UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2006 | |
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 of 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 ofRegulation 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 thisForm 10-K or any amendment to thisForm 10-K. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act (Check one):
Large accelerated filero | Accelerated filero | Non-accelerated filer þ |
Indicate by check mark whether the Registrant is a shell company (as defined inRule 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, 2006 of $13.19, as reported on the Nasdaq Global Market, was approximately $90.2 million. Common shares held as of May 31, 2006 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 31, 2007, the Registrant had outstanding 24,661,851 common shares, no par value.
EXPLANATORY NOTE
ThisForm 10-K/A amends Item 5 of the Annual Report onForm 10-K filed by Corel Corporation (the “Registrant”) on February 23, 2007 to provide additional disclosure required pursuant to the Nasdaq Marketplace Rules. No other amendments have been made, and thisForm 10-K/A does not reflect events occurring after the filing of the original Annual Report onForm 10-K or modify or update those disclosures affected by subsequent events.
The Registrant’s Annual Report onForm 10-K is hereby amended to add the following disclosure in Item 5:
DISCLOSURE PURSUANT TO THE REQUIREMENTS OF NASDAQ
A quorum for our general meetings is one person present and being, or representing by proxy, shareholders holding in the aggregate not less than 20% of the issued shares entitled to be voted at the meeting. We were granted an exemption from the Nasdaq Marketplace Rules requiring each issuer to provide for a quorum at any meeting of the holders of common stock of no less than 331/3% of the outstanding shares of the issuer’s common voting stock.
2
PART II
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Our common shares are listed on the Nasdaq Global Market under the symbol “CREL” and on the TSX under the symbol “CRE”. The following table sets forth the high and low closing sales prices per share of our common shares as reported on the Nasdaq Global Market, as applicable, and the TSX for each of the quarters during our fiscal year ended November 30, 2006. Our common shares commenced trading on the Nasdaq Global Market and the TSX on April 26, 2006.
Year Ended November 30, 2006 | |||||||||||||||||
Corel Corporation | |||||||||||||||||
Nasdaq [US$] | TSX [C$] | ||||||||||||||||
High | Low | High | Low | ||||||||||||||
Q2 | $ | 16.15 | $ | 13.19 | $ | 16.15 | $ | 13.96 | |||||||||
Q3 | $ | 12.90 | $ | 9.40 | $ | 14.09 | $ | 10.62 | |||||||||
Q4 | $ | 14.15 | $ | 11.10 | $ | 15.92 | $ | 12.71 |
On January 31, 2007 the last reported sale price on the Nasdaq Global Market for our common shares was $13.00 per share. On January 31, 2007 the last reported sale price on the TSX for our common shares was C$15.43 per share.
RECORD HOLDERS
As of January 31, 2007, there were approximately 97 shareholders of record of our common shares, one of which was Cede & Co., a nominee for Depository Trust Company, or DTC, and one of which was The Canadian Depository for Securities Limited, or CDS. All of our common shares held by brokerage firms, banks and other financial institutions in the U.S. and Canada as nominees for beneficial owners are considered to be held of record by Cede & Co. in respect of brokerage firms, banks and other financial institutions located in the U.S., and by CDS in respect of brokerage firms, banks and other financial institutions located in Canada. Cede & Co. and CDS are each considered to be one shareholder of record.
DIVIDEND POLICY
We do not currently anticipate paying dividends on our common shares. Any determination to pay dividends to holders of our common shares in the future will be at the discretion of our Board and will depend on many factors, including our financial condition, earnings, legal requirements and other factors as the Board deems relevant. In addition, our indebtedness limits our ability to pay dividends and we may in the future become subject to debt instruments or other agreements that further limit our ability to pay dividends.
In connection with our acquisition by Vector Capital, we distributed $4.1 million to Vector Capital in 2003 and we used $69.8 million to fund the repurchase of our common shares in the going private transaction. In addition, we paid $41.0 million of distributions to our shareholders in our fiscal year ended November 30, 2004 and $85.3 million of distributions to our shareholders during our fiscal year ended November 30, 2005. WinZip paid a $12.0 million dividend to Vector Capital in June 2005 and paid a $7.5 million dividend to Vector Capital in March 2006. Those payments are not indicative of our future dividend policy for the foreseeable future.
MATERIAL UNITED STATES FEDERAL AND CANADIAN INCOME TAX CONSEQUENCES
General
The following discussion of material U.S. federal income tax consequences and Canadian federal income tax consequences of ownership of our common shares is included for general information purposes only and does not purport to be a complete description of all potential tax consequences.
Material U.S. Federal Income Tax Consequences
This section summarizes the material United States federal income tax consequences to “U.S. Holders” (as defined below) of the ownership and disposition of our common shares. This section is included for general information purposes only and assumes that you hold your common shares as capital assets within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), for United States federal income tax purposes. In addition, this discussion does not address the tax consequences arising under the tax laws of any state, locality or foreign jurisdiction. Furthermore, this section does not purport to be a complete analysis of all of the potential United States
3
federal income tax considerations that may be relevant to particular holders of our common shares in light of their particular circumstances, nor does it deal with all United States federal income tax consequences applicable to holders subject to special tax rules, including banks, brokers, dealers in securities or currencies, traders in securities that elect to use amark-to-market method of accounting for their securities holdings, tax-exempt entities, insurance companies, persons liable for alternative minimum tax, persons that actually or constructively own 10 percent or more of our common shares, persons that hold common shares as part of a straddle or a hedging, constructive sale, synthetic security, conversion or other integrated transaction, pass-through entities (e.g., partnerships), persons whose functional currency is not the United States dollar, expatriates or former long-term residents of the United States, individual retirement accounts or other tax-deferred accounts, real estate investment trusts, or regulated investment companies.
This summary does not discuss United States federal income tax consequences to any beneficial owner of common shares that is not a U.S. Holder. For purposes of this discussion, you are a “U.S. Holder” if you are a beneficial owner of common shares and you are for United States federal income tax purposes (i) a citizen or resident of the United States, (ii) a corporation, or other entity taxable as a corporation, created or organized under the laws of the United States or any political subdivision thereof, (iii) an estate whose income is subject to United States federal income tax regardless of its source, or (iv) a trust (a) if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust or (b) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person.
If any entity that is classified as a partnership for United States federal income tax purposes holds common shares, the tax treatment of its partners will generally depend upon the status of the partner and the activities of the partnership. Partnerships and other entities that are classified as partnerships for United States federal income tax purposes and persons holding common shares through a partnership or other entity classified as a partnership for United States federal income tax purposes are urged to consult their tax advisors.
This section is based on the Code, existing and proposed Treasury regulations thereunder, published rulings, court decisions and administrative interpretations, all as currently in effect. These laws are subject to change, repeal or revocation, possibly on a retroactive basis, so as to result in United States federal income tax consequences different from those discussed below.
Taxation of Dividends
Subject to the passive foreign investment company rules discussed below, you must include in your gross income as ordinary income the gross amount of any dividend paid by us out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes), including the amount of any Canadian taxes withheld from this dividend. We do not maintain calculations of our earnings and profits for United States federal income tax purposes. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. Distributions in excess of our current and accumulated earnings and profits (as determined for United States federal income tax purposes), including the amount of any Canadian taxes withheld from the distributions, will be treated as a non-taxable return of capital to the extent of your adjusted basis in the common shares and as a capital gain to the extent such portion exceeds your adjusted basis. If you are a non-corporate U.S. Holder, dividends you receive in taxable years beginning before January 1, 2011, generally will be taxable at a rate of 15 percent, provided certain holding period and other requirements are satisfied. These requirements include (a) that we not be classified as a passive foreign investment company, and (b) that you not treat the dividend as “investment income” for purposes of the investment interest deduction rules. U.S. Holders should consult their own tax advisors regarding the application of these rules.
If you are entitled to benefits under theCanada-United States Income Tax Convention, dividends you receive with respect to common shares generally will be subject to Canadian withholding tax at the rate of 15 percent. Our dividends generally will be treated as foreign source income, except to the extent a portion of such dividends is treated as U.S. source income for purposes of calculating the foreign tax credit limitation. Accordingly, any Canadian tax withheld may, subject to certain limitations, be claimed as a foreign tax credit against your United States federal income tax liability or may be claimed as a deduction for United States federal income tax purposes. The rules relating to foreign tax credits are complex and the availability of a foreign tax credit depends on numerous factors. You should consult your own tax advisors concerning the application of the United States foreign tax credit rules to your particular situation.
Taxation of Dispositions
Subject to the passive foreign investment company rules discussed below, gain or loss you realize on the sale or other disposition of your common shares will generally be capital gain or loss for United States federal income tax purposes, and will be long-term capital gain or loss if you held your common shares for more than one year. The amount of gain or
4
loss will be equal to the difference between the United States dollar value of the amount that you realize and your adjusted tax basis, determined in United States dollars, in your common shares. Your adjusted tax basis in our common shares will generally be the cost to you of such shares. The gain or loss will generally be gain or loss from sources within the United States for foreign tax credit limitation purposes.
Passive Foreign Investment Company Considerations
If during any taxable year, 75 percent or more of our gross income consists of certain types of “passive” income, or if the average value (or, in the first year in which we are publicly traded, the average tax basis) during a taxable year of our “passive assets” (generally, assets that produce passive income or are held for the production of passive income) is 50 percent or more of the average value of all of our assets, we will be classified as a “passive foreign investment company” (“PFIC”) for such year and for all succeeding years.
No assurance can be given that we are not a passive foreign investment company or will not be a passive foreign investment company in the future.
If we are classified as a passive foreign investment company, you may be subject to increased tax liability and an interest charge in respect of gain you realize on the sale or other disposition of your common shares and on the receipt of certain “excess distributions.” Other adverse U.S. tax consequences may also apply. The adverse consequences resulting from our being classified as a PFIC can be mitigated in some cases if you are eligible for and timely make a valid election to treat us as a “qualified electing fund” (a “QEF election”) (in which case you would be required to include in income on a current basis your pro rata share of our ordinary income and net capital gains, but not losses). However, in order for you to be able to make the QEF election, we would have to provide you with certain information. We do not expect to provide the required information.
As another alternative to the foregoing rules, if we are determined to be a PFIC, you may make amark-to-market election to include in income each year as ordinary income an amount equal to the increase in value of your common shares for that year to deduct an amount equal to the decrease in value (but only to the extent of any net mark-to-market gains with respect to your common shares included by you in prior taxable years). However, if at any time our common shares cease to qualify as “marketable stock” you will no longer be able to make this election. There is no assurance that our shares will continue to qualify as marketable stock.
U.S. Holders should consult their own tax advisors with respect to the passive foreign investment company issue and its potential application to their particular situation.
Information Reporting and Backup Withholding
If you are a non-corporate U.S. Holder, information reporting requirements on Internal Revenue Service Form 1099 generally will apply to:
• | dividend payments or other taxable distributions made to you within the United States; and | |
• | the payment of proceeds to you from the sale of common shares effected at a United States office of a broker, |
unless you come within certain categories of exempt recipients.
Additionally, backup withholding may apply to such payments if you are a non-corporate U.S. Holder that does not come within certain categories of exempt recipients and you:
• | fail to provide an accurate taxpayer identification number; | |
• | are notified by the Internal Revenue Service (“IRS”) that you have failed to report all interest and dividends required to be shown on your United States federal income tax returns; or | |
• | in certain circumstances, fail to comply with other applicable requirements of the backup withholding rules. |
A U.S. Holder who does not provide a correct taxpayer identification number may be subject to penalties imposed by the IRS.
If backup withholding applies to you, a tax will be withheld and paid over to the IRS. The tax rate is 28% for payments made through 2010, and 31% for payments made in 2011 and thereafter. Any amounts withheld from payments to you under the backup withholding rules will be allowed as a credit against your United States federal income tax liability and may entitle you to a refund, provided the required information is furnished to the IRS. You should consult your tax advisor regarding the application of backup withholding in your particular situation, the availability of an exemption from backup withholding and the procedure for obtaining such an exemption, if available.
5
Material Canadian Income Tax Consequences
The following discussion summarizes the principal Canadian federal income tax considerations generally applicable to a person, referred to as an “Investor”, who holds our common shares, and who at all material times for the purposes of the Income Tax Act (Canada) (the “Act”), deals at arm’s length with us, is not affiliated with us, holds common shares as capital property, is a non-resident of Canada, and does not, and is not deemed to, use or hold any common share in, or in the course of, carrying on business in Canada.
This summary is based on the current provisions of the Act, including the regulations under the Act, and theCanada-United States Income Tax Convention (1980), referred to as the “Treaty”, as amended. This summary takes into account all specific proposals to amend the Act and the regulations under the Act publicly announced by the government of Canada prior to the date of this report, and our understanding of the current published administrative and assessing practices of the Canada Revenue Agency. It is assumed that all of those amendments will be enacted substantially as currently proposed, although no assurances can be given in this respect. Except to the extent otherwise expressly set out in this summary, this summary does not take into account any provincial, territorial, or foreign income tax law. Special rules, which are not discussed in this summary, may apply to a non-resident holder that is an insurer carrying on business in Canada and elsewhere, or a financial institution as defined by section 142.2 of the Act. If you are in any doubt as to your tax position, you should consult with your tax advisor.
Taxation Of Dividends
Any dividend on a common share paid or credited, or deemed under the Act to be paid or credited, by us to an Investor, will generally be subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend, or such lesser rates as may be available under an applicable income tax treaty. We will be required to withhold any such tax from the dividend, and remit the tax directly to the Canada Revenue Agency for the account of the Investor. Pursuant to the Treaty, the rate of withholding tax applicable to a dividend paid on a common share to an Investor who is a resident of the United States for the purposes of the Treaty will be reduced to 5% if the beneficial owner of the dividend is a company that owns at least 10% of our voting stock, and in any other case will be reduced to 15%. Under the Treaty, dividends paid or credited to an Investor that is a United States tax exempt organization as described in Article XXI of the Treaty will not be subject to Canadian withholding tax. It is the position of the Canada Revenue Agency that United States limited liability companies generally do not qualify as residents of the United States under the Treaty and therefore Treaty reductions are not available to those Investors.
Taxation Of Gain On Disposition
An Investor generally will not be subject to tax pursuant to the Act on any capital gain realized by the Investor on a disposition of a common share unless the common share constitutes “taxable Canadian property” to the Investor for purposes of the Act and the Investor is not eligible for relief pursuant to an applicable bilateral tax treaty. A common share that is disposed of by an Investor will not constitute taxable Canadian property of the Investor provided that the common share is listed on a stock exchange that is prescribed for the purposes of the Act (the TSX and NASDAQ are so prescribed), and that neither the Investor, nor one or more persons with whom the Investor did not deal at arm’s length, alone or together, at any time in the five years immediately preceding the disposition, owned 25% or more of the issued shares of any class or series of our capital stock. Even if a common share is taxable Canadian property to an Investor, the Treaty will generally exempt an Investor who is a resident of the United States for the purposes of the Treaty, and who would otherwise be liable to pay Canadian income tax in respect of any capital gain realized by the Investor on the disposition of a common share, from that liability, provided that the value of the common share is not derived principally from real property situated in Canada. We are of the view that the value of our common shares is not currently derived principally from real property situated in Canada. The Treaty may not be available to a non-resident Investor that is a U.S. limited liability company, which is not subject to tax in the United States.
THE FOREGOING SUMMARY OF MATERIAL U.S. AND CANADIAN TAX CONSEQUENCES IS BASED ON THE CONVENTION BETWEEN CANADA AND THE UNITED STATES OF AMERICA WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS, U.S. LAW, CANADIAN LAW, AND REGULATIONS, ADMINISTRATIVE RULINGS AND PRACTICES OF THE U.S. AND CANADA, ALL AS THEY EXIST AS OF THE DATE OF THIS REPORT. THIS SUMMARY DOES NOT DISCUSS ALL ASPECTS THAT MAY BE RELEVANT TO ANY PARTICULAR INVESTORS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES. INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES AND WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF OWNERSHIP OF COREL CORPORATION COMMON SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, PROVINCIAL, LOCAL AND FOREIGN TAX LAWS, ESTATE TAX LAWS AND PROPOSED CHANGES IN APPLICABLE LAWS.
6
RECENT SALES OF UNREGISTERED SECURITIES
During our fiscal year ended November 30, 2006 the following were the only issuances and sales of unregistered securities:
In February 2006, we issued 3,245 common shares, valued at approximately $52,000 in the aggregate, to the owners of an unaffiliated service provider, in consideration for services rendered to us, in reliance on the exemption provided for by section 4(2) of the Securities Act of 1933. In connection with such sale, the purchasers represented to us that they were “accredited investors” as defined in Rule 506 of the Securities Act of 1933.
In February 2006, we agreed to purchase WinZip from Vector Capital. In February 2006, we agreed to issue 4,322,587 common shares to Vector Capital as consideration for the acquisition of WinZip, in reliance on the exemption provided for in section 4(2) of the Securities Act of 1933. Such shares were acquired in May 2006. In connection with such sale, Vector Capital represented to us that it was an “accredited investor” as defined in Rule 506 of the Securities Act of 1933.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
Information regarding our equity compensation plans required by Item 201(d) ofRegulation S-K may be found under “Item 12—Share Option and Other Compensation Plans”.
DISCLOSURE PURSUANT TO THE REQUIREMENTS OF NASDAQ
A quorum for our general meetings is one person present and being, or representing by proxy, shareholders holding in the aggregate not less than 20% of the issued shares entitled to be voted at the meeting. We were granted an exemption from the Nasdaq Marketplace Rules requiring each issuer to provide for a quorum at any meeting of the holders of common stock of no less than 331/3% of the outstanding shares of the issuer’s common voting stock.
7
PART IV
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
The following exhibits are filed as part of this Amendment No. 1 to Form 10-K/A:
(b) Exhibits:
Exhibit | ||||
Number | Exhibit | |||
31 | .1* | Certification of Chief Executive Officer pursuant toRule 13a-14(a) or15d-14 of the Securities Exchange Act of 1934 | ||
31 | .2* | Certification of Chief Financial Officer pursuant toRule 13a-14(a) or15d-14 of the Securities Exchange Act of 1934 |
* | Filed herewith. |
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on April 5, 2007.
COREL CORPORATION
By: | /s/ DAVID DOBSON |
David Dobson
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 April 5, 2007.
SIGNATURE | TITLES | |||
/s/ DAVID DOBSON David Dobson | Chief Executive Officer and Director (principal executive officer) | |||
/s/ DOUGLAS MCCOLLAM Douglas McCollam | Chief Financial Officer and Director (principal financial and accounting officer) | |||
/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 |
9
EXHIBIT INDEX
Exhibit | ||||
Number | Exhibit | |||
31 | .1* | Certification of Chief Executive Officer pursuant toRule 13a-14(a) or15d-14 of the Securities Exchange Act of 1934 | ||
31 | .2* | Certification of Chief Financial Officer pursuant toRule 13a-14(a) or15d-14 of the Securities Exchange Act of 1934 |
* | Filed herewith. |
10