%
Maintenance and services		19,872			22,206			11.7	%
As a percent of revenue		11.2	%		8.9	%
Total		177,191			250,480			41.4	%

Total revenues for the year ended November 30, 2007 increased by 41.4% to $250.5 million from $177.2 million for the year ended November 30, 2006. Of this increase, $73.0 million is attributable to additional revenues generated from InterVideo products. There was an increase in total revenues from Corel products of $0.3 million in the current year. This increase was driven by growth of approximately $16.0 million, in WinZip, CorelDraw, iGrafx, and Corel Painter. These increases were largely offset by a decrease in WordPerfect revenues of $12.1 million and Digital Imaging revenues of $3.6 million from last year.

Product revenues for the year ended November 30, 2007 increased by 45.1% to $228.3 million from $157.3 million for the year ended November 30, 2006. Product revenues for Corel products decreased by $2.0 million or 1.3% to $155.3 million for the year ended November 30, 2007. This decline primarily reflects the decline in sales of WordPerfect and the decrease in sales of Digital Imaging products, which was partially offset by an increase in the sales of the rest of the portfolio of products, led by growth in WinZip, CorelDRAW, iGrafx and Corel Painter revenues. The decline in WordPerfect revenues for the year ended November 30, 2007 is due primarily to a decrease in point of sale royalties from one of our largest OEM customers, a decrease in enterprise license revenue and the latter part of the product lifecycle given the launch of WordPerfect Office X3 in the first quarter of the prior year. The decline in Digital Imaging revenue for the year ended November 30, 2007 is primarily attributable to lower

POS and APOS (after Point of Sale) revenue for Snapfire at one of our largest OEM customers, a decrease in the level of upgrades from earlier versions of Paint Shop Pro to Paint Shop Pro Photo X1 and the repositioning of this brand as our higher end product relative to our acquired Photo Impact and Photo Express brands. A new version of Paint Shop Pro was released in the fourth quarter of fiscal 2007. Also, we expect improved performance from the recently announced MediaOne product, which is the follow-on product to Snapfire. Revenues from our WinZip products have increased due to new license sales and upgrades resulting from increased conversion of trial customers to license users through more aggressive in-product messaging. The increase in iGrafx revenues is attributable to significant new customer wins in the Japanese market, the overall competitiveness of our product portfolio and additional marketing and promotional initiatives undertaken in the current year. The increase in CorelDRAW revenues during the year ended November 30, 2007 is attributable to growth in the European market due to significant enterprise license agreements and additional promotion and marketing activity. CorelDRAW continues to experience growth in emerging markets such as Latin America. The increase in Corel Painter revenue during fiscal 2007 is due to continued worldwide growth in OEMs, e-store sales, and channel sales.

Maintenance and services revenues increased by 11.7% to $22.2 million for the year ended November 30, 2007. This increase is largely attributable to increased sales of WinZip’s maintenance program. As a percentage of total revenue, maintenance and services revenue declined to 8.9% in fiscal 2007 from 11.2%, as a result of the change in product mix due to the acquisition of InterVideo. The InterVideo family of products generates minimal amounts of maintenance and services revenue.

Total Revenues by Product Group

As a result of our acquisition of InterVideo, we changed our revenue by product group classification so that it was aligned with how we now manage our product groups. Revenues by product for the year ended November 30, 2006 were reclassified to conform to the current period. There have been no changes to total revenues for the year ended November 30, 2006 as a result of this reclassification.


	Year Ended November 30,						Percentage
	2006			2007			Change
	(Dollars in thousands)

Graphics and Productivity	$	137,741		$	141,692			2.9	%
As a percent of revenue		77.7	%		56.6	%
Digital Media		39,450			108,788			175.8	%
As a percent of revenue		22.3	%		43.4	%

Graphics and Productivity revenues increased by $4.0 million or 2.9% to $141.7 million in fiscal 2007 from $137.7 million in fiscal 2006. There was a decline of $12.0 million in the sales of WordPerfect Office. The rest of the Graphics and Productivity portfolio of products increased by $16.0 million or 15.5% as compared to the year ending November 30, 2007. This was primarily driven by growth in WinZip, CorelDRAW, iGrafx and Corel Painter revenues. Revenues from our WinZip products have grown due to increased new license sales and upgrades resulting from increased conversion of trial customers to license users through more aggressive in-product messaging. The increase in iGrafx revenues is attributable to additional marketing and promotional initiatives undertaken in the current quarter, and new licensing deals in Japan. The increase in CorelDRAW is due to new licensing deals reached in EMEA. The increase in Corel Painter is due to continued worldwide growth in OEM’s, e-store sales, and channel sales. The decline in WordPerfect revenues is due primarily to the decrease in point of sale royalties from one of our largest OEM customers, the decrease in enterprise license revenue, and the launch of WordPerfect Office X3 in the first quarter of the prior year.

Digital Media revenues increased by 175.8% to $108.8 million in fiscal 2007 from $39.5 million in fiscal 2006. The significant increase is due to the inclusion of $73.0 million of revenue in fiscal 2007 that resulted from products acquired with our acquisition of InterVideo on December 12, 2006. Excluding acquired Digital Media products, Corel’s Digital Imaging products decreased by 9.2% to $35.9 million in fiscal 2007, as compared to $39.5 million in fiscal 2006. The decrease in revenues was the result of lower conversion rates and lower point of sales and after point of sales (APOS) revenue at our largest OEM customer. Some of this decline was offset by the introduction of MediaOne, which was not sold in fiscal 2006, as we continued to acquire new OEM partners and started to realize the benefit of APOS revenue. Also, during the second half of the year, we continued to reposition Paint Shop Pro as the high end, high value product in a portfolio of Digital Media products, which now also includes Photo Impact and MediaOne.

Total Revenues by Region


	Year Ended November 30,										Percentage
	2006		2007		2006			2007			Change
			(Dollars in thousands)

Americas	$	104,447	$	125,979		58.9	%		50.3	%		20.6	%
Europe, Middle East, and Africa (EMEA)		58,253		72,932		32.9			29.1			25.2
Asia Pacific (APAC)		14,491		51,569		8.2			20.6			255.9

Total	$	177,191	$	250,480		100.0	%		100.0	%		41.4	%

Revenues in the Americas increased by 20.6% to $126.0 million in fiscal 2007 compared to $104.4 million in fiscal 2006. The increase was principally driven by the revenues associated with our new InterVideo products, which generated sales of $28.7 million for the year ending November 30, 2007. Revenues for Corel products declined by 6.9% in fiscal 2007, due to lower WordPerfect and digital imaging revenues. WordPerfect decreased due to the decrease in point of sale royalties from one of our largest OEM customers, the decrease in enterprise license revenue, and the launch of WordPerfect Office X3 in the first quarter of the prior year. The decline in digital imaging revenues for fiscal 2007 is primarily attributable to lower POS revenue at one of our largest OEM customers and the repositioning of the Digital Imaging product as our higher end product relative to our acquired Photo Impact brand and MediaOne. A new version of Paint Shop Pro has been released in the fourth quarter of fiscal 2007.

Revenues in EMEA increased by 25.2% to $72.9 million in fiscal 2007 from $58.3 million in fiscal 2006. The main reason for the increase was the revenues generated by our InterVideo products which totaled $10.3 million in fiscal 2007. Revenues from Corel products increased by 7.6% primarily due to increases in CorelDRAW Graphics Suite and WinZip product sales, which offset decreases in sales in WordPerfect and Digital Imaging product. CorelDRAW Graphics Suite revenues increased in EMEA due to continued advances made in the retail, academic and enterprise market and the strengthening of the Euro relative to the US Dollar.

APAC revenues increased by 255.9% to $51.6 million in fiscal 2007. The increase is due largely to sales from InterVideo products of $34.0 million in fiscal 2007. Revenue growth in Corel products was 21.2% for the year ended November 30, 2007, due to revenue growth in WinZip and iGrafx. iGrafx growth was larger in this region due to licensing deals reached with one of our distribution partners initiated in the second quarter of fiscal 2007. Revenues from our WinZip products have grown significantly due to increased new license sales and upgrades resulting from increased conversion of trial customers to license users through more aggressive in-product messaging.

Cost of Revenues


	Year Ended November 30,						Percentage
	2006			2007			Change
	(Dollars in thousands)

Cost of product	$	21,339		$	49,775			133.3	%
As a percent of product revenue		13.6	%		21.8	%
Cost of maintenance and services		1,142			796			(30.3	)%
As a percent of maintenance and service revenue		5.7	%		3.6	%
Amortization of intangible assets		14,366			26,119			81.8	%
As a percent of revenue		8.1	%		10.4	%

Cost of Product Revenues. Cost of product revenues increased by 133.3% to $49.8 million in fiscal 2007 from $21.3 million in fiscal 2006. As a percentage of product revenues, cost of product revenues increased to 21.8% from 13.6%, for the year ended November 30, 2007. The increase in the period is largely attributable to the change in our product mix caused by the acquisition of InterVideo. InterVideo products generally have higher royalty bearing content than Corel products.

Cost of Maintenance and Services Revenues. Cost of maintenance and services revenues decreased to 3.6% of related revenues in fiscal 2007 compared to 5.7% in fiscal 2006. The increase in maintenance revenues is primarily attributable to WinZip’s higher maintenance revenues, for which we have experienced limited incremental costs to provide.

Amortization of Intangible Assets. Amortization of intangible assets increased by $11.7 million to $26.1 million in the year ended November 30, 2007, from $14.4 million in the year ended November 30, 2006. This increase is due to the $15.5 million of amortization related to the intangible assets of $86.6 million acquired with InterVideo.

Operating Expenses


	Year Ended November 30,						Percentage
	2006			2007			Change
	(Dollars in thousands)

Sales and marketing	$	54,851		$	70,587			28.7	%
As a percent of revenue		31.0	%		28.2	%
Research and development		25,883			44,712			72.7	%
As a percent of revenue		14.6	%		17.9	%
General and administrative		24,285			37,083			52.7	%
As a percent of revenue		13.7	%		14.8	%
Restructuring		810			1,447			78.6	%
As a percent of revenue		0.5	%		0.5	%
Acquired in-process research and development		—			7,831			n/a
As a percent of revenue		0.0	%		3.1	%
InterVideo integration expenses		358			5,220			1358.1	%
As a percent of revenue		0.2	%		2.1	%

Sales and Marketing. Sales and marketing expenses increased by 28.7% to $70.6 million in fiscal 2007 as compared to $54.9 million in fiscal 2006. For the year, sales and marketing expenses as a percentage of revenue decreased to 28.2%, as compared to 31.0% for the prior period. The increase in sales and marketing expenses is as a result of additional costs associated with assuming InterVideo operations. The decline in expenses as a percentage of revenue from the prior year is due to our integration activities which have created cost synergies in the current period.

Research and Development. Research and development expenses increased by 72.7% to $44.7 million for the year ended November 30, 2007, as compared to $25.9 million for the year ended November 30, 2006. As a percentage of total revenues, research and development expenses increased to 17.9% from 14.6% in fiscal 2007 as compared to fiscal 2006. The increase in research and development expenses is as a result of products acquired from InterVideo which are part of our Digital Media group of products. Further research and development investment has been, and is expected to be, made in Digital Media due to relative maturity and growth potential of this sector.

General and Administrative. General and administration expenses increased to $37.1 million in the year ended November 30, 2007, from $24.3 million for the year ended November 30, 2006. As a percentage of total revenues, general and administration expenses increased to 14.8% from 13.8% as compared to fiscal 2006. The increase in general and administration costs is due largely to the integration of InterVideo operations and resources as well as additional expenses incurred to be compliant with the Sarbanes-Oxley Act of 2002.

InterVideo Integration Expense: Integration costs relating to the acquisition of InterVideo totaling $5.2 million have been recorded during the year ending November 30, 2007. These costs relate to the integration of the InterVideo business into our existing operations, including travel costs, retention bonuses, incremental employees engaged solely for integration activities, other incremental costs for our employees who worked on the integration planning process, consultants for integrating systems, and other one-time charges for integrating systems.

Acquired in-process Research and Development. Intangible assets acquired with InterVideo included $7.8 million of in-process research and development projects that, on the date of the acquisition, the related technology had not reached technological feasibility and did not have an alternate future use. As required by purchase accounting, this in-process research and development was expensed upon acquisition in the first quarter of fiscal 2007.

Restructuring. In the fourth quarter of fiscal 2007, our management has initiated a restructuring plan to centralize much of our Digital Media operations in Greater China and Fremont, California. Additionally, further changes have been made to staff to align and balance our global teams. This has resulted in the planned closure of our Minneapolis location in fiscal 2008 as well as the termination of certain employees. The fair value of the liabilities arising from this plan are $2.2 million, of which $1.9 million relates to termination and related benefits, and $0.3 million relates to the closure of our Mineapolis facilty. These charges will be funded by our cash flow from operations. We have expensed restructuring charges of $1.4 million in fiscal 2007 as a result of this plan. Further expenses of $0.8 million will be recorded in fiscal 2008. We expect significant reductions in employee expenses in future periods as a result of the restructuring plan, however, some employees have been added in other locations to replace some of the individuals terminated.

For our fiscal year ended November 30, 2006, restructuring costs of $810,000 represent severance costs related to the realignment of our sales and marketing force in the Americas and reductions in our research and development team.

Non-Operating (Income) Expense


	Year Ended November 30,
	2006			2007
	(Dollars in thousands)

Loss on debt retirement	$	8,292		$	—
Interest expense, net		11.331			16,254
Amortization of deferred financing fees		1,180			1,074
Other non-operating (income) expenses		(565	)		(799	)

Total non-operating expenses	$	20,238		$	16,529

Loss on Debt Retirement. We incurred a loss on debt retirement of $8.3 million in fiscal 2006 relating to the write-off of deferred financing costs as a result of our refinancing $130.0 million of credit facilities prior to maturity, as part of our initial public offering on May 2, 2006.

Interest (Income) Expense, Net. Net interest expense increased by $4.9 million in fiscal 2007 from $11.3 million in fiscal 2006. The increase is due to the additional long-term debt of $70.0 million entered into as a result of our acquisitions of InterVideo.

Amortization of Deferred Financing Fees. The amortization of deferred financing fees decreased to $1.1 million for our fiscal year ended November 30, 2007 as compared to $1.2 million for our fiscal year ended November 30, 2006 as a result of the lower financing fees incurred under the senior credit facility entered into during our fiscal year ended November 30, 2006, as compared to those incurred with the Credit Suisse First Boston (“CSFB”) facility entered into during our fiscal year ended November 30, 2005.

Other non-operating income: Other non-operating income, which is generally comprised of foreign exchange gains and losses, increased from $0.6 million to $0.8 million largely as a result of additional favorable foreign currency exchange gains in fiscal 2007 relating to the weakening of the US Dollar versus the Canadian Dollar and the Euro. Our gains on foreign currency exchange increased by $0.5 million from $0.4 million to $0.9 million in fiscal 2007.

Income Tax Expense. Income tax expense of $3.4 million for our fiscal year ended November 30, 2007 consisted of current tax expense of $3.5 million and deferred tax recovery of $83,000 compared to a tax expense of $4.7 million for our fiscal year ended November 30, 2006 that included current tax expense of $3.4 million and a deferred tax expense of $1.3 million.

Current taxes for the years ending November 30, 2006 and 2007 include foreign withholding taxes plus taxes incurred by our foreign subsidiaries. Deferred taxes in fiscal 2007 relates to an additional $5.0 million valuation allowance against all deferred tax assets assumed in the InterVideo acquisition. In the third quarter, we determined that it was no longer more likely than not that the deferred tax assets would be realized, and accordingly a valuation allowance was recorded. This was offset by a reduction in our deferred income tax liability related to the amortization of intangible assets recorded on the acquisition of InterVideo. Deferred taxes in fiscal 2006 related to the tax benefits realized in Canada from the use of tax loss carryforwards, existing prior to our acquisition by Vector Capital, in post-acquisition periods, less deferred tax credits relating to WinZip operations in 2005.

We had current tax expense of $3.4 million on a loss before tax of $9.8 million due mostly to foreign withholding taxes which are not creditable due to the Canadian loss carryforwards and foreign taxes in jurisdictions which are profitable.

Comparison of Fiscal Year Ended November 30, 2006 to Fiscal Year Ended November 30, 2005

Our consolidated financial statements for our fiscal year ended November 30, 2006 have been prepared in accordance with U.S. generally accepted accounting principles.


	Year Ended November 30,												Percentage
	2005			2006			2005			2006			Change
	(Dollars in thousands)

Revenues
Product	$	148,308		$	157,319			90.4	%		88.8	%		6.1	%
Maintenance and services		15,736			19,872			9.6			11.2			26.3

Total revenues		164,044			177,191			100.0			100.0			8.0

Cost of revenues
Cost of product(1)		18,461			21,339			12.4			13.6			15.6
Cost of maintenance and services(1)		1,154			1,142			7.3			5.7			(1.0	)
Amortization of intangible assets		26,139			14,366			15.9			8.1			(45.0	)

Total cost of revenues		45,754			36,847			27.9			20.8			(19.5	)

Gross margin		118,290			140,344			72.1			79.2			18.6

Operating expenses:
Sales and marketing		54,056			54,851			33.0			31.0			1.5
Research and development		23,538			25,883			14.3			14.6			10.0
General and administrative		19,851			24,285			12.1			13.7			22.3
Other operating expense		3,125			358			1.9			0.2			(88.5	)
Restructuring		834			810			0.5			0.5			(2.9	)

Total operating expenses		101,404			106,187			61.8			59.9			4.7

Income from operations		16,886			34,157			10.3	%		19.3	%		102.3	%

Other expenses (income)
Loss on debt retirement		3,937			8,292				*			*			*
Interest expense, net		12,608			11,331				*			*			*
Gain on disposal of investments		(125	)		—				*			*			*
Amortization of deferred financing fees		1,756			1,180				*			*			*
Other non-operating (income) expense		1,172			(565	)			*			*			*

Income (loss) before income tax expense (recovery)		(2,462	)		13,919				*			*			*
Income tax expense		6,291			4,668				*			*			*

Net income (loss)	$	(8,753	)	$	9,251				*			*			*


(1)		Percentage reflects percentage of related revenues.

*		Not Meaningful

Revenues


	Year Ended November 30,						Percentage
	2005			2006			Change

Product	$	148,308		$	157,319			6.1	%
As a percent of revenue		90.4	%		88.8	%
Maintenance and services		15,736			19,872			26.3	%
As a percent of revenue		9.6	%		11.2	%
Total		164,044			177,191			8.0	%

Product revenues increased by 6.1% to $157.3 million in our fiscal year ended November 30, 2006 from $148.3 million in our fiscal year ended November 30, 2005. This is mainly due to increases in revenues from license sales of WinZip 10.0 Pro and CorelDRAW; both of which were within the first half of their release cycle, and due to the continued growth of the iGrafx products. These increases were partially offset by a decline in sales of WordPerfect and a slight decrease in revenue from Corel Paint Shop Pro. We also benefited from a full year of revenues from WinZip products. In our fiscal year ended November 30, 2005, WinZip

revenues from December 1, 2004 through January 18, 2005, the period prior to its acquisition by Vector, were not included in our financial results.

Maintenance and services revenues increased by 26.3% to $19.9 million in our fiscal year ended November 30, 2006 from $15.7 million in our fiscal year ended November 30, 2005. This increase is attributable to the successful implementation of WinZip’s maintenance program, commenced in the latter half of our fiscal year ended November 30, 2005, which provides customers with the right to unspecified upgrades of software licences on a when-and-if-available basis.

Total Revenues by Product Group

As a result of our acquisition of InterVideo in fiscal 2007, we changed our revenue by product group classification so that it was aligned with how we now manage our product groups. For this period and future periods, we will report on Corel’s two product categories: Digital Media and Graphics and Productivity. Our primary Digital Media products include the InterVideo products listed above and also our Paint Shop Pro, Snapfire, Photo Album, and MediaOne products. Our primary Graphics and Productivity products include, CorelDRAW Graphics Suite, WinZip, WordPerfect Office Suite and iGrafx. Revenues by product for the years ended November 30, 2006 and 2005 were reclassified to conform to the current period presentation. There was no impact on total revenues as a result of this re-classification.


	Year Ended November 30,										Percentage
	2005		2006		2005			2006			Change
	(Dollars in thousands)

Graphics and Productivity	$	123,126	$	137,741		75.1	%		77.7	%		11.9	%
Digital Media		40,918		39,450		24.9			22.3			(3.6	)%

Total	$	164,044	$	177,191		100.0	%		100.0	%		8.0	%

Graphics and Productivity revenues increased by 11.9% to $137.7 million in our fiscal year ended November 30, 2006 from $123.1 million in our fiscal year ended November 30, 2005. Revenues from our WinZip products have grown significantly due to increased new license sales and upgrades resulting from increased conversion of trial customers to license users through more aggressive in-product messaging. The increase is also attributable to the availability of new versions WinZip, including WinZip 10.0 and WinZip 10.0 Pro, and the implementation of our WinZip maintenance program commenced in the second half of our fiscal year ended November 30, 2005. iGrafx revenues have increased as a result of the release of a new version in the first quarter of our fiscal year ended November 30, 2006. Our CorelDRAW products had increased revenues for our fiscal year ended November 30, 2006 as compared to November 30, 2005. The growth is attributable to the strength of CorelDRAW Graphics Suite which generated higher revenues as it was within the first half of its release cycle.

These gains were offset by a decrease in WordPerfect revenues. Overall WordPerfect revenues were lower in the year as a result of a decline in enterprise license revenues from our corporate and government install base, and the decrease in point of sale revenue as a result of the removal of the preload of the full WordPerfect word processor application and trial applications of Quattro Pro and Presentations from the Dell Dimension and Inspiron PCs in the Americas. WordPerfect revenues increased in our global Internet store and retail channel as a result of the recent release of WordPerfect X3. On a quarterly basis, WordPerfect is now the fourth largest brand in Corel, behind CorelDRAW, Paint Shop Pro, and WinZip. There were also lower sales of Corel Painter and Corel Designer Suite, which are late in their release cycle.

Digital Media revenues decreased 3.6% to $39.5 million in our fiscal year ended November 30, 2006 from $40.9 million in our fiscal year ended November 30, 2005. Corel PaintShop which had increased sales during the fourth quarter of our fiscal year ended November 30, 2006 through OEM partners that were offset by lower sales in the retail market.

Total Revenues by Region


	Year Ended November 30,										Percentage
	2005		2006		2005			2006			Change
	(Dollars in thousands)

Americas	$	98,412	$	104,447		60.0	%		58.9	%		6.1	%
EMEA		52,965		58,253		32.3			32.9			10.0
Asia Pacific		12,667		14,491		7.7			8.2			14.4

Total	$	164,044	$	177,191		100.0	%		100.0	%		8.0	%

In our fiscal year ended November 30, 2006, revenues by region for our fiscal year ended November 30, 2005 were reclassified to conform to the current period presentation of revenues in the Americas, Europe, Middle East, Africa (EMEA), and Asia Pacific. In our fiscal year ended November 30, 2005 the geographic identification of WinZip Internet sales was based on the location of the WinZip server rather than the location of the customer. In the second quarter of our fiscal year ended November 30, 2006, we reclassified WinZip internet sales by location of the customer in order to be consistent with the rest of the organization.

As a result there was a reclassification of reported revenue in the aggregate amount of $5.6 million from the Americas to EMEA and Asia Pacific in the aggregate amount of $4.2 million and $1.4 million, respectively.

Revenues in the Americas increased by 6.1% for our fiscal year ended November 30, 2006 to $104.4 million compared to $98.4 million for our fiscal year ended November 30 2005. The increase was principally driven by the increased revenues associated with our WinZip products which increased because of higher new license sales and upgrades resulting from increased conversion of trial customers to license users through more aggressive in-product messaging. CorelDRAW revenues increased significantly because it is in the first half of its release cycle; and we added more North American OEM partners and bundling initiatives. The revenue growth in the Americas was offset by lower WordPerfect revenues due to lower PC shipments by our key OEM partners, and in particular Dell, and a decrease in revenues from our corporate and government install base.

EMEA revenues increased 10.0% to $58.3 million for our fiscal year ended November 30, 2006, compared to $53.0 million for our fiscal year ended November 30, 2005. EMEA revenues have increased in this period due to new licensing agreements and the improved performance of our OEM partnerships with Markement, as well as the launch of new language versions and localized e-stores.

Asia Pacific revenues increased by 14.4% to $14.5 million for our fiscal year ended November 30, 2006 as compared to $12.7 million for our fiscal year ended November 30, 2005. The larger percentage growth in this geographic segment, as compared to the Americas and EMEA, is due primarily to further investment in our marketing and sales force in Japan, and the release of CorelDraw X3 and WinZip.

Cost of Revenues


	Year Ended November 30,						Percentage
	2005			2006			Change
	(Dollars in thousands)

Cost of product	$	18,461		$	21,339			15.6	%
As a percent of product revenue		12.4	%		13.6	%
Cost of maintenance and services		1,154			1,142			(1.0	)%
As a percent of maintenance and service revenue		7.3	%		5.7	%
Amortization of intangible assets		26,139			14,366			(45.0	)%
As a percent of revenue		15.9	%		8.1	%

Cost of Product Revenues. Cost of product revenues increased 15.6% to $21.3 million in our fiscal year ended November 30, 2006 from $18.5 million in our fiscal year ended November 30, 2005. As a percentage of product revenues, cost of product revenues increased to 13.6% in our fiscal year ended November 30, 2006 from 12.4% in our fiscal year ended November 30, 2005. The increase in the period is largely attributable to a change in our distribution channel and product mix, as well as increased royalties due to a change in the revenue mix in our OEM distribution channels.

Cost of Maintenance and Services Revenues. Cost of maintenance and services revenues decreased 1.0% to $1.1 million in our fiscal year ended November 30, 2006 from $1.2 million in our fiscal year ended November 30, 2005. As a percentage of maintenance and services revenues, cost of maintenance and services revenues decreased to 5.7% in our fiscal year ended November 30, 2006 from 7.3% in our fiscal year ended November 30, 2005 as there were limited incremental costs to provide the additional revenue generated in the current year.

Amortization of Intangible Assets. Amortization of intangible assets decreased 45% to $14.4 million in our fiscal year ended November 30, 2006 from $26.1 million in our fiscal year ended November 30, 2005 as the technology valued in connection with our acquisition by Vector Capital and our application of push-down accounting, became fully amortized at the beginning of our fiscal year ended November 30, 2006.

Operating Expenses


	Year Ended November 30,						Percentage
	2005			2006			Change
	(Dollars in thousands)

Sales and marketing	$	54,056		$	54,851			1.5	%
As a percent of revenue		33.0	%		31.0	%
Research and development		23,538			25,883			10.0	%
As a percent of revenue		14.3	%		14.6	%
General and administrative		19,851			24,285			22.3	%
As a percent of revenue		12.1	%		13.7	%
Restructuring		834			810			(2.9	)%
As a percent of revenue		0.5	%		0.5	%
Other operating expenses		3,125			358			(88.5	)%
As a percent of revenue		1.9	%		0.2	%

Sales and Marketing. Sales and marketing expenses increased 1.5% to $54.9 million in our fiscal year ended November 30, 2006 from $54.0 million in our fiscal year ended November 30, 2005. As a percentage of total revenues, sales and marketing expenses decreased to 31.0% in our fiscal year ended November 30, 2006 from 33.0% in our fiscal year ended November 30, 2005. The overall increase for the year is primarily related to marketing efforts to support our most recent releases of WordPerfect and CorelDRAW Graphics Suite in the first half of our fiscal year ended November 30, 2006. In relation to revenues, sales and marketing has decreased due to a reduction in marketing and development fund related activities as well as a savings realized from the termination of a naming rights agreement on a sports and entertainment venue.

Research and Development. Research and development expenses increased 10.0% to $25.9 million in our fiscal year ended November 30, 2006 from $23.5 million in our fiscal year ended November 30, 2005. As a percentage of total revenues, research and development expenses increased to 14.6% in our fiscal year ended November 30, 2006 from 14.3% in our fiscal year ended November 30, 2005. The increase in expenses is a direct result of higher salaries and benefits and localization costs related to our products targeted for emerging markets.

General and Administrative. General and administrative expenses increased 22.3% to $24.3 million in our fiscal year ended November 30, 2006 from $19.9 million in our fiscal year ended November 30, 2005. As a percentage of total revenues, general and administrative expenses increased to 13.7% in our fiscal year ended November 30, 2006 from 12.1% during our fiscal year ended November 30, 2005. The increase is attributable largely to costs associated with becoming a public company, as well as an increase of $1.2 million in stock based compensation for general and administrative employees.

Other Operating Expense. Other operating expense in our fiscal year ended November 30, 2005 includes $2.2 million related to the termination of an obligation for naming rights on a sporting and entertainment venue, and $883,000 of fees associated with corporate and tax planning for WinZip. Other operating expenses in our fiscal year ended November 30, 2006 include business integration costs of $358,000 relating to the acquisition of InterVideo. This includes travel costs and other incremental costs for Corel employees who worked on the acquisition.

Restructuring. Restructuring expense increased by 2.9% to $810,000 for our fiscal year ended November 30, 2006 as compared to $834,000 for our fiscal year ended November 30, 2005. For our fiscal year ended November 30, 2005, restructuring charges consist of severance and related expenses for terminated employees. The majority of the restructuring charges totaling $834,000 in our fiscal year ended November 30, 2005 relate to the integration of Jasc. For our fiscal year ended November 30, 2006, restructuring costs of $810,000 represent charges for the elimination of redundant positions and also the severance costs related to the realignment of our sales and marketing force in the Americas and our research and development team. There are no future service obligations due from any of our terminated employees, and we do not expect any future restructuring expenses to occur as a result of these realignments.

Non-Operating (Income) Expense


	Year Ended November 30,
	2005		2006
	(Dollars in thousands)

Loss on debt retirement	$	3,937	$	8,292
Interest expense, net		12,608		11,331
Amortization of deferred financing fees		1,756		1,180
Other non-operating (income) expenses		1,172		(565	)

Total non-operating expenses	$	19,473	$	20,238

Loss on Debt Retirement. We incurred a loss on debt retirement of $8.3 million relating to the write-off of deferred financing costs for our fiscal year ended November 30, 2006 as a result of our refinancing $130.0 million of credit facilities prior to maturity, as part of our initial public offering on May 2, 2006. The $3.9 million loss on retirement of debt in our fiscal year ended November 30, 2005 consisted of financing fees of $1.9 million and an early repayment fee of $2.0 million incurred on the termination of the credit facility with Wells Fargo Foothill (“WFF”).

Interest (Income) Expense, Net. Net interest expense decreased to $11.3 million in our fiscal year ended November 30, 2006 from $12.6 million in our fiscal year ended November 30, 2005. The decrease is primarily attributable to the refinancing that occurred in May 2006 where we raised $69.1 million of net proceeds from our initial public offering, entered into a $90.0 million senior credit facility, and repaid $130.0 million of our existing credit facilities. The net result was $50.0 million less debt at a lower interest rate. As a result, interest expense has decreased significantly since May 2006. For our fiscal year ended November 30, 2006 this was offset by the higher level of debt facilities until the time of our initial public offering in May 2006.

Amortization of Deferred Financing Fees. The amortization of deferred financing fees decreased to $1.2 million for our fiscal year ended November 30, 2006 as compared to $1.8 million for our fiscal year ended November 30, 2005 as a direct result of the lower financing fees incurred under the senior credit facility entered into during our fiscal year ended November 30, 2006, as compared to those incurred with the Credit Suisse First Boston (“CSFB”) facility entered into during our fiscal year ended November 30, 2005. Financing fees incurred in our fiscal year ended November 30, 2005 have been reduced to zero as they were expensed and recorded as a loss on debt retirement in our fiscal year ended November 30, 2006.

Other Non-Operating (Income) Expense. Other non-operating (income) expense consists primarily of foreign exchange gains and losses and unrealized gains and losses on forward exchange contracts. There was net income of $565,000 in our fiscal year ended November 30, 2006 compared to a net expense of $1.2 million in our fiscal year ended November 30, 2005. We had non-operating income as opposed to non-operating expenses in the prior year comparable period due to the significant strengthening of foreign currencies against the U.S. dollar, in particular the Euro and the British Pound. This was partially offset by the less significant strengthening of the Canadian dollar against the U.S. dollar, which is the currency in which we incur most of our expenses.

Income Tax Expense. Income tax expense of $4.7 million for our fiscal year ended November 30, 2006 consisted of current tax expense of $3.4 million and deferred tax expense of $1.3 million compared to a tax expense of $6.3 million for our fiscal year ended November 30, 2005 that included current tax expense of $5.5 million and a deferred tax expense of $830,000.

Current taxes in both periods include foreign withholding taxes plus taxes incurred by our foreign subsidiaries. Deferred tax expense in both periods related to the tax benefits realized in Canada from the use of tax loss carryforwards, existing prior to our acquisition by Vector Capital, in post-acquisition periods, less deferred tax credits relating to WinZip operations in 2005.

Our effective tax rate for 2006 was 33.5%, which differs from the statutory rate of 36.1% due mostly to a reduction for profits which are subjected to lower foreign tax rates. This is offset by increases resulting from non deductible expenses and foreign withholding taxes which were not creditable in Canada.

We anticipate an effective tax rate going forward of between 10% and 20%. The lower rate as compared to the fiscal year ended November 30, 2006, is due to strategic business plans which will have profits realized in foreign jurisdictions which have tax rates significantly lower than Canada.

LIQUIDITY AND CAPITAL RESOURCES

As of November 30, 2007, our principal sources of liquidity include cash and cash equivalents of $24.6 million and trade accounts receivable of $41.1 million. Our cash equivalents do not consist of any investments in asset backed commercial paper. We also have a five-year $75.0 million revolving line of credit facility which was unused at November 30, 2007.

During fiscal 2007 we received an invoice from a supplier of InterVideo relating to the period prior to our acquisition of InterVideo. During fiscal 2008, we expect to have a significant cash payout related to the settlement of this invoice. We are currently performing an audit on this invoice as we are disputing some of the items invoiced. As of November 30, 2007, we have

accrued a material amount for what we believe to be an appropriate settlement. This accrual has been included in the purchase price allocation. However, it is possible that this estimate may be materially different from the final settlement amount. During fiscal 2008, we will also pay approximately $2.0 million related to our restructuring announced in the fourth quarter of fiscal 2007. Based on our current business plan and internal forecasts, we believe that cash generated from operations and the unused operating line of credit facility included under our senior credit facility, will be sufficient to meet our working capital and operating cash requirements for the next year. Cash from operations could be affected by various risks and uncertainties, including, but not limited to, the risks detailed in or incorporated by reference in Item 1A — “Risk Factors”.

Based on our current senior debt facility, a significant balloon payment will be required in fiscal 2012. We expect that the Company will maintain its creditworthiness over this time such that this payment can be refinanced at or prior to that date.

Working Capital

The net working capital deficit at November 30, 2007 was $15.2 million, a decrease of $46.4 million from the November 30, 2006 net working capital surplus of $31.2 million. The decrease is primarily attributable to the financing of the acquisition of InterVideo and the working capital deficiency of approximately $27.0 million which existed in InterVideo when we completed the purchase on December 12, 2006. The acquisition of InterVideo used approximately $69.3 million of working capital, consisting of $19.1 million of cash, $43.0 million operating line of credit and $7.2 million of direct transaction and restructuring costs. We have repaid the entire balance of the operating line of credit over the year ended November 30, 2007. Our working capital deficiency has improved by $27.1 million from its position at February 28, 2007, the end of our first quarter following the acquisition of InterVideo. In addition, the Company has generated and expects to continue generating, cash from operations which we expect will reduce the working capital deficiency over the next 12 months.

Current assets at November 30, 2007 were $71.5 million, a decrease of $2.4 million from the November 30, 2006 year end balance of $73.9 million. The decrease was primarily attributable to a decrease in cash and cash equivalents of $26.4 million, which is offset by an increase in trade accounts receivable of $22.9 million. The decrease in cash is attributable to the cash used in the acquisition of InterVideo, as well as cash used to pay down the operating line of credit which was used in the acquisition. The increase in the trade accounts receivable balance is primarily attributable to our increased sales over the prior period resulting from the InterVideo acquisition, recent product launches and the timing of cash receipts from some of our largest customers.

Current liabilities at November 30, 2007 were $86.7 million, an increase of $44.0 million from November 30, 2006. The increase primarily resulted from the increase in accounts payable and accrued liabilities of $39.1 million and a $3.0 million increase in deferred revenue. The increases in both balances are due to the increasing size of our operations subsequent to the acquisition of InterVideo, including an increase of $25.8 million in accrued royalties.

Cash Flows


	Year Ended November 30,
	2005			2006			2007
	(In thousands)

Cash provided by operating activities	$	40,459		$	36,225		$	26,499
Cash provided by (used in) financing activities		(38,552	)		(3,885	)		71,808
Cash provided by (used in) investing activities		7,301			(1,906	)		(124,760	)

Year ended November 30, 2007 compared to year ended November 30, 2006.

Cash flow from operations of $26.5 million in our fiscal year ended November 30, 2007 was a decrease of $9.7 million from our fiscal year ended November 30, 2006. The decrease in operating cash flows in fiscal 2007 is attributable to reducing the net working capital deficiency assumed in the acquisition of InterVideo of $27.0 million, additional integration and restructuring costs, and a significant increase in our accounts receivable balance as at November 30, 2007 due to the timing of cash receipts from OEM Customers. There were no significant non-operating cash receipts included in net income in our fiscal year ended November 30, 2007.

Cash flow from financing activities was $71.8 million in our fiscal year ended November 30, 2007, an increase of $75.7 million compared to cash used in financing activities of $3.9 million in our fiscal year ended November 30, 2006. Sources of cash in the current period are the additional term loan of $70.0 million received as part of our service agreement amendment to fund the acquisition of InterVideo, and cash generated by exercises of Corel stock options of $5.4 million. The exercise of options was minimal in fiscal 2006, as we were only a public company for a portion of the year and there was no trading window for the exercise of our stock options unless it involved a terminated employee. Financing cash outflows in fiscal 2007 were $1.7 million in financing fees and $2.1 million in repayments of long-term debt.

Cash used in investing activities was $124.8 million in our fiscal year ended November 30, 2007 compared to $1.9 million in our fiscal year ended November 30, 2006. The additional cash outlay reflects the purchase of InterVideo on December 12, 2006 and the remaining interest in Ulead on December 28, 2006 totaling $120.9 million. There were also purchases of property, plant

and equipment of $3.8 million an increase of $1.9 million from fiscal 2006. During the current fiscal year, we entered into a number of capital leases for capital assets with a value of $3.1 million. Payments on these leases will be made until fiscal 2013.

At the beginning of the third quarter of fiscal 2007, we received a notice of reassessment from the Ministry of Revenue of Ontario (the “Ministry”) for CDN$13.4 million. The Ministry’s reassessment disallows various deductions claimed on our tax returns for the 2000, 2001 and 2002 taxation years resulting in a potential disallowance of loss carryforwards and liabilities for tax and interest. In September, 2007, we received further notice that the Ministry had applied tax losses and other attributes which reduced the assessment from CDN$13.4 million to CDN$6.4 million. Subsequently, in November 2007, we received another notice of reassessment which increased the capital tax and interest for the 2000, 2001 and 2002 tax years The reassessed balance changed to CDN $7.5 million. We intend to vigorously defend against the reassessment. While management believes that they have adequately provided for potential assessments, it is possible that an adverse outcome may lead to a deficiency in its recorded income tax expense and may adversely affect its liquidity. However, we believe that the positions taken in our tax returns are correct and estimate the potential loss from the reassessment will not have a material impact on our financial condition or results of operations.

Indebtedness

On May 2, 2006, we entered into a $165.0 million senior credit facility consisting of a $90.0 million term loan with a six-year maturity and a $75.0 million revolving line of credit with a five-year term. Proceeds from this refinancing were used to repay our existing debt at that time. On December 12, 2006, this facility was amended and we completed our acquisition of InterVideo and Ulead. The acquisition was partially financed through an amendment to the credit facility for an additional $70.0 million of term loan borrowings. In addition there was a $43.0 million draw on our revolving line of credit and the remainder was financed from cash of the combined Company. During the year ended November 30, 2007 we have repaid the $43.0 million revolving line of credit. There is no balance outstanding on the line of credit as of November 30, 2007.

The credit facility agreement requires us to make fixed quarterly principal repayments of 0.25% of the original principal amount on the term loan, or $225,000 from June 2006 to December 2006 and $400,000 from January 2007 through to December 2011, with the balance of the loan due in April 2012. The term loan and revolving line of credit bear interest at floating rates tied to either the Alternate Base Rate (“ABR”), which equals the higher of (i) the federal funds rate plus 50 basis points, and (ii) the prime rate) plus 2.25% until December 2006 and ABR plus 3.00% thereafter, or Adjusted LIBOR plus 3.25% until December 2006 and Adjusted LIBOR plus 4.00% thereafter. On an annual basis, beginning the first quarter of fiscal 2008, we are required to make a cash sweep payment to fund our principal balance, based on excess cash flow as defined in the agreement. We currently estimate that no payment will be required for the fiscal 2007 cash sweep and that no payments will be required through November 30, 2008. Our first payment is expected to be made in the first quarter of fiscal 2009.

In addition to the above loans, the facility also provides us with a $25.0 million letter of credit and a $5.0 million Swingline commitment. The applicable interest rate on any borrowings is based on a leverage ratio pricing grid. As at November 30, 2007, no balance was outstanding on either the letter of credit or the Swingline commitment.

In connection with the senior credit facility, we obtained interest rate protection by entering into an interest rate swap with its principal lender for $109.5 million. The variable rate of interest is based on three-month LIBOR plus 4.00%. The fixed rates range from 8.93% to 9.49%.

The borrowings under the senior credit facility are collateralized by a pledge of all our assets, including subsidiary stock. Under the terms of the credit agreement we are subject to restrictive covenants, such as restrictions on additional borrowing, distributions and business acquisitions/divestitures. It also includes the following financial covenants:


	•	a maximum total leverage ratio, which is defined as the ratio of total debt to trailing four quarter consolidated Adjusted EBITDA, as defined in the credit agreement, to be less than specified amounts over the term of the facility as follows:


Period	Ratio

Through to November 29, 2007		3.50
November 30, 2007 through November 29, 2008		3.25
November 30, 2008 through November 29, 2009		3.00
November 30, 2009 through November 29, 2010		2.75
November 30, 2010 through November 29, 2011		2.50
November 30, 2011, thereafter		2.25


	•	a minimum fixed charge coverage ratio, which is defined as the ratio of trailing four quarter consolidated Adjusted EBITDA to fixed charges as follows:


Period	Ratio

Through to Nov 29, 2010		2.00
November 30, 2010 through November 29, 2011		2.25
November 30, 2011, thereafter		2.50

The future debt payments on long-term debt as of November 30, 2007, excluding the annual cash sweep as discussed above, are as follows:


	Principal		Interest		Total

2008	$	2,249	$	13,914	$	16,163
2009		1,596		13,772		15,368
2010		1,596		13,631		15,227
2011		1,596		13,489		15,085
2012		151,571		4,491		156,062

Total	$	158,608	$	59,297	$	217,905

As of November 30, 2007, we were in compliance with all debt covenants. We have included the following reconciliation from the cash flow provided by operations to the Adjusted EBITDA used in the covenant calculations. Adjusted EBITDA is a non-GAAP measure that we use to assist in evaluation of our liquidity and is used by our bank lenders to calculate compliance with certain financial covenants. Adjusted EBITDA was $57.3 million for our fiscal year ended November 30, 2007 compared to $55.2 million for our fiscal year ended November 30, 2006.

This measure does not have any standardized meaning prescribed by GAAP and therefore is unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance or changes in cash flows calculated in accordance with GAAP. We consider cash flow from operations to be the closest GAAP measure to Adjusted EBITDA. For our fiscal years ended November 30, 2007, 2006 and 2005, we had cash flow from operations of $26.5 million, 36.2 million and $40.5 million, respectively. The table below reconciles Adjusted EBITDA to cash flow from operations:


	Year-Ended November 30
	2005			2006			2007
	(In thousands)

Cash flow provided by operations	$	40,459		$	36,225		$	26,499
Change in operating assets and liabilities		(10,440	)		3,736			5,238
Interest expense, net		12,608			11,331			16,254
Income tax expense		6,291			4,668			3,443
Provision for bad debts		(529	)		(195	)		(252	)
Unrealized foreign exchange losses on forward contracts		(263	)		(150	)		(147	)
Deferred income taxes		(830	)		(876	)		83
Loss on interest rate swap recorded at fair value		—			(810	)		(392	)
Gain (Loss) on disposal of fixed assets		20			—			(102	)
Restructuring		834			810			1,447
Integration costs		—			358			5,220
Reorganization costs		883			117			—

Adjusted EBITDA	$	49,033		$	55,214		$	57,291

Contractual Obligations and Commitments

We have operating leases for office space. In accordance with GAAP, neither the lease liabilities nor the underlying assets are carried on the balance sheet as the terms of the leases do not meet the criteria for capitalization. Payments on these leases were approximately $6.8 million for our fiscal year ended November 30, 2007, $5.2 million for our fiscal year ended November 30, 2006 and $4.4 million for our fiscal year ended November 30, 2005.

We have debt as discussed in the indebtedness section above.

The following table outlines our contractual commitments over the next five years and thereafter at November 30, 2007:


	Less than						More than
	1 Year		2-3 Years		4-5 Years		5 Years		Total
	(In thousands)

Long-term debt	$	16,163	$	30,595		171,147	$	—	$	217,905
Capital Leases		966		1,785		549		—		3,300
Operating leases		4,420		7,882		6,362		8,349		27,013

Total	$	21,549	$	40,262	$	178,058	$	8,349	$	248,218

Since our fiscal year ended November 30, 2004 we have funded our operations from cash flow from operations. We believe that our current resources are adequate to meet our requirements for working capital and capital expenditures for at least the next years. At some point in the future we may require additional funds for either operating or strategic purposes and may seek to raise the additional funds through public or private debt or equity financings. If we ever need to seek additional financing, there is a risk that additional financing will not be available, or if available, will not be available on reasonable terms.

Off-Balance Sheet Arrangements

In certain agreements with customers and distributors, including OEMs and online services companies, we provide indemnifications for third-party intellectual property infringement claims, and many of these indemnification obligations are not subject to monetary limits. We evaluate estimated losses for such indemnifications under SFAS No. 5, Accounting for Contingencies, as interpreted by Financial Accounting Standards Board (“FASB”) Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. We consider factors such as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. To date, we have not encountered material costs as a result of such obligations and have not accrued any material liabilities related to such indemnifications in our financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States consistently applied throughout all periods. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to product returns, bad debts, inventories, intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Revenue Recognition

We recognize revenues in accordance with Statement of Position (“SOP”) 97-2, “Software Revenues Recognition,” issued by the American Institute of Certified Public Accountants, SOP 98-9, “Modification of 97-2, Software Recognition with Respect to Certain Transactions” and Staff Accounting Bulletin (“SAB”) No. 101 “Revenues Recognition in Financial Statements,” issued by the SEC.

Our application of SOP 97-2 requires judgment, including whether a software arrangement includes multiple elements, and if so, whether vendor-specific objective evidence (“VSOE”) of fair value exists for those elements. VSOE is based on the associated price when the elements are sold separately. Some customers receive certain elements of our products over a period of time. In certain cases, these elements include post-delivery telephone support and the right to receive unspecified upgrades/enhancements on a when-and-if-available basis. When maintenance is sold separately we recognize revenues ratably over the contractual time period. Changes to the elements in a software arrangement, the ability to identify VSOE for those elements and the fair value of the respective elements could materially affect the amount of earned and unearned revenues.

We record product revenues from sales of our packaged software and license fees when legal title transfers, which is generally when the product ships or, in some cases, when products are delivered to retailers. We sell some of our products on consignment to resellers and retailers and recognize revenue for these consignment transactions only when the end-user sale has occurred.

We record revenue from our OEM customers based on the evidence of products sold by our OEM customers to end customers or to the OEMs sales channel partners. Under certain agreements where post contract support (“PCS”) is granted to OEM’s for a period greater than a year, we recognize revenue ratably over the shorter of the contractual PCS period or the estimated life of the

product. Typically, our OEM customers do not have the right to claim a credit or refund for returns from an OEM’s sales channel partners or end customers back to the OEM.

At the time of contract signing, we assess whether the fee associated with the revenues transactions is fixed or determinable based on the payment terms associated with the transaction. We consider the fee to be fixed or determinable if it is due within our normal payment terms, which are generally 30 to 90 days from invoice date.

We assess the probability of collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. If it is determined that collection of a fee is not reasonably assured, management defers the fee and recognizes revenues at the time collection becomes reasonably assured, which is generally upon receipt of cash.

Allowance for Product Returns and Rebate Programs

We allow returns of our packaged software from certain distributors and resellers for various reasons such as the release of new product versions that supersede older versions in channel inventory. Consequently we establish a return provision that is netted against revenues. In computing this provision, we use estimates and judgment based on our experience. These estimates are based on channel inventory levels, current and historical return rates, channel sell in and timing of new version and product introductions, and are in accordance with Statement of Financial Accounting Standards 48 (“FAS 48”), “Revenue Recognition when Right of Return Exists”. While our past estimates have been materially accurate, actual return rates could vary materially from our estimates. An increase in the return rate could result from changes in consumer demand or other factors. Should this variance occur, revenues could fluctuate significantly. Variances between estimated return rates and actual return rates are adjusted on a quarterly basis.

While we believe our accounting practice for establishing and monitoring our product return provision is adequate and appropriate, any adverse activity or unusual circumstances could result in an increase in reserve levels in the period in which such determinations are made and have a significant affect on revenues.

Accounting for Income Taxes

We have operations in a number of countries worldwide. Our income tax liability is therefore a consolidation of the tax liabilities we expect to have in various locations. Our tax rate is affected by the profitability of our operations in all locations, tax rates and systems of the countries in which we operate our tax policies and the impact of certain tax planning strategies which we have implemented.

To determine our worldwide tax liability we make estimates of possible tax liabilities. Our tax filings, positions and strategies are subject to review under local or international tax audit and the outcomes of such reviews are uncertain. In addition, these audits generally take place years after the period in which the tax provision in question was provided and it may take a substantial amount of time before the final outcome of any audit is known. In prior years we have had to make adjustments to taxes to account for the resolution of certain tax audits. The adjustments have on occasion been significant and have been accounted for as changes in estimates. Future final tax outcomes could also differ materially from the amounts recorded in our financial statements. These differences could have a material effect on our financial position and our net income in the period such determination is made.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have had substantial tax losses over the years and only a limited history of profitability, therefore we have recorded a valuation allowance against most tax assets. The deferred tax assets include the tax effect of $202.0 million of tax loss carryforward in Canada of which a significant portion are due to expire over the next two taxation years. Given the large interest expense related to the acquisition of InterVideo, and declining sales of WordPerfect, it is unlikely that we will be able to realize the benefit of these losses. Other deferred tax assets include investment tax credits in Canada and Taiwan which can only be applied against taxable income. Given that neither entity has a history of generating taxable income, it is unlikely that we will be able to realize the benefit of these investment tax credits. Therefore, we have recorded a full valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.

We provide for withholding taxes on the undistributed earnings of our foreign subsidiaries where applicable. The ultimate tax liability related to the undistributed earnings could differ materially from the liabilities recorded in our financial statements. These differences could have a material effect on our income tax liabilities and our net income.

In April 2005, WinZip sold its intellectual property and trademarks to a non-US affiliate in a taxable transaction. We did not recognize any gain on the transfer of the property based on an analysis of the fair market value of the assets transferred that was performed at the time of the transfer, and as a result did not accrue any income tax expense on the transfer. The assessment of fair market value is based on both subjective and objective factors and if applicable tax authorities disagree with the fair market value analysis, we could be subject to significant tax liabilities, penalties and interest.

Business Combinations

We account for acquisitions of businesses and technologies in accordance with Statement of Financial Accounting Standards No 141 Business Combinations (“FAS 141”). We allocate the purchase price to tangible assets, intangible assets, and liabilities based on fair values, with the excess of purchase price being allocated to goodwill.

Historically, our acquisitions have resulted in the allocation of a portion of the purchase price to goodwill, acquired intangible assets and consequent adjustments to our deferred taxes. In order to determine the fair value of these intangible assets, we make estimates and judgments based on assumptions about the future income producing capabilities of these assets and related future expected cash flows. We also make estimates about the useful life of those acquired intangible assets. Should different conditions prevail, we could record, write-downs of intangible assets or changes in the estimate of useful life of those intangible assets, which would result in changes to amortization expense.

Acquired definite lived intangible assets are initially recorded at fair value based on the present value of these estimated net future income-producing capabilities of the software products acquired. A significant change to the initial value assigned to the definite lived intangible assets, could result if different assumptions are used in determining the present value of the estimated net future income producing capabilities of the asset.

Acquired definite lived intangible assets are amortized over the future income producing period, which we consider to be the useful life, on a straight-line basis, with the exception of customer relationships which are amortized over the pattern in which we expect to generate economic benefits from the asset.

Impairment of Goodwill

In accordance with Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets (“FAS 142”), goodwill is subject to annual impairment tests or on a more frequent basis if events or conditions indicate that goodwill may be impaired. Goodwill is tested for impairment in the fourth quarter of each fiscal year. We also test goodwill for impairment more frequently if events or circumstances warrant. Corel as a whole is considered one reporting unit. We estimate the value of our reporting unit based on market capitalization. If we determine that our carrying value exceeds our fair value, we would conduct the second step of the goodwill impairment test. The second step compares the implied fair value of the goodwill (determined as the excess fair value over the fair value assigned to our other assets and liabilities) to the carrying amount of goodwill. If the carrying amount of goodwill were to exceed the implied fair value of goodwill, an impairment loss would be recognized.

Long-lived Assets

We amortize our long-lived assets over the estimated useful life of the asset. We evaluate all of our long-lived assets, including intangible assets other than goodwill and fixed assets, periodically for impairment in accordance with Statement of Financial Accounting Standards No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets (“FAS 144”). FAS 144 requires that long-lived assets be evaluated for impairment when events or changes in facts and circumstances indicate that their carrying value may not be recoverable. Events or changes in facts or circumstances can include a strategic change in business direction, decline or discontinuance of a product line, a reduction in our customer base or a restructuring. If one of these events or circumstances indicates that the carrying value of an asset may not be recoverable or that our estimated amortization period was not appropriate, we would record impairment in long lived assets. The amount of impairment would be measured as the difference between the carrying value and the fair value of the impaired asset as calculated using a net realizable value methodology. An impairment would be recorded as an operating expense in the period of the impairment and as a reduction in the carrying value of that asset.

Stock Option Accounting

In accordance with Statement of Financial Accounting Standards No. 123(R) Share BasedPayment (“FAS 123(R)”) we estimate the fair value of our options for financial accounting purposes using the Black-Scholes model, which requires a number of subjective assumptions, including the expected life of the option, risk-free interest rate, dividend rate, forfeiture rate, future volatility of the price of our common shares and vesting period. The use of subjective assumptions could materially affect the fair value estimate. Prior to our initial public offering, there was no active market for our common shares. Since we have been public for less than the vesting period of our options, we do not consider the volatility of our share price to be representative of the estimated future volatility when computing the fair value of options granted. Accordingly, until such time that a representative volatility can be determined based on our share price, we will use a blended rate of our own share price volatility and the U.S. Dow Jones Software and Computer Services Index. We estimate the risk-free interest rate based on Government of Canada benchmark bonds with an average yield of five to ten years. We base our estimate of the expected life of the option based on comparable industry data and the period for which our options can be exercised. We assess our forfeiture rate through an analysis of the turnover of our employees since we commenced issuing options in December 2003. The fair values of the options issued are being recognized as compensation expense over the applicable vesting period of four years on a straight line basis except for performance based options which we recognize over the expected service period based on management’s best estimate of the expected achievement.

Based on equity awards outstanding as of November 30, 2007, we had unrecognized stock-based compensation totaling $14.6 million, and we expect to record approximately $7.0 million in stock-based compensation in our fiscal year ending November 30, 2008. To the extent we continue to grant equity awards in the future, the amounts of stock-based compensation recorded in future periods may be greater than these expectations. Stock-based compensation expense is reported in our Consolidated Statements of Operations, either as a cost of revenues, or as an operating expense with which the award recipients are associated.

Prior to our initial public offering, we did not obtain contemporaneous valuations from an unrelated valuation specialist. Instead, a retrospective valuation was performed by management, with input from Vector Capital. Contemporaneous valuations were not obtained because we were a private company and units were granted on a frequent basis. Therefore, it was impractical to obtain a valuation at each grant date. We believe that management, as a result of their experience and Vector Capital as a private equity firm, have relevant experience valuing companies. Where there was more than one class of shares outstanding, the enterprise value was equally allocated to the “as-converted” common shares to arrive at a per share fair value.

Prior to our initial public offering, determining the fair value of our common shares required making complex and subjective judgments. Management used the income approach to estimate the value of the enterprise. The income approach involves applying appropriate discount rates to estimated cash flows that are based on forecasts of revenues and costs. The enterprise value is then allocated to preferred and common shares using the probability-weighted expected return method. Under this method, management considered the specific rights and preferences of each share class, and the likelihood of future outcomes. Had management considered a different allocation method, the allocations between preferred and common shares would have been different.

In arriving at the fair value of our common shares, we made a number of estimates including an organic revenue growth rate and a marketability discount. We used an organic revenue growth rate that was based upon our financial results available at the valuation date and the expected industry growth rate. In addition, we used a marketability discount of 40% to reflect the fact that our common shares were not trading in a public market. This rate was based upon U.S. and Canadian case law and numerous independent pre-IPO “lack of marketability” studies.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2006, the Financial Accounting Standards Board (“FASB”) released FIN 48, Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement 109 and is effective for annual periods beginning on or after December 15, 2006, which is the year ending November 30, 2008 for the Company. We are currently completing a final assessment of income tax uncertainties across all jurisdictions. At this time, it is unknown as to whether any material retroactive adjustments will be recorded as part of the transition to FIN 48.

In September 2006, the Financial Accounting Standards Board released FASB 157, “Fair Value Measurements” and is effective for fiscal years beginning after November 15, 2007, which is the year ending November 30, 2008 for the Company. FASB 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. In November 2007, FASB agreed to a one-year deferral of the effective date for nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. We are currently assessing the impact the adoption of this pronouncement will have on the financial statements.

In February 2007, the Financial Accounting Standards Board released FASB 159, “The Fair Value Option for Financial Assets and Financial Liabilities” and is effective for fiscal years beginning after November 15, 2007, which is the year ending November 30, 2008 for the Company. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. We do not expect to use the fair value option for any financial assets and financial liabilities that are not currently recorded at fair value.

In December 2007, the Financial Accounting Standards Board released FASB 141-R, Business Combinations. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, which is business combinations in the year ending November 30, 2010 for the Company. The objective of this Statement is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects.

In December 2007, the Financial Accounting Standards Board released FASB 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, which for the Company is the year ending November 30, 2010 and the interim periods within that fiscal year. The objective of this Statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. This standard currently does not impact us as we have full controlling interest of all of our subsidiaries.

QUARTERLY FINANCIAL DATA


	Quarter Ended
2006	Feb. 28			May. 31			Aug. 30			Nov. 30			Total Year
	(Dollars in thousands,
	except number of shares and per share amounts)

Revenue:
Product	$	39,498		$	39,151		$	36,362		$	42,308		$	157,319
Maintenance and service		4,789			5,059			4,892			5,132			19,872

Total revenue		44,287			44,210			41,254			47,440			177,191

Cost of revenues:
Cost of products		5,005			5,049			5,338			5,947			21,339
Cost of maintenance and services		314			276			287			265			1,142
Amortization of intangible assets		6,627			2,648			2,712			2,379			14,366

Total cost of revenues		11,946			7,973			8,337			8,591			36,847

Gross margin		32,341			36,237			32,917			38,849			140,344

Operating expenses:
Sales and marketing		14,504			14,023			11,810			14,514			54,851
Research and development		6,181			6,640			6,379			6,683			25,883
General and administration		5,395			6,193			5,833			6,864			24,285
InterVideo integration costs		—			—			—			358			358
Restructuring		560			251			—			(1	)		810

Total operating expenses		26,640			27,107			24,022			28,418			106,187

Income from operations		5,701			9,130			8,895			10,431			34,157
Other expenses (income):
Loss on debt retirement		—			8,275			17			—			8,292
Interest expense, net		3,863			3,207			2,334			1,927			11,331
Amortization of deferred financing fees		444			357			188			191			1,180
Other non-operating (income) expense		(120	)		(528	)		377			(294	)		(565	)

Income (loss) before taxes		1,514			(2,181	)		5,979			8,607			13,919
Income tax expense		3,152			1,791			485			(760	)		4,668

Net (loss)	$	(1,638	)	$	(3,972	)	$	5,494		$	9,367		$	9,251

Other comprehensive income (loss):
Unrealized (loss) gain on securities		(48	)		(23	)		(36	)		(24	)		(131	)

Total comprehensive loss	$	(1,686	)	$	(3,995	)	$	5,458		$	9,343		$	9,120

Net income (loss) per share:
Basic
WinZip common	$	105.85			N/A			N/A			N/A			N/A
Corel common	$	(0.25	)	$	(0.19	)	$	0.22		$	0.38		$	0.41
Fully diluted
WinZip common	$	92.04			N/A			N/A			N/A			N/A
Corel common	$	(0.25	)	$	(0.19	)	$	0.22		$	0.37		$	0.40


	Quarter Ended
2007	Feb. 28			May. 31			Aug. 30			Nov. 30			Total Year
	(Dollars in thousands,
	except number of shares and per share amounts)

Revenue:
Product	$	47,304		$	59,553		$	55,018		$	66,399		$	228,274
Maintenance and service		5,330			5,479			5,352			6,045			22,206

Total revenue		52,634			65,032			60,370			72,444			250,480

Cost of revenues:
Cost of products		8,487			14,010			12,143			15,135			49,775
Cost of maintenance and services		198			221			244			133			796
Amortization of intangible assets		5,757			6,373			6,925			7,064			26,119

Total cost of revenues		14,442			20,604			19,312			22,332			76,690

Gross margin		38,192			44,428			41,058			50,112			173,790

Operating expenses:
Sales and marketing		17,104			17,492			17,231			18,760			70,587
Research and development		11,344			10,697			11,282			11,389			44,712
General and administration		9,095			9,187			8,803			9,998			37,083
Acquired in-process research and development		7,831			—			—			—			7,831
InterVideo integration expense		785			860			2,220			1,355			5,220
Restructuring		—			—			—			1,447			1,447

Total operating expenses		46,159			38,236			39,536			42,949			166,880

Income from operations		(7,967	)		6,192			1,522			7,163			6,910
Other expenses (income):
Interest expense, net		3,921			3,718			4,195			4,420			16,254
Amortization of deferred financing fees		265			269			270			270			1,074
Other non-operating (income) expense		(632	)		479			(497	)		(149	)		(799	)

Income (loss) before taxes		(11,521	)		1,726			(2,446	)		2,622			(9,619	)
Income tax (recovery) provision		355			(587	)		4,314			(639	)		3,443

Net income (loss)	$	(11,876	)	$	2,313		$	(6,760	)	$	3,261		$	(13,062	)

Other comprehensive (loss) income		—			—			56			(731	)		(675	)

Total comprehensive (loss) income	$	(11,876	)	$	2,313		$	(6,704	)	$	2,530		$	(13,737	)

Net income (loss) per share:
Basic	$	(0.48	)	$	0.09		$	(0.27	)	$	0.13		$	(0.52	)
Fully Diluted	$	(0.48	)	$	0.09		$	(0.27	)	$	0.13		$	(0.52	)


ITEM 9A.	*CONTROLS AND PROCEDURES*

Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this amendment No. 1 to our annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of our internal control over financial reporting as of November 30, 2007. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on our assessment using those criteria, we concluded that our internal control over financial reporting was effective as of November 30, 2007.

The effectiveness of the Company’s internal control over financial reporting as of November 30, 2007, has been audited by PricewaterhouseCoopers LLP, our independent auditors, as stated in their report which appears in Item 8 of this amendment No. 1 to our annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting. We acquired InterVideo on December 12, 2006 and contemporaneously with the closing of the acquisition commenced the integration of the InterVideo business with ours. This included implementation of a number internal controls related to InterVideo operations and migrating InterVideo processes to our processes. More specifically the following controls were implemented:


	•	Migration from InterVideo financial reporting system to our financial reporting system

	•	Additional review and sign-offs of subsidiary workbooks

	•	Hired additional staff to ensure adequate oversight of financial functions

During the year we also implemented a number of internal controls around our tax provision preparation processes. This included the hiring of additional staff to ensure adequate segregation between preparation and review of our tax provisions.

There were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal year 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


ITEM 11.	*EXECUTIVE COMPENSATION*

Pursuant to Item 402 of Regulation S-K, we have provided in this Item 11 the information required by Items 6.B. and 6.E.2 of Form 20-F and pursuant to disclosure rules in Canada.

Summary Compensation Table

The following table provides information about the compensation earned during the fiscal years ended November 30, 2006 and 2007 by our Chief Executive Officer, our Chief Financial Officer and our three next most highly compensated executive officers (the “Named Executive Officers”). For those individuals who receive compensation in a currency different then the United States dollar, salary is converted based on the average exchange rate during the year, and bonus is converted based on the exchange rate as at November 30, which best reflects the rates at which these amounts were paid.


									Long Term Compensation
									Securities		Units
			Annual Compensation(1)						Underlying		Subject to
Name And Principal							Other Annual		Options		Resale		LTIP		All Other
Position	Fiscal Year		Salary		Bonus		Compensation		Granted		Restrictions		Payments		Compensation

David Dobson(2)(3)		2007	$	385,566	$	323,700	$	56,051		200,000		—		—		—
Chief Executive Officer		2006		376,820		369,284	$	679,676		—		—		—		—
		2005		140,754		203,500		—		413,971		—		—		—
Douglas McCollam		2007		232,269		178,800		—		30,000		—		—		—
Chief Financial Officer		2006		227,000		245,160		—		—		—		—		—
		2005		203,500		183,150		—		8,540		—		—		—
Randall Eisenbach		2007		300,000		169,500		—		20,000		—		—		—
Executive Vice President, Operations		2006		260,000		181,400		—		—		—		—		—
		2005		260,000		97,500		—		61,910		—		—		—
Amanda Bedborough(4)		2007		344,972		367,826		—		40,000		—		—		—
Executive VP, International Operations		2006		305,688		203,254		—		—		—		—		—
		2005		398,805		85,937		—		44,831		—		—		104,772
Patrick Morley		2007		300,000		240,000		—		50,000		—		—		—
Former Chief Operating Officer		2006		300,000		175,500		—		—		—		—		—
		2005		52,308		50,000		—		85,394		—		—		—


(1)		Excludes perquisites and other benefits because such compensation did not exceed the lesser of C$50,000 and 10% of the total annual salary and bonus for any of the Named Executive Officers.

(2)		Mr. Dobson received other annual compensation of $56,051 relating to housing benefits of $35,482, vehicle allowance of $7,519, and travelling allowances of $13,050 for travel between his primary residence and our corporate head office during the year.

(3)		Mr. Dobson received other annual compensation of $252,324 relating to loans forgiven in our fiscal year ended November 30, 2006, and $4,844 for retirement plan payments. In addition, during fiscal 2006, we repurchased options from Mr. Dobson that were previously granted to him pursuant to the terms of his employment agreement, for an aggregate amount of $427,352, of which half was applied as a repayment against a loan and half to help defray additional expenses incurred in connection with his relocation to Canada. See “Item 13 — Certain Relationships and Related Transactions.”

(4)		Ms. Bedborough’s salary for our fiscal year ended November 30, 2005 includes $19,532 of retirement plan payments and $85,240 of insurance premiums

Option Grants During the Fiscal Year Ended November 30, 2007 to Named Executive Officers

The following table sets forth information regarding options for the purchase of shares granted during the fiscal year ended November 30, 2007 to the Named Executive Officers.

% of Total

Market Value

Number of Shares

Options Granted

Exercise Price

of Securities

Underlying Options

to Employees

Per Share

Underlying

Expiration

Name

Granted(1)

in Fiscal Year(2)

($/Security)

Options(3)

Date

David Dobson

200,000

9.0

13.73

Nil

July 17, 2017

Douglas McCollam

30,000

1.4

13.03

Nil

April 24, 2017

Randall Eisenbach

30,000

1.4

0.00

334,200

Jan 3, 2017

Amanda Bedborough

40,000

1.8

6.52

222,800

April 24, 2017

Patrick Morley

50,000

2.3

13.03

Nil

Dec 1, 2007


(1)		Some Named Executive Officers received grants of restricted stock units which are included in the totals above. Randall Eisenbach and Amanda Bedborough received restricted stock units in the amounts of 30,000 and 20,000 restricted stock units, respectively. The options granted to Amanda Bedborough vest as to 25% on the first anniversary of the date of grant and as to an additional 6.25% at the completion of each three-month period thereafter. The options granted to Randall Eisenbach vest in


		increments of 16.67% at the completion of each three-month period beginning September 1, 2007 and ending December 1, 2008, but vesting is subject to acceleration, in part, in the event that certain performance targets are achieved.

(2)		The total amount of options granted of 2,210,765 units, includes 150,000 restricted stock units.

(3)		Based on the difference between the exercise price per share and the market price per share as at November 30, 2007 of $11.14.

Aggregate Options Exercised During the Fiscal Year Ended November 30, 2007, Most Recently Completed Financial Year and Option Values at November 30, 2007 for Named Executive Officers

The following table shows the number of options to purchase common shares exercised by the Named Executive Officers during our fiscal year ended November 30, 2007. The value of unexercised in-the-money options of those persons has been based on the closing price of the common shares on the Nasdaq Global Market on November 30, 2007.


									Value of Unexercised
					Unexercised Options at				In-the-Money Options as at
	Shares Acquired		Aggregate Value		November 30, 2007				November 30, 2007(1)
Name	on Exercise		Realized		Exercisable		Unexercisable		Exercisable		Unexercisable

David Dobson		174,379	$	1,981,262		157,365		259,531	$	1,568,929	$	593,534
Douglas McCollam		Nil		Nil		78,684		39,234		784,479		92,063
Randall Eisenbach		51,503		610,097		23,143		30,073		230,736		326,153
Amanda Bedborough		Nil		Nil		72,606		51,915		723,882		341,593
Patrick Morley		42,698		486,323		Nil		Nil		Nil		Nil


(1)		Based on the difference between the exercise price per share and the market price per share as at November 30, 2007 of $11.14.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

Compensation of Directors and Executive Officers

For the fiscal year ended November 30, 2007, the compensation paid to individuals, other than members of our management, for serving as a director was $25,000 per year. The chairperson of the Audit Committee was paid an additional $15,000 for our fiscal year ended November 30, 2007. The chairpersons of the Board’s other standing committees did not receive any additional compensation for acting as chairperson.

Each new non-employee director that joins our Board will receive options to purchase 25,000 common shares and thereafter shall receive an additional 15,000 options for each successive year of service on the Board. The exercise price of all such options shall be equal to the fair market value of those shares on the date of the grant. These options vest as to 25% on the first anniversary of the date of grant and as to an additional 25% each year thereafter in quarterly installments. Upon the occurrence of a significant event (such as a change in control), as defined under the 2006 Equity Incentive Plan, all options or other equity awards held by members of our Board under the plan shall immediately vest.

We also reimburse directors and officers, respectively, for reasonable out-of-pocket expenses incurred in performing their duties. Directors and officers of our subsidiaries do not receive any additional remuneration for acting in that capacity but will be reimbursed for reasonable out-of-pocket expenses incurred in performing their duties.

Material Terms and Conditions of Employment Agreements

We have employment agreements with certain of the Named Executive Officers. The agreements contain, among other things, confidentiality, non-solicitation and non-competition covenants that will apply during the term of each officer’s employment and for a specific period of time after termination of their employment.

David Dobson. In June 2005, we entered into an employment agreement with David Dobson, our Chief Executive Officer and a member of our Board. He currently receives an annual base salary of C$415,000 ($414,710 based on the exchange rate in effect as of the close of business on November 30, 2007) with an annual target bonus of 100% of the base salary based on meeting financial targets set by our board or compensation committee. If we terminate his employment without cause, we are obligated to continue paying his salary for 18 months, pay to him his annual target bonus of 100% of his base salary prorated for the portion of the year prior to the termination date and continue to make contributions in respect of Mr. Dobson to our executive group benefit plan for 18 months. In the event there is a change of control, and we terminate Mr. Dobson’s employment for any reason other than for cause or he resigns for any reason within six months of the change of control, his share-based awards become fully exercisable on the earlier of the date of termination or the six-month anniversary of the change of control. We have made loans to Mr. Dobson which have been fully repaid as of November 30, 2007. See “Item 13 — Certain Relationships and Related Party Transactions — Other Related Party Transactions.”

Douglas McCollam. In December 2003, we entered into an employment agreement with Douglas McCollam, our Chief Financial Officer and a former member of our Board. He currently receives an annual base salary of C$250,000 ($249,825 based on the exchange rate in effect as of the close of business on November 30, 2007), with an annual target bonus of 100% of the base salary based on meeting financial targets set by our Board or compensation committee. If we terminate his employment without cause, we are obligated to pay to him a lump sum of one month of his then current base salary per year of service, up to a maximum of three months.

Randall Eisenbach. In May 2005, we entered into an employment agreement with Randall Eisenbach, our EVP, Operations. He currently receives an annual base salary of $300,000, with an annual target bonus of $200,000 based on meeting targets set by our Board or compensation committee each year. If we terminate his employment without cause or upon his death or disability while employed by us, we are obligated to pay to him a lump sum of six months of his then current base salary, maintain his benefits and pay his accommodation and travel expenses for six months.

Amanda Bedborough. In January 2003, we entered into an employment agreement with Amanda Bedborough, our Executive Vice President, International Operations. She currently receives an annual base salary of £169,104, with an annual target bonus of £101,296 ($344,972 and $206,644, respectively, based on the exchange rate in effect as of the close of business on November 30, 2007) based on meeting targets set by our Board or compensation committee each year. In addition, she may be eligible for a target bonus at the sole discretion of our Board. If we terminate her employment without cause, we are obligated to pay to her up to 18 months of her base salary and maintain her benefits for up to 18 months. In the event there is a change of control, and we terminate Ms. Bedborough’s employment during the period beginning one month before and ending six months after the change of control, she is entitled to receive 18 months written notice. In lieu of notice, we may elect to pay her up to 18 months of her base salary and maintain her benefits for up to 18 months.

Patrick Morley. Mr. Morley voluntarily left the Company on December 1, 2007. No termination benefits were provided on his departure and no further benefits will be paid subsequent to November 30, 2007.

Composition of the Compensation Committee

The compensation committee assists the Board in determining and administering the compensation for the executive officers of Corel and our subsidiaries. During our fiscal year ended November 30, 2007, the compensation committee was comprised of three directors: Steven Cohen, Amish Mehta and Alexander Slusky (Chair).

Other than Amish Mehta, none of the members of the compensation committee is an officer, employee or former officer or employee of us or any of our affiliates. No member of the compensation committee is eligible to participate in our executive compensation program.

Report on Executive Compensation

The compensation committee’s executive compensation philosophy is guided by its objective to obtain and retain executives critical to our success and the enhancement of shareholder value. The Company entered into employment agreements with its executive officers prior to the Company’s initial public offering in May 2006, prior to which the Company did not have a compensation committee. Concurrent with the Company’s initial public offering, the compensation committee was established to:


	•	oversee the Company’s compensation and benefits policies generally;

	•	oversee and set compensation for the Company’s executive officers;

	•	evaluate executive officer performance and review the Company’s management succession plan; and

	•	review compensation related disclosure to be filed or submitted by the Company.

A copy of our compensation committee charter is available on our website at http://investor.corel.com/documents.cfm or by contacting us directly at 1600 Carling Avenue, Ottawa, Ontario, Canada, K1Z 8R7, (613) 728-0826.

Following the Company’s initial public offering, compensation matters relating to our executive officers are approved by our Board upon the recommendation of the compensation committee. The compensation committee requested that our human resources management engage outside consultation on executive compensation.

The compensation committee’s executive compensation philosophy is intended to provide a competitive level of compensation and to reward individual performance. Our executive compensation program is composed of base salary as well as short-term incentives and equity incentive plan rewards (the “incentive plans”). The compensation of our executives is primarily based on the achievement by us of financial targets and on the achievement by the individual of personal goals and objectives. Our equity incentive plans are designed to encourage ownership of our common shares and our long-term growth. The short-term incentives are designed to achieve growth and efficiencies required in the short-term.

Each Named Executive Officer’s performance and related salary level, annual bonus target and level of participation in the incentive plan is reviewed and approved annually by the compensation committee in conjunction with appropriate senior management.

For the fiscal year ended November 30, 2007, the compensation committee recommended awards under the short-term incentives equal to approximately 84% of each Named Executive Officer’s base salary. These awards were based on the achievement of certain revenue and profit targets and personal goals and objectives. Since the completion of our initial public offering, we did not make any new grants of options to executive officers of the Company.

The chief executive officer’s compensation was determined pursuant to the terms of an employment agreement with him prior to the Company’s initial public offering. At that time, the Company made a determination as to appropriate compensation of its chief executive officer, as compared with other comparable companies. The chief executive officer’s compensation for the fiscal year ended November 30, 2007 is primarily based upon a base salary plus a bonus based upon the achievement of corporate revenue and earnings targets fully described in the employment agreement between the Company and him.

No additional benefits or perquisites are provided to members of management that are not available to employees of Corel generally. These currently include vision care, health, long-term disability, dental, group life insurance and a fitness/technology/wellness benefit.

The compensation committee intends to continually evaluate the compensation of its executive officers based on the compensation objectives as fully described in the compensation committee charter.

Report Presented by:

Steven Cohen

Amish Mehta

Alexander Slusky (Chair)

Performance Graphs

As of November 30, 2007, the following graphs show the total cumulative return on a $100 investment on May 2, 2006 in common shares of Corel Corporation with the cumulative total return of the S&P/TSX Composite Index, the Nasdaq Composite Index and the Nasdaq 100 Technology Sector Index, for the period commencing on May 2, 2006 and ending on November 30, 2007, assuming reinvestment of all dividends.



Candian Dollar		US Dollar

Indebtedness of Directors, Officers and Others

Other than as described in “Item 13 — Certain Relationships and Related Transactions,” our directors, senior officers, and their associates were not indebted to us or to any of our subsidiaries at any time during our fiscal year ended November 30, 2007.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized on January 7, 2009.

COREL CORPORATION


	By:	/s/ KRIS HAGERMAN

Kris Hagerman

Interim Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated and on January 7, 2009.


SIGNATURE				TITLES


/s/ KRIS HAGERMAN Kris Hagerman				Interim Chief Executive Officer (principal executive officer)

/s/ DOUGLAS McCOLLAM Douglas McCollam				Chief Financial Officer (principal financial and accounting officer)

/s/ DANIEL T. CIPORIN Daniel T. Ciporin				Director

/s/ STEVEN COHEN Steven Cohen				Director

/s/ J. IAN GIFFEN J. Ian Giffen				Director

/s/ AMISH MEHTA Amish Mehta				Director (authorized representative in the United States)

/s/ ALEXANDER SLUSKY Alexander Slusky				Director