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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the period ended August 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to _________
Commission file number 0-20562
COREL CORPORATION (Exact name of Registrant as specified in its Charter)
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1600 Carling Avenue
Ottawa, Ontario, Canada KIZ 8R7
(Address of Principal Executive Offices including Zip Code)
(613) 728-8200
(Registrant's Telephone Number, Including Area Code)
(Former name, former address and former fiscal year if changed
since last report)
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 reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
As of October 10, 2000, the registrant had 73,547,663 Common Shares outstanding.
COREL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial statements
Consolidated Balance Sheets as of August 31, 2000 and November 30, 1999
Consolidated Statements of Cash Flows for the Nine Months Ended August 31, 2000 and 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II. Other Information
Item 1. Legal Proceedings
COREL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of US$)
|
August 31, |
November 30, | ||||
| 2000 | 1999 | ||||
| ASSETS |
(unaudited) |
(audited) |
|||
| Current assets: | |||||
| Cash and cash equivalents | $ 11,557 | $ 18,021 | |||
| Accounts receivable, net | |||||
| Trade | 26,177 | 54,770 | |||
| Other | 1,664 | 3,954 | |||
| Inventory, net | 8,272 | 13,567 | |||
| Income taxes recoverable . . . . . . . . . . . . . . . . . . . . . . | - | 5,135 | |||
| Future income tax assets . . . . . . . . . . . . . . . . . . . . . | 1,713 | 1,642 | |||
| Prepaid expenses | 2,277 | 2,042 | |||
| Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . | 51,660 | 99,131 | |||
| Investments | 11,772 | 2,873 | |||
| Capital assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 40,469 | 49,697 | |||
| Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $ 103,901 | $ 151,701 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable and accrued liabilities | $ 34,235 | $ 50,284 | |||
| Current portion of Novell obligations | 5,470 | 10,594 | |||
| Income taxes payable | 5,187 | - | |||
| Deferred revenue | 13,100 | 18,472 | |||
| Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . | 57,992 | 79,350 | |||
| Novell obligations. . . . . . | 6,464 | 7,985 | |||
| Shareholders' equity | |||||
| Common Shares (000s), no par value, 73,537 and | |||||
| 65,532 issued at August 31, 2000 and | |||||
| November 30, 1999, respectively | |||||
| Share capital | 243,998 | 222,155 | |||
| Contributed surplus | 1,099 | 1,099 | |||
| Deficit | (205,652) | (158,888) | |||
| Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . .. . | 39,445 | 64,366 | |||
| Total liabilities and shareholders' equity . . . . . . . . . . . | $ 103,901 | $ 151,701 |
(See accompanying notes)
COREL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND DEFICIT
(in thousands of US$, except per share data)
(unaudited)
| Three Months Ended
August 31, |
|
Nine Months Ended
August 31, |
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| 2000 | 1999 | 2000 | 1999 | |||||
| Sales | $ 36,357 | $ 71,312 | $ 117,137 | $ 182,119 | ||||
| Cost of sales | 7,840 | 15,466 | 34,121 | 41,118 | ||||
| Gross profit | 28,517 | 55,846 | 83,016 | 141,001 | ||||
| Expenses | ||||||||
| Advertising | 6,912 | 11,641 | 29,586 | 32,358 | ||||
| Selling, general and administrative | 18,602 | 19,377 | 64,421 | 59,934 | ||||
| Research and development | 12,151 | 10,671 | 35,904 | 36,526 | ||||
| Depreciation and amortization | 1,832 | 1,895 | 5,398 | 4,568 | ||||
| Settlement proceeds . . . . . . . . . . . . . . . . . | - | (6,342) | - | (6,342) | ||||
| Loss on foreign exchange | 727 | 319 | 1,196 | 265 | ||||
| 40,224 | 37,561 | 136,505 | 127,309 | |||||
| Income (loss) from operations | (11,707) | 18,285 | (53,489) | 13,692 | ||||
| Gain on investment. . . . . . . . . . . . . . . . . . . | 4,503 | - | 14,585 | - | ||||
| Interest income (expense) | 191 | 46 | 254 | (283) | ||||
| Income (loss) before income taxes | (7,013) | 18,331 | (38,650) | (13,409) | ||||
| Income tax expense. . . . . . . . . . . . . . . . . . . | (2,944) | (737) | (5,882) | (1,275) | ||||
| Share of loss in equity investee . . . . . . . . . | (788) | - | (2,232) | - | ||||
| Net income (loss) | (10,745) | 17,594 | (46,764) | 12,134 | ||||
| Deficit beginning of period . . . . . . . . . . . . . | (194,907) | (181,064) | (158,888) | (175,604) | ||||
| Deficit end of period . . . . . . . . . . . . . . . . . | $ (205,652) | $ (163,470) | $ (205,652) | $ (163,470) | ||||
| Income (loss) per share: | ||||||||
| Net income (loss) | ||||||||
| Basic | $ (0.15) | $ 0.28 | $ (0.69) | $ 0.20 | ||||
| Fully diluted . . . . . . . . . . . . . . . . . . . . | $ (0.15) | $ 0.26 | $ (0.69) | $ 0.18 | ||||
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Average number of Common Shares
outstanding (000s) |
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| Basic . . . . . . . . . . . . . . . . . . . . . . . . . . | 71,335 | 62,793 | 68,152 | 61,519 | ||||
| Fully diluted . . . . . . . . . . . . . . . . . . . . | 71,335 | 69,062 | 68,152 | 68,720 | ||||
(See accompanying notes)
COREL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of US$)
(unaudited)
| Nine Months ended August 31 | |||
| 2000 | 1999 | ||
| Operating activities: | |||
| Net loss | $ (46,764) | $ 12,134 | |
| Adjustments to reconcile net loss to net cash
provided by operating activities: |
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| Depreciation and amortization | 15,204 | 14,436 | |
| Write down of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 934 | - | |
| Loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . | 131 | - | |
| Future income tax assets | (71) | 853 | |
| Equity loss in investments . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,232 | - | |
| Gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (14,585) | (809) | |
| Decrease (increase) in accounts receivable . . . . . . . . . . . . . | 30,883 | (3,255) | |
| Decrease (increase) in inventory. . . . . . . . . . . . . . . . . . . . . . | 5,295 | 2,168 | |
| Decrease (increase) in prepaid expenses . . . . . . . . . . . . . . . | (235) | 2,405 | |
| Decrease in accounts payable and accrued liabilities. . . . . . | (23,049) | (10,721) | |
| Increase in income taxes payable . . . . . . . . . . . . . . . . . . . . . | 5,187 | (3,806) | |
| Decrease in income taxes recoverable . . . . . . . . . . . . . . . . . | 5,135 | - | |
| Increase (decrease) in deferred revenue . . . . . . . . . . . . . . . . | (5,372) | (304) | |
| Net cash provided by (used in) operating activities | (25,075) | 13,101 | |
| Financing activities: | |||
| Issue of common stock | 21,843 | 6,712 | |
| Reduction of Novell Obligations | (6,645) | (7,000) | |
| Net cash provided by (used in) financing activities . . . . . . . . . . . . . . | 15,198 | (288) | |
| Investing activities: | |||
| Purchase of investments | (1,663) | (1,561) | |
| Purchase of capital assets | (9,781) | (12,871) | |
| Proceeds on disposal of investment . . . . . . . . . . . . . . . . . . . . . . | 14,585 | 2,922 | |
| Proceeds on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . | 272 | 96 | |
| Net cash provided by (used in) investing activities . . . . . . . . . . . . . . | 3,413 | (11,414) | |
| Decrease in cash and cash equivalents | (6,464) | 1,399 | |
| Cash and cash equivalents at beginning of period | 18,021 | 22,393 | |
| Cash and cash equivalents at end of period | $ 11,557 | $ 23,792 | |
(See accompanying notes)
COREL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
(U.S. dollars, tabular amounts in thousands except per share data)
(unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts of Corel Corporation and its subsidiaries (collectively, the "Company") after elimination of all significant intercompany balances and transactions. Certain amounts for the comparative periods have been reclassified to conform to the current year presentation. The financial statements have been prepared by the Company in accordance with accounting principles for interim financial statements generally accepted in Canada, which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These principles are also generally accepted in the United States except as disclosed in Note 7. While management has based its assumptions and estimates on facts and circumstances currently known, actual amounts may differ from such estimates. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis and financial statements and notes thereto included in the Company's 1999 Annual Report on Form 10-K.
These financial statements have been prepared using generally accepted accounting principles that are applicable to a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the normal course of business. As such, the financial statements do not reflect adjustments in the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used, that would be necessary if the going concern assumption were not appropriate, and such adjustments could be material. Based on subsequent events, as described in Note 6, the Company believes the above going concern assumption is appropriate.
Software Revenue Recognition
On December 1, 1999, the Company adopted SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions" ("SOP 98-9"). Revenue from license fees for software products is recognized when the software is delivered, when there is persuasive evidence that an arrangement exists, when the fee is fixed and determinable and collection is probable. If software products transactions include the right to receive future products, a portion of the revenue is deferred and recognized as such products are delivered. Revenue from services is recognized as the services are performed. The adoption of SOP 98-9 has not had a material impact on the Company's financial results.
2. Unaudited Interim Financial Statements
The interim consolidated financial information contained herein is unaudited but, in the opinion of management, includes all adjustments (consisting only of normal recurring entries) necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. Results of operations for the periods presented herein are not necessarily indicative of results of operations for the entire year.
3. Inventories
| August 31,
2000 |
November 30, 1999 | ||
| Product components | $ 4,569 | $ 8,582 | |
| Finished goods | 3,703 | 4,985 | |
| $ 8,272 | $ 13,567 |
4. 1998 Restructuring Charge
The Company proceeded with the implementation of a consolidation plan introduced in the third fiscal quarter of 1998. During the first nine months of fiscal 2000, approximately $0.5 million was disbursed, principally for facilities closure costs, from the November 30, 1999 balance of accrued restructuring costs. As at August 31, 2000 the restructuring accrual included in accounts payable and accrued liabilities was approximately $0.7 million.
5. Income Taxes
On December 1, 1999, the Company adopted the Canadian Institute of Chartered Accountants' ("CICA") handbook section 3465, "Income Taxes", which is similar in all material respects to United States Financial Accounting Standards Board Statement No.109. Under this new accounting policy, income taxes are provided for using the liability method whereby future tax assets and liabilities are recognized using current tax rates on the difference between the financial statement carrying amounts and the respective tax basis of assets and liabilities.
The tax effects of the significant components of temporary differences giving rise to the Company's future income tax assets are as follows:
| August 31,
2000 |
November 30, 1999 | ||
| Operating loss carryforward | $ 16,339 | $ 11,200 | |
| Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5,915 | 9,400 | |
| Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3,392 | 3,100 | |
| Royalties not yet deducted for tax purposes . . . . . . . . . . . . . . . . | 1,151 | 1,300 | |
| Investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2,000 | 2,000 | |
| 28,797 | 27,000 | ||
| Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | (27,084) | (25,358) | |
| Net current future tax assets | $ 1,713 | $ 1,642 |
The net current future tax assets relate to the operations in the United States of America. These assets are temporary differences which the Company believes will reverse in the near future.
6. Subsequent events
On September 6, 2000, the Company announced that it had identified the components of the previously-targeted $40 million in expenditure cuts, designed to realign the company's costs with its expected achievable revenues. As part of this plan, the Corporation announced the proposed consolidation of its engineering operations, based in Dublin, Ireland, to its corporate headquarters in Ottawa, Canada. A total of 139 positions at the Dublin facility will be eliminated as a result of the move.
On September 19, 2000, the Company announced it had entered into a share purchase agreement with an institutional investor. Subject to the terms and conditions of this agreement, the Corporation may issue and sell to the investor up to 14,690,000 shares in periodic draw down periods over 24 months, if all associated warrants are exercised.
On October 2, 2000, the Company announced it had formed a strategic alliance with Microsoft Corporation that will see the two companies expand their relationship to encompass projects related to Microsoft's new .NET initiative. As part of this expanded relationship, Microsoft has purchased 24 million non-voting participating convertible preferred shares at a purchase price of $5.625 per share or a total purchase price and liquidation value of $135 million convertible on a share for share basis subject to anti-dilution protections, but not in Microsoft's hands. The companies will also work together to support the development, testing and marketing of new products related to the .NET platform. Joint-marketing initiatives will include participation in product launches and trade show events and representation on mutual Web sites. In addition, both companies have agreed to settle certain legal issues between them.
7. Significant Differences Between Canadian and United States GAAP
The Company's financial statements are prepared on the basis of Canadian GAAP, which is different in some respects from US GAAP. Significant differences between Canadian GAAP and US GAAP are set forth below:
(a) Comprehensive Income
On December 1, 1999, the Company adopted the United States Financial Accounting Standards Board ("FASB") Statement No.130, "Reporting Comprehensive Income", ("FAS 130"). FAS 130 requires the presentation of comprehensive income and its components in a full set of general-purpose financial statements. The purpose of reporting comprehensive income is to report changes in equity that result from transactions and other economic events, excluding transactions with owners in their capacity as owners. The Company's comprehensive income consists of net loss and unrealized gain or loss on available-for-sale marketable securities; however, the adoption of FAS 130 had no impact on the financial position or results of operations of the Company. The Company's comprehensive income (loss) for the three and nine months periods ended August 31, 2000 and 1999 was $(10,499,500), $(51,182,998), $16,127,972 and $12,540,217 , respectively.
(b ) Stock-based compensation
At the Company's Annual and Special Meeting of Shareholders held on March 8, 2000, the shareholders approved an amendment to the Corel Corporation Stock Option Plan to increase the number of Common Shares reserved for issuance under the plan by 2,500,000 to accommodate the potential exercise of options currently granted under the plan. In addition, the shareholders also approved the extension of the expiry date of certain options held by senior management which were unable to be exercised, and therefore would expire, due to shares not being available pending the above noted shareholder approval of additional shares being reserved and also due to certain restricted trading periods imposed by the Company on senior management. The compensation cost to the Company for U.S. GAAP purposes is approximately $29.5 million.
(c) New accounting pronouncements
In June 1998, the FASB issued FAS 133, Accounting for Derivative Instruments and Hedging Activities, amended by FAS 137 and 138 which establish standards for derivative instruments and hedging activities. They require that all derivatives be recognized as either assets or liabilities on the Balance Sheet and be measured at fair value. These statements are effective for all fiscal quarters of all fiscal years beginning after June 15, 2000, which is the year beginning December 1, 2000 for the Company. Prior periods should not be restated. The Company has not yet assessed the impact of adopting this pronouncement.
On March 31, 2000, the FASB issued Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation - an interpretation of APB Opinion No. 25 ("FIN 44"), providing new accounting rules for stock-based compensation under APB Opinion No. 25, Accounting for Stock Issued to Employees. FIN 44 does not change FASB Statement No. 123, Accounting for Stock-Based Compensation. The new rules are significant and will result in compensation expense in several situations in which no expense is typically recorded under current practice, including option repricings, purchase business combinations and plans that permit tax withholdings. FIN 44 is generally effective for transactions occurring after July 1, 2000, but applies to repricings and some other transactions after December 15, 1998. The Company does not expect the adoption of FIN 44 to have a material impact on its results of operations or financial position.
In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements ("SAB 101"), which was amended in March 2000 by SAB 101A. SAB 101 summarizes certain of the SEC staff views in applying generally accepted accounting
principles to revenue recognition in financial statements. SAB 101 is effective beginning the Company's first quarter of fiscal 2001. The Company does not expect the adoption of SAB 101 to have a material impact on its results of operations or financial position.
8. Segmented information
The Company has only one global operating segment as detailed in the consolidated financial statements included herein.
The Company sells its products worldwide from three geographic regions. A summary of sales by product, by sales channel and by region from consolidated operations is as follows:
| Three Months
Ended August 31 |
Nine Months
Ended August 31 | ||||||
| 2000 | 1999 | 2000 | 1999 | ||||
| By product | |||||||
| Professional & Consumer Graphics software . . . | $ 17,235 | $ 32,403 | $ 53,854 | $ 74,212 | |||
| Productivity software . . . . . . . . . . . . . . . . . . . . . | 17,859 | 38,870 | 57,106 | 107,493 | |||
| Linux operating system and applications. . . . . . . . . | 1,263 | - | 6,179 | - | |||
| Video Communications . . . . . . . . . . . . . . . . . . . . . . | - | 39 | (2) | 414 | |||
| Total sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | $ 36,357 | $ 71,312 | $ 117,137 | $ 182,119 | |||
| By sales channel | |||||||
| Retail packaged products | $ 17,133 | $ 42,471 | $ 58,927 | $ 103,560 | |||
| OEM licenses | 4,313 | 8,464 | 13,168 | 21,835 | |||
| Corporate licenses | 14,911 | 20,377 | 45,042 | 56,724 | |||
| Total sales | 36,357 | 71,312 | 117,137 | 182,119 |
| By region | |||||||
| North America | $ 25,963 | $ 48,191 | $ 72,052 | $ 120,266 | |||
| Europe | 5,814 | 14,690 | 28,754 | 45,937 | |||
| Other international | 4,580 | 8,431 | 16,331 | 15,916 | |||
| Total sales | $ 36,357 | $ 71,312 | $ 117,137 | $ 182,119 |
9. Contingencies
The Company is a party to a number of claims arising in the ordinary course of business relating to employment, intellectual property and other matters. The Company believes that such claims, individually, will not have a material adverse effect on its business, financial position or results of operations but, in the aggregate, may have a material adverse effect on its business, financial position or results of operations. Such possible effect cannot be reasonably estimated at this time.
10. Stock option plan 2000
At the Company's Annual and Special Meeting of Shareholders held on March 8, 2000, the shareholders approved the Corel Corporation Stock Option Plan 2000 (the "Plan") with the maximum number of common shares to be issued under the Plan set at 4,000,000. Pursuant to the Plan, on March 30, 2000, options for an aggregate of 3,413,000 common shares of the Company, exercisable at a price of Cdn. $15.25 per share, were granted to employees of the Company and on April 17, 2000, options for 30,000 common shares of the Company, exercisable at a price of Cdn. $9.65 per share, were granted to an employee of the Company. On July 10, 2000, 63,000 options were granted at a price of Cdn. $5.40 and another 8,000 were granted at a price of $3.63. On August 15, 2000, 10,000 options were granted at a price of Cdn. $5.35.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company develops, manufactures, licenses, sells and supports a wide range of software products, including Linux operating system, graphics, business productivity and consumer product applications. The Company's products are available for users of most PCs, including International Business Machines Corporation and IBM compatible PCs, Apple Computer Inc.'s Macintosh, UNIX-based and Linux-based systems.
On December 22, 1999, the Company acquired a one third ownership stake in LinuxForce Inc., of Philadelphia, with a three-year option to increase the ownership position to two-thirds. LinuxForce is a company organized to deliver a full-range of technical services and support for Linux®. This strategic investment will allow Corel to deliver end-to-end Linux solutions by combining Corel's Linux product lines with a comprehensive technical and professional services portfolio.
On January 12, 2000, the Company entered into an agreement to acquire up to a 30 per cent interest in Newlix Corporation, an Ottawa-based Linux start-up company. Newlix develops Linux-based Omega server software.
On January 18, 2000, the Company entered into an agreement to acquire up to a 30 per cent stake in OE/One.com Corp., a Hull, Quebec based start up company developing an "Information Appliance" platform or thin-client Internet Appliance platform.
On February 7, 2000, the Company entered into a definitive merger agreement with Inprise Corporation ("Inprise") of Scotts Valley, California. On May 15, 2000 Inprise and the Company entered into a Termination Agreement and Release. As a result of the Termination Agreement, the proposed merger between Inprise and the Company was terminated and Inprise and the Company agreed to release each other from all liabilities arising from, relating to or in connection with the Merger Agreement and related option agreements.
On March 24, 2000, the Company entered into an agreement to purchase all of the assets relating to the Painter, Bryce and KPT family of graphic software products of MetaCreations Corporation of Santa Barbara California. The cash purchase price for the assets was $10.0 million of which $2.0 million was paid on each of March 24, 2000 and June 30, 2000 and the balance being payable in $2.0 million instalments on each of September 30, 2000, December 31, 2000 and January 31, 2001.
On June 28, 2000, the Company issued 7,299,270 common shares at Cdn. $4.11 per common share for total gross proceeds of Cdn. $30 million. In addition, warrants, on the basis of one warrant for every two shares purchased, were issued to the purchasers of common shares of the Company that were purchased as part of the offering. In the event that all of the warrants are exercised, the Company will issue an additional 3,649,635 common shares resulting in gross proceeds of Cdn. $16,642,335.60. As at August 31, 2000, 11,659 warrants have been exercised for gross proceeds of Cdn. $53,165.
On July 17, 2000, the Company announced that Hemera Technologies Inc. ("Hemera"), of Hull, Quebec, acquired GraphicCorp, a division of the Company, as well as the Company= s collection of premium and stock digital photographic images. As part of the transaction, the Company has obtained a 23 percent equity interest in Hemera. The companies have also entered into agreements which allow the Company to maintain perpetual licences to use and distribute the image content in its products and online services. The results of operations of GraphicCorp are not considered material to the Company's continuing operations.
On August 15, 2000 Michael Cowpland resigned as President, Chief Executive Officer and Chair of the Board of Directors of the Company. He will continue to serve as a director and as a technology advisor. Derek J. Burney, formerly executive vice-president, engineering and chief technology officer of the Company was appointed interim President and CEO. Mr. James Baillie, counsel to the law firm of Torys and Mr. Larry O'Brien, Chair of CALIAN Technology Ltd., were appointed to the Board of Directors following the Board of Directors' acceptance of the resignation from Mr. William G. Davis for personal reasons. Mr. Baillie has been appointed as Chair of the Board of Directors. On October 2, 2000 Mr. Burney was appointed President and CEO and appointed to the Board of Directors.
Results of Operations
Sales
Sales decreased 49% to $36.4 million in the third quarter of fiscal 2000 from $71.3 million in the third quarter of fiscal 1999. Sales also decreased 37% to $117.1 million in the first nine months of fiscal 2000 from $182.1 million in the first nine months of fiscal 1999. This decrease was due primarily to the Company's flagship products WordPerfect Office 2000 and CorelDRAW 9 nearing the end of their life cycles in fiscal 2000. Financial performance in the third quarter of fiscal 2000 as compared to the same period in the prior year was negatively impacted primarily by the decline in revenues. The Company has been impacted, as has the entire industry in the Company's belief, by the reduction in the amount of product inventory traditionally held within the distribution channel. The Company expects to release, for general availability, CorelDRAW 10 in the fourth quarter of fiscal 2000. The Company generally experiences an increase in revenues upon release of a major upgrade of its flagship products.
The table below shows sales consisting of professional and consumer graphics software, productivity software, Linux products and video communications:
| Three Months
Ended August 31 |
Nine Months
Ended August 31 | ||||||
| 2000 | 1999 | 2000 | 1999 | ||||
| Professional & Consumer Graphics software . . . . . . | $ 17,235 | $ 32,403 | $ 53,854 | $ 74,212 | |||
| Productivity software . . . . . . . . . . . . . . . . . . . . . . . . | 17,859 | 38,870 | 57,106 | 107,493 | |||
| Linux operating system and applications. . . . . . . . . . . . . . |
1,263 |
- | 6,179 | - | |||
| Video Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . | - | 39 | (2) | 414 | |||
| Total sales | $ 36,357 | $ 71,312 | $ 117,137 | $ 182,119 | |||
Graphics software revenues decreased by $15.2 million in the third quarter of fiscal 2000, as compared to the third quarter of fiscal 1999. Graphics software revenues also decreased by $20.4 million in the first nine months of fiscal 2000, as compared to the first nine months of fiscal 1999. The reduction in Graphics software revenue is primarily attributable to CorelDRAW 9 being in the early stages of its life cycle in the third quarter of fiscal 1999 and nearing the end of its life cycle in the third quarter of 2000.
Productivity software revenues decreased by $21.0 million in the third quarter of fiscal 2000, as compared to the third quarter of fiscal 1999. Productivity software also decreased by $50.4 million in the first nine months of fiscal 2000, as compared to the first nine months of fiscal 1999. The reduction in productivity sales revenue was due primarily to WordPerfect Office 2000 drawing to the end of its life cycle in the third quarter of fiscal 2000.
The Company distributes its products primarily through distributors (as retail packaged products), OEM licenses and corporate licenses. The table below shows sales through these channels:
| Three Months
Ended August 31 |
Nine Months
Ended August 31 | ||||||
| 2000 | 1999 | 2000 | 1999 | ||||
| Retail packaged products | $ 17,133 | $ 42,471 | $ 58,927 | $ 103,560 | |||
| OEM licenses | 4,313 | 8,464 | 13,168 | 21,835 | |||
| Corporate licenses | 14,911 | 20,377 | 45,042 | 56,724 | |||
| Total sales | $36,357 | $71,312 | $117,137 | $182,119 | |||
Retail packaged products and corporate licences are sold primarily through distributors. The three largest distributors accounted for $7.1 million (20%) and $21.4 million (30 %) of the Company's sales in the third quarter of fiscal 2000 and 1999, respectively, and $16.8 million (14%) and $60.8 million (33%) in the first nine months of fiscal 2000 and 1999, respectively. Retailed packaged product volume decreased by $25.3 million in the third quarter of fiscal 2000 and by $44.6 million in the first nine months of fiscal 2000 as compared to the same time periods in fiscal 1999. The reduction in retail packaged products was due primarily to the Company's flagship products, WordPerfect Office 2000 and CorelDRAW 9, being near the end of their life cycles.
OEM licenses decreased by $4.2 million in the third quarter of fiscal 2000 as compared to the third quarter of fiscal 1999. OEM license revenue also decreased by $8.7 million in the first nine months of fiscal 2000, as compared to the first nine months of fiscal 1999. The decrease in OEM license revenue is due primarily to decreases in sales of CorelDRAW 9, WordPerfect Office and Print House.
Corporate licenses, including maintenance revenues, decreased by $5.5 million in the third quarter of fiscal 2000, as compared to the third quarter of fiscal 1999. Corporate licenses decreased by $11.7 million in the first nine months of fiscal 2000, as compared to the first nine months of fiscal 1999. The decrease in corporate licenses is primarily attributable to WordPerfect Office 2000 being near the end of its life cycle.
The table below shows the Company's sales geographically:
| Three Months
Ended August 31 |
Nine Months
Ended August 31 | ||||||
| 2000 | 1999 | 2000 | 1999 | ||||
| North America | $ 25,963 | $ 48,191 | $ 72,052 | $ 120,266 | |||
| Europe | 5,814 | 14,690 | 28,754 | 45,937 | |||
| Other international | 4,580 | 8,431 | 16,331 | 15,916 | |||
| Total sales | $ 36,357 | $ 71,312 | $ 117,137 | $ 182,119 | |||
Sales outside North America, principally in Europe, were 29% and 32% of the Company's sales for the third quarter of fiscal 2000 and 1999, respectively. In the first nine months of fiscal 2000 and fiscal 1999 sales outside North America, principally in Europe, were 39% and 34%, respectively.
The Company's products are sold primarily in US dollars except to non-distributor customers in Canada. Sales in US dollars as a percentage of total sales were in excess of 90% in the third quarter of both fiscal 2000 and fiscal 1999, as well as the first nine months of both fiscal 2000 and fiscal 1999.
Gross Profit
The Company includes in cost of sales all costs associated with the acquisition of components, the assembly of finished products, product royalties, the amortization of software acquisition costs and shipping. Costs associated with warehousing are included in selling, general and administrative expenses. Acquired software has been capitalized and is currently being amortized over a 36-month period commencing with the month of first shipment of the product incorporating such acquired software, except for the cost of the WordPerfect family of software programs and related technology, which is currently being amortized over a five year period.
Gross profit as a percentage of sales increased marginally in the third quarter of fiscal 2000 as compared to the third quarter of fiscal 1999. In the first nine months of fiscal 2000 gross profit as a percentage of sales decreased as compared to the first nine months of fiscal 1999 due principally to the fixed costs components of cost of sales as described above being applied to an overall decrease in sales.
Advertising Expense
Advertising expenses include all marketing, advertising and trade show expenses. Advertising expenses decreased in both the third quarter of fiscal 2000 compared to the third quarter of fiscal 1999 and the first nine months of fiscal 2000 compared to the first nine months of fiscal 1999. The decrease in advertising expenses can be attributed to the Company's cost reduction plan.
Selling, General and Administrative Expense
Selling, general and administrative expenses include all general administrative expenses as well as expenses associated with warehousing. Selling, general and administrative expenses decreased in the third quarter of fiscal 2000 compared to the third quarter of fiscal 1999 primarily due to a reduced headcount. The increase in selling, general and administrative expenses in the first nine months of fiscal 2000 as compared to the first nine months of fiscal 1999 is primarily due to increased selling efforts for CorelDRAW 9, WordPerfect Office 2000 and Corel's Linux operating system, Corel LINUX OS, an increased headcount in the first two quarters of fiscal 2000 as well as a one time legal settlement of approximately $2.6 million and consulting costs related to the Company's cost reduction plan.
Research and Development Expense
The Company has expensed all of its internal software development costs as incurred, in accordance with Canadian GAAP. Research and development expenses are reported net of Canadian investment tax credits.
Net research and development expenses increased in the third quarter of fiscal 2000 compared to the third quarter of fiscal 1999 due to the upcoming launch of CorelDRAW 10 in the fourth quarter of fiscal 2000. Net research and development decreased marginally in the first nine months of fiscal 2000 as compared to the first nine months of fiscal 1999. Included in research and development expenses are one time employee severance costs associated with the Company's cost reduction plan of approximately $2.5 million.
Depreciation and Amortization Expense
Depreciation and amortization expenses, which do not include the amortization of purchased software, increased in both the third quarter and the first nine months of fiscal 2000 compared to the third quarter and the first nine months of fiscal 1999. The increase in depreciation and amortization expense is due primarily to the purchase of computer assets during the second quarter of fiscal 2000 as well as a one time revaluation of assets to market value.
Foreign Exchange Gains or Losses
Foreign exchange gains or losses on non-US dollar transactions are due to fluctuations in the value of those currencies relative to the value of the US dollar between the time of the transaction and its settlement, and revaluation gains or losses relating to short-term investments held in a currency other than the financial measurement and reporting currency due to fluctuations in the value of those currencies relative to the value of the US dollar.
Interest Expense (Income)
The Company reported a decrease in net interest expense in both the third quarter and the first nine months of fiscal 2000 compared to the third quarter and the first nine months of fiscal 1999. The change was due to the decreased balance of the Novell obligations.
Income Taxes
The Company's effective tax rates were (41%) and 4% for the third quarter of fiscal 2000 and 1999, respectively and (15.1%) and 9.5% for the first nine months of fiscal 2000 and 1999. These rates vary from the Company's statutory tax rate of 44%, primarily due to foreign tax rate differences associated with the Company's international operations and the unrecorded tax benefit of accounting losses in the 1999, 1998 and 1997 fiscal years. The accounting losses include loss carry forwards for income tax purposes.
Cost Reduction Plan
On May 16, 2000, following termination of the merger agreement with Inprise Corporation, the Company announced that it had undertaken a cost reduction plan with the intention of eliminating $40 million in costs to the Company on an annualized basis. The cost reduction plan has been implemented in a series of steps.
Cost reduction actions commenced in late April 2000, when the Company began to curtail discretionary spending, particularly in the area of direct marketing and travel. In early May 2000, the Company proceeded to identify broader areas of spending cuts, namely, in the areas of future hirings, capital purchases and other discretionary purchases. In mid-May 2000, the Company began to consider employee terminations and commenced a formal process of planning for spending cuts that would reduce its quarterly expenses to a level commensurate with expected achievable revenues.
The Company established a targeted spending rate for its second and third fiscal quarters based on its expectations in early May 2000 for achievable revenues in those periods. Consideration was also given to the amount of spending that had occurred in the first quarter and spending estimates for the second quarter, with a normalization factor for what was considered non-recurring. In summary, this called for a quarterly cost structure of $45 million or a $10 million quarterly reduction from normalized spending rates.
On June 8, 2000, the Company announced a reduction in its workforce of approximately 320 positions from a combination of employee terminations, termination of contract positions, elimination of vacant positions, attrition and termination of the services of independent contractors. The costs of severance and other termination payments estimated at $1.6 million, have been recorded in the Company's third fiscal quarter ending August 31, 2000. The estimated annualized cost saving from the workforce reduction, without taking into account one time implementation charges, is expected to be approximately $11 million.
On September 6, 2000, the Company announced that it had identified the remaining components of the previously-targeted $40 million in expenditure cuts, designed to realign the Company's costs with its expected achievable revenues. As part of this plan, the Company announced the proposed consolidation of its engineering operations, based in Dublin, Ireland, to its corporate headquarters in Ottawa, Canada. A total of 139 positions at the Dublin facility will be eliminated as a result of the move with the estimated costs of severance and other termination payment, being approximately $0.85 million recorded in the third quarter of fiscal 2000 and approximately $1.4 million in additional costs to be recorded in a future period.
The Company does not expect to incur significant costs in connection with the implementation of other components of the cost reduction plan other than workforce reduction.
As stated above, the Company's cost reduction plan is intended to match costs with expected achievable revenues for future quarters. In the past the Company has experienced an increase in revenues immediately following and as a result of the release by the Company of new versions of its products, including CorelDRAW and Corel WordPerfect Office. The Company may receive increased revenues from the expected release of a new version of CorelDRAW for Windows in the fourth quarter of fiscal 2000 and from the release of a new version of Corel WordPerfect Office for Windows in the first half of fiscal 2001. In addition, the Company may receive additional revenues from the release of Linux-based application software which is currently under development. However, there can be no assurance that the anticipated releases described above will result in such increases.
The Company is also considering the possible spin-off of non-core activities or activities which can be readily outsourced, as well as the sale of some or all of its minority investments. The Company does not expect that the transfer of such activities or the sale of such investments will result in immediate cost reductions or cash proceeds.
Liquidity and Capital Resources
As of August 31, 2000, the Company's principal sources of liquidity included cash and cash equivalents of approximately $11.6 million, and accounts receivable of $27.8 million. Cash equivalents consist of overnight call loans to a major Canadian bank.
Cash used in operations was $25.1 million for the first nine months of fiscal 2000 compared to cash provided by operations of $13.1 million for the first nine months of fiscal 1999. The decrease of $38.2 million was primarily due to the net loss of $46.8 million in the first nine months of fiscal 2000 as compared to the net income of $12.1 million in the first nine months of fiscal 1999.
Accounts receivable, net of provisions, increased in the third quarter of fiscal 2000 from the second quarter of 2000, primarily as a result of a reduction in the provision for sales returns to reflect the reduced level of products in the distribution channel.
Financing activities provided $15.2 million in the first nine months of fiscal 2000 compared to a net use of $0.3 million in the first nine months of fiscal 1999. The source of cash in 2000 through financing activities was the issuance of stock for $18.8 million and the exercise of employee stock options for $3 million as compared to $6.7 million from the exercise of stock options in the first nine months of fiscal 1999. The use of cash in the first nine months of 2000 and 1999 was the repayment of the Novell obligations.
Investing activities provided $3.4 million in the first nine months of fiscal 2000 compared to a use of
$11.4 million in the first nine months of fiscal 1999, including proceeds from sales of shares of GraphOn Corporation ("GraphOn") of $14.6 million in the first nine months of fiscal 2000 and expenditures for capital assets of $9.8 million in the first nine months of fiscal 2000 compared to $12.9 million for the purchase of capital assets in the first nine months of fiscal 1999.
On September 19, 2000, the Company announced it had entered into a share purchase agreement with an institutional investor. Subject to the terms and conditions of this agreement, the Company may issue and sell to the investor up to 14,690,000 shares in periodic draw down periods over 24 months, if all associated warrants are exercised.
On October 2, 2000, the Company announced it had formed a strategic alliance with Microsoft Corporation that will see the two companies expand their relationship to encompass projects related to Microsoft's new .NET initiative. As part of this expanded relationship, Microsoft has purchased 24 million non-voting participating convertible preferred shares at a purchase price of $5.625 per share or a total purchase price and liquidation value of $135 million convertible on a share for share basis subject to anti-dilution protections, but not in Microsoft's hands. The companies will also work together to support the development, testing and marketing of new products related to the .NET platform. Joint-marketing initiatives will include participation in product launches and trade show events and representation on mutual Web sites. In addition, both companies have agreed to settle certain legal issues between them.
At August 31, 2000, the Company's capital resource commitments consisted primarily of commitments under litigation settlement agreements, prior period asset purchase agreements and lease arrangements for office space. No significant commitments exist for future capital expenditures. The Company believes available balances of cash and cash equivalents combined with the proceeds of the shares issued and issuable as described above are sufficient to meet the Company's working capital requirements for the foreseeable future.
Potential Fluctuations in Quarterly Results
The Company has experienced, and expects to continue to experience, significant fluctuations in its quarterly operating results due to the following factors: market acceptance of new and enhanced products, timing and shipment of significant orders, mix of products sold, exchange rate fluctuations, length of sales cycles and cycles in the markets the Company serves. In addition, the Company's net sales and operating results for a future quarter will depend on generating and shipping orders in the same quarter that the order is received. The failure to receive anticipated orders or delays in shipments near the end of a quarter, due to rescheduling, cancellations or unexpected manufacturing difficulties, may cause net sales in a particular quarter to fall significantly below expectations. This could adversely affect the Company's operating results for such quarter.
Forward-looking Statements
This report and other reports and statements published by the Company from time to time (collectively, "Published Reports") contain, or may contain, certain forward-looking statements and information that are based on the beliefs of, and information currently available to, the Company's management, as well as estimates and assumptions made by the Company's management. When used in Published Reports, words such as "anticipate," "believe," "estimate," "expect," "future," "intend," "plan" and similar expressions, as they relate to the Company or the Company's management, identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions relating to the Company's operations and results of operations, competitive factors and pricing pressures, shifts in market demand, the performance and needs of the industries served by the Company, the costs of product development, the successful implementation of the cost reduction plan and other risks and uncertainties, including, in addition to any risks and uncertainties specifically identified in the text surrounding such statements, those risks discussed in Corel Corporation's 1999 Annual Report on Form 10-K under the section titled "Factors That May Affect Future Operating Results," uncertainties with respect to changes or developments in social, business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including the Company's stockholders, customers, suppliers, business partners, competitors and legislative, regulatory, judicial and other governmental authorities and officials. Should one or more of these risks or uncertainties materialize, or should the underlying estimates or assumptions prove incorrect, actual results or outcomes may vary significantly from those anticipated, believed, estimated, expected, intended or planned.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On or about February 23, 1998, the Company became aware that a class action lawsuit had been filed against it by named Plaintiff Great Neck Capital Appreciation Investment Partnership in the United States District Court for the Eastern District of New York. The Great Neck complaint was consolidated by order dated June 1, 1998 with four other previously filed complaints: Giskan, Meyer, Mangold and Hagler. Also on June 1, 1998, the court approved the plaintiff's motion for the appointment of lead plaintiff and lead counsel. Great Neck (as lead plaintiff) filed a consolidated amended complaint on behalf of lead plaintiff and the class on September 9, 1998 (the "Consolidated Complaint"). On February 7, 2000, the Court preliminarily approved the proposed settlement and fixed May 12, 2000 as the date for the settlement hearing. By Order and Final Judgment dated May 12, 2000, the Consolidated Complaint was dismissed with prejudice pursuant to an agreed payment by the Company.
On or about June 19, 1998, the Company became aware of a complaint filed against it by Dennis Berkla, d.b.a. Digarts Software. The plaintiff claimed breach of a Non-Disclosure Agreement (NDA) and claimed Copyright Infringement. On January 24, 2000, the District court issued an order denying recovery of attorneys' fees or costs by either party. On February 24, 2000, plaintiff filed a second notice of appeal, appealing the District Court's denial of recovery of plaintiff's attorneys' fees. Corel has cross-appealed the District Court's order denying Corel's attorneys' fees and costs. All appeals are pending. Court-connected mediation regarding the appeal issues was held on June 19, 2000 with no resolution.
On December 15, 1999, Corel filed suit against the United States of America in the U.S. District Court for the District of Columbia, in Washington, D.C., for the actions of its agency, the Department of Labor in conducting an unlawful procurement. The Complaint claims that, in its goal to standardize its office automation suite, the Department of Labor violated various statutes, regulations and treaties by "sole-sourcing" its contract to a competing vendor rather than conduct an open and fair procurement in accordance with U.S. law. In dispute is the decision by the Department of Labor to standardize on a competing product despite the fact that, at the time of the award, the Corel WordPerfect family of products was licenced for a majority of the Department's 20,000 work stations. It is believed that the three-year standardization deal with the competing vendor could be valued as high as US $8 million. As a remedy, Corel is seeking an immediate injunction against the further implementation of the "sole source" contract and to have it declared void. Corel is also seeking to have the standardization process and related procurement activities tendered in a fair and open competition in accordance with the applicable statutes, regulations and treaties. The Answer to the Complaint was filed by the Government on March 21, 2000. The Government has filed a motion to have Corel's action dismissed for lack of jurisdiction and, in the alternative, for summary judgment. Corel filed its motion for preliminary injunction. All motions were argued on August 11, 2000 in conjunction with arguments on the merits of the case. The decision of the court is pending.
On October 14, 1999, the Ontario Securities Commission filed charges against Dr. Michael C.J. Cowpland, the Company's former Chairman, President and Chief Executive Officer and his holding company, M.C.J.C. Holdings Inc., in the Ontario Court of Justice. The charges include four counts of violating provisions of the Ontario Securities Act related to insider trading. The trial of these issues is a private matter between the Ontario Securities Commission and Dr. Cowpland as an individual. As such, it is not expected to affect the Company's day-to-day activities. Dr. Cowpland continues to deny all allegations by the Ontario Securities Commission.
On March 13, 2000, the Company was served with a complaint filed against it and Dr. Michael C.J. Cowpland by plaintiffs Anthony Basilio and Fred Spagnola in the United States District Court for the Eastern District of Pennsylvania. The complaint was filed on behalf of all persons who purchased or otherwise acquired Corel common shares between December 7, 1999 and December 21, 1999 (the "Class Period"). The complaint alleges that the defendants violated various provisions of the federal securities laws, including Section 10(b), Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, as amended, by misrepresenting or failing to disclose material information about Corel's financial condition. The complaint seeks an unspecified amount of money damages. On March 29, 2000, the Company was served with a second complaint filed against the same named defendants by plaintiff Alan Treski in the United States District Court for the Eastern District of Pennsylvania. This second complaint references an identical Class Period as the Basilio complaint referenced above and contains similar allegations. Since service of the Basilio and Treski complaints, the Company has become aware of four additional complaints filed in the same jurisdiction and one complaint filed in the District of Massachusetts that reference an identical Class Period and contain similar allegations. On May 12, 2000, the firm of Savett Frutkin Podell & Ryan, counsel for plaintiffs Basilio, Spagnola and Treski, filed Motions for Appointment of Lead Plaintiffs and Co-Lead Counsel and a related Motion for Consolidation in respect of the six pending Eastern District of Pennsylvania and the one District of Massachusetts actions. A scheduling conference occurred on June 14, 2000. All plaintiffs support consolidation of the pending cases in the Eastern District of Pennsylvania. At the conference on June 14, 2000, the court appointed Fred Spagnola, Michael Perron and David Chavez as Lead Plaintiffs, and the law firms of Weinstein, Kitchenoff Scarlato & Goldman Ltd. and Savett Frutkin Podell& Ryan, P.C. as Co-Lead Counsel. The Court has consolidated all pending cases in the Eastern District of Pennsylvania. An Amended Consolidation Complaint was served on or about August 14, 2000. The Amended Consolidated Complaint references an expanded class period, from December 7, 1999 to March 20, 2000 (inclusive). On October 16, 2000 Corel will file a motion to dismiss the complaint on the grounds of forum non conveniens and for failure to state the claims in accordance with applicable laws. The Company intends to aggressively defend this matter.
On April 24, 2000, Carleton Acquisition Co., a wholly-owned subsidiary of Corel, was served with a lawsuit filed by Management Insights, Inc. in the Court of Chancery of the State of Delaware in New Castle County against Inprise Corporation ("Inprise"), four individually named directors of Inprise, Corel and Carleton Acquisition Co. The president and CEO of the plaintiff corporation is C. Robert Coates, who resigned as director of Inprise allegedly as a result of the proposed merger with Corel. The plaintiff sought an injunction against the consummation of the merger, and in the alternative sought rescissory and other unspecified equitable relief and damages. As against Corel, the plaintiff alleged that the Company induced the merger agreement with misrepresentations of its current and projected financial results. Due to the failure of the Corel / Inprise merger on May 16, 2000, the case became moot. On June 5, 2000, the case was dismissed with prejudice, with the defendant Inprise contributing some funds toward the plaintiff's legal costs. The Company did not contribute funds toward the settlement.
The Company is a party to a number of additional claims arising in the ordinary course of business relating to employment, intellectual property and other matters. The Company believes that such claims, individually, will not have a material adverse effect on its business, financial position or results of operations but, in the aggregate, may have a material adverse effect on its business, financial position or results of operations. Such possible effect cannot be reasonably estimated at this time.
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibits are filed as part of this Quarterly Report on Form 10-Q
3.1 - Amendment to Articles of Incorporation, dated October 2, 2000, to create a first series of 24,000,000 participating convertible preferred shares.
4.1 - Purchase Agreement, dated October 2, 2000, between Corel Corporation and Microsoft Corporation (previously filed as an exhibit to the Company's Current Report on Form 8-K dated October 2, 2000 and incorporated herein by reference)
4.2 - Registration Rights Agreement, dated October 2, 2000, between Corel Corporation and Microsoft Corporation (previously filed as an exhibit to the Company's Current Report on Form 8-K dated October 2, 2000 and incorporated herein by reference)
10.1 - Technology Support and Settlement Agreement, dated October 2, 2000, between Corel Corporation and Microsoft Corporation (previously filed as an exhibit to the Company's Current Report on Form 8-K dated October 2, 2000 and incorporated herein by reference)
27.1 - Financial Data Schedule
b) Reports on Form 8-K
On June 13, 2000, June 16, 2000, June 21, 2000, June 22, 2000, June 26, 2000, June 27, 2000, June 30, 2000, August 17, 2000, September 12, 2000, September 28, 2000 and October 11, 2000 the Company filed Current Reports on Form 8-K which included information under Item 5 (Other Events).
Items 2,3,4 and 5 are not applicable and have been omitted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
COREL CORPORATION
(Registrant)
Date: October 16, 2000 By: /s/ John Blaine
John Blaine
Chief Financial Officer, Executive Vice QAGQ
(Principal Financial and Accounting Officer)
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