8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 10, 2009

COREL CORPORATION

(Exact name of Registrant as specified in its Charter)

CANADA	000-20562	98-0407194
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1600 Carling Avenue
Ottawa, Ontario
Canada
K1Z 8R7
(613) 728-0826
(Address of principal executive offices)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EX-99.1

Item 2.02 Results of Operations and Financial Condition.

     Today Corel Corporation issued a press release disclosing financial results for the fiscal quarter ended May 31, 2009. The text of the release is furnished herewith as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

     (d) The following exhibits are furnished with this Form 8-K:

          99.1     Press Release dated July 10, 2009.

2

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: July 10, 2009

COREL CORPORATION
By:	/s/ DARREN SUKONICK
	Name:	Darren Sukonick
	Title:	Interim General Counsel

3

EXHIBIT INDEX

Exhibit	Description
99.1	Press release dated July 10, 2009.

4

EX-99.1

For Immediate Release

Corel Corporation Reports Second Quarter 2009 Financial Results

OTTAWA, July 10, 2009 — Corel Corporation (NASDAQ:CREL) (TSX:CRE) today reported financial results for its second quarter ended May 31, 2009. Revenues in the second quarter of fiscal 2009 were $50.4 million, compared to $67.0 million in the second quarter of fiscal 2008. GAAP net loss in the second quarter of fiscal 2009 was $4.1 million or $0.16 per basic and diluted share, compared to GAAP net income of $930,000, or $0.04 per basic and diluted share, in the second quarter of fiscal 2008.

Non-GAAP adjusted net income for the second quarter of fiscal 2009 was $5.6 million, or $0.22 per diluted share, compared to non-GAAP adjusted net income for the second quarter of fiscal 2008 of $9.5 million, or $0.36 per diluted share. Non-GAAP adjusted EBITDA in the second quarter of 2009 was $10.1 million, compared to $14.9 million in the second quarter of 2008.

A reconciliation of GAAP net income to non-GAAP adjusted net income and non-GAAP adjusted EBITDA is provided in the notes to the financial information included in this press release.

“While Corel continued to feel the effects of the economic climate, we took proactive steps to reduce expenses and were pleased by the industry recognition we received for our innovative efforts to improve user experience,” said Kris Hagerman, Interim CEO, Corel. “We continue to invest in the product strategies, distribution channels and regions that will further strengthen our competitive position and support our long term growth as the economy improves.”

Corel will host a conference call to discuss its financial results at 8:00 a.m. Eastern Time today. To access the conference call, please dial (877) 795-3613 or (719) 325-4799 approximately 5 minutes prior to the 8:00 AM ET start time. A live webcast will also be available through Corel’s Investor Relations website at http://investor.corel.com/events.cfm. Following the call, an audio replay will be available beginning at 11:00 AM ET on July 10, 2009 from Corel’s Investor Relations website or by calling (888) 203-1112 or (719) 457-0820, Passcode: 4081313.

Financial Statements Governance Practice:

The Audit Committee of Corel’s Board of Directors reviewed the earnings portion of this press release as well as the related financial statements and MD&A, and recommended they be approved by the Board of Directors. Following review by the full Board, the financial statements,

MD&A and the earnings portion of this press release were approved.

Forward Looking Statements:

This news release includes forward-looking statements which are based on estimates and assumptions made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances including but not limited to general economic conditions, product pricing levels and competitive intensity, and new product introductions.

Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results, performance or achievements to differ materially from any future results, performance, or achievements discussed or implied by such forward-looking statements. Such risks include the recent disruption in the overall economy and financial and credit markets, which may adversely impact our operations and financial results as well as our ability to obtain financing required to grow our business and make acquisitions. We may experience fluctuations in our operating results depending on the timing and success of product releases. Our core products have been marketed for many years and the packaged software market in North America and Europe is relatively mature and characterized by modest growth. Accordingly, we must successfully complete acquisitions, penetrate new markets, establish relationships with new original equipment manufacturer customers, or increase penetration of our installed base to achieve revenue growth. The long-term trend in our business reflects growth in revenues from acquisitions, which give rise to their own risks and challenges, rather than from our existing products, and that recent growth may not be representative of future growth. We face competitive threats from well established software companies that have significantly greater market share and resources than us and from online services companies that are increasingly seeking to provide software products at little or no incremental cost to their customers to expand their Internet presence and build consumer loyalty. We rely on a small number of key strategic relationships for a significant percentage of our revenue and these relationships can be modified or terminated at any time. In addition, we face potential claims from third parties who may hold patent and other intellectual property rights which purport to cover various aspects of our products and from certain of our customers who may be entitled to indemnification from us in respect of potential claims they may receive from third parties related to their use or distribution of our products. Any resulting litigation costs, settlement costs or royalty requirements could affect our profitability.

These and other risks, uncertainties and other important factors are described in Corel’s Annual Report dated February 9, 2009, filed with the Securities and Exchange Commission (SEC) and the Canadian Securities Administrators (CSA) under the caption “Risk Factors” and elsewhere. A copy of the Corel Annual Report and such other filings can be obtained on Corel’s website, on the SEC’s website at http://www.sec.gov./ or on the CSA’s website at http://www.sedar.com. These factors should be considered carefully, and readers should not place undue reliance on our forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any intention or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based, except as required by law.

Financial Presentation and Use of Non-GAAP Measures:

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP, which differ in certain material respects from Canadian generally accepted accounting principles. In addition, our financial statements and information in this release are presented in U.S. Dollars, unless otherwise indicated. This news release includes certain non-GAAP financial measures, such as adjusted net income and adjusted EBITDA. We use these non-GAAP financial measures to confirm our compliance with covenants contained in our debt facilities, as supplemental indicators of our operating performance, to assist in evaluation of our ongoing operations and liquidity and to determine appropriate levels of indebtedness. We believe each of these non-GAAP financial measures is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. These measures do not have any standardized meanings prescribed by GAAP and therefore are not comparable to the calculation of similar measures used by other companies. These non-GAAP financial measures should not be considered in isolation, and should not be viewed as alternatives to measures of financial performance or changes in cash flows calculated in accordance with GAAP. We believe it is useful for ourselves and investors to review, as applicable, both GAAP information, which includes interest, income taxes, depreciation, amortization, provision for bad debts, effects of disposal or fixed assets and investments, restructuring, integration and reorganization costs, and certain other gains, losses and expenses, and the non-GAAP measures, which exclude certain of these amounts, in order to assess the performance of our continuing operations and for planning and forecasting in future periods. Investors are encouraged to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to the closest GAAP measures as set out in the notes to the financial statements attached to this news release.

About Corel

Corel is one of the world’s top software companies with more than 100 million active users in over 75 countries. We develop software that helps people express their ideas and share their stories in more exciting, creative and persuasive ways. Through the years, we’ve built a reputation for delivering innovative, trusted products that are easy to learn and use, helping people achieve new levels of productivity. The industry has responded with hundreds of awards for software innovation, design and value.

Our award-winning product portfolio includes some of the world’s most widely recognized and popular software brands, including CorelDRAW® Graphics Suite, Corel® Painter™, Corel DESIGNER® Technical Suite, Corel® Paint Shop Pro® Photo, VideoStudio®, WinDVD®, Corel® WordPerfect® Office and WinZip®. Our global headquarters are in Ottawa, Canada, with major offices in the United States, United Kingdom, Germany, China, Taiwan and Japan.

^© 2009 Corel Corporation. All rights reserved. Corel, CorelDRAW, Corel DESIGNER, Painter, Paint Shop Pro, VideoStudio, WinDVD, WinZip, WordPerfect, and the Corel logo are trademarks or registered trademarks of Corel Corporation and/or its subsidiaries. All other product names and any registered and unregistered trademarks mentioned are used for identification purposes only and remain the exclusive property of their respective owners.

CRELF

Press Contact:

Catherine Hughes

613-728-0826 x1659

catherine.hughes@corel.com

Investor Relations Contact:

Doug McCollam
613-728-0826 x 1953

doug.mccollam@corel.com

Corel Corporation
Quarterly Financial results
For the quarter ended May 31, 2009
(in thousands, except per share data; unaudited)

	Three Months ended						Six Months ended
	May 31,			May 31,			May 31,			May 31,
Consolidated Condensed Statement of Operations	2009			2008			2009			2008
Revenues — Product	$	44,280		$	60,249		$	94,355		$	119,611
Revenues — Maintenance and services		6,088			6,795			12,227			12,977
Total revenues		50,368			67,044			106,582			132,588
Cost of revenues — Product		14,366			14,008			29,897			29,235
Cost of revenues — Maintenance and services		110			132			210			299
Amortization of intangible assets		6,154			6,418			12,319			12,832
Total cost of revenues		20,630			20,558			42,426			42,366
Gross margin		29,738			46,486			64,156			90,222
Operating expenses
Sales and marketing		14,820			20,748			30,042			40,432
Research and development		9,180			11,716			18,396			23,807
General and administration		5,945			8,640			12,424			17,451
Restructuring		1,404			447			1,613			625
Total operating expenses		31,349			41,551			62,475			82,315
Income (loss) from operations		(1,611	)		4,935			1,681			7,907
Other expenses (income)
Interest expense — net		2,969			2,933			6,023			7,221
Amortization of deferred financing fees		271			270			542			540
Expenses associated with evaluation of strategic alternatives		—			705			—			705
Other non-operating (income) expense		(1,774	)		102			(898	)		(1,362	)
Income (loss) before income taxes		(3,077	)		925			(3,986	)		803
Income tax provision (recovery)		1,048			(5	)		1,675			(97	)
Net income (loss)	$	(4,125	)	$	930		$	(5,661	)	$	900
Net loss per share:
Basic	$	(0.16	)	$	0.04		$	(0.22	)	$	0.04
Fully diluted	$	(0.16	)	$	0.04		$	(0.22	)	$	0.03
Weighted average number of shares:
Basic		25,878			25,543			25,860			25,503
Fully diluted		25,878			26,238			25,860			26,165

Consolidated Condensed Balance Sheet

	May 31,			November 30,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	32,127		$	50,260
Restricted cash		159			159
Accounts receivable
Trade, net of allowance for doubtful accounts		29,033			33,241
Other		1,889			2,932
Inventory		1,138			1,562
Income taxes recoverable		719			785
Deferred tax assets		—			3,138
Prepaids and other current assets		3,530			2,456
Total current assets		68,595			94,533
Capital assets		9,475			10,549
Intangible assets		54,520			67,029
Goodwill		80,993			82,343
Deferred financing and other long-term assets		4,407			4,942
Total assets	$	217,990		$	259,396
Liabilities and shareholders’ deficit
Current liabilities:
Accounts payable and accrued liabilities	$	53,470		$	64,376
Due to related parties		334			341
Income taxes payable		1,404			1,226
Deferred revenue		11,461			15,190
Current portion of long-term debt		14,385			19,095
Current portion of obligations under capital leases		732			621
Total current liabilities		81,786			100,849
Deferred revenue		1,987			2,404
Income taxes payable		13,232			12,960
Deferred income taxes		8,431			13,059
Long-term debt		123,729			137,264
Accrued pension benefit obligation		243			261
Obligations under capital leases		701			962
Total liabilities		230,109			267,759
Shareholders’ deficit
Share capital		44,718			43,992
Additional paid-in capital		10,867			9,198
Accumulated other comprehensive loss		(4,641	)		(4,151	)
Deficit		(63,063	)		(57,402	)
Total shareholders’ deficit		(12,119	)		(8,363	)
Total liabilities and shareholders’ deficit	$	217,990		$	259,396

Consolidated Condensed Statement of Cash Flows

	Three Months ended						Six Months ended
	May 31,			May 31,			May 31,			May 31,
	2009			2008			2009			2008
Cash flow from operating activities
Net income (loss)	$	(4,125	)	$	930		$	(5,661	)	$	900
Depreciation and amortization		1,119			1,233			2,299			2,395
Amortization of deferred financing fees		271			270			542			540
Amortization of intangible assets		6,154			6,418			12,319			12,832
Stock-based compensation		1,307			1,977			2,360			3,115
Provision for (recovery of) bad debts		80			129			(29	)		233
Deferred income taxes		605			(1,233	)		(140	)		(2,467	)
Loss on disposal of fixed assets		17			6			18			48
Loss (gain) on interest rate swap recorded at fair value		(122	)		(512	)		(219	)		243
Unrealized gain on forward foreign exchange contracts		(45	)		—			(45	)		—
Gain on sale of investment		—			—			—			(822	)
Defined benefit pension plan costs		15			—			22			—
Change in operating assets and liabilities		(4,496	)		(2,308	)		(10,715	)		(3,700	)
Cash flow provided by (used in) operating activities		780			6,910			751			13,317
Cash flow from financing activities
Restricted cash		—			—			—			56
Repayments of long-term debt		(17,846	)		(404	)		(18,245	)		(1,095	)
Repayments of capital lease obligations		(190	)		(205	)		(366	)		(339	)
Proceeds from exercise of stock options		1			203			35			254
Other financing activities		(21	)		—			(50	)		—
Cash flow provided by (used in) financing activities		(18,056	)		(406	)		(18,626	)		(1,124	)
Cash flow from investing activities
Purchase of long-lived assets		(269	)		(1,865	)		(1,053	)		(3,299	)
Cash flow used in investing activities		(269	)		(1,865	)		(1,053	)		(3,299	)
Effect of exchange rate changes on cash and cash equivalents		999			(59	)		795			(94	)
Increase (decrease) in cash and cash equivalents		(16,546	)		4,580			(18,133	)		8,800
Cash and cash equivalents, beginning of period		48,673			28,835			50,260			24,615
Cash and cash equivalents, end of period	$	32,127		$	33,415		$	32,127		$	33,415

Non-GAAP Results
(In thousands, except per share data)

	Three Months ended						Six Months ended
	May 31,			May 31,			May 31,			May 31,
	2009			2008			2009			2008
Non-GAAP Adjusted Net Income Calculation:
Net income (loss)	$	(4,125	)	$	930		$	(5,661	)	$	900
Amortization of intangible assets		6,154			6,418			12,319			12,832
Tax benefit on amortization of intangible assets		605			(1,233	)		(140	)		(2,467	)
Stock-based compensation		1,307			1,977			2,360			3,115
Restructuring		1,404			447			1,613			625
Expenses associated with evaluation of strategic alternatives		—			705			—			705
Amortization of deferred financing fees		271			270			542			540
Non-GAAP Adjusted Net Income	$	5,616		$	9,514		$	11,033		$	16,250
Percentage of revenue		11.1	%		14.2	%		10.4	%		12.3	%
Diluted non-GAAP adjusted net income per share	$	0.22		$	0.36		$	0.42		$	0.62
Shares used in computing diluted non-GAAP adjusted net income per share		26,063			26,238			26,120			26,165
Non-GAAP Adjusted EBITDA Calculation:
Cash flow provided by (used in) operating activities	$	780		$	6,910		$	751		$	13,317
Change in operating assets and liabilities		4,496			2,308			10,715			3,700
Interest expense, net		2,969			2,933			6,023			7,221
Income tax expense (recovery)		1,048			(5	)		1,675			(97	)
Deferred income taxes		(605	)		1,233			140			2,467
Recovery (provision) for bad debts		(80	)		(129	)		29			(233	)
Defined benefit pension plan costs		(15	)		—			(22	)		—
Unrealized gain on forward foreign exchange contracts		45			—			45			—
Gain on sale of investment		—			—			—			822
Gain (loss) on interest rate swap recorded at fair value		122			512			219			(243	)
Loss on disposal of fixed assets		(17	)		(6	)		(18	)		(48	)
Expenses associated with evaluation of strategic alternatives		—			705			—			705
Restructuring		1,404			447			1,613			625
Non-GAAP Adjusted EBITDA	$	10,147		$	14,908		$	21,170		$	28,236
Percentage of revenue		20.1	%		22.2	%		19.9	%		21.3	%

Other Supplemental Information
(In thousands)

	Three Months ended						Six Months ended
	May 31,			May 31,			May 31,			May 31,
	2009			2008			2009			2008
Revenue by Product Segment
Graphics and Productivity	$	27,582		$	38,497		$	57,236		$	75,444
Digital Media		22,786			28,547			49,346		$	57,144
Total	$	50,368		$	67,044		$	106,582		$	132,588
As percentage of revenues
Graphics and Productivity		54.8	%		57.4	%		53.7	%		56.9	%
Digital Media		45.2	%		42.6	%		46.3	%		43.1	%
Total		100.0	%		100.0	%		100.0	%		100.0	%
Revenue by Geography
Americas	$	24,997		$	32,793		$	51,166		$	63,690
EMEA		11,249			19,564			26,369			40,577
APAC		14,122			14,687			29,047			28,321
Total	$	50,368		$	67,044		$	106,582		$	132,588
As percentage of revenues
Americas		49.6	%		48.9	%		48.0	%		48.0	%
EMEA		22.3	%		29.2	%		24.7	%		30.6	%
APAC		28.0	%		21.9	%		27.3	%		21.4	%
Total		100.0	%		100.0	%		100.0	%		100.0	%
Allocation of Stock-Based Compensation Expense
Cost of revenues — Product	$	3		$	5		$	7		$	15
Cost of revenues — Maintenance and services		2			2			4			4
Sales and marketing		631			504			947			899
Research and development		176			329			343			536
General and administration		495			1,137			1,059			1,661
Total	$	1,307		$	1,977		$	2,360		$	3,115