##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 20-F
  o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
    THE SECURITIES EXCHANGE ACT OF 1934ORþ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended April
    30, 2007ORo

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

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934Date of event requiring this
    shell company report       Commission file number: 0-49984
  MITEL NETWORKS CORPORATION /
    CORPORATION MITEL NETWORKS
 (Exact name of Registrant as
    specified in its charter)
  MITEL NETWORKS CORPORATION
 (Translation of
    Registrants name into English)
  Canada
 (Jurisdiction of incorporation
    or organization)
  350 Legget Drive
 Ottawa, Ontario, Canada K2K 2W7
 (Address of principal executive
    offices)
  Securities registered or to be registered pursuant to
    Section 12(b) of the Act:
 None
  Securities registered or to be registered pursuant to
    Section 12(g) of the Act:
 Common Shares, Without Par Value
    o þ
  o þ
  þ o
  Rule 12b-2
  o o þ
   þ o
  Rule 12b-2 o þ




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##### Table of Contents



Basis of
    Presentation
  Form 20-F
  Forward
    Looking Information
    
    our ability to achieve profitability in the future;
    our ability to achieve anticipated cost savings, revenue
    enhancements and other benefits expected from our acquisition of
    Inter-Tel;
    the continued development of the market opportunity for
    IP-based
    communications solutions and related services;
    technological developments and evolving industry standards;
    our dependence on a small number of outside contract
    manufacturers to manufacture our products;
    our dependence on sole source and limited source suppliers for
    key components;
    delay in the delivery of, or lack of access to, software or
    other intellectual property licensed from our suppliers;
    our ability to protect our intellectual property and our
    possible infringement of the intellectual property rights of
    third parties;
    our reliance on our channel partners for the majority of our
    sales;
    our solutions may contain design defects, errors, failures or
    bugs;
    intense competition from our competitors, many of which have
    greater financial resources;
    our reliance on strategic alliances;
    uncertainties arising from our foreign operations; and
    the fluctuations in our quarterly and annual revenues and
    operating results.   2




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##### Table of Contents



TABLE OF
    CONTENTS
  
  PART I


5Item 1. Identity of Directors, Senior
    Management and Advisors


5Item 2. Offer Statistics and Expected
    Timetable


5Item 3. Key Information


5A. Selected Financial Data


5B. Capitalization and Indebtedness


6C. Reasons for the Offer and Use of Proceeds


6D. Risk Factors


6Item 4. Information on Mitel


19A. History and Development of Mitel


19B. Business Overview


21C. Organizational Structure


31D. Property, Plant and Equipment


31Item 5. Operating and Financial Review and
    Prospects


32A. Operating Results


37B. Liquidity and Capital Resources


57C. Research and Development, Patents and
    Licenses, etc.


60D. Trend Information


60E. Off-balance Sheet Arrangements


62F. Tabular Disclosure of Contractual
    Obligations


62G. Safe Harbor


63Item 6. Directors, Senior Management and
    Employees


63A. Directors and Senior Management


63B. Compensation


69C. Board Practices


73D. Employees


74E. Share Ownership


75Item 7. Major Shareholders and Related Party
    Transactions


77A. Major Shareholders


77B. Related Party Transactions


78C. Interests of Experts and Counsel


83Item 8. Financial Information


83A. Consolidated Statements and Other Financial
    Information


83B. Significant Changes


84Item 9. The Offer and Listing


84A. Offer and Listing Details


84B. Plan of Distribution


84C. Markets


84D. Selling Shareholders


84E. Dilution


84F. Expenses of the Issue


85 3




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Item 10. Additional Information


85A. Share Capital


85B. Memorandum and Articles of Incorporation


85C. Material Contracts


90D. Exchange Controls


94E. Taxation


95F. Dividends and Paying Agents


99G. Statement by Experts


99H. Documents on Display


99I. Subsidiary Information


99Item 11. Quantitative and Qualitative
    Disclosures About Market Risk


100Item 12. Description of Securities Other than
    Equity Securities


101PART II


101Item 13. Defaults, Dividend Arrearages and
    Delinquencies


101Item 14. Material Modifications to the Rights
    of Security Holders and Use of Proceeds


101Item 15. Controls and Procedures


101Item 16. [Reserved]


101A. Audit Committee Financial Expert


101B. Code of Ethics


101C. Principal Accountant Fees and Services


102D. Exemptions from the Listing Standards for
    Audit Committees


102E. Purchases of Equity Securities by the Issuer
    and Affiliated Purchasers


102PART III


103Item 17. Financial Statements


103Item 18. Financial Statements


103Item 19. Exhibits


103EX-1.7EX-2.5EX-2.23EX-2.24EX-2.25EX-4.6EX-4.68EX-4.69EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2EX-99.9EX-1.7: ARTICLES OF AMENDMENT DATED AUGUST 16, 2007EX-2.5: SPECIMEN CLASS 1 SHARE CERTIFICATEEX-2.23: FIRST LIEN CREDIT AGREEMENTEX-2.24: SECOND LIEN CREDIT AGREEMENTEX-2.25: CLASS I CONVERTIBLE PREFERRED SHARE SUBSCRIPTION AGREEMENTEX-4.6: FORM OF WARRANT AS AMENDED ON AUGUST 16, 2007EX-4.68: COMMON SHARE REPURCHASE, VOTING AND CONVERSION AGREEMENTEX-4.69: COMMON SHARE REPURCHASE AND VOTING AGREEMENTEX-8.1: SUBSIDIARIESEX-12.1: CERTIFICATIONEX-12.2: CERTIFICATIONEX-13.1: CERTIFICATIONEX-13.2: CERTIFICATIONEX-99.1: AUDITORS CONSENT   4




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##### Table of Contents



Note to
    Shareholders
      PART I
  Item 1.
    Identity
    of Directors, Senior Management and Advisors    Item 2.
    Offer
    Statistics and Expected Timetable    Item 3.
    Key
    Information  A.
    Selected
    Financial Data    STATEMENT
    OF OPERATIONS DATA
  Fiscal Year





Six DaysEnded





Ended


Fiscal Year EndedApril 27,


April 25,


April 24,


April 30,


April 30,


April 30,2003


2004


2005


2005


2006


2007(In millions, except share and per share data)Consolidated Statement of Operations DataRevenues

$
352.2


$
340.7


$
342.2


$
3.2


$
387.1


$
384.9Cost of revenues


225.4



202.9



213.2



2.4



225.7



225.1Gross margin


126.8



137.8



129.0



0.8



161.4



159.8Expenses Research and development


41.2



36.2



41.4



0.7



44.1



41.7Selling, general and administrative


114.9



111.4



114.9



1.8



120.7



123.5Special charges(1)


13.7



11.7



10.6







5.7



9.3Litigation settlement






















16.3Initial public offering costs






















3.3Loss (gain) on disposal of assets






0.6



3.4







(2.4
)


(1.0
)Amortization of acquired intangibles(2)


29.1



0.2















Operating loss


(72.1
)


(22.3
)


(41.3
)


(1.7
)


(6.7
)


(33.3
)Other (income) expense, net


0.9



8.0



7.5



(0.1
)


39.8



(0.1
)Income tax (recovery) expense


(2.9
)


0.3



0.8







(1.9
)


1.8Net loss

$
(70.1
)

$
(30.6
)

$
(49.6
)

$
(1.6
)

$
(44.6
)

$
(35.0
)Net loss per common share Basic and diluted

$
(0.63
)

$
(0.26
)

$
(0.49
)

$
(0.01
)

$
(0.44
)

$
(0.36
)Weighted average number of Common Shares outstanding


113,109,751



127,831,211



113,792,829



117,149,933



117,230,198



117,336,927  5




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BALANCE
    SHEET DATA
  As at


As at


As at


As at


As at


As atApril 27,


April 25,


April 24,


April 30,


April 30,


April 30,2003


2004


2005


2005


2006


2007(In millions)Consolidated Balance Sheet DataCash and cash equivalents

$
22.3


$
26.7


$
9.7


$
46.6


$
35.7


$
33.5Other current assets


120.6



115.0



117.5



115.8



130.8



136.9Property and equipment


25.3



20.3



20.9



20.6



17.4



16.5Other assets


7.3



7.4



8.5



12.3



15.9



15.3Total assets

$
175.5


$
169.4


$
156.6


$
195.3


$
199.8


$
202.2Current liabilities

$
135.8


$
103.2


$
115.8


$
101.9


$
126.0


$
143.8Long-term debt


23.1



15.5



20.2



66.7



56.7



66.8Derivative instruments(3)(5)






29.2



38.0



37.4



75.9



67.3Other long-term liabilities


24.6



24.8



25.4



25.1



45.6



55.4Redeemable shares(4)(5)


29.0



51.3



57.2



57.3



64.2



71.5Capital stock


183.4



184.8



187.6



187.6



188.8



189.1Other capital accounts


(2.2
)


7.7



14.7



23.3



(1.9
)


6.5Accumulated deficit


(218.2
)


(247.1
)


(302.3
)


(304.0
)


(355.5
)


(398.2
)Total liabilities and shareholders equity

$
175.5


$
169.4


$
156.6


$
195.3


$
199.8


$
202.2     (1)
    
    Special charges related to restructuring activities, product
    line exit and other loss accruals undertaken to improve our
    operational efficiency and to realign our business.(2)
    
    Acquired intangible assets relating to the acquisition of the
    Mitel name, certain assets and subsidiaries from Zarlink
    Semiconductor Inc. in 2001 were fully amortized in 2004.(3)
    
    The derivative instruments related to our Class A
    Series 1 Preferred Shares (the Series A
    Preferred Shares) and the Class B Series 1
    Preferred Shares (the Series B Preferred
    Shares). The derivative instruments arose because a
    portion of the redemption price of the Series A Preferred
    Shares and Series B Preferred Shares is indexed to our
    common share price and as required by SFAS 133 has been
    bifurcated and accounted for separately.(4)
    
    Redeemable shares included 10,000,000 Common Shares (which are
    redeemable by virtue of a shareholders agreement dated
    April 23, 2004, as amended, among certain of our
    shareholders and us), 20,000,000 Series A Preferred Shares
    and 67,789,300 Series B Preferred Shares (See
    Item 6.A. Directors, Senior Management and
    Employees  Directors and Senior Management).(5)
    
    On August 16, 2007, in conjunction with the Merger (as
    defined below), we converted each existing Series A
    Preferred Share into Common Shares and Class 1 Preferred
    Shares, converted each existing Series B Preferred Share
    into Common Shares and purchased for cancellation the redeemable
    shares.  B.
    Capitalization
    and Indebtedness    C.
    Reasons
    for the offer and use of proceeds    D.
    Risk
    Factors  An investment in our Common Shares should be regarded as
    highly speculative and is suitable only for those investors who
    are able to sustain a total loss of their investment. You should
    carefully consider the following risks, as
 6




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well as the other information contained in this annual
    report, when evaluating us and our business and prospects. Any
    of the following risks, as well as risks not currently known to
    us, could materially and adversely affect our business, results
    of operations or financial condition, and could result in a
    complete loss of your investment.
  Risks
    Relating to our Business
  We
    have incurred net losses since our incorporation in 2001 and we
    may not be profitable in the future.
    We may
    fail to realize the anticipated cost savings, revenue
    enhancements and other benefits expected from our acquisition of
    Inter-Tel.
        Uncertainties
    associated with our integration and cost-reduction plans may
    cause a loss of employees and may otherwise materially adversely
    affect our future business and operations.
   7




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Norman Stout
  Craig W. Rauchle
  Douglas W. Michaelides
  Ronald G. Wellard
 8




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
    our contract manufacturers experiencing delays, disruptions or
    quality control problems in their manufacturing operations;
    lead-times for required materials and components varying
    significantly and being dependent on factors such as the
    specific supplier, contract terms and the demand for each
    component at a given time;
    overestimating our forecast requirements resulting in excess
    inventory and related carrying charges;
    underestimating our requirements, resulting in our contract
    manufacturers having inadequate materials and components
    required to produce our products, or overestimating our
    requirements, resulting in charges assessed by the contract
    manufacturers or liabilities for excess inventory, each of which
    could negatively affect our gross margins; and
    the possible absence of adequate capacity and reduced control
    over component availability, quality assurances, delivery
    schedules, manufacturing yields and costs.    We
    depend on sole source and limited source suppliers for key
    components. If these components are not available on a timely
    basis, or at all, we may not be able to meet scheduled product
    deliveries to our customers.
    Delay
    in the delivery of, or lack of access to, software or other
    intellectual property licensed from our suppliers could
    adversely affect our ability to develop and deliver our
    solutions on a timely and reliable basis.
   9




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Our
    success is dependent on our intellectual property. Our inability
    or failure to protect our intellectual property could seriously
    harm our ability to compete and our financial
    success.
        Our
    business may be harmed if we infringe intellectual property
    rights of third parties.
     10




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We
    rely on our channel partners for the majority of our sales, and
    disruptions to, or our failure to effectively develop and
    manage, our distribution channel and the processes and
    procedures that support it could adversely affect our ability to
    generate revenues.
      Design
    defects, errors, failures or bugs, which may be
    difficult to detect, may occur in our solutions.
   11




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We
    face intense competition from many competitors and we may not be
    able to compete effectively against these
    competitors.
      As
    voice and data networks converge, we are likely to face
    increased competition from companies in the information
    technology, personal and business applications and software
    industries.
     12




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Our
    business may suffer if our strategic alliances are not
    successful.
    Our
    operations in international markets involve inherent risks that
    we may not be able to control.
    
    political or social unrest or economic instability in a specific
    country or region;
    macroeconomic conditions adversely affecting geographies where
    we do business;
    higher costs of doing business in foreign countries;
    infringement claims on foreign patents, copyrights, or trademark
    rights;
    difficulties in managing operations across disparate geographic
    areas;  
    difficulties associated with enforcing agreements and
    intellectual property rights through foreign legal systems;  
    trade protection measures and other regulatory requirements
    which may affect our ability to import or export our products
    from or to various countries;
    adverse tax consequences;
    unexpected changes in legal and regulatory requirements;
    military conflict, terrorist activities, natural disasters and
    widespread medical epidemics; and
    our ability to recruit and retain channel partners in foreign
    jurisdictions.  Our
    competitive position may be affected by fluctuations in exchange
    rates, and our current currency hedging strategy may not be
    sufficient to counter such fluctuations.
   13




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Our
    quarterly and annual revenues and operating results have
    historically fluctuated, and the results of one period may not
    provide a reliable indicator of our future
    performance.
    
    the fact that an individual order or contract can represent a
    substantial amount of revenues for that period;
    the size, timing and shipment of individual orders;
    changes in pricing or discount levels by us or our competitors;
    foreign currency exchange rates;
    the mix and volume of products sold by us;
    the timing of the announcement, introduction and delivery of new
    products
    and/or
    product enhancements by us and our competitors; and
    general economic conditions.    Our
    business requires a significant amount of cash, and we may
    require additional sources of funds if our sources of liquidity
    are unavailable or insufficient to fund our
    operations.
    
    the level of sales and the related margins on those sales;
    the collection of receivables;
    the timing and size of capital expenditures;
    the timing and size of purchase of inventory and related
    components;
    costs associated with potential restructuring actions;
    the timing and volume of sales of leases to third party funding
    sources;
    mergers and acquisitions; and
    customer financing obligations.    and/or
 14




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The
    exercise of conversion rights by one or more of our preferred
    shareholders, warrant holders, and option holders, could
    adversely affect the market value of our Common Shares as well
    as our ability to complete any future equity
    financing.
    
    307,087 Class 1 Preferred Shares (Class 1
    Preferred Shares). These Class 1 Preferred Shares are
    convertible into Common Shares at the option of the holders and
    upon certain triggering events. The conversion ratio 767.08 was
    as of September 28, 2007 and increases over time than one Common
    Share for each Class 1 Preferred Share;
    Stock options to acquire 22,407,179 Common Shares; and
    Warrants to acquire up to an additional 81,505,385 Common Shares.    We
    have a significant amount of debt, which contain customary
    default clauses, a breach of which may result in acceleration of
    the repayment of some or all of this debt.
    We are
    exposed to risks inherent in our defined benefit pension
    plan.
    Transfer
    pricing rules may adversely affect our income tax
    expenses.
   15




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Future
    changes in financial accounting standards could adversely affect
    our reported results of operations.
    Governmental
    regulation could harm our operating results and future
    prospects.
    E-Rate E-Rate
  Our
    future success depends on our existing key
    personnel.
   16




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We may
    make further strategic acquisitions in the future. We may not be
    successful in operating or integrating these
    acquisitions.
    
    unanticipated costs and liabilities;
    difficulties in integrating new products, software, businesses,
    operations, technology infrastructure and personnel in an
    efficient and effective manner;
    difficulties in maintaining customer relations;
    the potential loss of key employees of the acquired businesses
    or our key employees;
    the diversion of the attention of our senior management from the
    operation of our daily business;
    the potential adverse effect on our cash position as a result of
    all or a portion of an acquisition purchase price being paid in
    cash;
    the potential issuance of securities that would dilute our
    shareholders percentage ownership;
    the inability to maintain uniform standards, controls, policies
    and procedures; and
    fluctuations in interests rates, and the timing and volume of
    sales of leases to third party funding sources.    The
    costs and risks associated with Sarbanes-Oxley regulatory
    compliance may have a material adverse effect on
    us.
  and/or
  Business
    interruptions could adversely affect our
    operations.
   17




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Risks
    Related to an Investment in our Common Shares
  There
    are significant restrictions on the resale of our securities and
    there can be no assurance as to when such restrictions will
    cease to apply, if ever.
  Securities Act
    of 1933 and/or
  Each
    of Francisco Partners and Dr. Matthews is a significant
    shareholder and each has the potential to exercise significant
    influence over matters requiring approval by our
    shareholders.
    Each
    of Francisco Partners and Dr. Matthews
    ownership of our Common Shares, as well as provisions contained
    in our articles of incorporation and Canadian law, may reduce
    the likelihood of a change of control occurring and, as a
    consequence, may deprive you of the opportunity to sell your
    Common Shares at a control premium.
  Competition Act Investment Canada Act
 18




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You
    may be unable to bring actions or enforce judgments against us,
    certain of our directors and officers, certain of the selling
    shareholders or our independent public accounting firm under
    U.S. federal securities laws.
    U.S.
    investors will suffer adverse United States federal income tax
    consequences if we are characterized as a passive foreign
    investment company.
    Item 4.
    Information
    on Mitel  A.
    History
    and Development of Mitel  (613) 592-2122, (613) 592-4784.
  Significant
    developments subsequent to fiscal 2006:
  Form F-1
   19




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inter alia
                
    $330 million in a senior secured first lien facility,
    comprised of:      
    $130 million in a senior secured second lien facility.     20




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International
    Brotherhood of Electrical Workers
    Inter-Tel
    Merger:
    B.
    Business
    Overview  IP-based
  IP-based IP-based IP-based
 21




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##### Table of Contents



IP-based IP-based IP-based IP-based IP-based
  IP-based IP-based
  Our
    Solutions
  IP-based
      
    Mitel Applications Suite:  TMC Labs Innovation
    Award (2007)
    Mitel Customer Interaction Solutions:  IP
    Contact Center Technology Pioneer Award (2007)
    Mitel Your Assistant, Quick Conference and 5340 IP
    Phone:  Communications Solutions Magazine, Product
    of the Year (2006)
    Mitel Customer Interaction Solutions:  Miercom
    Best Supervisor Functions (2006)
    Mitel Customer Interaction Solutions:  TMC Labs
    Innovation Award (2006)
    Mitel Live Business Gateway:  Internet
    Telephony Product of the Year (2006)
    Mitel Customer Interaction Solutions:  IP
    Contact Center Technology Pioneer Award (2006)
    Mitel Navigator:  Internet Telephony Product of
    the Year (2005); and Frost & Sullivan Award for
    Technology Innovation (2006)
    Mitel Customer Interaction Solutions/Mitel Contact Center
    Solutions:  Customer Value Enhancement Award
    Contact Center Industry (2004); Customer Interaction Solutions
    IP Contact Center Technology Pioneer Award (2005); and TMC Labs
    Innovation Award (2005) 22




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
    Mitel Messaging Server:  Internet Telephony
    Product of the Year (2005)  
    Mitel 3300 IP Communications Platform
    (ICP):  Rated Best
    IP-PBX
    Value, Mid-Size systems by Miercom (2005)  
    Mitel SX-200 IP Communications Platform
    (ICP):  Rated Best in Test by Miercom
    (2005)
    Mitel Your Assistant:  Communications
    Convergence, Visions of Convergence, Product of the Year (2004)  IP-based IP-based
  Platforms
    and Gateways
    
    The Mitel 3300 IP Communications Platform(ICP). The Mitel 3300 ICP, the
    cornerstone of our
    IP-based
    communications product portfolio, is a converged communications
    platform that supports our suite of advanced call processing and
    related applications and
    IP-enabled
    desktop devices. Our call processing software supports over 500
    networking and end user features and is available in up to
    10 languages. The Mitel 3300 ICPhas the flexibility
    to operate as either a single site, distributed or hosted
    solution and interoperates with a customers legacy
    infrastructure. The Mitel 3300 ICPis scalable to serve
    the needs of small and medium businesses with as few as 10
    users, and large enterprises with as many as 65,000 users.
    The Mitel 3300 ICPalso acts as an applications and
    services gateway, allowing customers access to advanced
    applications such as messaging, mobility and teleworking. With
    the Mitel Live Business Gateway attributes enabled, the
    applications and services gateway provides connectivity to
    Microsofts Live Communications Server for our solutions
    and the legacy infrastructure of competitors. The applications
    and services gateway uses open industry standards to
    interoperate with our and third party business applications and
    devices.
    For customers with branch offices, we offer the ability to
    either implement a Mitel 3300 ICPat each location or
    allow users at a remote site to receive a hosted service from a
    Mitel 3300 ICPsituated elsewhere in the network (or a
    combination of both options). Those customers using a hosted
    model have access to the same software applications and services
    as those situated at the office where the Mitel 3300 ICPphysically resides. The Mitel 3300 ICPcan also be
    implemented as a survivable gateway at a branch office such that
    if the network to the office from which they are being hosted
    becomes unavailable, then the local Mitel 3300 ICPwill provide the same services seamlessly until the network
    connection is restored. We are able to distribute the features,
    software applications and services normally only available at
    larger corporate offices to any part of the network, addressing
    the communications challenges facing organizations with
    decentralized operations and personnel. This approach also
    provides alternative network configurations for customers
    concerned with disaster recovery and business continuity.
    Mitel Enterprise Manager.  Our enterprise
    management application allows our customers to administer and
    control their network of Mitel 3300 ICPs and associated
    applications and devices. This application allows our customers
    to administer users, monitor and control telecommunication
    spending as well as network monitoring, alarm handling and
    troubleshooting. Our enterprise management application include
    the following:  
    Enterprise Manager.  The Enterprise Manager
    provides a single management interface to monitor and manage all
    of the activities of the Mitel 3300 ICPand perform
    day-to-day management tasks helping control costs by delivering
    simplified PC-based administration.
    Remote Management.  The Remote Management
    capabilities allows the maintainer to access network and system
    information and resolve issues remotely. 23




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
    Integrated Management Applications.  Integrated
    Management Applications provides the ability to analyze the IP
    networks capability to support IP communications. Voice
    quality metrics and diagnostics can be used to test the network
    capabilities and to help troubleshoot potential issues.
    Technology Interfaces.  Recognizing that some
    customers may have specialized requirements beyond our packaged
    software products, we offer a wide range of technology
    interfaces for specific enhancements. Open interfaces allow
    integration to third party management solutions, such as those
    from Microsoft and Hewlett Packard.  
    Mitel SX-200 ICP.  The Mitel SX-200 ICPspecifically addresses the North American market and
    provides the features required by the smaller business market
    and the hospitality industry. The Mitel SX-200 ICPtargets organizations with up to 600 users either at a
    single location or in multiple locations and it supports
    networking and interoperability with legacy Mitel SX-200systems.
    Mitel 3600 Hosted IP Key System.  The Mitel
    3600 Hosted IP Key System is designed for businesses with
    fewer than 20 employees. This product is sold through
    service providers or channel partners who wish to offer a hosted
    solution and eliminate the need for the platform to be located
    and managed at the end-users office. The Mitel 3600enables the features of a key telephone system to be
    delivered as a service and works with our Mitel IP Phones.  Desktop
    Portfolio:
  IP-based
  IP-based IP-based
  Mitel 3300 ICP
  Applications
  IP-based
  
    Contact Center Applications.  A contact center
    is generally a dedicated function within a business that
    typically serves as an inside sales help desk, providing
    customer support, lead generation, emergency response, telephone
    answering service, inbound response and outbound telemarketing.
    In addition to delivering solutions to this requirement we have
    developed capabilities in anticipation of trends in this sector.
    This includes supporting integrated customer service groups for
    staff in any location, including work at home agents. Also,
    customer service organizations need to serve their clients via
    any media  a reality in todays consumer market.
    To meet these requirements we provide sophisticated routing and
    agent capabilities as well as a suite of web-based applications
    for streamlining contact center management and reporting.
    Customers can therefore choose to implement those elements that
    are most relevant to their business needs. Our contact center
    applications provide multimedia functionality incorporating
    routing of an 24




---



##### Table of Contents



inquiry to the first available agent or the agent that has been
    idle for the longest period. Visibility of the presence and
    availability of colleagues or resources can be provided by
    integration with Microsoft Live Communications Server using the
    Mitel Live Business Gateway to facilitate first call resolution.
    An inquiry can be associated with an incoming call,
    e-mail, fax
    or webchat. Contact center agents are fully supported across a
    centralized or multi-site environment including home working.  
    Wireless Telephony Applications.  We offer
    wireless telephony applications for in-building mobility as well
    as to enable the seamless convergence of in-building wired or
    wireless networks with mobile cellular-based networks. Our
    in-building wireless applications provide roaming users with the
    majority of the features available on a desktop device including
    extension-to-extension dialing, attendant functions, voice mail
    and messaging as well as external calling. We use wireless
    devices that work with other major manufacturers wireless
    access points allowing customers the use of their existing
    access point investment for in-building mobile telephony. We
    also provide the functionality to pair a cellular phone with an
    office extension or any other telephone such that each device
    will ring simultaneously if the office extension is called. This
    pairing significantly reduces the number of calls that are
    missed. When a call is answered on a cellular phone it is still
    presented at the office extension, which means that by pressing
    a single key on the office telephone, the call can be moved from
    the cellular phone to the office extension. This process can
    also be achieved in reverse, so that an employee who may need to
    leave for a meeting, can transfer the call from the office
    extension to the cellular device. This feature reduces charges
    and enables the user to operate with one phone number and one
    voice mail box whether in the office, at home or traveling.
    Video Applications.  Our video applications and
    related devices provide businesses access to video conferencing
    at the desktop or for dedicated conference rooms. Our video
    conferencing solutions are easy to use and a conference call can
    be established by simply dialing the number or extension of the
    remote party from an IP telephone and then, once the telephone
    call is established, pressing a single key on the handset to
    transform the audio call into a video conference. Our video
    applications and related devices also incorporate collaboration
    tools, including those from Microsoft Office, that allow users
    to share computer applications during conferences. Our solutions
    can simultaneously support eight separate locations involved in
    the video conference.
    Collaboration Tools.  We offer a computer-based
    collaboration, presence and contact management application
    called Your Assistantthat can optionally include a
    softphone. The softphone provides a number of important features
    of a Mitel desktop telephone on a personal computer, at the
    users desk or from any location around the world where
    there is access to the Internet. Your Assistantinteracts
    with the users contact database and offers secure instant
    messaging capabilities, video conferencing, knowledge management
    (automatic retrieval of pertinent files associated with the name
    and number of the caller) and enables simplified drag and
    drop call and conference call initiation by moving, with a
    computer mouse, the name of a contact from a list or directory
    into the communications window. Your Assistantalso
    enables the simple sharing of presentations, documents or
    spreadsheets and also offers the ability to create a virtual
    white board on each users computer screen for the purposes
    of creating drawings, diagrams or for making notes. In addition,
    a video conference can be established with a non-user of Your
    Assistantby publishing the name of an Internet web page
    associated with the conference call.
    Speech Enabled Messaging, Unified Messaging and Voice
    Mail.  Mitel NuPoint Messenger, our branded
    integrated messaging application, provides a
    scalable and reliable way to relay, store, and retrieve voice
    messages using either a phone, fax machine, pager or personal
    computer. NuPoint Messengeralso allows users to have
    their calls routed to them while they are travelling, or access
    their voice or fax messages from their personal computer.
    NuPoint Messengerprovides a high availability and highly
    scalable solution, which can be suitable as a carrier or large
    enterprise solution. Our Mitel Messaging Serverproduct
    allows businesses to mix and match the requirements of
    individual employees by supporting both unified messaging and
    traditional voicemail on the same platform. Speech recognition
    capability is integrated into the system giving users the
    ability to control their messaging via speech enabled commands.
    Messaging Serversupports Microsoft Outlook/Exchange, IBM
    Lotus/Domino and Novell GroupWise messaging environments. Our
    messaging solutions also interoperate with Microsoft Live
    Communications Server. 25




---



##### Table of Contents




    Teleworking.  Our
    IP-based
    teleworker solution enables users to make secure and encrypted
    IP phone calls from their home office or any remote office by
    extending the features and functionality of an office telephone
    over the Internet. As a result, long distance charges can be
    significantly reduced or in some cases eliminated. As an option,
    our Teleworker telephone can support an integral module that
    allows the telephone to access the public switched telephone
    network for making local calls and calls to emergency services
    and to receive incoming calls. Customers can download reports
    that provide detailed usage statistics on teleworker activity.
    This information provides return on investment
    feedback as a means of itemizing savings.
    Mitel Applications Suite.  The Mitel
    Applications Suite has been developed to make IP communications
    applications, such as those listed above, easier to acquire,
    implement and use. The product integrates the applications into
    a single server or is integrated within the Mitel 3300 ICPfor certain users, unifies the management and provides users
    with an integrated interface to access the functionality. This
    allows these applications to be delivered cost effectively and
    with simplicity to the small business market and is a unique and
    differentiated offering. The first release of this product
    integrates Teleworker, NuPoint Messenger and Mobile Extension
    and other applications will follow.  Our
    Legacy Telephony Communication Solutions
  Mitel
    SX-2000 Mitel SX-2000 Mitel
    SX-2000 Mitel SX-200 Mitel 3300 ICP Mitel SX-200 ICP
  Our
    Services
  IP-based
  IP-based
 26




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##### Table of Contents



Business
    Segments and Principal Markets
    Six Days EndedFiscal 2005


April 30, 2005


Fiscal 2006


Fiscal 2007% of





% of





% of





% ofRevenues


Revenues


Revenues


Revenues


Revenues


Revenues


Revenues


Revenues(In millions, except percentages)United States

$
153.5



44.9
%

$
1.8



56.3
%

$
178.5



46.1
%

$
161.6



42.0
%EMEA


145.5



42.5
%


1.0



31.2
%


156.3



40.4
%


162.4



42.2
%Canada and CALA


37.2



10.8
%


0.4



12.5
%


43.6



11.3
%


49.4



12.8
%Asia Pacific


6.0



1.8
%







%


8.7



2.2
%


11.5



3.0
%$
342.2



100.0
%

$
3.2



100.0
%

$
387.1



100.0
%

$
384.9



100.0
%     Sales,
    Marketing and Distribution
    case-by-case
     27




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##### Table of Contents



Our
    Strategy
    
    continue to expand our market focus through our highly scalable
    solutions;
    seek opportunities to grow the business organically and through
    acquisition;
    increase our focus on software applications;
    provide a gradual migration path to IP for our customers and
    those of our competitors;
    expand our geographic presence and distribution capabilities;
    broaden and deepen our strategic partnerships and
    alliances; and
    continue to leverage our operating model.    Manufacturing
    and Supply Chain Management
    
    focus on the design, development, sales and support of our
    products;
    leverage the scale and expertise of specialized contract
    manufacturers;
    reduce manufacturing and supply chain risk;
    reduce distribution costs; and
    ensure competitive pricing and levels of service.        
    evaluating, selecting, pricing and negotiating contracts with
    EMS suppliers;
    monitoring EMS supplier contract manufacturer performance
    against established service level agreements;
    maintaining the authorized vendor list of component suppliers;
    managing finished goods inventory; and
    selecting outbound freight partners, shipping methods, remote
    stocking strategies and shipping routes. 28




---



##### Table of Contents



Research
    and Development
  IP-based IP-based IP-based IP-based
  IP-based IP-based IP-based
      Intellectual
    Property
  IP-based
  IP-based
 29




---



##### Table of Contents



IP-based
    IP-based IP-based
    Competition
    
    the quality of our IP product portfolio and richness of our
    software applications;
    the useability of our software and its application to vertical
    markets;
    the interoperability with equipment supplied by other vendors
    and with legacy circuit-switched network equipment;
    the scalability and flexibility of our architecture, and the
    ease of deployment in either a centrally-managed,
    remotely-distributed or hosted architecture;
    the strength of our strategic alliances;
    the ease of doing business for our channel partners; and
    Our track record of customer focussed innovation. 30




---



##### Table of Contents



IP-based IP-based
  IP-based
  C.
    Organizational
    Structure      
  D.
    Property,
    Plant and Equipment  Leased
    Facilities:
    Area


ExpirationLocation

Purpose

(In Square Feet)


Date of LeaseOttawa, Canada

Corporate Head Office(1)


352,000


February 15, 2011Caldicot, United Kingdom

U.K. and EMEA Regional Headquarters


45,000


March 9, 2021Ottawa, Canada

Office and Manufacturing Facilities(2)


160,000


February 15, 2011     (1)
    
    42,930 square feet sublet to an unrelated third party until
    August 14, 2009. 31




---



##### Table of Contents



(2)
    
    Sublet to BreconRidge until August 31, 2006  See
    Item 7.B. Major Shareholders and Related Party
    Transactions  Related Party Transactions 
    BreconRidge Manufacturing Solutions Corporation. An
    aggregate of 80,246 square feet has subsequently been
    sublet to two unrelated third parties until August 31, 2009
    and January 3, 2008, respectively.      
    throughout the United States (including New York City, Atlanta,
    Chicago, Boston, Costa Mesa (California), Herndon (Virginia) and
    Waukesha (Wisconsin));
    throughout Canada (including Toronto, Montreal, Calgary,
    Winnipeg, Burnaby (British Columbia) and Halifax);
    throughout the United Kingdom (including London and Strathclyde
    (Scotland));
    throughout Continental Europe, the Middle East and Africa
    (including France, Germany, the Netherlands, Italy, Saudi
    Arabia, Dubai and South Africa);
    in Asia-Pacific (including Hong Kong and Beijing (China),
    Singapore and Sydney (Australia)); and
    in Latin America (including Mexico and Brazil).  Item 5.
    Operating
    and Financial Review and Prospects  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
    Inter-Tel
    Merger
       32




---



##### Table of Contents



Overview
  IP-based
    IP-based IP-based IP-based IP-based IP-based IP-based IP-based IP-based
  Comparability
    of Periods
  six-day six-day IP-based
     33




---



##### Table of Contents



Key
    Performance Indicators
            Sources
    of Revenues and Expenses
    Revenues
      when-and-if
   34




---



##### Table of Contents



Cost
    of Revenues
    IP-based
 35




---



##### Table of Contents



Research
    and Development Expenses
  IP-based
    Sales,
    General and Administrative Expenses
    Special
    Charges
  IP-based
  Other
    Operating Expenses
   36




---



##### Table of Contents



A.
    Operating
    Results    STATEMENT
    OF OPERATIONS DATA
  Six DaysYear Ended


Ended


Year EndedApril 27,


April 25,


April 24,


April 30,


April 30,


April 30,2003


2004


2005


2005


2006


2007(In millions of US dollars, except share and per share
    data)Revenues

$
352.2


$
340.7


$
342.2


$
3.2


$
387.1


$
384.9Cost of revenues


225.4



202.9



213.2



2.4



225.7



225.1Gross margin


126.8



137.8



129.0



0.8



161.4



159.8Research and development


41.2



36.2



41.4



0.7



44.1



41.7Selling, general and administrative


114.9



111.4



114.9



1.8



120.7



123.5Special charges


13.7



11.7



10.6







5.7



9.3Loss (gain) on disposal of assets






0.6



3.4







(2.4
)


(1.0
)Litigation settlement






















16.3Initial public offering costs






















3.3Amortization of acquired intangibles


29.1



0.2















Operating loss


(72.1
)


(22.3
)


(41.3
)


(1.7
)


(6.7
)


(33.3
)Other (income) expense, net


0.9



8.0



7.5



(0.1
)


39.8



(0.1
)Income tax (recovery) expense


(2.9
)


0.3



0.8







(1.9
)


1.8Net loss

$
(70.1
)

$
(30.6
)

$
(49.6
)

$
(1.6
)

$
(44.6
)

$
(35.0
)Net loss per common share Basic and diluted

$
(0.63
)

$
(0.26
)

$
(0.49
)

$
(0.01
)

$
(0.44
)

$
(0.36
)Weighted average number of Common Shares outstanding (in
    millions)


113.1



127.8



113.8



117.1



117.2



117.3  37




---



##### Table of Contents



Fiscal
    2007 as compared to Fiscal 2006
    Fiscal2006


2007% of





% of


ChangeAmounts


Revenues


Amounts


Revenues


Amount


%(In millions, except percentages)Revenues

$
387.1



100.0
%

$
384.9



100.0
%

$
(2.2
)


(0.6
)%Cost of revenues


225.7



58.3
%


225.1



58.5
%


(0.6
)


(0.3
)%Gross margin


161.4



41.7
%


159.8



41.5
%


(1.6
)


(1.0
)%Research and development


44.1



11.4
%


41.7



10.9
%


(2.4
)


(5.4
)%Selling, general and administrative


120.7



31.1
%


123.5



32.0
%


2.8



2.3
%Special charges(1)


5.7



1.5
%


9.3



2.4
%


3.6



63.2
%Litigation settlement






0.0
%


16.3



4.3
%


16.3




*Initial public offering costs






0.0
%


3.3



0.9
%


3.3




*Loss (gain) on sale of manufacturing operations


(0.9
)


(0.2
)%


(1.0
)


(0.3
)%


(0.1
)



*Gain on sale of assets


(1.5
)


(0.4
)%






0.0
%


1.5




*Operating loss


(6.7
)


(1.7
)%


(33.3
)


(8.7
)%


(26.6
)



*Interest expense


7.6



2.0
%


9.1



2.4
%


1.5



19.7
%Mark-to-market adjustment on derivatives


32.6



8.4
%


(8.6
)


(2.2
)%


(41.2
)



*Other (income) expense, net


(0.4
)


(0.1
)%


(0.6
)


(0.2
)%


(0.2
)



*Income tax (recovery) expense


(1.9
)


(0.5
)%


1.8



0.4
%


3.7




*Net loss

$
(44.6
)


(11.5
)%

$
(35.0
)


(9.1
)%

$
9.6



(21.5
)%     *
    
    the comparison is not meaningful(1)
    
    Special charges relate to restructuring activities   and other
    loss accruals undertaken to improve our operational efficiency
    and realign our business.  Revenues:
  Geographic
    Segment Revenues:
    
    the United States;
    Europe, Middle East & Africa (EMEA);
    Canada and Caribbean & Latin America (CALA); and
    Asia Pacific. 38




---



##### Table of Contents



Fiscal2006


2007% of





% of


ChangeRevenues


Revenues


Revenues


Revenues


Amount


%(In millions, except percentages)United States

$
178.5



46.1
%

$
161.6



42.0
%

$
(16.9
)


(9.5
)%EMEA


156.3



40.4
%


162.4



42.2
%


6.1



3.9
%Canada and CALA


43.6



11.3
%


49.4



12.8
%


5.8



13.3
%Asia Pacific


8.7



2.2
%


11.5



3.0
%


2.8



32.2
%$
387.1



100.0
%

$
384.9



100.0
%

$
(2.2
)


(0.6
)%                 Fiscal2006


2007% of





% of


ChangeRevenues


Revenues


Revenues


Revenues


Amount


%(In millions, except percentages)Products:Platforms and desktop appliances

$
204.3



52.8
%

$
201.4



52.3
%

$
(2.9
)


(1.4
)%Software applications


34.2



8.8
%


38.4



10.0
%


4.2



12.3
%Other(1)


22.0



5.7
%


23.8



6.2
%


1.8



8.2
%260.5



67.3
%


263.6



68.5
%


3.1



1.2
%Services:Maintenance and support


80.9



20.9
%


77.2



20.1
%


(3.7
)


(4.6
)%Installation


24.6



6.4
%


21.2



5.5
%


(3.4
)


(13.8
)%Managed services


9.2



2.4
%


7.7



2.0
%


(1.5
)


(16.3
)%Professional and other services


11.9



3.0
%


15.2



3.9
%


3.3



27.7
%126.6



32.7
%


121.3



31.5
%


(5.3
)


(4.2
)%$
387.1



100.0
%

$
384.9



100.0
%

$
(2.2
)


(0.6
)%  39




---



##### Table of Contents



(1)
    
    Other products include mainly OEM products representing
    approximately 6% of total revenues in both the fiscal year ended
    April 30, 2006 and the fiscal year ended April 30,
    2007.  Product
    Revenues:
    IP-based IP-based IP-based
  IP-based IP-based IP-based
    IP-based
  Service
    Revenues:
         40




---



##### Table of Contents



Gross
    Margin:
    Fiscal2006


2007% of





% ofAmount


Revenue


Amount


Revenue(In millions, except percentages)ProductsRevenues

$
260.5



100.0
%

$
263.6



100.0
%Gross Margin


111.4



42.8
%


111.8



42.4
%ServicesRevenues

$
126.6



100.0
%

$
121.3



100.0
%Gross Margin


50.0



39.5
%


48.0



39.6
%TotalRevenues

$
387.1



100.0
%

$
384.9



100.0
%Gross Margin


161.4



41.7
%


159.8



41.5
%       
    a 1.1% decline as a result of an individual project which
    incurred a loss due primarily to the sale of original equipment
    manufacturers products that were re-sold at a negative margin.
    a 0.8% improvement as a result of (i) an improved mix of
    software applications revenues as a total of product revenues as
    software applications typically generate higher margins than
    either communication platforms and desktop appliances or other
    product revenues; and (ii) cost reductions on
    communications platforms and desktop appliances resulting from
    product re-design efforts and improved costs from electronic
    contract manufacturers; and
    a 0.3% decline as a result of temporary pricing promotions on
    certain IP desktop appliances in fiscal 2007. Similar promotions
    were not run during fiscal 2006.    Operating
    Expenses
  Research
    and Development:
    IP-based
 41




---



##### Table of Contents



Selling,
    General and Administrative:
    Special
    Charges:
      Litigation
    Settlement:
      Initial
    Public Offering Costs:
  Form F-1
 42




---



##### Table of Contents



Gain on
    Sale of Manufacturing Operations:
        Gain on
    Sale of Assets:
  6-month 10-year 1 2
  Interest
    Expense:
    Other
    (Income) Expense, Net:
   43




---



##### Table of Contents



Mark-to-Market
    Adjustment on Derivatives:
        Provision
    for Income Taxes:
   44




---



##### Table of Contents



Fiscal
    2006 as compared to Fiscal 2005
    Fiscal2005


2006% of





% of


ChangeAmounts


Revenues


Amounts


Revenues


Amount


%(In millions, except percentages)Revenues

$
342.2



100.0
%

$
387.1



100.0
%

$
44.9



13.1
%Cost of revenues


213.2



62.3



225.7



58.3



12.5



5.9Gross margin


129.0



37.7



161.4



41.7



32.4



25.1Research and development


41.4



12.1



44.1



11.4



2.7



6.5Selling, general and administrative


114.9



33.6



120.7



31.1



5.8



5.0Special charges(1)


10.6



3.1



5.7



1.5



(4.9
)


(46.2
)Loss (gain) on sale of manufacturing operations


3.4



1.0



(0.9
)


(0.2
)


(4.3
)


*Gain on sale of assets










(1.5
)


(0.4
)


(1.5
)


*Operating loss


(41.3
)


(12.1
)


(6.7
)


(1.7
)


34.6



*Interest expense


2.6



0.8



7.6



2.0



5.0



192.3Mark-to-market adjustment on derivatives


5.3



1.5



32.6



8.4



27.3



515.1Other (income) expense, net


(0.4
)


(0.1
)


(0.4
)


(0.1
)






*Income tax expense


0.8



0.2



(1.9
)


(0.5
)


(2.7
)


*Net loss

$
(49.6
)


(14.5
)%

$
(44.6
)


(11.5
)%

$
5.0



(10.1
)%     *
    
    the comparison is not meaningful(1)
    
    Special charges relate to restructuring activities, product line
    exit and other loss accruals undertaken to improve our
    operational efficiency and realign our business.  Revenues:
    Fiscal2005


2006% of





% of


ChangeRevenues


Revenues


Revenues


Revenues


Amount


%(In millions, except percentages)United States

$
153.5



44.9
%

$
178.5



46.1
%

$
25.0



16.3
%EMEA


145.5



42.5



156.3



40.4



10.8



7.4Canada and CALA


37.2



10.8



43.6



11.3



6.4



17.2Asia-Pacific


6.0



1.8



8.7



2.2



2.7



45.0$
342.2



100.0
%

$
387.1



100.0
%

$
44.9



13.1
%      45




---



##### Table of Contents



Fiscal2005


2006% of





% of


ChangeRevenues


Revenues


Revenues


Revenues


Amount


%(In millions, except percentages)Products:Platforms and desktop devices

$
165.1



48.2
%

$
204.3



52.8
%

$
39.2



23.7
%Software applications


23.5



6.9



34.2



8.8



10.7



45.5Other(1)


19.1



5.6



22.0



5.7



2.9



15.2207.7



60.7



260.5



67.3



52.8



25.4Services:Maintenance and support


85.3



24.9



80.9



20.9



(4.4
)


(5.2
)Installation


22.1



6.5



24.6



6.4



2.5



11.3Managed services


10.9



3.2



9.2



2.4



(1.7
)


(15.6
)Professional and other services


16.2



4.7



11.9



3.0



(4.3
)


(26.5
)134.5



39.3



126.6



32.7



(7.9
)


(5.9
)$
342.2



100.0
%

$
387.1



100.0
%

$
44.9



13.1
%     (1)
    
    Other products include mainly OEM products representing
    approximately 5.5% of total revenues in both the fiscal year
    ended April 24, 2005 and the fiscal year ended
    April 30, 2006.  Product
    Revenues:
    IP-based IP-based
  IP-based IP-based
 46




---



##### Table of Contents



IP-based
  IP-based IP-based
  Service Revenues:
          Gross
    Margin:
    Fiscal2005


2006% of





% ofAmount


Revenues


Amount


Revenues(In millions, except percentages)ProductsRevenues

$
207.7



100.0
%

$
260.5



100.0
%Gross Margin


75.7



36.4
%


111.4



42.8
%ServicesRevenues

$
134.5



100.0
%

$
126.6



100.0
%Gross Margin


53.3



39.6
%


50.0



39.5
%TotalRevenues

$
342.2



100.0
%

$
387.1



100.0
%Gross Margin


129.0



37.7
%


161.4



41.7
%       
    a 1.3% improvement as a result of (i) a shift in
    communication platform sales mix whereby total communication
    platform sales contained a higher proportion of higher margin
    large enterprise business 47




---



##### Table of Contents



platforms in fiscal 2006 versus fiscal 2005; (ii) an
    improved mix of software applications revenues as a total of
    product revenues as software applications typically generate
    higher margins than either communication platforms and desktop
    appliances or other product revenues; and (iii) cost
    reductions on communications platforms and desktop appliances
    resulting from product re-design efforts and improved costs from
    electronic contract manufacturers; and  
    a 0.4% improvement as a result of lower inventory obsolescence
    provisions recorded in fiscal 2006 compared to fiscal 2005 due
    to the end of life of our Mitel 3100 ICPproduct in the
    third quarter of fiscal 2005.    Operating
    Expenses
  Research
    and Development:
  IP-based
    Selling,
    General and Administrative:
    Special
    Charges:
     48




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##### Table of Contents



Gain on
    Sale of Manufacturing Operations:
      Gain on
    Sale of Assets:
  1 2
  Interest
    Expense:
    Other
    (Income) Expense, Net:
    Mark-to-Market
    Adjustment on Derivatives:
    Provision
    for Income Taxes:
   49




---



##### Table of Contents



Critical
    Accounting Policies
    Revenue Recognition:
          Allowance
    for Doubtful Accounts:
     50




---



##### Table of Contents



Inventory
    Obsolescence:
        April 30,


April 30,2006


2007Raw materials

$
0.9


$
3.6Finished goods


25.2



20.226.1



26.1Less: inventory write-down


(2.5
)


(4.0
)$
23.6


$
19.810
%


15
%   Warranty
    Provision:
    April 24,


April 30,


April 30,2005


2006


2007Balance, beginning of period

$
2.1


$
2.6


$
2.0Warranty costs incurred


(1.0
)


(1.8
)


(1.2
)Warranties issued


1.0



1.0



1.1Other


0.5



0.2



(0.1
)Balance, end of period

$
2.6


$
2.0


$
1.8   Long-Lived
    Assets:
   51




---



##### Table of Contents



Goodwill:
    Special
    Charges:
    Lease
    Termination Obligations:
      Deferred
    Taxes:
   52




---



##### Table of Contents



Pension
    Costs:
      April 30,April 30, 2007


SFAS 158


2007Pre-SFAS 158


Adjustments


Post-SFAS 158Pension liability

$
25.4


$
25.1


$
50.5Accumulated deficit

$
(397.8
)

$
(0.4
)

$
(398.2
)Accumulated other comprehensive loss

$
(31.9
)

$
(24.7
)

$
(56.6
)       April 30,

April 30,2006

2007Discount rate

5.00%

5.50%Compensation increase rate

2.75%

3.00%Inflation rate

2.75%

3.00%Average remaining service life of employees

21 years

20 years   Stock
    Based Compensation:
   53




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##### Table of Contents



Derivative
    Instruments:
        
    The discount rate is determined based on several factors
    including our credit risk, cost of borrowing and liquidity risk.
    These factors were taken into consideration when the original
    discount rate was determined to be 17%. At the time the
    redeemable preferred shares were issued, this rate was set to
    exceed our cost of borrowing so that it would reflect a premium
    for credit risk to maturity. As of April 30, 2007, we
    believed that the rate of 17% continued to be appropriate since,
    although the credit risk may have decreased due to the reduced
    term to maturity, we did not have access to unsecured credit
    facilities. As at year-end, there was also an impending
    liquidity risk of the put options being exercised if the merger
    transaction was not completed, thereby supporting that a
    decrease in the rate is not required.
    The fair value of the Common Shares at the time the redeemable
    preferred shares were issued in April 2004 was determined to be
    $0.87 (C$1.00). The fair value of the shares used in the
    calculation of the fair value of the derivative at
    April 30, 2007 was $1.05 (C$1.16).
    At any time after five years, our preferred shareholders have
    the right to require us to redeem the shares. Since the shares
    were issued in April 2004, there were two years remaining as at
    April 30, 2007.   54




---



##### Table of Contents



Effect on LossBefore Income TaxesChange in Assumption

(Inncrease)/Decrease(In millions)1 percentage point increase in discount rate

$
1.11 percentage point decrease in discount rate


(1.2
)1 cent increase in fair value of common share price


(0.6
)1 cent decrease in fair value of common share price


0.6     Determination
    of Fair Market Value of our Common Shares
         55




---



##### Table of Contents



Recent
    Accounting Pronouncements
  SFAS 155
    FIN 48
    SFAS 157
  Fair Value Measurements,
  SFAS 159
   56




---



##### Table of Contents



B.
    Liquidity
    and Capital Resources        195.8
     57




---



##### Table of Contents



Cash
    Flows
  Comparison
    of fiscal 2007 to fiscal 2006
  Fiscal2006


2007


Change(In millions)Net cash provided by (used in)Operating activities

$
(2.3
)

$
(12.0
)

$
(9.7
)Investing activities


3.7



(12.4
)


(16.1
)Financing activities


(11.7
)


21.5



33.2Effect of exchange rate changes on cash and cash equivalents


0.6



0.7



1.3Increase (decrease) in cash and cash equivalents

$
(10.9
)

$
(2.2
)

$
8.7Cash and cash equivalents, end of period

$
35.7


$
33.5


$
(2.2
)     Cash Used in Operating Activities:
    
    a $9.6 million decrease in the net loss;
    a $25.5 million decrease in non cash expenses, comprised
    mainly of:  
    a $41.2 million decrease in the fair value adjustment on
    the derivative instrument;
    a $5.6 million increase in deferred income tax expense,
    which is a non-cash expense;
    a $5.3 million decrease in unrealized foreign exchange net
    losses;
    $15.3 million of the Ayava litigation settlement was
    non-cash; and  
    $14.0 million in cash provided by changes in non-cash
    operating assets and liabilities.  Cash
    Provided by (Used in) Investing Activities:
    
    We received $12.4 million less in proceeds on the sale of
    assets in fiscal 2007 than we did in fiscal 2006, as a result of
    the August 2005 sale of our Caldicot property; and
    Our foreign exchange hedging activities used $4.0 million
    more in fiscal 2007 than in fiscal 2006  Cash
    Provided by (Used in) Financing Activities:
    
    in fiscal 2007 we raised $15 million through the issuance
    of warrants to Wesley Clover (a corporation controlled directly
    or indirectly by Dr. Matthews);
    in fiscal 2007, we raised $10.9 million of proceeds upon
    transferring our receivables to an unaffiliated financial
    institution;
    in fiscal 2006 we used $9.8 million to repay the mortgage
    of the Caldicot property following its sale in August
    2005; and 58




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##### Table of Contents




    in fiscal 2007 we used $1.6 million to repay bank
    indebtedness, whereas $0.7 million was provided in 2006 by
    increasing bank indebtedness.  Comparison
    of fiscal 2006 to fiscal 2005
    Fiscal2005


2006


Change(In millions)Net cash provided by (used in)Operating activities

$
(31.8
)

$
(2.3
)

$
29.5Investing activities


(5.8
)


3.7



9.5Financing activities


20.1



(11.7
)


(31.8
)Effect of exchange rate changes on cash and cash equivalents


0.5



(0.6
)


(1.1
)Increase (decrease) in cash and cash equivalents

$
(17.0
)

$
(10.9
)

$
6.1Cash and cash equivalents, end of period

$
9.7


$
35.7


$
26.0   Cash
    Used in Operating Activities:
    
    a $5.0 million decrease in the net loss;
    a $27.3 million increase in the fair value adjustment on
    the derivative instrument, which is a non-cash expense; and
    a $4.1 million increase in unrealized foreign exchange net
    losses.    Cash
    Provided by (Used in) Investing Activities:
    
    $12.4 million in proceeds resulting from the sale of our
    Caldicot property in August 2005; and
    $2.8 million in net proceeds resulting from net foreign
    exchange gain on our hedging activities.    
    $4.3 million increase in additions to capital; and
    $1.4 million increase in restricted cash.  Cash
    Provided by (Used in) Financing Activities:
    
    the repayment of $9.8 million owed on our mortgage of the
    Caldicot property following its sale in August 2005; 59




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##### Table of Contents




    the $12.4 million proceeds received upon the issuance of
    warrants to Technology Partnerships Canada in fiscal 2005
    pursuant to research and development funding received from
    Technology Partnerships Canada; and
    cash provided by bank indebtedness was $8.2 million less in
    fiscal 2006 compared to fiscal 2005.  C.
    Research
    and Development, Patents and Licenses, etc.    D.
    Trend
    Information   IP-based. IP-based
    IP-based IP-based
  IP-based
    IP-based IP-based IP-based IP-based IP-based
 60




---



##### Table of Contents



IP-based
  
    the reduction or elimination of long distance and local toll
    charges;
    lower network maintenance expenses since physical moves,
    additions and changes can be handled centrally in an
    IP-based
    network;
    decreased network management staff requirements since both voice
    and data communications are carried on a single network; and
    lower cabling costs in new building construction since the same
    cable carries both voice and data communications.  IP-based IP-based IP-based IP-based
  IP-based IP-based
  IP-based
   61




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##### Table of Contents



E.
    Off-Balance
    Sheet Arrangements    Letters
    of Credit:
    Bid
    and Performance Related Bonds:
  and/or
  Intellectual
    Property Indemnification Obligations:
    F.
    Tabular
    Disclosure of Contractual Obligations    Payments Due by PeriodLess Than








AfterContractual Obligations

Total


1 Year


1-3 Years


4-5 Years


5 Years(In millions)Long-term debt obligations(1)

$



$



$



$



$
Capital lease obligations(1)


4.4



2.0



2.0



0.4



Operating lease obligations(2)


64.9



16.1



27.2



13.0



8.6Purchase obligations(3)


















Defined benefit pension plan Contributions(4)


3.0



3.0











Other


18.7



3.8



7.5



7.4



Convertible notes(5)


67.9



4.7



63.2







Total contractual cash obligations

$
140.2


$
25.8


$
92.4


$
13.4


$
8.6     (1)
    
    Represents the principal and interest payments for the loans.
    Interest on these loans ranges from 1.3% to 11.8%, as described
    in our consolidated financial statements.(2)
    
    Operating lease obligations exclude payments to be received by
    us under sublease arrangements.(3)
    
    Represents primarily our obligation to acquire capital equipment
    from BreconRidge pursuant to the supply agreement between us and
    BreconRidge dated August 31, 2001.(4)
    
    Represents the estimated contribution to our U.K. defined
    benefit pension plan over the next twelve months. We expect our
    funding requirements to increase in future years. The amount of
    the increase will depend upon the 62




---



##### Table of Contents



time period in which the deficit is amortized. If the deficit
    were to continue to be amortized over 14 years, we would
    expect our annual funding requirement to be approximately
    $5.2 million. If the deficit is amortized over
    10 years, we would expect our annual funding requirements
    to be approximately $6.2 million. The actual amount of the
    annual funding will depend upon the results of the negotiations
    with the trustees. We expect to fund any future increase in the
    annual contributions out of our expected future cash flows from
    operations. Liabilities arising from the deficit in our defined
    benefit pension plan are not included in the above table. As at
    April 30, 2007, the projected benefit obligation of
    $173.9 million exceeded the fair value of the plan assets
    of $123.4 million, resulting in an unfunded status of
    $50.5 million as recorded in our consolidated balance sheet
    as of April 30, 2007.(5)
    
    Represents the principal balance on maturity of the convertible
    notes and an estimate of the variable interest payable on the
    convertible notes. The interest is based on a spread over LIBOR
    of 500 basis points prior to an initial public offering and
    250 basis points subsequent to an initial public offering.
    For the purposes estimating the variable interest, LIBOR has
    been assumed to be 5%. Immediately prior to the completion of
    our acquisition of Inter-Tel, we entered into an agreement
    with the Noteholders to prepay the principal balance for an
    aggregate amount of $66 million plus accrued and unpaid
    interest (see Item 10.C. Additional Information Material
    Contracts  Senior Secured Convertible Note
    Transaction.        G.
    Safeharbor    Item 6.
    Directors,
    Senior Management and Employees  A.
    Directors
    and Senior Management    Fund II-B Fund II-A, Fund II-A,
 63




---



##### Table of Contents



64




---



##### Table of Contents



Name and Municipality of Residence

Age

Position

Principal OccupationDr. Terence H. Matthews(1)
    Ottawa, Ontario, Canada


64


Chairman of the Board

Chairman of the Board of Mitel Chairman of the Board of March
    NetworksDonald W. Smith Ottawa,
    Ontario, Canada


59


Chief Executive Officer and Director

Chief Executive Officer of MitelPeter D. Charbonneau(2)
    Ottawa, Ontario, Canada


54


Lead Director

General Partner of Skypoint Capital CorporationKirk K. Mandy
    Ottawa, Ontario, Canada


51


Director

Chief Executive Officer of ZarlinkGilbert S. Palter
    Toronto, Ontario, Canada


42


Director

Chief Investment Officer and Managing Partner of EdgeStone
    Capital Partners, L.P.Guthrie J. Stewart
    Montréal, Quebec, Canada


52


Director

Partner of EdgeStone Capital Partners, L.P.Paul A.N. Butcher
    Ottawa, Ontario, Canada


45


President and Chief Operating Officer and Director

President and Chief Operating Officer of MitelSteven E. Spooner
    Ottawa, Ontario, Canada


49


Chief Financial Officer

Chief Financial Officer of MitelGraham Bevington
    Chepstow, Wales


47


Vice President and Managing Director, Europe, Middle East and
    Africa Region

Vice President and Managing Director, Europe, Middle East and
    Africa Region of MitelNorman Stout
    Phoenix, Arizona, US


50


Chief Executive Officer, Mitel US

Chief Executive Officer, Mitel USCraig Rauchle
    Phoenix, Arizona, US


52


President, Mitel US

President, Mitel USRoger K. Fung
    Hong Kong, China


55


Vice President and Managing Director, Asia-Pacific Region

Vice President and Managing Director, Asia-Pacific Region of
    MitelDouglas W. Michaelides(3)
    Ottawa, Ontario, Canada


46


Vice President, Global Marketing

Vice President, Global Marketing of MitelRonald G. Wellard
    Ottawa, Ontario, Canada


49


Vice President, Product Development

Vice President, Product Development of Mitel     (1)
    
    Dr. Matthews routinely invests in and sits as a director on
    the boards of businesses that are at an early stage of
    development and that, as a result, involve substantial risks.
    Dr. Matthews was a director of Ironbridge Networks
    Corporation, which went into receivership in January 2001 and
    West End Systems Corporation, which went into receivership in
    February 1999.(2)
    
    Mr. Charbonneau was a director of METConnex Inc., which
    filed a notice of intention to file for bankruptcy protection on
    September 28, 2006. He resigned from the board in June 2007.(3)
    
    Mr. Michaelides was employed by Nortel Networks Corporation
    (Nortel) in the area of sales and marketing prior to
    October 2003. In that time, he became subject to a management
    cease trade order regarding the securities of Nortel issued by
    the Ontario Securities Commission, resulting from a failure by
    Nortel to file its financial statements as required. The cease
    trade order was revoked on June 21, 2005.   65




---



##### Table of Contents



Dr. Terence H. Matthews
  Donald W. Smith
  Peter D. Charbonneau
  Kirk K. Mandy
 66




---



##### Table of Contents



Gilbert S. Palter
  Guthrie J. Stewart
  Paul A.N. Butcher
  Steven E. Spooner
  Graham Bevington
  Roger K. Fung
 67




---



##### Table of Contents



Norman Stout
  Craig W. Rauchle
  Douglas W. Michaelides
  Ronald G. Wellard
 68




---



##### Table of Contents



B.
    Compensation    Summary
    Compensation Table
  Long Term CompensationSecurities Underlying OptionsAnnual Compensation

and Deferred Share Units

All OtherName and Principal Position

Salary

Bonus

Granted

CompensationDonald W. Smith

$
662,375







600,000 Common Shares


$
10,549(3
)Chief Executive Officer (1)Paul A.N. Butcher

$
440,518







449,746 Common Shares


$
21,926(4
)President and Chief Operating Officer (1)Steven E. Spooner

$
285,586


$
26,373



400,000 Common Shares


$
10,549(5
)Chief Financial Officer (1)Graham Bevington

$
382,736







84,000 Common Shares


$
38,138(6
)Vice President and Managing Director, Europe,
    Middle East and Africa Region (2)Roger K. Fung

$
272,208







30,000 Common SharesVice President and Managing Director Asia-Pacific Region     (1)
    
    Compensation paid in Canadian dollars, but converted to U.S.
    dollars at the average of the noon buying rates per Federal
    Reserve Bank of New York for fiscal 2007 of C$1.00 = $0.8791.(2)
    
    Compensation paid in British Pounds Sterling, but converted to
    U.S. dollars at the average of the noon buying rates per Federal
    Reserve Bank of New York for fiscal 2006 of GBP £1.00 =
    $1.911.(3)
    
    Mr. Smiths other compensation is a car allowance of
    $10,549.(4)
    
    Mr. Butchers other compensation is comprised of a car
    allowance of $15,824 and a company contribution to our Deferred
    Share Unit Plan of $6,102.(5)
    
    Mr. Spooners other compensation is a car allowance of
    $10,549.(6)
    
    Mr. Bevingtons other compensation is a car allowance
    of $22,964 and a company contribution to a defined benefit plan
    of $14,575. 69




---



##### Table of Contents



Market ValueNumber of


Percent of


Exercise


ofCommon


Total Option


Price


CommonShares


s


Per Common


SharesUnderlying


Granted to


Share


UnderlyingOptions


Employees in


($/Common


Options on


ExpirationName

Granted(1)


Fiscal Year


Share)(2)


Date of Grant(3)


DateDonald W. Smith


600,000



10.19
%

$
1.06







1-Feb-12Paul A.N. Butcher


400,000



6.79
%

$
1.06







1-Feb-12Steven E. Spooner


400,000



6.79
%

$
1.06







1-Feb-12Graham Bevington


4,000



0.07
%

$
1.40







8-Jun-1180,000



1.36
%

$
1.06







1-Feb-12Roger K. Fung


30,000



0.51
%

$
1.06







1-Feb-12Dr. Terence H. Matthews


5,932



0.10
%

$
1.40







8-Jun-1195,996



1.63
%

$
1.12







28-Mar-12Peter D. Charbonneau


22,034



0.37
%

$
1.40







8-Jun-1156,173



0.95
%

$
1.12







28-Mar-12Kirk K. Mandy


20,339



0.35
%

$
1.40







8-Jun-1151,748



0.88
%

$
1.12







28-Mar-12Gilbert S. Palter



(4)














Guthrie J. Stewart



(4)














     (1)
    
    The options vest as to 25% on the first anniversary of the date
    of grant and as to an additional 25% each year thereafter.(2)
    
    Option exercise prices have been set in Canadian dollars but
    converted to U.S. dollars at the noon buying rate per Federal
    Reserve Bank of New York on April 30, 2007 of C$1.00 =
    $0.90.(3)
    
    Values based on the midpoint of the public offering price range
    set forth on the cover page of this prospectus.(4)
    
    Options to purchase 105,101 Common Shares have been granted to
    EdgeStone Capital Equity Fund II Nominee, Inc. in
    connection with Mr. Palter and Mr. Stewart acting as
    directors of Mitel.        Annual service on the board of directors (other than the Chair)

C$
25,000Annual service as the Chair of the board of directors

C$
100,000Annual service as a member of the audit committee (other than
    the Chair)

C$
10,000Annual service as the Chair of the audit committee

C$
15,000Annual service as a member of other standing committees

C$
7,500Meeting fees (varies depending on whether in person, by
    telephone and by committee)

C$
500-2,000      70




---



##### Table of Contents



Employment
    Contracts:
  Donald W. Smith. 24-month
    Paul A.N. Butcher. 18-month
    Steven E. Spooner. 18-month
 71




---



##### Table of Contents



Graham Bevington.
  Norman Stout. 18-month
    Indebtedness
    of Directors, Officers and Members of Senior
    Management:
    Pension
    and Retirement Plans
       72




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##### Table of Contents



Deferred
    Share Unit Plan
          C.
    Board
    Practices      Board
    Committees:
    Audit Committee.
    
    the integrity of our financial statements and accounting and
    financial process and the audits of our financial statements;
    our compliance with legal and regulatory requirements;
    our external auditors qualifications and independence;
    the work and performance of our financial management, internal
    auditor and external auditor; and 73




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##### Table of Contents




    our system of disclosure controls and procedures and system of
    internal controls regarding finance, accounting, legal
    compliance, risk management and ethics established by management
    and our board.      Compensation Committee.
  
    compensation, development, succession and retention of the chief
    executive officer and key employees;
    the establishment of fair and competitive compensation and
    performance incentive plans; and
    the production of an annual report on executive compensation for
    inclusion in our public disclosure documents.  Compensation Committee Interlocks and Insider
    Participation.
  Other
    Committees:
    
    reviewing all forward-looking information in our continuous
    disclosure documents;
    implementation of the disclosure committee policy and the
    education of employees, officers and directors on matters
    related to the policy;
    approving the designation of spokespersons;
    ensuring that appropriate processes are in place to monitor our
    corporate website;
    ensuring that when a public disclosure requires corrections,
    such correction is timely and made under the supervision of the
    disclosure committee;
    monitoring the integrity and effectiveness of our disclosure
    controls and procedures on an ongoing basis and reporting
    findings to the CEO and CFO;
    reviewing and supervising the preparation of documentation that
    are required to be or are voluntarily filed with a securities
    commission, stock exchange or government under applicable
    securities or corporate law including annual certifications,
    annual reports filed with the SEC on
    Form 20-F
    and
    6-K; and
    evaluating the effectiveness of our disclosure controls and
    procedures as of the end of each year end.  D.
    Employees  IP-based IP-based
 74




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##### Table of Contents



E.  Share
    Ownership
        Employee
    Equity Compensation Plans:
  2001
    Stock Option Plan:
         75




---



##### Table of Contents



2006
    Equity Incentive Plan:
          
    to amend general vesting provisions;
    to amend the term of any option, subject to limits contained in
    the plan;
    to amend the provisions in the plan dealing with retirement,
    death, disability or termination of participants;
    to make amendments for the protection of participants in the
    plan, including amendments resulting from changes in law in any
    jurisdiction; and
    to make amendments to cure or correct ambiguities, defects or
    mistakes in the plan.     76




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##### Table of Contents



Item 7.
    Major
    Shareholders and Related Party Transactions  A.
    Major
    Shareholders    Beneficial Amount Owned(1)


Percentage HeldClass 1





Voting


Class 1Preferred


Common


Power


Preferred


Common


VotingShares


Shares


(2)


Shares


Shares


Power(2)Dr. Matthews Group(8)Dr. Matthews


13,500



1,143,402



11,640,325



4.4
%


0.4
%


2.6
%Celtic Tech Jet Corporation


0



4,555,169



4,555,169



0.0
%


1.6
%


1.0
%Wesley Clover Corporation


0



158,790,234



158,790,234



0.0
%


55.9
%


35.1
%13,500



164,488,805



174,985,728
(3)


4.4
%


57.9
%


38.7
%Francisco Partner Group(8)Arsenal HoldCo I S.a.r.l


205,819



15,596,446



175,630,638



67.0
%


5.5
%


38.9
%Arsenal HoldCo II S.a.r.l


13,928



1,055,429



11,885,153



4.6
%


0.4
%


2.6
%219,747



16,651,875



187,515,791
(4)


71.6
%


5.9
%


41.5
%Her Majesty the Queen in Right of Canada


0



32,140,528



32,140,528



0.0
%


11.3
%


7.1
%Morgan Stanley Principal Investments, Inc.


43,340



3,284,196



36,983,003
(5)


14.1
%


1.2
%


8.2
%EdgeStone


19,000



10,450,299



25,223,493
(6)


6.2
%


3.7
%


5.6
%PTIC


11,500



14,327,483



23,269,053
(7)


3.7
%


5.0
%


5.1
%     (1)
    
    Beneficial ownership is determined in accordance with SEC rules,
    which generally attribute beneficial ownership of securities to
    each person or entity who possesses, either solely or shared
    with others, the power to vote or dispose of those securities.
    These rules also treat as outstanding all shares that a person
    would receive upon exercise of stock options or warrants, or
    upon conversion of convertible securities held by that person
    that are exercisable or convertible within 60 days of the
    determination date. Shares issuable pursuant to exercisable or
    convertible securities are deemed to be outstanding for
    computing the percentage ownership of the person holding such
    securities, but are not deemed outstanding for computing the
    percentage ownership of any other person.(2)
    
    Percentage of Voting Power is calculated based on the beneficial
    amount owned divided by total shares outstanding including
    warrants, options or other convertible securities which are
    exercisable or convertible within 60 days into our Common
    Shares. For the purposes of calculating the percentage of Voting
    Power, the Class 1 Preferred Shares convert into our Common
    Shares on a 1 for 777.546 basis (after taking into consideration
    the 8% per annum accretion, calculated to 60 days after the
    determination date)(3)
    
    Includes the common share equivalent to 13,500 Class 1
    Preferred Shares of 10,496,923 and 158,790,234 Common Shares
    owned by Wesley Clover and the 4,555,169 Common Shares owned by
    CTJL and 120,406 stock.(4)
    
    Includes the common share equivalent to 219,747 Class 1
    Preferred Shares of 170,863,916 and 16,651,875 warrants that are
    currently exercisable.(5)
    
    Includes the common share equivalent to 43,340 Class 1
    Preferred Shares of 33,698,807 and 3,284,196 warrants that are
    currently exercisable.(6)
    
    Includes the common share equivalent to 19,000 Class 1
    Preferred Shares of 14,773,194 and 5,359,893 Common Shares and
    90,406 options that are currently exercisable and 5,000,000
    warrants that are currently exercisable. 77




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##### Table of Contents



(7)
    
    Includes the common share equivalent to 11,500 Class 1
    Preferred Shares of 8,941,570 and 13,456,042 Common Shares and
    871,441 warrants that are currently exercisable.(8)
    
    The parties to the 2007 Shareholders Agreement agreed, among
    other matters, to act and vote from time to time so that on any
    election of directors by our shareholders, the Francisco
    Partners and Matthews nominees are elected. See Item 10.C.
    Additional Information  Material
    Contracts  2007 Shareholders Agreement for a
    discussion of the 2007 Shareholders Agreement.    United
    States Shareholders:
    B.  Related
    Party Transactions
    BreconRidge
    Manufacturing Solutions Corporation
    Outsourcing
    of Manufacturing and Repair Operations
     78




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##### Table of Contents



Management
    Services:
    Leased
    Property:
      Brookstreet
    Research Park Corporation
    March
    Networks Corporation
     79




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##### Table of Contents



Zarlink
    Semiconductor Inc.
    Supply
    Agreement:
    IP-based IP-based
    Other
    Supply Arrangements:
    Intellectual
    Property License Agreement:
   80




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##### Table of Contents




    a non-competition and non-solicitation agreement among us,
    Zarlink and its subsidiaries, Wesley Clover, and
    Dr. Matthews, dated February 16, 2001; and
    a lease between us and Zarlink Semiconductor Limited, a
    subsidiary of Zarlink, for premises in Caldicot, United Kingdom,
    which we assigned in connection with the sale of the Caldicot
    property on August 31, 2005.  Wesley
    Clover Corporation
      Other
    Transactions
    
    NewHeights Software (a corporation formerly controlled by Owen
    Matthews, who is related to Dr. Matthews) may have been
    deemed a related party because Dr. Matthews indirectly owns
    approximately 40% of Counterpath Solutions, which closed
    its acquisition of NewHeights on August 2, 2007. During
    fiscal 2007, we paid NewHeights $2.2 million in software
    royalties relating to a customized desktop communication
    management software application which we integrate and
    distribute as Your Assistant(2005 
    $0.8 million; the Transition Period  $nil;
    2006  $2.6 million). We also received
    $0.1 million of rental and other income from NewHeights
    during fiscal 2007 (2005  $0.1 million; the
    Transition Period  $nil;
    2006  $0.1 million).
    Encore Networks may be deemed to be a related party because
    Dr. Matthews directly or indirectly owns approximately 70%
    of that company. During fiscal 2007, we paid Encore less than
    $0.05 million for the purchase of certain signaling
    conversion hardware and software which we distribute as part of
    our product line and for other services (2005  $nil;
    the Transition Period  $nil; 2006 
    $0.2 million). We also received $0.2 million of other
    income from Encore Networks during fiscal 2007 (2005 
    $0.1 million; the Transition Period  $nil;
    2006  $0.1 million).
    MKC Corporation may be deemed to be a related party because
    Dr. Matthews directly or indirectly owns approximately 82%
    of that company, prior to September 1, 2006 when MKC
    Corporation merged with NewHeights Software. During fiscal 2007,
    we paid MKC $nil for the purchase of SIP-based equipment and
    software components (2005  $0.1 million; the
    Transition Period  $0.1 million;
    2006  $nil). On 81




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April 1, 2006, we entered into a purchase and sale
    agreement whereby we purchased certain SIP-based IP assets from
    MKC. The purchase price for the assets is payable in the form of
    a royalty equal to $0.50 for each Mitel SIP-enabled IP desktop
    device we sell over the next five years, up to a maximum royalty
    value, in the aggregate, of C$1.3million. During fiscal
    2007, we recorded royalties payable to MKC of $0.1 million
    relating to this agreement.  
    Natural Convergence may be deemed to be a related party because
    Dr. Matthews directly or indirectly owns approximately
    20% of that company. During fiscal 2007, we paid Natural
    Convergence $2.1 million for a non-exclusive, worldwide
    software license and other hardware and software products
    associated with our Mitel 3600 Hosted IP Key System
    product (2005  $0.1 million; the Transition
    Period  $nil;
    2006  0.8 million). On April 25, 2006,
    we entered into an agreement with Natural Convergence to
    purchase certain pre-paid software licenses associated with our
    3600 Hosted IP Key System product. Under the agreement, we
    agreed to purchase $1.2 million worth of software licenses,
    payable in four equal instalments of $0.3 million per
    quarter over the course of our fiscal 2007. At our option, we
    may instead use any unpaid instalments to invest in certain
    secured debentures of Natural Convergence which are
    (a) repayable to us (plus a credit fee of 25% per annum of
    any outstanding principal) on the earlier of December 31,
    2006, or on the occurrence of certain events, or
    (b) automatically convertible into preferred shares of
    Natural Convergence on the occurrence of certain events. If we
    exercise the option to invest in the convertible debentures of
    Natural Convergence, we are also entitled to receive a warrant
    of Natural Convergence entitling us to acquire a number of
    Common Shares of Natural Convergence equal to the dollar amount
    of our investment divided by $1.00, at an exercise price per
    common share of C$0.0001. In May 2006, we purchased
    $0.3 million in pre-paid software licenses under the
    agreement. In August 2006 and November 2006, we exercised our
    option under the agreement and used the second and third
    installment payments to purchase a total of $0.6 million of
    Natural Convergence convertible debentures. In November 2006,
    Natural Convergence completed a qualifying financing of
    $10.0 million of Class C Preferred Shares and so our
    entire $0.6 million balance of debentures and
    $0.1 million accrued interest was automatically converted
    into Class C Preferred Shares of Natural Convergence at a
    5% discount. In February 2007, we invested our fourth and final
    installment payment in $0.3 million of Class C
    Preferred Shares and exercised the warrants we received in
    connection with the convertible debentures. At April 30,
    2007 we held 8,467,523 of Class C Preferred Shares and
    600,000 Common Shares in Natural Convergence, representing an
    aggregate ownership of 5.6%.      
    CTJL may be deemed to be a related party because
    Dr. Matthews directly or indirectly wholly owns that
    company. During fiscal 2007, we paid $0.1 million to CTJL
    for chartered plane rentals (2005  less than
    $0.05 million; the Transition Period  $nil;
    2006  less than $0.05 million).
    Brookstreet Hotel Corporation may be deemed to be a related
    party because Dr. Matthews directly or indirectly wholly
    owns that company. During fiscal 2007, we paid $0.2 million
    to Brookstreet Hotel for accommodations and meeting space
    (2005  less than $0.05 million; the Transition
    Period  $nil;
    2006  $0.2 million).
    The Celtic Manor Resort Limited may be deemed to be a related
    party because Dr. Matthews directly or indirectly wholly
    owns that company. During fiscal 2007, we paid less than
    $0.05 million to The Celtic Manor Resort Limited for
    accommodations and meeting space (2005 
    $0.3 million; the Transition Period  $nil;
    2006  $0.1 million).
    Bridgewater Systems Corporation may be deemed to be a related
    party because Dr. Matthews directly or indirectly owns
    approximately 12% of that company. During fiscal 2007, there
    were no sales made to Bridgewater (2005  $nil; the
    Transition Period  $nil; 2006 
    $0.1 million).   82




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##### Table of Contents




    a summary of the nature of the relationship with the related
    party and the significant commercial terms of the transaction
    such as price and total value;
    the parties to the transaction;
    an outline of the benefits to us of the transaction;
    whether terms are at market and whether they were negotiated at
    arms length; and
    for related party transactions involving our officers or
    directors, whether there has been any loss of a corporate
    opportunity.    Registration
    Rights
  and/or and/or
  C.
    Interests
    of Experts and Counsel    Item 8.
    Financial
    Information  A.
    Consolidated
    Statements and Other Financial Information    Legal
    Proceedings
   83




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##### Table of Contents



Dividend
    Policy
    B.
    Significant
    Changes      Item 9.
    The
    Offer and Listing  A.
    Offer
    and Listing Details  Securities Act of 1933
  B.
    Plan
    of distribution    C.
    Markets    D.
    Selling
    shareholders    E.
    Dilution   84




---



##### Table of Contents



F.
    Expenses
    of the issue    Item 10.
    Additional
    Information  A.
    Share
    Capital    B.
    Memorandum
    and Articles of Incorporation  385460-4.
      
    amendments to By-Law No. 1A which reflect our current
    corporate governance structure and enhanced practices including
    an increase in the quorum requirement for meetings of
    shareholders as well as current provisions of the CBCA; and
    amendments to our articles of incorporation to (a) increase
    the minimum number of directors from one (1) to three
    (3) and the maximum number of directors from ten
    (10) to fifteen (15) in order to support any future
    increases in the size of the board of directors, and (b) to
    change our name from Mitel Networks Corporation to
    Mitel Corporation.        Meetings
    of Shareholders:
   85




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##### Table of Contents



and/or
  Directors:
       86




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##### Table of Contents



his/her he/she his/her
  Share
    Capital:
  winding-up
          Class 1
    Preferred Shares:
  Issue Price  $1,000.00 per
    Class 1 Preferred Share.
  Conversion, Liquidation and
    Redemption Value 
  Conversion 
 87




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##### Table of Contents



Ranking 
  Dividends 
  Liquidation Preference 
  Voluntary Redemption after Five
    Years 
  Mandatory Redemption after Seven
    Years 
  Mandatory Conversion 
  Anti-dilution Provision 
  Voting Rights 
  Protective Provisions 
 88




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##### Table of Contents



Class 2
    Preferred Shares:
  Directors Authority to Issue One or More
    Series 
  Terms of Each Series 
  Ranking of the Class 2 Preferred
    Shares 
  Priority 
  (e) Liquidation Preference
      Other Preferences 
  Conversion Right 
  Redemption Right 
  Dividends 
 89




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##### Table of Contents



Voting Rights 
  Variation of Rights 
    C.
    Material
    Contracts    Sale
    and Lease-Back of Caldicot Property:
    Merger
    Agreement:
      
    In order to effect a return of capital on Series A
    Preferred Shares, the conversion of the Series A Preferred
    Shares into Class 1 Preferred Shares and Common Shares and
    the termination of the Series 2 Warrants, each as described
    in Item 4.A.  Information on Mitel 
    History and Development of Mitel, we entered into a Return of
    Capital, Voting and Conversion Agreement with EdgeStone (the
    EdgeStone Return of Capital, Voting and Conversion
    Agreement).
    In order to effect the conversion of the PTIC Series B
    Preferred Shares and repurchase one-half of the Common Shares
    issued to PTIC upon such conversion, as described above, we
    entered into a Common Share Repurchase, Voting and Conversion
    Agreement with PTIC (the PTIC Common Share Repurchase,
    Voting and Conversion Agreement).
    In order to effect the repurchase of the Zarlink Common Shares,
    as described above, we entered into a Common Share Repurchase
    and Voting Agreement with Zarlink (the Zarlink Common
    Share Repurchase and Voting Agreement). 90




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##### Table of Contents




    In order to effect the conversion of the Wesley Clover
    Series B Preferred Shares and the repurchase for
    cancellation and termination of the Matthews Warrants, as
    described above, we entered into a Warrant Repurchase, Voting,
    and Conversion Agreement with Dr. Matthews, Wesley Clover
    and CTJL (the Matthews Warrant Repurchase, Voting and
    Conversion Agreement).    2007
    Shareholders Agreement:
      Registration
    Rights Agreement:
  and/or and/or
  Convertible
    Notes:
  Senior
    Secured Convertible Note Transaction:
    Debt
    Financing:
   91




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##### Table of Contents



First Lien Facility
  Second Lien Facility:
  Default:
  Pledge, Security and Guarantee:
  Equity
    Financing:
  Subscription Agreement:
  
    Issued and sold to the Investors 263,087 Class 1 Preferred
    Shares at a purchase price of $1,000 per share.
    Issued and sold to the Investors, for the aggregate price of
    $0.01, warrants to purchase 19,936,071 Common Shares at an
    exercise price set out above under the heading
    Warrants.      Warrants:
         92




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##### Table of Contents



Y(A-B)A     Y  =
    the number of warrant shares in respect of which the net
    issuance election is being made.A  =
    the Fair Market Value (as defined in the warrant) of
    one Common Share as at the time the net issuance election is
    made.  B  =
    the Exercise Price (initially $1.32, as adjusted to the date of
    calculation)  Inter-Tel
    Agreements:
  Inter-Tel, Incorporated Tax Deferred Savings Plan and
    Retirement Trust.
  Agreements
    with Related Parties and Others:
  Derivative contract between us and JPMorgan Chase Bank,
    N.A.:
    Agreements
    with Key Employees:
    TPC
    Agreement, as amended:
   93




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##### Table of Contents



12-month
    Agreement
    between Mr. Peter Charbonneau and
    Dr. Matthews:
    D.
    Exchange
    Controls  Competition Act
    Investment
    Canada Act
  Investment Canada Act Investment Canada
    Act Investment Canada Act Investment Canada Act Investment
    Canada Act Investment Canada Act
   94




---



##### Table of Contents



Investment Canada Act
  
    the acquisition of our Common Shares by a person in the ordinary
    course of that persons business as a trader or dealer in
    securities;
    the acquisition or control of us in connection with the
    realization of security granted for a loan or other financial
    assistance and not for any purpose related to the provisions of
    the Investment Canada Act; and
    the acquisition or control of us by reason of an amalgamation,
    merger, consolidation or corporate reorganization following
    which the ultimate direct or indirect control in fact of us,
    through the ownership of voting interests, remains unchanged.    E.
    Taxation  UNITED
    STATES FEDERAL INCOME TAX CONSIDERATIONS
         95




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##### Table of Contents



Taxation
    of Dividends
      Taxation
    of Dispositions
    Conversion
    of Canadian Dollars
   96




---



##### Table of Contents



Passive
    Foreign Investment Company Considerations
  re-tested
  non-U.S. corporation
    
    a qualified electing fund election (a QEF
    election), as defined in the Code, to be taxed currently
    on your pro rata portion of our ordinary earnings and net
    capital gain, whether or not such amounts are distributed in the
    form of dividends or otherwise, or
    a mark-to-market election and thereby agree for the
    year of the election and each subsequent tax year to recognize
    ordinary income or loss (but only to the extent of prior
    ordinary gain) based on the increase or decrease in market value
    for such taxable year. Your tax basis in our Common Shares would
    be adjusted to reflect these income or loss amounts.      Information
    Reporting and Backup Withholding
    
    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. 97




---



##### Table of Contents




    fail to provide an accurate taxpayer identification number,
    are notified by the IRS that you have failed to report all
    interest and dividends required to be shown on your United
    States federal income tax returns, or
    otherwise fail to comply with other applicable requirements of
    the backup withholding rules.      CANADIAN
    FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS
  Income Tax Act
      Taxation
    of Dividends
   98




---



##### Table of Contents



Disposition
    of Common Shares
    60-month
  F.
    Dividends
    and Paying Agents    G.
    Statement
    by Experts    H.
    Documents
    on Display  Securities Exchange Act of 1934 1-800-SEC-0330.
      613-592-2122.
  I.
    Subsidiary
    Information   99




---



##### Table of Contents



Item 11.
    Quantitative
    and Qualitative Disclosures about Market Risk    Equity
    Price Risk:
    Foreign
    Currency Risk:
      Interest
    Rate Risk:
           100




---



##### Table of Contents



Item 12.
    Description
    of Securities Other than Equity Securities    PART II
  Item 13.
    Defaults,
    Dividend Arrearages and Delinquencies    Item 14.
    Material
    Modifications to the Rights of Security Holders and Use of
    Proceeds    Item 15.
    Controls
    and Procedures  Securities Exchange
    Act of 1934
    Rule 13A-15(d)
  Item 16.
    [Reserved]  A.
    Audit
    Committee Financial Expert    B.
    Code
    of Ethics   101




---



##### Table of Contents



613-592-2122.
  C.
    Principal
    Accountant and Fees    Fiscal 2007


Fiscal 2006$



$Audit Fees


780,840



741,259Audit-Related Fees


45,618



85,561Tax Fees


28,921



205,889Total


855,379



1,032,709         Audit
    committee pre-approval process:
      D.
    Exemptions
    from the Listing Standards for Audit Committees    E.
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers   102




---



##### Table of Contents



(d) MaximumNumber (orApproximateDollar(c) Total


Value) ofNumber of


SharesShares


(or Units)(or Units)


that mayPurchased


yet be(a) Total


(b) Average


as Part


PurchasedNumber of


Price


of Publicly


Under theShares (or


Paid per


Announced Plans


Plans orPeriod

Units) Purchased


Share (or Units)


or Programs


ProgramsMay 1 to May 31, 2006














June 1 to June 30, 2006


1,733


C$
4.00







July 1 to July 31, 2006














August 1 to August 31, 2006














September 1 to September 30, 2006














October 1 to October 31, 2005


6,388


C$
1.00







November 1 to November 30, 2006














December 1 to December 31, 2006


5,739


C$
1.00







January 1 to September 30, 2007














TOTAL


13,860   PART III
  Item 17.
    Financial
    Statements  page F-1
  Item 18.
    Financial
    Statements    Item 19.
    Exhibits  1
.

Articles of Incorporation and bylaws as currently in effect:1
.1

Articles of Incorporation and amendments thereto prior to
    April 22, 2004(4)1
.2

Articles of Amendment dated April 22, 2004(4)1
.3

Articles of Amendment dated April 23, 2004(4)1
.4

Articles of Amendment dated October 12, 2006(10)1
.5

Bylaws(4), as amended on September 7, 2006(10)1
.6

Articles of Amendment dated August 16, 2007(11)1
.7

Articles of Amendment dated August 16, 20072
.

Instruments defining the rights of holders of equity securities
    being registered:2
.1

See Articles of Incorporation described above in
    Exhibit 1.1, Articles of Amendment dated April 22,
    2004 described above in Exhibit 1.2, Articles of Amendment
    dated April 23, 2004 described above in Exhibit 1.3
    and Articles of Amendment dated October 12, 2006 described
    above in Exhibit 1.4, Articles of Amendment dated
    August 16, 2007 described above in Exhibit 1.6 and
    Articles of Amendment dated August 16, 2007 described above
    in Exhibit 1.72
.2

Specimen Common Share certificate(1)2
.3

Specimen Series A Share certificate(4) 103




---



##### Table of Contents



2
.4

Specimen Series B Share certificate(4)2
.5

Specimen Class 1 Share Certificate2
.6

Securities Purchase Agreement between Mitel and the Noteholders,
    dated April 27, 2005(11)++2
.7

Form of Note (See Exhibit 2.6 above)2
.8

General Security Agreement between Mitel and Highbridge (as a
    secured party, and also in its capacity as Collateral Agent (now
    BNY) on behalf of the Noteholders), dated April 27, 2005(5)2
.9

Guaranty and Security Agreement between MNI and Highbridge (as a
    secured party, and also in its capacity as Collateral Agent (now
    BNY) on behalf of the Noteholders), dated April 27,
    2005(11)++2
.10

Pledge Agreement between MNL and Highbridge (as a secured party,
    and also in its capacity as Collateral Agent (now BNY) on behalf
    of the Noteholders), dated April 27, 2005(5)2
.11

Charge Over Book Debts and Cash at Bank between MNL and
    Highbridge (as a secured party, and also in its capacity as
    Collateral Agent (now BNY) on behalf of the Noteholders), dated
    April 27, 2005(10)++2
.12

Guarantee and Indemnity between MNL and Highbridge (as a secured
    party, and also in its capacity as Collateral Agent (now BNY) on
    behalf of the Noteholders), dated April 27, 2005(5)2
.13

Mortgage Debenture between MNL and Highbridge (as a secured
    party, and also in its capacity as Collateral Agent (now BNY) on
    behalf of the Noteholders), dated April 27, 2005(5)2
.14

Guarantee and Security Agreement between MNOL and Highbridge (as
    a secured party, and also in its capacity as Collateral Agent
    (now BNY) on behalf of the Noteholders), dated June 30,
    2005(5)2
.15

Deed of Guarantee and Subordination between MNIL, MNOL and
    Highbridge (as a secured party, and also in its capacity as
    Collateral Agent (now BNY) on behalf of the Noteholders), dated
    June 30, 2005(5)2
.16

Deed of Guarantee and Subordination between MNIL, MNOL and BNY,
    dated July 15, 2005(5)2
.17

Intellectual Property Security Agreement between Mitel and BNY,
    effective from April 27, 2005(5)2
.18

Class A Convertible Preferred Share Subscription Agreement
    between Mitel and EdgeStone dated April 23, 2004(10)++2
.19

Form of Warrant (See Exhibit 2.18 above)(10)2
.20

Securities Purchase Agreement between Mitel and Wesley Clover
    Corporation dated September 21, 2006(10)++2
.21

Form of Warrant (See Exhibit 2.20 above)(10)2
.22

Termination Agreement between Mitel, Zarlink, PTIC EdgeStone,
    Dr. Matthews, Wesley Clover and CTJL dated August 16,
    2007(13)2
.23

First Lien Credit Agreement among Mitel, Mitel US Holdings Inc.,
    certain lenders, Morgan Stanley Senior Funding, Inc., Morgan
    Stanley & Co, Incorporated and Merrill Lynch, Pierce,
    Fenner & Smith Incorporated dated August 16,
    2007++2
.24

Second Lien Credit Agreement among Mitel, Mitel US Holdings
    Inc., certain lenders, Morgan Stanley Senior Funding, Inc.,
    Morgan Stanley & Co, Incorporated and Merrill Lynch,
    Pierce, Fenner & Smith Incorporated dated
    August 16, 2007++2
.25

Class I Convertible Preferred Share Subscription Agreement
    among Mitel, Arsenal Holdco I, s.a.r.l., Arsenal Holdco II,
    s.a.r.l. and Morgan Stanley Principal Investors Inc. dated
    August 16, 2007++2
.26

Form of Warrant granted to Arsenal Holdco I, s.a.r.l.,
    Arsenal Holdco II, s.a.r.l., Morgan Stanley Principal Investors
    Inc., PTIC and Dr. Matthews(11)2
.27

Shareholder Agreement among Mitel, PTIC, Dr. Matthews,
    Wesley Clover, CTJL, EdgeStone, Arsenal Holdco I, s.a.r.l.,
    Arsenal Holdco II, s.a.r.l. and Morgan Stanley Principal
    Investors Inc. dated August 16, 2007(13)2
.28

Registration Rights Agreement among Mitel, Arsenal
    Holdco I, s.a.r.l., Arsenal Holdco II, s.a.r.l. and Morgan
    Stanley Principal Investors Inc. dated August 16, 2007(13)4
.

Material contracts:4
.1

Cap/Floor Collar Transaction Agreement between Mitel and
    JPMorgan Chase Bank N.A. dated October 3, 2005(5)4
.2

ISDA Master Agreement between Mitel and JPMorgan Chase Bank N.A.
    dated September 25, 2005(5)4
.3

Contract for the Sale of Freehold Land and Building Subject to
    Leases and the Leaseback of Part of Building between MNL and
    Hitchens effective August 31, 2005(5) 104




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##### Table of Contents



4
.4

Securities Purchase Agreement between Mitel and the Noteholders,
    dated April 27, 2005 (See Exhibit 2.6 above) (10)++4
.5

Form of Note (See Exhibit 2.7 above)4
.6

Form of Warrant(10), as amended on August 16, 20074
.7

Registration Rights Agreement between Mitel and the Noteholders,
    dated April 27, 2005(5)4
.8

General Security Agreement between Mitel and Highbridge (as a
    secured party, and also in its capacity as Collateral Agent (now
    BNY) on behalf of the Noteholders), dated April 27, 2005
    (See Exhibit 2.8 above)4
.9

Guaranty and Security Agreement between MNI and Highbridge (as a
    secured party, and also in its capacity as Collateral Agent (now
    BNY) on behalf of the Noteholders), dated April 27, 2005
    (See Exhibit 2.9 above)++4
.10

Pledge Agreement between MNL and Highbridge (as a secured party,
    and also in its capacity as Collateral Agent (now BNY) on behalf
    of the Noteholders), dated April 27, 2005 (See
    Exhibit 2.10 above)4
.11

Charge Over Book Debts and Cash at Bank between MNL and
    Highbridge (as a secured party, and also in its capacity as
    Collateral Agent (now BNY) on behalf of the Noteholders), dated
    April 27, 2005 (See Exhibit 2.11 above)++4
.12

Guarantee and Indemnity between MNL and Highbridge (as a secured
    party, and also in its capacity as Collateral Agent (now BNY) on
    behalf of the Noteholders), dated April 27, 2005 (See
    Exhibit 2.12 above)4
.13

Mortgage Debenture between MNL and Highbridge (as a secured
    party, and also in its capacity as Collateral Agent (now BNY) on
    behalf of the Noteholders), dated April 27, 2005 (See
    Exhibit 2.13 above)4
.14

Guarantee and Security Agreement between MNOL and Highbridge (as
    a secured party, and also in its capacity as Collateral Agent
    (now BNY) on behalf of the Noteholders), dated June 30,
    2005 (See Exhibit 2.14 above)4
.15

Deed of Guarantee and Subordination between MNIL, MNOL and
    Highbridge (as a secured party, and also in its capacity as
    Collateral Agent (now BNY) on behalf of the Noteholders), dated
    June 30, 2005 (See Exhibit 2.15 above)4
.16

Deed of Guarantee and Subordination between MNIL, MNOL and BNY,
    dated July 15, 2005 (see Exhibit 2.16 above)4
.17

Intellectual Property Security Agreement between Mitel and BNY,
    effective from April 27, 2005 (see Exhibit 2.17 above)4
.18

Union Agreement between MNSI (now MNI as a result of the merger
    of MNI and MNSI) and IBEW dated October 1, 2004++4
.19

Deferred Share Unit Plan (DSU Plan) for Executives effective
    December 9, 2004(5)4
.20

Shareholders Agreement between Mitel, Mitel Knowledge, PTIC,
    Zarlink, Mitel Systems (now Wesley Clover), WCC (now Wesley
    Clover), EdgeStone, and Dr. Matthews, dated April 23,
    2004(2) , as amended on June 26, 2006(10)4
.21

Class A Convertible Preferred Share Subscription Agreement
    between Mitel and EdgeStone dated April 23, 2004 (see
    Exhibit 2.18 above)++4
.22

Registration Rights Agreement between Mitel, Mitel Knowledge,
    PTIC, Zarlink, EdgeStone, Mitel Systems (now Wesley Clover) and
    WCC (now Wesley Clover), dated April 23, 2004(2)4
.23

Receivables Purchase Agreement between Mitel, MNI and MNSI, and
    The Canada Trust Company, effective date of April 16,
    2004++(4)4
.24

Amended and Restated Credit Agreement between Mitel, the Lenders
    from time to time and Bank of Montreal as Administrative Agent
    dated April 21, 2004(4) ++, as amended July 24,
    2004(4) , as further amended February 7, 2005(5)4
.25

Loan Agreement between MNL and Export Development Canada dated
    March 4, 2003, as amended(3)4
.26

Chattel Mortgage Loan Agreement between MNL and Barclays Bank
    PLC dated October 22, 2001(1)4
.27

Chattel Mortgage Loan Agreement between MNL and Barclays Bank
    PLC dated April 25, 2003(3)4
.28

Business Overdraft and Ancillary Facility Agreement between MNL
    and Barclays Bank PLC dated August 30, 2002(3)4
.29

Supply Agreement between Mitel and its subsidiaries and
    BreconRidge and its subsidiaries datedAugust 30, 2001(1)+, and related amendment dated
    February 27, 2003(3) + 105




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##### Table of Contents



4
.30

Amendment to the Supply Agreement between Mitel and its
    subsidiaries and BreconRidge and its subsidiaries dated
    February 27, 2003(3)4
.31

Sublease Agreement between Mitel and BreconRidge dated
    August 31, 2001 and First Amendment of Sublease Agreement
    between Mitel and BreconRidge dated May 31, 2002(1) +4
.32

Supply Agreement between Mitel and Zarlink (formerly Mitel
    Corporation) dated February 16, 2001 and related amendment
    dated October 24, 2001(1) +, amended by Amending Agreement
    dated April 23, 2004(4)4
.33

Intellectual Property License Agreement between Mitel and
    Zarlink (formerly Mitel Corporation) dated February 16,
    2001(1) +4
.34

Amendment to the Intellectual Property License Agreement between
    Mitel and Zarlink dated October 24, 2001(1)4
.35

Non Competition and Non Solicitation Agreement between Zarlink
    (formerly Mitel Corporation), Mitel Semiconductor V.N. Inc.,
    Mitel Semiconductor Limited, Mitel Semiconductor Inc., 3755461
    Canada Inc. (now Wesley Clover), Mitel and MRPC dated
    February 16, 2001(1)4
.36

Lease Agreement between Mitel and MRPC dated March 27,
    2001(1)4
.37

Contract for the Sale of Freehold Land and Building Subject to
    Leases and the Leaseback of Part of the Building, dated
    August 24, 2005(7)4
.38

Lease Agreement between Mitel Networks Limited and Breconridge
    Manufacturing Solutions Limited, dated September 14, 2001(7)4
.38

Strategic Alliance Agreement between Mitel and March Networks
    dated September 21, 2001(1), as amended September 20,
    2003(4) , and September 20, 2004(5)4
.39

Integrated Communications Solutions R&D Project Agreement
    between Mitel, Mitel Knowledge, March Networks and Her Majesty
    the Queen in Right of Canada dated October 10, 2002(1) +,
    as amended on March 27, 2003(4), May 2, 2004(10),
    September 16, 2004(10), June 27, 2005(10), and
    October 3, 2005(10), respectively4
.40

CIBC Warrant, dated April 29, 2004(7), as amended(10)4
.41

Employee Stock Option Plan, dated March 6, 2001, as
    amended(6)4
.42

2004 U.S. Employee Stock Purchase Plan(8)4
.43

Form of Global Mitel Employment Agreement(7)4
.44

2006 Equity Incentive Plan(10)4
.45

Amended and Restated Employment Contract between the Registrant
    and Donald Smith, dated April 17, 2001 (the Smith
    Employment Contract)(7)4
.46

Agreement Amending the Smith Employment Contract, dated
    May 5, 2006(7)4
.47

Amended and Restated Employment Contract between the Registrant
    and Paul Butcher, dated February 16, 2001 (the
    Butcher Employment Contract)(7)4
.48

Agreement Amending the Butcher Employment Contract, dated
    May 5, 2006(7)4
.49

Employment Contract, dated January 1, 2006, between the
    Registrant and Steven Spooner(7)4
.50

Employment Contract, dated August 31, 1999, between the
    Registrant and Graham Bevington (the Bevington Employment
    Contract)(7)4
.51

Alterations to the Bevington Employment Contract, dated
    July 20, 2001(7)4
.52

Employment Contract, dated February 21, 2005, between Mitel
    and Kevin Bowyer(7)4
.53

Letter agreement, dated March 1, 2002, between Terence H.
    Matthews and Paul Butcher (the Butcher Letter
    Agreement)(9)4
.54

Amendment No. 1 to the Butcher Letter Agreement, dated
    May 1, 2006(9)4
.55

Letter agreement, dated March 1, 2002, between Terence H.
    Matthews and Donald Smith (the Smith Letter
    Agreement)(9)4
.56

Amendment No. 1 to the Smith Letter Agreement, dated
    May 1, 2006(9)4
.57

Letter agreement, dated May 1, 2006, between Terence H.
    Matthews and Peter D. Charbonneau(9)4
.58

Securities Purchase Agreement between Mitel and Wesley Clover
    Corporation dated September 21, 2006 (see Exhibit 2.20
    above)++4
.59

Share Charge between MNHL and Highbridge (as a secured party,
    and also in its capacity as Collateral Agent (now BNY) on behalf
    of the Noteholders), dated June 7, 2005(10) 106




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##### Table of Contents



4
.60

Tri-Party Agreement between MNOL, MNIL and MNL dated
    June 30, 2005(10)4
.61

Real Property Loan Facility between MNL and Barclays Bank PLC
    dated December 13, 2001, secured by a legal charge dated
    January 24, 2002(1)4
.62

Merger Agreement among Mitel, Inter-Tel (Delaware), Incorporated
    and Arsenal Acquisition Corporation dated April 26, 2007(12)4
.63

Class I Convertible Preferred Share Subscription Agreement
    among Mitel, Arsenal Holdco I, s.a.r.l., Arsenal Holdco II,
    s.a.r.l. and Morgan Stanley Principal Investors Inc. dated
    August 16, 2007 (see Exhibit 2.23 above)++4
.64

Form of Warrant granted to Arsenal Holdco I, s.a.r.l.,
    Arsenal Holdco II, s.a.r.l., Morgan Stanley Principal Investors
    Inc., PTIC and Dr. Matthews (see Exhibit 2.24 above)4
.65

Shareholder Agreement among Mitel, PTIC, Dr. Matthews,
    Wesley Clover, CTJL, EdgeStone, Arsenal Holdco I, s.a.r.l.,
    Arsenal Holdco II, s.a.r.l. and Morgan Stanley Principal
    Investors Inc. dated August 16, 2007 (see Exhibit 2.25
    above)4
.66

Registration Rights Agreement among Mitel, Arsenal
    Holdco I, s.a.r.l., Arsenal Holdco II, s.a.r.l. and Morgan
    Stanley Principal Investors Inc. dated August 16, 2007 (see
    Exhibit 2.26 above)4
.67

Return of Capital, Voting and Conversion Agreement between Mitel
    and EdgeStone dated June 22, 2007(14)4
.68

Common Share Repurchase, Voting and Conversion Agreement between
    Mitel and PTIC dated August 15, 20074
.69

Common Share Repurchase and Voting Agreement between Mitel and
    Zarlink dated May 30, 20074
.70

Warrant Repurchase, Voting and Conversion Agreement between
    Mitel, Dr. Matthews, Wesley Clover and CTJL dated
    August 15, 2007(13)4
.71

Termination Agreement between Mitel, Zarlink, PTIC EdgeStone,
    Dr. Matthews, Wesley Clover and CTJL dated August 16,
    2007 (see Exhibit 2.22 above)4
.72

First Lien Credit Agreement among Mitel, Mitel US Holdings Inc.,
    certain lenders, Morgan Stanley Senior Funding, Inc., Morgan
    Stanley & Co, Incorporated and Merrill Lynch, Pierce,
    Fenner & Smith Incorporated dated August 16, 2007
    (see Exhibit 2.23 above)++4
.73

Second Lien Credit Agreement among Mitel, Mitel US Holdings
    Inc., certain lenders, Morgan Stanley Senior Funding, Inc.,
    Morgan Stanley & Co, Incorporated and Merrill Lynch,
    Pierce, Fenner & Smith Incorporated dated
    August 16, 2007 (see Exhibit 2.24 above)++4
.74

Employment Contract dated October 12, 2006 between
    Inter-Tel (Delaware), Incorporated and Norman Stout (15)4
.75

Form of Key Employee Tier 1 Change of Control Severance
    Agreement(16)4
.76

Inter-Tel, Incorporated Tax Deferred Savings Plan and Retirement
    Trust(17)8
.1

Subsidiaries of Mitel Networks Corporation12
.1

Certification by CEO pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200212
.2

Certification by CFO pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200213
.1

Certification by CEO pursuant to Section 906 of the
    Sarbanes-Oxley Act of 200213
.2

Certification by CFO pursuant to Section 906 of the
    Sarbanes-Oxley Act of 200299
.1

Auditors Consent     (1)
    
    Filed as an exhibit to the Registration Statement on
    Form 20-F,
    as amended (File
    No. 0-49984)
    of Mitel and incorporated herein by reference.(2)
    
    Filed on May 3, 2004 as an exhibit to a Schedule 13D
    (Mitel as issuer) by EdgeStone Capital Equity
    Fund II-A,
    L.P.; EdgeStone Capital Equity
    Fund II-US,
    L.P.; EdgeStone Capital Equity
    Fund II-US-Inst.,
    L.P.; National Bank Financial & Co. Inc.; EdgeStone
    Capital Equity
    Fund II-A
    GP, L.P.; EdgeStone Capital Equity Fund II US GP, L.P.;
    EdgeStone Capital Equity
    Fund II-US-Inst.
    GP, L.P.; EdgeStone Capital Equity
    Fund II-A
    GP, Inc.; EdgeStone Capital Equity
    Fund II-US
    Main GP, Inc.; EdgeStone Capital Equity
    Fund II-US-Inst.
    GP, Inc.; Samuel L. Duboc; Gilbert S. Palter; Bryan W. Kerdman;
    Sandra Cowan; and EdgeStone Capital Equity
    Fund II-B
    GP, Inc. and incorporated herein by reference.(3)
    
    Filed on August 1, 2003 as an exhibit to the annual report
    on
    Form 20-F
    of Mitel for the year ended April 27, 2003 and incorporated
    herein by reference. 107




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##### Table of Contents



(4)
    
    Filed on August 31, 2004 as an exhibit to the annual report
    on
    Form 20-F
    of Mitel for the year ended April 25, 2004, and
    incorporated herein by reference.(5)
    
    Filed on October 24, 2005 as an exhibit to the annual
    report on
    Form 20-F
    of Mitel for the year ended April 24, 2005 and the
    transition period ended April 30, 2005 and incorporated
    therein by reference.(6)
    
    Filed as an exhibit to the
    Form S-8
    of the Registrant, dated March 6, 2006, filed with the
    Commission on March 6, 2006 and incorporated therein by
    reference.(7)
    
    Filed as an exhibit to the
    Form F-1
    of the Registrant, dated May 9, 2006, filed with the
    Commission on May 9, 2006 and incorporated therein by
    reference.(8)
    
    Filed as an exhibit to the
    Form S-8
    of the Registrant, dated November 29, 2004, filed with the
    Commission on November 29, 2004 and incorporated therein by
    reference.(9)
    
    Filed as an exhibit to Amendment No. 1 to the
    Schedule 13D (the Registrant as issuer) filed with the
    Commission on May 5, 2006 by Terence H. Matthews, Wesley
    Clover Corporation and Celtic Tech Jet Limited and incorporated
    therein by reference.(10)
    
    Filed on October 30, 2006 as an exhibit to the annual
    report on
    Form 20-F
    of Mitel for the year ended April 30, 2006 and incorporated
    therein by reference.(11)
    
    Filed as an exhibit to Amendment No. 2 to the
    Schedule 13D (the Registrant as issuer) filed with the
    Commission on August 27, 2007 by Arsenal Holdco I,
    S.A.R.L., Arsenal Holdco II, S.A.R.L., Francisco Partners GP II
    (Cayman), L.P., Francisco Partners GP II Management (Cayman)
    Limited, Francisco Partners Gp II, L.P., Francisco
    Partners II (Cayman), L.P., and Francisco Partners Parallel
    Fund II, L.P. and incorporated therein by reference.(12)
    
    Filed as an exhibit to the
    Form 8-K
    of Inter-Tel (Delaware), Incorporated filed with the Commission
    on April 26, 2007 and incorporated therein by reference.(13)
    
    Filed as an exhibit to Amendment No. 2 to the
    Schedule 13D (the Registrant as issuer) filed with the
    Commission on September 28, 2007 by Terence H. Matthews,
    Wesley Clover Corporation and Celtic Tech Jet Limited and
    incorporated therein by reference.(14)
    
    Filed on August 28, 2007 as an exhibit to Amendment
    No. 2 of Schedule 13D (Mitel as issuer) by EdgeStone
    Capital Equity
    Fund II-A,
    L.P.; EdgeStone Capital Equity Fund II-US, L.P.; EdgeStone
    Capital Equity
    Fund II-US-Inst.,
    L.P.; National Bank Financial & Co. Inc.; EdgeStone
    Capital Equity
    Fund II-A
    GP, L.P.; EdgeStone Capital Equity Fund II US GP, L.P.;
    EdgeStone Capital Equity
    Fund II-US-Inst.
    GP, L.P.; EdgeStone Capital Equity
    Fund II-A
    GP, Inc.; EdgeStone Capital Equity
    Fund II-US
    Main GP, Inc.; EdgeStone Capital Equity
    Fund II-US-Inst.
    GP, Inc.; Samuel L. Duboc; Gilbert S. Palter; Bryan W. Kerdman;
    Sandra Cowan; and EdgeStone Capital Equity
    Fund II-B
    GP, Inc. and incorporated herein by reference.(15)
    
    Filed as an exhibit to the
    Form 8-K
    of Inter-Tel (Delaware), Incorporated filed with the Commission
    on October 16, 2007 and incorporated therein by reference.(16)
    
    Filed as an exhibit to the
    Form 10-K
    of Inter-Tel (Delaware), Incorporated filed with the Commission
    for the year ended December 31, 2003 and incorporated
    therein by reference.(17)
    
    Filed as an exhibit to the
    Form 10-K
    of Inter-Tel (Delaware), Incorporated filed with the Commission
    for the year ended November 30, 1984 and incorporated
    therein by reference.+
    
    Portions of this document have been granted Confidential
    Treatment by the Secretary of the Securities and Exchange
    Commission.++
    
    Portions of this document are subject to a pending Confidential
    Treatment Request filed with the Secretary of the Securities and
    Exchange Commission and have been filed separately with the
    Securities and Exchange Commission. 108




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##### Table of Contents



Index
    to Financial Statements
    Independent Auditors Report  Deloitte &
    Touche LLP


F-2Consolidated Balance Sheets


F-3Consolidated Statements of Operations


F-4Consolidated Statements of Shareholders Equity


F-5Consolidated Statement of Cash Flows


F-7Notes to Consolidated Financial Statements


F-8Financial Statement Schedules:(Note: Schedules other than that listed below are omitted as
    they are not applicable or not required, or the information is
    included in the consolidated financial statements or notes
    thereto)Schedule II  Valuation of Qualifying Accounts


F-49  109




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##### Table of Contents



SIGNATURE
  Form 20-F
    /s/  Donald
    W. Smith   Title:
    Chief Executive Officer   110




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##### Table of Contents



(PICTURE)
    
    MITEL NETWORKSCORPORATION
 CONSOLIDATED FINANCIAL STATEMENTS  (in accordance with US GAAP)
 FOR THE FISCAL YEARS ENDED April 24, 2005, April 30, 2006 and April 30, 2007 and FOR THE SIX DAY
PERIOD ENDED APRIL 30, 2005
  (MITEL LOGO)




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
      -s- Deloitte & Touche LLPOttawa, Canada
June 19, 2007, except for Notes 28 and 29, which are at October 10,2007
    
    Deloitte & Touche LLP Licensed
Public Accountants
   
 -s- Deloitte & Touche LLPOttawa, Canada
June 19, 2007, except for Notes 28 and 29, which are at October 10,2007
    
    Deloitte & Touche LLP Licensed
Public Accountants
 (MITEL LOGO)




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##### Table of Contents



MITEL NETWORKS CORPORATION
 (incorporated under the laws of Canada)
 CONSOLIDATED BALANCE SHEETS
 (in millions of US dollars, except share amounts)
 April 30, 2006
    
    April 30, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    35.7
    
    
    $
    33.5Restricted cash
    
    
    1.7
    
    
    
    3.6Accounts receivable (net of allowance of $2.5 and $2.5, respectively)
    
    
    79.7
    
    
    
    81.7Due from related parties
    
    
    0.4
    
    
    
    0.8Inventories
    
    
    23.6
    
    
    
    19.8Income tax receivable
    
    
    
    
    
    
    0.8Deferred tax asset
    
    
    0.7
    
    
    
    Other current assets
    
    
    24.7
    
    
    
    30.2166.5
    
    
    
    170.4Investment
    
    
    
    
    
    
    1.0Long-term receivables
    
    
    0.4
    
    
    
    0.9Property and equipment
    
    
    17.4
    
    
    
    16.5Goodwill
    
    
    6.8
    
    
    
    6.8Intangible and other assets
    
    
    6.6
    
    
    
    6.6Deferred tax asset
    
    
    2.1
    
    
    
    $
    199.8
    
    
    $
    202.2LIABILITIES, REDEEMABLE SHARES AND SHAREHOLDERS DEFICIENCYCurrent liabilities:Bank indebtedness
    
    $
    2.1
    
    
    $
    0.5Accounts payable and accrued liabilities
    
    
    73.3
    
    
    
    98.7Income and other taxes payable
    
    
    1.7
    
    
    
    0.1Deferred revenue
    
    
    23.1
    
    
    
    19.6Due to related parties
    
    
    24.2
    
    
    
    23.0Current portion of long-term debt
    
    
    1.6
    
    
    
    1.9126.0
    
    
    
    143.8Long-term debt
    
    
    2.5
    
    
    
    2.1Long-term portion of lease termination obligations
    
    
    5.5
    
    
    
    3.7Litigation settlement obligation
    
    
    
    
    
    
    10.8Convertible notes
    
    
    48.7
    
    
    
    50.2Derivative instruments
    
    
    75.9
    
    
    
    67.3Deferred gain
    
    
    5.5
    
    
    
    4.9Pension liability
    
    
    40.1
    
    
    
    50.5304.2
    
    
    
    333.3Commitments and contingenciesRedeemable common shares, without par value : 10,000,000 shares
authorized; issued and outstanding at April 30, 2006 and April 30, 2007
    
    
    18.7
    
    
    
    19.0Convertible, redeemable preferred shares,
without par value  unlimited shares authorized; issued and outstanding: Series A: 20,000,000 shares at April 30,
2006, and April 30, 2007; Series B: 67,789,300 shares at April 30,
2006 and April 30, 2007
    
    
    45.5
    
    
    
    52.564.2
    
    
    
    71.5Shareholders deficiency:Common shares, without par value 
unlimited shares authorized:, 107,302,322, and 107,344,086 issued and outstanding at April 30, 2006, and
April 30, 2007
    
    
    188.8
    
    
    
    189.1Warrants
    
    
    47.9
    
    
    
    62.9Deferred stock-based compensation
    
    
    (0.1
    )
    
    
    (0.1
    )Additional paid-in capital
    
    
    
    
    
    
    0.3Accumulated deficit
    
    
    (355.5
    )
    
    
    (398.2
    )Accumulated other comprehensive loss
    
    
    (49.7
    )
    
    
    (56.6
    )(168.6
    )
    
    
    (202.6
    )$
    199.8
    
    
    $
    202.2
 APPROVED BY THE BOARD(SIGNATURE)
    
    
    
    (SIGNATURE)Director
    
    
    
    Director
  (MITEL LOGO)




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##### Table of Contents



MITEL NETWORKS CORPORATION
(incorporated under the laws of Canada)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions of US dollars, except share and per share amounts)
 Year Ended
    
    Six Days Ended
    
    Year Ended
    
    Year EndedApril 24, 2005
    
    April 30, 2005
    
    April 30, 2006
    
    April 30, 2007Revenues:Products
    
    $
    207.7
    
    
    $
    1.7
    
    
    $
    260.5
    
    
    $
    263.6Services
    
    
    134.5
    
    
    
    1.5
    
    
    
    126.6
    
    
    
    121.3342.2
    
    
    
    3.2
    
    
    
    387.1
    
    
    
    384.9Cost of revenues:Products
    
    
    132.0
    
    
    
    1.6
    
    
    
    149.1
    
    
    
    151.8Services
    
    
    81.2
    
    
    
    0.8
    
    
    
    76.6
    
    
    
    73.3213.2
    
    
    
    2.4
    
    
    
    225.7
    
    
    
    225.1Gross margin
    
    
    129.0
    
    
    
    0.8
    
    
    
    161.4
    
    
    
    159.8Expenses:Selling, general and administrative
    
    
    114.9
    
    
    
    1.8
    
    
    
    120.7
    
    
    
    123.5Research and development
    
    
    41.4
    
    
    
    0.7
    
    
    
    44.1
    
    
    
    41.7Special charges
    
    
    10.6
    
    
    
    
    
    
    
    5.7
    
    
    
    9.3Litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16.3Initial public offering costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.3Loss (gain) on sale of manufacturing operations
    
    
    3.4
    
    
    
    
    
    
    
    (0.9
    )
    
    
    (1.0
    )Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    (1.5
    )
    
    
    170.3
    
    
    
    2.5
    
    
    
    168.1
    
    
    
    193.1Operating loss
    
    
    (41.3
    )
    
    
    (1.7
    )
    
    
    (6.7
    )
    
    
    (33.3
    )Interest expense
    
    
    (2.6
    )
    
    
    
    
    
    
    (7.6
    )
    
    
    (9.1
    )Fair value adjustment on derivative instruments
    
    
    (5.3
    )
    
    
    (0.1
    )
    
    
    (32.6
    )
    
    
    8.6Other income
    
    
    0.4
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    0.6Loss before income taxes
    
    
    (48.8
    )
    
    
    (1.6
    )
    
    
    (46.5
    )
    
    
    (33.2
    )Current income tax expense (recovery)
    
    
    0.8
    
    
    
    
    
    
    
    0.9
    
    
    
    (0.2
    )Deferred income tax expense (recovery)
    
    
    
    
    
    
    
    
    
    
    (2.8
    )
    
    
    2.0Net loss
    
    $
    (49.6
    )
    
    $
    (1.6
    )
    
    $
    (44.6
    )
    
    $
    (35.0
    )Net loss per common share:Basic and diluted
    
    $
    (0.49
    )
    
    $
    (0.01
    )
    
    $
    (0.44
    )
    
    $
    (0.36
    )Weighted-average number of common shares outstandingBasic and diluted
    
    
    113,792,829
    
    
    
    117,149,933
    
    
    
    117,230,198
    
    
    
    117,336,927
  (MITEL LOGO)




---



##### Table of Contents



MITEL NETWORKS CORPORATION
(incorporated under the laws of Canada)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIENCY AND COMPREHENSIVE LOSS
(in millions of US dollars, except share amounts)
 Deferred
    
    
    
    
    
    Accumulated Other
    
    TotalCommon Shares
    
    
    
    
    
    Stock-based
    
    Accumulated
    
    Comprehensive
    
    ShareholdersShares
    
    Amount
    
    Warrants
    
    Compensation
    
    Deficit
    
    Income (Loss)
    
    DeficiencyBalances at April 25, 2004
    
    
    101,782,757
    
    
    $
    184.8
    
    
    $
    29.8
    
    
    $
    (0.2
    )
    
    $
    (247.1
    )
    
    $
    (21.9
    )
    
    $
    (54.6
    )Common shares issued:Cash and employee loans
    
    
    5,601,870
    
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.6Professional services received
    
    
    153,616
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Exchange of common shares for Series B
convertible, redeemable preferred shares
    
    
    (364,156
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Common share issue costs
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Share purchase loans
    
    
    
    
    
    
    (1.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.3
    )Share purchase loan repayments
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Shares repurchased
    
    
    (24,154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    10.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.4Amortization of deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Accretion of interest on redeemable common and
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.6
    )
    
    
    
    
    
    
    (5.6
    )107,149,933
    
    
    $
    187.6
    
    
    $
    40.2
    
    
    $
    (0.4
    )
    
    $
    (252.7
    )
    
    $
    (21.9
    )
    
    $
    (47.2
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49.6
    )
    
    
    
    
    
    
    (49.6
    )Other comprehensive income:Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.6
    )
    
    
    (5.6
    )Minimum pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.4
    
    
    
    2.4Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49.6
    )
    
    
    (3.2
    )
    
    
    (52.8
    )Balances at April 24, 2005
    
    
    107,149,933
    
    
    $
    187.6
    
    
    $
    40.2
    
    
    $
    (0.4
    )
    
    $
    (302.3
    )
    
    $
    (25.1
    )
    
    $
    (100.0
    )Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    7.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.7Accretion of interest on redeemable common and
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )107,149,933
    
    
    $
    187.6
    
    
    $
    47.9
    
    
    $
    (0.4
    )
    
    $
    (302.4
    )
    
    $
    (25.1
    )
    
    $
    (92.4
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.6
    )
    
    
    
    
    
    
    (1.6
    )Other comprehensive income:Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    0.9Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.6
    )
    
    
    0.9
    
    
    
    (0.7
    )Balances at April 30, 2005
    
    
    107,149,933
    
    
    $
    187.6
    
    
    $
    47.9
    
    
    $
    (0.4
    )
    
    $
    (304.0
    )
    
    $
    (24.2
    )
    
    $
    (93.1
    )
  (MITEL LOGO)




---



##### Table of Contents



MITEL NETWORKS CORPORATION
(incorporated under the laws of Canada)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIENCY AND COMPREHENSIVE LOSS
(in millions of US dollars, except share amounts)
 Additional
    
    Deferred
    
    
    
    
    
    Accumulated Other
    
    TotalCommon Shares
    
    
    
    
    
    paid-in
    
    Stock-based
    
    Accumulated
    
    Comprehensive
    
    ShareholdersShares
    
    Amount
    
    Warrants
    
    Capital
    
    Compensation
    
    Deficit
    
    Income (Loss)
    
    DeficiencyBalances at April 30, 2005
    
    
    107,149,933
    
    
    $
    187.6
    
    
    $
    47.9
    
    
    $
    
    
    
    $
    (0.4
    )
    
    $
    (304.0
    )
    
    $
    (24.2
    )
    
    $
    (93.1
    )Common shares issued:Exercise of stock options
    
    
    58,174
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Professional services received
    
    
    132,261
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Fair value adjustment relating to stock option plan
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Share purchase loan repayments
    
    
    
    
    
    
    1.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.1Shares repurchased
    
    
    (38,046
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock-based compensation
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Accretion of interest on redeemable common and
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.9
    )
    
    
    
    
    
    
    (6.9
    )107,302,322
    
    
    $
    188.8
    
    
    $
    47.9
    
    
    $
    
    
    
    $
    (0.1
    )
    
    $
    (310.9
    )
    
    $
    (24.2
    )
    
    $
    (98.5
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44.6
    )
    
    
    
    
    
    
    (44.6
    )Other comprehensive income:Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10.9
    )
    
    
    (10.9
    )Minimum pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14.6
    )
    
    
    (14.6
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44.6
    )
    
    
    (25.5
    )
    
    
    (70.1
    )Balance at April 30, 2006
    
    
    107,302,322
    
    
    $
    188.8
    
    
    $
    47.9
    
    
    $
    
    
    
    $
    (0.1
    )
    
    $
    (355.5
    )
    
    $
    (49.7
    )
    
    $
    (168.6
    )Common shares issued:Exercise of stock options
    
    
    45,624
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Professional services received
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Warrants issued
    
    
    
    
    
    
    
    
    
    
    15.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.0Share purchase loan repayments
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Shares repurchased
    
    
    (13,860
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Accretion of interest on redeemable common and
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7.3
    )
    
    
    
    
    
    
    (7.3
    )107,344,086
    
    
    $
    189.1
    
    
    $
    62.9
    
    
    $
    0.3
    
    
    $
    (0.1
    )
    
    $
    (362.8
    )
    
    $
    (49.7
    )
    
    $
    (160.3
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35.0
    )
    
    
    
    
    
    
    (35.0
    )Other comprehensive income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    1.2Minimum pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16.6
    
    
    
    16.6Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35.0
    )
    
    
    17.8
    
    
    
    (17.2
    )Adoption of SFAS 158 pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.4
    )
    
    
    (24.7
    )
    
    
    (25.1
    )Balance at April 30, 2007
    
    
    107,344,086
    
    
    $
    189.1
    
    
    $
    62.9
    
    
    $
    0.3
    
    
    $
    (0.1
    )
    
    $
    (398.2
    )
    
    $
    (56.6
    )
    
    $
    (202.6
    )
  (MITEL LOGO)




---



##### Table of Contents



MITEL NETWORKS CORPORATION
(incorporated under the laws of Canada)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of US dollars)
 Year Ended
    
    Six Days Ended
    
    Year Ended
    
    Year EndedApril 24, 2005
    
    April 30, 2005
    
    April 30, 2006
    
    April 30, 2007CASH PROVIDED BY (USED IN)Operating activities:Net loss
    
    $
    (49.6
    )
    
    $
    (1.6
    )
    
    $
    (44.6
    )
    
    $
    (35.0
    )Adjustments to reconcile net loss to net cash from operating activities:Amortization and depreciation
    
    
    8.9
    
    
    
    0.2
    
    
    
    10.2
    
    
    
    9.8Amortization of deferred gain
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    (0.6
    )Fair value adjustment on derivative instruments
    
    
    5.3
    
    
    
    0.1
    
    
    
    32.6
    
    
    
    (8.6
    )Accretion of convertible notes to redemption value
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    1.5Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.3Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    (2.8
    )
    
    
    2.8Loss (gain) on sale of manufacturing operations
    
    
    3.4
    
    
    
    
    
    
    
    (0.9
    )
    
    
    (1.0
    )Loss (gain) on sale of business and assets
    
    
    
    
    
    
    
    
    
    
    (1.5
    )
    
    
    Unrealized foreign exchange loss (gain)
    
    
    (2.0
    )
    
    
    (0.9
    )
    
    
    2.1
    
    
    
    (3.2
    )Non-cash movements in provisions
    
    
    5.5
    
    
    
    
    
    
    
    4.2
    
    
    
    4.1Non-cash portion of litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.3Change in non-cash operating assets and liabilities, net
    
    
    (3.3
    )
    
    
    1.0
    
    
    
    (3.1
    )
    
    
    2.6Net cash used in operating activities
    
    
    (31.8
    )
    
    
    (1.2
    )
    
    
    (2.3
    )
    
    
    (12.0
    )Investing activities:Additions to capital and intangible assets
    
    
    (4.5
    )
    
    
    (0.1
    )
    
    
    (8.8
    )
    
    
    (7.1
    )(Increase) decrease in restricted cash
    
    
    0.9
    
    
    
    (1.0
    )
    
    
    (0.5
    )
    
    
    (1.9
    )Proceeds on sale of assets
    
    
    
    
    
    
    
    
    
    
    12.4
    
    
    
    Realized foreign exchange loss on hedging activities
    
    
    (8.4
    )
    
    
    
    
    
    
    (8.0
    )
    
    
    (3.9
    )Realized foreign exchange gain on hedging activities
    
    
    6.2
    
    
    
    
    
    
    
    8.6
    
    
    
    0.5Net cash provided by (used in) investing activities
    
    
    (5.8
    )
    
    
    (1.1
    )
    
    
    3.7
    
    
    
    (12.4
    )Financing activities:Increase (decrease) in bank indebtedness
    
    
    8.9
    
    
    
    (14.6
    )
    
    
    0.7
    
    
    
    (1.6
    )Deferred financing costs
    
    
    
    
    
    
    (0.4
    )
    
    
    (1.8
    )
    
    
    (2.1
    )Proceeds from issuance of convertible notes
    
    
    
    
    
    
    54.3
    
    
    
    
    
    
    
    Repayment of long-term debt
    
    
    (4.4
    )
    
    
    
    
    
    
    (11.9
    )
    
    
    (1.0
    )Proceeds from transfer of receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.9Proceeds from issuance of warrants
    
    
    12.4
    
    
    
    
    
    
    
    
    
    
    
    15.0Proceeds from issuance of common shares
    
    
    2.4
    
    
    
    
    
    
    
    0.2
    
    
    
    0.1Proceeds from repayments of employee share purchase loans
    
    
    1.1
    
    
    
    
    
    
    
    1.1
    
    
    
    0.2Share issue costs
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    20.1
    
    
    
    39.3
    
    
    
    (11.7
    )
    
    
    21.5Effect of exchange rate changes on cash and cash equivalents
    
    
    0.5
    
    
    
    (0.1
    )
    
    
    (0.6
    )
    
    
    0.7Increase (decrease) in cash and cash equivalents
    
    
    (17.0
    )
    
    
    36.9
    
    
    
    (10.9
    )
    
    
    (2.2
    )Cash and cash equivalents, beginning of period
    
    
    26.7
    
    
    
    9.7
    
    
    
    46.6
    
    
    
    35.7Cash and cash equivalents, end of period
    
    $
    9.7
    
    
    $
    46.6
    
    
    $
    35.7
    
    
    $
    33.5
  (MITEL LOGO)




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##### Table of Contents



MITEL NETWORKS CORPORATION
(incorporated under the laws of Canada)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    BACKGROUND AND NATURE OF OPERATIONS
  Canada Business Corporations Act
 2.
    
    ACCOUNTING POLICIES
             (MITEL LOGO)
 8




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Indirect channels
   Direct channels
  (MITEL LOGO)
 9




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##### Table of Contents



Accounting for the Impairment or Disposal of
Long-Lived Assets
  (MITEL LOGO)
 10




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##### Table of Contents



Goodwill and Other Intangible Assets
   Accounting for Derivative Instruments
and Hedging Activities
         (MITEL LOGO)
 11




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##### Table of Contents



April 30, 2007Risk-free interest rate
    
    
    4.1
    %Dividends
    
    
    0
    %Expected volatility
    
    
    86.6
    %Annual forfeiture rate
    
    
    15
    %Expected life of the options
    
    5 yearsFair value per option
    
    $
    0.77
        (MITEL LOGO)
 12




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##### Table of Contents



3.
    
    RELATED PARTY TRANSACTIONS
  (MITEL LOGO)
 13




---



##### Table of Contents



Disposal of manufacturing operations
     Leased properties
    Financing
  Prepaid License and Investment Agreement
  (MITEL LOGO)
 14




---



##### Table of Contents



Other
   4.
    
    SPECIAL CHARGES
    
 15




---



##### Table of Contents



LeaseWorkforce
    
    Termination
    
    Assets WrittenDescription
    
    Reduction
    
    Obligation
    
    Off
    
    Legal Costs
    
    TotalBalance of provision as of April 25, 2004
    
    $
    2.1
    
    
    $
    5.3
    
    
    $
    
    
    
    $
    0.4
    
    
    $
    7.8Fiscal 2005:Charges
    
    
    8.7
    
    
    
    1.3
    
    
    
    0.9
    
    
    
    
    
    
    
    10.9Adjustments
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Cash payments
    
    
    (8.9
    )
    
    
    (1.2
    )
    
    
    
    
    
    
    (0.4
    )
    
    
    (10.5
    )Assets written off
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    (0.9
    )Foreign currency impact
    
    
    0.4
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.7Balance of provision as of April 24, 2005
    
    $
    2.0
    
    
    $
    5.7
    
    
    $
    
    
    
    $
    
    
    
    $
    7.7Transition Period:Cash payments
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Foreign currency impact
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Balance of provision as of April 30, 2005
    
    $
    1.8
    
    
    $
    5.6
    
    
    $
    
    
    
    $
    
    
    
    $
    7.4Fiscal 2006:Charges
    
    
    5.7
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    6.5Adjustments
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    
    
    
    
    (0.8
    )Cash payments
    
    
    (6.0
    )
    
    
    (1.3
    )
    
    
    
    
    
    
    
    
    
    
    (7.3
    )Foreign currency impact
    
    
    0.2
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Balance of provision as of April 30, 2006
    
    $
    1.7
    
    
    $
    4.0
    
    
    $
    
    
    
    $
    
    
    
    $
    5.7Fiscal 2007:Charges
    
    
    8.7
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    9.3Cash payments
    
    
    (9.5
    )
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    (10.5
    )Foreign currency impact
    
    
    0.3
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.7Balance of provision as of April 30, 2007
    
    $
    1.2
    
    
    $
    4.0
    
    
    $
    
    
    
    $
    
    
    
    $
    5.2
 5.
    
    SEGMENT INFORMATIONGeneral descriptionMitels portfolio of solutions provide advanced voice, video and data communications
platforms, desktop phones and Internet appliances, applications for customer relationship
management and mobility, messaging and multimedia collaboration.In years previous to fiscal 2006, the Company reported its operations in two segments: the
Communications Solutions segment (Solutions) and the Customer Services segment
(Services). Effective fiscal 2006, Mitel changed its structure of reporting so that the
reportable segments are now represented by the following four geographic areas: United
States, Canada and Caribbean & Latin America (CALA), Europe, Middle East & Africa (EMEA), and
Asia Pacific. These reportable segments were determined in accordance with how management
views and evaluates the Companys business. The results of operations for 2005 have been
restated to conform with the new presentation.The Companys Chief Executive Officer (CEO) has been identified as the chief operating
decision maker as defined by SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information. The CEO evaluates the performance of the segments and allocates
resources based on information provided by the Companys internal management system. The
primary financial measure used by the CEO is the contribution margin, which includes segment
revenues less the related cost of sales and direct selling costs.The Company does not
allocate research and development, marketing, general and administrative expenses,
amortization, stock-based compensation expense and one-time charges to its segments as
management does not use this information to measure the performance of the operating
segments. These unallocated expenses are included in shared and unallocated costs in the
reconciliation of operating results. In addition, total asset information by segment is not
presented because the CEO does not use such segmented measures to allocate resources and
assess performance. Inter-segment sales are based on fair market values and are eliminated
on consolidation. With the exception of contribution margin defined above, the accounting
policies of reported segments are the same as those described in the summary of significant
accounting policies.
 
 16




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##### Table of Contents



Business segmentsFinancial information by geographic area for fiscal years 2005, 2006 and 2007, and the
Transition Period under the new basis of reporting is summarized below. External revenues are
attributed to geographic area based on sales office location.
 United
    
    Canada and
    
    
    
    
    
    
    
    
    
    CorporateStates
    
    CALA
    
    EMEA
    
    Asia Pacific
    
    and Other
    
    TotalFiscal 2005Revenue
    
    $
    153.5
    
    
    $
    37.2
    
    
    $
    145.5
    
    
    $
    6.0
    
    
    $
    
    
    
    $
    342.2Contribution Margin
    
    
    59.5
    
    
    
    13.7
    
    
    
    39.7
    
    
    
    
    
    
    
    
    
    
    
    112.9Shared and unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (154.2
    )
    
    
    (154.2
    )Operating earnings (loss)
    
    $
    59.5
    
    
    $
    13.7
    
    
    $
    39.7
    
    
    $
    
    
    
    $
    (154.2
    )
    
    $
    (41.3
    )Transition PeriodRevenue
    
    $
    1.8
    
    
    $
    0.4
    
    
    $
    1.0
    
    
    $
    
    
    
    $
    
    
    
    $
    3.2Contribution Margin
    
    
    0.5
    
    
    
    
    
    
    
    (0.3
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    0.1Shared and unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.8
    )
    
    
    (1.8
    )Operating earnings (loss)
    
    $
    0.5
    
    
    $
    
    
    
    $
    (0.3
    )
    
    $
    (0.1
    )
    
    $
    (1.8
    )
    
    $
    (1.7
    )Fiscal 2006Revenue
    
    $
    178.5
    
    
    $
    43.6
    
    
    $
    156.3
    
    
    $
    8.7
    
    
    $
    
    
    
    $
    387.1Contribution Margin
    
    
    73.9
    
    
    
    17.1
    
    
    
    52.1
    
    
    
    0.6
    
    
    
    
    
    
    
    143.7Shared and unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150.4
    )
    
    
    (150.4
    )Operating earnings (loss)
    
    $
    73.9
    
    
    $
    17.1
    
    
    $
    52.1
    
    
    $
    0.6
    
    
    $
    (150.4
    )
    
    $
    (6.7
    )Fiscal 2007Revenue
    
    $
    161.6
    
    
    $
    49.4
    
    
    $
    162.4
    
    
    $
    11.5
    
    
    $
    
    
    
    $
    384.9Contribution margin
    
    
    63.0
    
    
    
    20.0
    
    
    
    51.2
    
    
    
    1.9
    
    
    
    
    
    
    
    136.1Shared and unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169.4
    )
    
    
    (169.4
    )Operating earnings (loss)
    
    $
    63.0
    
    
    $
    20.0
    
    
    $
    51.2
    
    
    $
    1.9
    
    
    $
    (169.4
    )
    
    $
    (33.3
    )
 Product informationEffective fiscal 2006, the Company revised the allocation of revenues between its product and
service groups. The following table sets forth the net revenues for groups of similar
products and services by period under the revised basis of reporting:
 Transition2005
    
    Period
    
    2006
    
    2007Products:Platforms and desktop appliances
    
    $
    165.1
    
    
    $
    1.3
    
    
    $
    204.3
    
    
    $
    201.4Applications
    
    
    23.5
    
    
    
    0.3
    
    
    
    34.2
    
    
    
    38.4Other (1)
    
    
    19.1
    
    
    
    0.1
    
    
    
    22.0
    
    
    
    23.8207.7
    
    
    
    1.7
    
    
    
    260.5
    
    
    
    263.6Services:Maintenance and support
    
    
    85.3
    
    
    
    1.2
    
    
    
    80.9
    
    
    
    77.2Installation
    
    
    22.1
    
    
    
    0.1
    
    
    
    24.6
    
    
    
    21.2Managed services
    
    
    10.9
    
    
    
    0.2
    
    
    
    9.2
    
    
    
    7.7Professional services
    
    
    16.2
    
    
    
    
    
    
    
    11.9
    
    
    
    15.2134.5
    
    
    
    1.5
    
    
    
    126.6
    
    
    
    121.3Total
    
    $
    342.2
    
    
    $
    3.2
    
    
    $
    387.1
    
    
    $
    384.9
 (1)
    
    Other products include mainly OEM products representing approximately six
percent, three percent, six percent and six percent of total revenue in fiscal 2005,
Transition Period, fiscal 2006 and fiscal 2007 respectively.
 
 17




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##### Table of Contents



Geographic informationRevenues from external customers are attributed to the following countries based on location
of the customers.
 Transition2005
    
    Period
    
    2006
    
    2007Canada
    
    $
    26.5
    
    
    $
    0.3
    
    
    $
    30.9
    
    
    $
    37.6United States
    
    
    155.3
    
    
    
    1.8
    
    
    
    178.9
    
    
    
    161.9United Kingdom
    
    
    127.3
    
    
    
    1.0
    
    
    
    130.2
    
    
    
    129.0Other foreign countries
    
    
    33.1
    
    
    
    0.1
    
    
    
    47.1
    
    
    
    56.4$
    342.2
    
    
    $
    3.2
    
    
    $
    387.1
    
    
    $
    384.9
 Geographic long-lived asset information is based on the physical location of the assets as of
the end of each fiscal period. The following table sets forth long-lived assets by
geographic areas:
 April 30, 2006
    
    April 30, 2007Intangible
    
    
    
    
    
    
    
    
    
    IntangibleProperty and
    
    
    
    
    
    and Other
    
    Property and
    
    
    
    
    
    and OtherEquipment
    
    Goodwill
    
    Assets
    
    Equipment
    
    Goodwill
    
    AssetsCanada
    
    $
    10.4
    
    
    $
    4.2
    
    
    $
    6.6
    
    
    $
    11.6
    
    
    $
    4.2
    
    
    $
    6.6United States
    
    
    1.0
    
    
    
    0.9
    
    
    
    
    
    
    
    1.1
    
    
    
    0.9
    
    
    
    United Kingdom
    
    
    5.0
    
    
    
    1.7
    
    
    
    
    
    
    
    3.6
    
    
    
    1.7
    
    
    
    Other foreign countries
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    $
    17.4
    
    
    $
    6.8
    
    
    $
    6.6
    
    
    $
    16.5
    
    
    $
    6.8
    
    
    $
    6.6
 ConcentrationsThe Company sells its products and services to a broad set of enterprises ranging from large,
multinational enterprises, to small and mid-sized enterprises, government agencies, health
care organizations and schools. Management believes that the Company is exposed to minimal
concentration risk since the majority of its business is conducted with companies within
numerous industries. The Company performs periodic credit evaluations of its customers
financial condition and generally does not require collateral for its accounts receivable.
In some cases, the Company will require payment in advance or security in the form of letters
of credit or third-party guarantees. For the period ended April 30, 2007, sales of $48.4
were made to one customer in the United States and accounted for more than 10 percent of the
Companys revenue. No other single customer accounted for more than 10 percent of the
Companys revenue for the periods ended April 24, 2005, April 30, 2006 and April 30, 2007 and
the Transition Period.As a result of the disposal of the manufacturing operations described in Note 3, BreconRidge
manufactures substantially all of the Companys products. The Company is not obligated to
purchase products from BreconRidge in any specific quantity, except as the Company outlines
in forecasts or orders for products required to be manufactured by BreconRidge. In addition,
the Company may be obligated to purchase certain excess inventory levels from BreconRidge
that could result from the Companys actual sales of product varying from forecast. As of
April 30, 2007, there was excess inventory of $4.0 (2006  $0.9) for which the Company was
liable, and has been recorded in the due to related parties amount. The Companys supply
agreement with BreconRidge results in a concentration that, if suddenly eliminated, could
have an adverse effect on the Companys operations. While the Company believes that
alternative sources of supply would be available, disruption of its primary source of supply
could create a temporary, adverse effect on product shipments.
 6.
    
    DIVESTITURESSale of Edict Training Ltd.On October 7, 2005, the Company completed the sale of its 8,000 shares, or eighty-percent
ownership interest, in Edict for consideration of £0.2, or $0.3 to be applied against amounts
due from Edict Training Ltd. The transaction resulted in an insignificant loss, which was
recorded in other income/expense. As a result of this transaction, the Company no longer
holds any equity interest in Edict. The costs incurred in connection with this disposal were
considered nominal.
 
 18




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##### Table of Contents



Revenues and net loss relating to Edict for the period from May 1, 2005 until the date of
disposal amounted to $0.4 and $0.6 respectively ($3.4 and $1.6 for fiscal 2005). The
following details the carrying value of Edicts major classes of assets and liabilities as at
the date of disposal:
 October 7,2005AssetsCash
    
    $
    0.1Accounts receivable
    
    
    0.3Fixed assets
    
    
    Due to affiliates (net)
    
    
    1.0LiabilitiesAccounts payable and accrued liabilities
    
    
    (0.6
    )Deferred revenue
    
    
    (0.5
    )$
    0.3
 Sale of U.K. land and buildingOn August 31, 2005, the Company sold land and building relating to its U.K. subsidiary for
cash consideration of $12.4 (£7.1), resulting in a pre-tax gain of $7.3 (£4.2). The
transaction included a commitment for the Company to lease back a portion of the property,
which provided the Company with more than a minor part but less than substantially all of the
use of the property, and thereby qualified the transaction as a sale-leaseback arrangement
under SFAS 13. As a result, the Company entered into a 6-month interim lease and a 10-year
long-term lease for a portion of the property sold. Accordingly, $5.8 of the gain has been
deferred and will be amortized over the combined term of the leases (10 1/2 years). The
remaining gain of $1.5 was recognized immediately at the time of the sale and included in
gain on sale of assets. The deferred and unamortized balance at April 30, 2006 and April 30,
2007 was $5.5 and $4.9 respectively. The provision for income taxes in fiscal 2006 relating
to the sale of the land and buildings was $0.9 (£0.6).
 7.
    
    RECEIVABLES PURCHASE AGREEMENTOn April 30, 2007, the Company entered into an agreement under which it sold $12.8 of its
non-interest bearing trade accounts receivable to an unaffiliated financial institution at a
rate of 7.5% on Canadian dollar receivables and 10.25% on US dollar receivables. Under the
Agreement, the Company will continue to service, administer and collect the pool of accounts
receivable without a fee, on behalf of the purchaser and, in certain events of breach can be
required to repurchase the receivables. The Agreement is guaranteed by the Companys
principal shareholder, for which a fee of $0.012 was paid, and $1.9 was recorded as
restricted cash in connection with the agreement. The Company is not considered to have ceded
control over the transferred receivables, and so the transfer has not been accounted for as a
sale. The agreement does not provide the financial institution with the right to pledge or
resell the transferred receivables.8.
    
    OTHER CURRENT ASSETSThe following are included in other current assets as of April 30, 2006 and April 30, 2007.
 April 30,
    
    April 30,2006
    
    2007Prepaid expenses
    
    $
    13.6
    
    
    $
    14.3Other receivables
    
    
    9.5
    
    
    
    11.7Deferred charges
    
    
    1.6
    
    
    
    4.2$
    24.7
    
    
    $
    30.2
 Included in deferred charges is $2.1 relating to the financing described in Note 28. Included
in other receivables are unbilled receivables of $9.5 as of April 30, 2007 (2006  $6.5).9.
    
    INVENTORIES
 April 30,
    
    April 30,2006
    
    2007Raw materials
    
    $
    0.9
    
    
    $
    2.4Finished goods
    
    
    22.7
    
    
    
    17.4$
    23.6
    
    
    $
    19.8
 
 19




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##### Table of Contents



10.
    
    PROPERTY AND EQUIPMENT
 April 30,
    
    April 30,2006
    
    2007Cost:Equipment
    
    $
    68.8
    
    
    $
    69.968.8
    
    
    
    69.9Less accumulated depreciationEquipment
    
    
    51.4
    
    
    
    53.451.4
    
    
    
    53.4$
    17.4
    
    
    $
    16.5
 As of April 30, 2007, equipment included leased assets with cost of $6.2 (2006  $4.6) and
accumulated depreciation of $2.8 (2006  $1.3) and equipment utilized in the provision of
Managed Services (see Note 2(f)) with cost of $7.5 (2006  $8.0) and accumulated depreciation
of $6.6 (2006  $6.7). Depreciation expense recorded in fiscal 2007 amounted to $7.1 (2005 
$7.6; Transition Period  $0.2; 2006  $8.6).11.
    
    GOODWILL
 April 30,
    
    April 30,2006
    
    2007Balance, beginning of the period
    
    $
    6.0
    
    
    $
    6.8Foreign currency impact
    
    
    0.8
    
    
    
    Balance, end of period
    
    $
    6.8
    
    
    $
    6.8
 The Company performs its impairment tests of goodwill annually on January 31 in accordance
with SFAS 142, Goodwill and Other Intangible Assets. The Company concluded that there was
no impairment since the fair value determination of the reporting units were found to exceed
the carrying values in fiscal 2006 and fiscal 2007.12.
    
    INTANGIBLE AND OTHER ASSETS
 April 30,
    
    April 30,2006
    
    2007Cost:Patents, trademarks and other
    
    $
    5.4
    
    
    $
    6.9Deferred debt issue costs
    
    
    4.5
    
    
    
    5.09.9
    
    
    
    11.9Less accumulated depreciationPatents, trademarks and other
    
    
    2.5
    
    
    
    3.6Deferred debt issue costs
    
    
    0.8
    
    
    
    1.73.3
    
    
    
    5.3$
    6.6
    
    
    $
    6.6
 Amortization of intangible and other assets was $0.7, $nil, $1.7 and $1.9 each of fiscal
2005, Transition Period, fiscal 2006, and fiscal 2007 respectively. Deferred debt issue costs
will be amortized over 5 years of which $1.7 has been amortized to date. The estimated
amortization expense related to intangible assets in existence as of April 30, 2007, over the
next five years is as follows: fiscal 2008  $2.4; fiscal 2009  $1.7; fiscal 2010  $1.5;
fiscal 2011  $0.5 and fiscal 2012  $0.5. The Company does not allocate intangible assets
to its segments, as management does not use this information to measure the performance of
the operating segments.13.
    
    BANK INDEBTEDNESSThe Companys UK subsidiary has indemnity facilities totaling $1.9 (£1.0) available for
letters of credit and other guarantees, $0.9 of which has been drawn at April 30, 2007 (April
30, 2006  $0.8). The indemnity and credit facilities are unsecured.Amounts appearing in bank indebtedness as of April 30, 2006 and April 30, 2007 represent
credit book balances resulting from an excess of outstanding checks over funds on deposit
where a right of offset does not exist.
 
 20




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14.
    
    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 April 30,
    
    April 30,2006
    
    2007Trade payable
    
    $
    21.0
    
    
    $
    40.0Employee-related payables
    
    
    11.6
    
    
    
    14.0Restructuring, warranty and other provisions
    
    
    5.7
    
    
    
    5.1Receivables purchase obligation
    
    
    
    
    
    
    12.8Other accrued liabilities
    
    
    35.0
    
    
    
    26.8$
    73.3
    
    
    $
    98.7
 15.
    
    LONG-TERM DEBT
 April 30,
    
    April 30,2006
    
    2007Capital leases, at interest rates
varying from 1.3% to 11.8%, payable
in monthly installments, with
maturity dates ranging from 8 to 36
months, secured by the leased assets
    
    $
    4.1
    
    
    $
    4.04.1
    
    
    
    4.0Less: current portion
    
    
    1.6
    
    
    
    1.9$
    2.5
    
    
    $
    2.1
 Interest expense related to long-term debt, including obligations under capital leases, was
$0.2 in fiscal 2007 (2005  $1.0; Transition Period  insignificant; 2006  $0.5). Future
minimum lease payments as of April 30, 2007 under capital leases total $4.4 of which $2.0,
$1.6, $0.4 and $0.4 relate to fiscal years 2008 to 2011, respectively. Interest costs of
$0.4 are included in the total future lease payments.
 16.
    
    CONVERTIBLE NOTESSenior Secured Convertible NotesOn April 27, 2005, the Company issued Senior Secured Convertible Notes, with attached
warrants, for gross proceeds of $55.0 to a group of private investors (Holders). The notes
mature on April 28, 2010 and accrue interest, payable semi-annually in arrears, at LIBOR plus
5.0% for any period prior to the consummation of a Qualified IPO, LIBOR plus 2.5% for any
period following the consummation of a Qualified IPO and LIBOR plus 10.0% on or after the
30month anniversary of the issuance date of the convertible notes if a Qualified
IPO has not been consummated. At any time on or after the consummation of a Qualified IPO or
upon the occurrence of a Fundamental Change, the Holders of the notes are entitled to convert
any portion of the outstanding principal and accrued and unpaid interest into common shares
of the Company with the number of common shares to be received being calculated based on a
formula that considers the fair value of the common shares in the case of an IPO and, in the
case of a Fundamental Change, is based on $1.50 per common share subject to adjustment for a
Make-Whole Premium. The Make-Whole Premium, which is based on the effective date of the
Fundamental Change, the current fair value of the Companys common shares and whether the
Fundamental Change occurs Pre-IPO or Post-IPO may be settled in cash, by delivery of common
shares or a combination thereof at the option of the Company. The determination of the
Make-Whole Premium is not based on interest rates or credit risk and therefore is not
considered clearly and closely related to the host instrument and qualifies as an embedded
derivative under SFAS 133. Accordingly, the fair value of the embedded derivative is
required to be recorded at fair value separate from the debt host. As at April 30, 2007
management has determined the fair value of the derivative instrument to be nominal.At any time commencing on or after the later of (i) May 1, 2008 and (ii) the 18 month
anniversary of the Lock-Up Expiration Date provided that on each of the 10 consecutive
trading days, the closing sale price per share is at least 200% of the conversion price of
the notes, the Company has the right to redeem all or any portion of the principal remaining
under the notes at a redemption price equal to the principal plus interest accrued to the
date of redemption plus the net present value of the remaining interest payments to April 28,
2010. In the Event of Default, Holders of the notes may accelerate and require the Company
to redeem all or any portion of the notes held including accrued and unpaid interest. Upon
the occurrence of a Fundamental Change, the Company shall irrevocably offer to repurchase all
or a portion of the note at a price equal to (i) 125% of the principal of the notes (plus
accrued and unpaid interest) if the Fundamental Change occurs during 18 months after issuance
but prior to the consummation of a Qualified IPO, (ii) 120% of the principal of the notes
(plus accrued and unpaid interest) if the Fundamental Change occurs following the 18 months
after issuance but prior to the consummation of a Qualified IPO or (iii) 100% of the
principal of the notes (plus accrued and unpaid interest) if the Fundamental Change occurs
following the consummation of a Qualified IPO. A Fundamental Change includes a consolidation
or merger, sale, transfer or assignment of all or substantially all of the Companys assets,
a purchase of more than 50% of the Companys outstanding common shares, consummation of a
stock purchase agreement or other business combination, or reorganization, recapitalization
or reclassification of the common shares of the Company, or any event that results in the
Principal Shareholder beneficially owning in aggregate less than 115 million of the issued
and outstanding shares in the capital of the Company.
 
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As a redemption upon the occurrence of a Fundamental Change in the 18 months after issuance
but prior to the consummation of a Qualified IPO could result in (1) the Holder doubling its
initial rate of return on the debt host and(2) the rate of return is at least twice what
would otherwise be the market return for a contract that has the same terms and credit risk
as the debt host contract, the redemption feature is not considered to be clearly and closely
related to the debt host and requires separate accounting from the debt host under the
provisions of FAS 133. At April 30, 2006 management has assigned nominal value to the
derivative instrument. At April 30, 2007 the right to receive this rate of return no longer
exists since the 18-month period after issuance has lapsed.The Holders of the notes have no voting rights and all payments due under this note shall
rank pari passuwith all additional notes and, prior to the consummation of a Qualified IPO,
shall not be subordinate to any indebtedness of the Company. The notes are secured by a
first priority, perfected security interest over the assets of the Company and over the
assets and stock of specific subsidiaries.In conjunction with the issuance of the Senior Secured Convertible notes, the Company issued
16.5 million warrants, which are described further in Note 21. The gross proceeds from the
financing were allocated between the notes and the warrants based on their relative fair
values. Debt issue costs of $4.5 were incurred in connection with the financing transaction,
and have been recorded as a deferred charge within the Intangible and Other Assets balance in
the Consolidated Balance Sheet.The following table summarizes the allocation of the convertible notes among its different
elements and movement in the carrying value of the convertible notes:
 April 30,
    
    April 30,2006
    
    2007Balance, beginning of period
    
    $
    46.6
    
    
    $
    48.7Accretion of convertible notes to redemption value
    
    
    1.5
    
    
    
    1.5Foreign currency impact
    
    
    0.6
    
    
    
    Balance, end of period
    
    $
    48.7
    
    
    $
    50.2
 Convertible DebenturesOn August 16, 2002, the Company closed a private offering of debentures convertible into
shares of the Company that resulted in total cash proceeds of $6.5. In fiscal 2004, the
entire carrying value of the debentures and accrued interest of $9.3 was converted into
5,445,775 common shares of the Company at C$2.00 per common share. In fiscal 2004 and fiscal
2005, the common shares were converted into 10,891,550 Series B preferred shares. As the
Company determined that the fair value of the Series B preferred shares to be equivalent to
the fair value of the common shares, there was no gain or loss recorded on the exchange.
 17.
    
    COMMITMENTS AND GUARANTEESOperating leasesThe Company leases certain equipment and facilities under 3rd party operating leases. The
Company is also committed under related party leases and subleases for certain facilities
(see Note 3). Rental expense and income on operating leases were as follows:
 Transition2005
    
    Period
    
    2006
    
    2007Rental expenseArms-length
    
    $
    8.3
    
    
    $
    
    
    
    $
    8.1
    
    
    $
    12.2Related party
    
    
    5.9
    
    
    
    0.1
    
    
    
    6.5
    
    
    
    6.6Total
    
    $
    14.2
    
    
    $
    0.1
    
    
    $
    14.6
    
    
    $
    18.8Rental incomeArms-length
    
    $
    0.6
    
    
    $
    
    
    
    $
    0.2
    
    
    $
    1.9Related party
    
    
    3.6
    
    
    
    
    
    
    
    2.8
    
    
    
    0.7Total
    
    $
    4.2
    
    
    $
    
    
    
    $
    3.0
    
    
    $
    2.6
 Future operating minimum lease payments and future sublease income are as follows:
 Future Lease Payments
    
    Future Lease IncomeFiscal year
    
    Arms-length
    
    Related Party
    
    Arms-length
    
    Related Party2008
    
    $
    8.0
    
    
    $
    8.1
    
    
    $
    1.9
    
    
    $
    0.12009
    
    
    6.5
    
    
    
    8.1
    
    
    
    1.1
    
    
    
    2010
    
    
    4.5
    
    
    
    8.1
    
    
    
    0.5
    
    
    
    2011
    
    
    3.4
    
    
    
    6.8
    
    
    
    0.1
    
    
    
    2012
    
    
    2.8
    
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    8.6
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    33.8
    
    
    $
    31.1
    
    
    $
    3.6
    
    
    $
    0.1
 
 22




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GuaranteesThe Company has the following major types of guarantees that are subject to the accounting
and disclosure requirements of FASB Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others(FIN 45):Product warrantiesThe Company provides all customers with standard warranties on hardware and software for
periods up to fifteen months. The following table details the changes in the warranty
liability:
 April 30,
    
    April 30,2006
    
    2007Balance, beginning of period
    
    $
    2.6
    
    
    $
    2.0Warranty costs incurred
    
    
    (1.8
    )
    
    
    (1.2
    )Warranties issued
    
    
    1.0
    
    
    
    1.1Other
    
    
    0.2
    
    
    
    (0.1
    )Balance, end of period
    
    $
    2.0
    
    
    $
    1.8
 Intellectual property indemnification obligationsThe Company enters on a regular basis into agreements with customers and suppliers that
include limited intellectual property indemnification obligations that are customary in the
industry. These guarantees generally require the Company to compensate the other party for
certain damages and costs incurred as a result of third party intellectual property claims
arising from these transactions. The nature of these intellectual property indemnification
obligations prevents the Company from making a reasonable estimate of the maximum potential
amount it could be required to pay to its customers and suppliers. Historically, the Company
has not made any significant indemnification payments under such agreements and no amount has
been accrued in the consolidated financial statements with respect to these guarantees.Bid and performance related bondsThe Company enters into bid and performance related bonds related to various customer
contracts. Performance related bonds usually have a term of twelve months and bid bonds
generally have a much shorter term. Potential payments due under these may be related to the
Companys performance and/or the Companys resellers performance under the applicable
contract. Under FIN 45, the Company must measure and recognize a liability equal to the fair
value of bid and performance related bonds involving the performance of the Companys
resellers. At April 30, 2006 and April 30, 2007 the liability recognized in accounts payable
and accrued liabilities related to these bid and performance related bonds, based on past
experience and managements best estimate, was insignificant. At April 30, 2007, the total
maximum potential amount of future payments the Company could be required to make under bid
and performance related bonds was $3.6 (2006  $2.5).
 18.
    
    CONTINGENCIESOn June 23, 2006, one of the Companys competitors filed a complaint in the United States
District Court for the Eastern District of Virginia alleging that the Company is infringing
on certain of its patents and requested damages. On September 8, 2006 the Company filed a
defense to the competitors complaint and a counterclaim alleging that the competitor is
infringing on certain of the Companys patents and also requested damages.The competitor had also filed a complaint in the United States District Court for the
District of New Jersey seeking a declaratory judgment that certain of the Companys patents
are not being infringed by them or are invalid.During fiscal 2007, the Company and the competitor both expressed willingness to settle all
litigation claims outside of court, and a final agreement was reached on March 19, 2007.
Under the terms of the settlement agreement, the competitor agreed to release the Company
from all past infringements and the parties have also entered into a covenant to not sue each
other for a period of 5 years from the effective date. In accordance with SFAS No. 5,
Accounting for Contingencies, a one-time litigation settlement charge of $14.8, representing
the present value of $19.7 payable over a 5-year period and discounted using an interest rate
of 12%, was recorded during the year ended April 30, 2007 in the consolidated statement of
operations. Also included in the litigation settlement charge of $16.3 are legal costs
incurred of $1.5. At April 30, 2007, $5.9 had been recorded in accounts payable and accrued
liabilities and $10.4 was recorded in the litigation settlement obligation. The litigation
settlement obligation also includes $0.4 of accrued interest. The first payment under the
settlement agreement was paid in the first quarter of fiscal 2008.A class action suit was certified on October 7, 2006 in the Ontario Superior Court of Justice
that covered a certain number of Mitels Canadian employees who were terminated in connection
with the restructuring activities in the quarter ending October 31, 2006. On February 28,
2007, the action was settled at mediation. An amount was accrued at the time when the loss
was determined to be both probable and estimable.
 
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On April 30, 2007, Mitel was made party to a class action lawsuit related to the proposed
merger described in Note 28. The complaint alleges that the Company aided and abetted
Inter-Tel in breaching their fiduciary duties of loyalty and due care by approving the merger
without regard to the fairness of the transaction to Inter-Tel stockholders. The plaintiff is
seeking an injunction to the consummation of the proposed merger. While the Company believes
the claims are without merit and intends to defend vigorously, Mitel cannot predict the
outcome of the lawsuit and the impact it could have on the merger.The Company is also party to a small number of other legal proceedings, claims or potential
claims arising in the normal course of its business. In the opinion of the Companys
management and legal counsel, any monetary liability or financial impact of such claims or
potential claims to which the Company might be subject after final adjudication would not be
material to the consolidated financial position of the Company, its results of operations, or
its cash flows.
 19.
    
    REDEEMABLE COMMON SHARESPursuant to the shareholders agreement dated April 23, 2004, upon failure to complete an
initial public offering (IPO) of its common shares by September 1, 2006 (the put date),
Zarlink, a shareholder of the Company, has a right to require the Company to redeem for cash
all or part of its 10,000,000 common shares held in the Company at a price of C$2.85 per
common share which translates to a total cash outlay of $25.8 based on April 30, 2007 foreign
exchange rates. On June 26, 2006 the agreement was amended to extend the put date until May
1, 2007. Subsequent to year-end, the put date was again extended until the earlier of the
completion of the acquisition as described in Note 28, or November 2, 2007 (see Note 29). The
common shares held by Zarlink with an original carrying value of $16.9 are classified in the
mezzanine section of the Consolidated Balance Sheets as redeemable common shares. In
addition, an aggregate amount of $2.1 (2006  $1.8) accreted for the excess of the redemption
amount over the original carrying value was recorded as of April 30, 2007. The accreted
amount is recorded as an increase in accumulated deficit.The following table summarizes the changes in redeemable common shares during the years
presented:
 April 30,
    
    April 30,2006
    
    2007Balance, beginning of the period
    
    $
    18.2
    
    
    $
    18.7Interest accreted during the period
    
    
    0.5
    
    
    
    0.3Balance, end of period
    
    $
    18.7
    
    
    $
    19.0
 20.
    
    CONVERTIBLE, REDEEMABLE PREFERRED SHARESSeries A Preferred Shares
 On April 23, 2004 the Company issued 20,000,000 Class A Series 1 Convertible and Redeemable
Preferred Shares (Series A Preferred Shares) for cash consideration of C$1.00 per share
(USD equivalent of $0.73 per share), together with attached common stock purchase warrants.
As described further in Note 21, the warrants entitle the Series A holders to purchase
5,000,000 common shares of the Company at an exercise price of C$1.25 per share. The
warrants are immediately exercisable and expire 7 years from the original issuance date. The
fair value of the warrants on the date of issuance of $1.0 was allocated from the net
proceeds on sale of the shares and is recorded as a component of shareholders deficiency.The Series A Preferred Shares are subject to non-cumulative dividends as and when declared by
the Board of Directors of the Company. The amount, if any, of any such dividends is at the
absolute discretion of the Board. No dividends have been declared as of April 30, 2006 and
April 30, 2007. The holders of the Series A Preferred Shares are entitled to elect two
members of the Board of Directors of the Company, and at least one of the members of certain
committees of the Board of Directors, and are entitled to vote as a single class with each
share of Series B Preferred Shares and Common Shares.The Series A Preferred Shares are convertible at any time at the option of the holders
without payment of any additional consideration into common shares at a conversion value of
C$1.00 per share, plus any declared but unpaid dividends. The terms of the agreement provide
that, if the Company subsequently issues common shares or common share equivalents at a price
less than the conversion value in effect prior to such issuance (subject to certain excluded
transactions), the conversion value of the Series A Preferred Shares will be reduced
accordingly. The Series A Preferred Shares also have the following additional conversion
features: i) the shares will automatically convert into common shares upon the closing of a
qualified IPO or upon a vote or written consent of the majority of the Series A shareholders;
ii) if the Series A shareholders convert after 2 years from the original issue date, in
addition to the common shares otherwise issuable upon conversion, the Series A shareholders
will also receive, in respect of each share so converted, an additional number of common
shares equal to the issue price of C$1.00 per preferred share divided by the fair market
value of a common share on the date of conversion iii) if the shares are converted pursuant
to a non-qualified IPO within the first two years after the original issuance, the Series A
shareholders will receive an additional number of common shares based on a formula set out in
the articles of the Company which takes into consideration the relative value of the issue
price to the IPO price. As the fair market value of the common shares into which the Series
A Preferred Shares were convertible was greater than the effective conversion price for
accounting purposes, determined based on the gross proceeds less the fair value of the
warrants on the date of issuance, a deemed dividend for this excess of $1.4 was recorded as
an increase in the net loss attributable to common shareholders for the year ended April 25,
2004.
 
 24




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At any date after 5 years from the original issuance date, or at any date prior to a partial
sale event other than a public offering, the majority holders of the Series A Preferred
Shares have a right to require the Company to redeem the shares for cash. The redemption
amount is equal to the original issue price of C$1.00 per preferred share times the number of
Series A Preferred Shares outstanding, plus any declared but unpaid dividends, plus the then
current fair market value of the common shares into which the Series A Preferred Shares are
convertible (other than common shares issuable under additional conversion features). The
Series A shareholders will also have a right to request the redemption of the Series A shares
upon the exercise of put rights by certain shareholders. In the event of an exercise of put
rights, the redemption amount will be equal to the original issue price of C$1.00 per
preferred share times the number of Series A Preferred Shares outstanding, plus any declared
but unpaid dividends, plus the issuance of the number of common shares into which the Series
A Preferred Shares are convertible. At April 30, 2006 and April 30, 2007 management has
estimated that the fair market value of the preferred shares was C$2.55 and C$2.16 per share,
respectively.As a portion of the redemption price of the preferred shares is indexed to the common share
price of the Company, an embedded derivative exists which has been bifurcated and accounted
for separately, under SFAS 133. The derivative component relating to the Series A Preferred
Shares was valued at $15.3 as of April 30, 2007 (April 30, 2006  $17.3), and is recorded as
a liability with the change in the value of the derivative being recorded as a non-cash
expense in the Consolidated Statements of Operations. The initial value of the Series A
Preferred Shares of $5.8, after allocation of proceeds between warrants and the derivative
instrument, is classified in the mezzanine section of the Consolidated Balance Sheet. The
difference between the initial carrying amount and the redemption amount is being accreted
over the five-year period to redemption. For fiscal 2005, Transition Period, fiscal 2006 and
fiscal 2007, the amount of accreted interest was $1.2, insignificant, $1.6 and $2.1
respectively.Series B Preferred SharesOn April 23, 2004, pursuant to the issuance of the Series A Preferred Shares, certain common
shareholders of the Company exchanged 29,530,494 common shares for 67,060,988 Series B
Preferred Shares of the Company at C$1.00 per preferred share. During fiscal 2005, the
remaining 364,156 common shares issued to the convertible debenture holders (refer to Note
16) upon conversion were exchanged for 728,312 Series B preferred shares.The Series B Preferred Shares carry the same rights and privileges with respect to dividends
and votes as the Series A Preferred Shares, except that the Series B Preferred Shares rank
junior to the Series A Preferred Shares, but senior to the holders of common shares or any
other class of shares, in the event of payment of preferential amounts required upon a
liquidation or change of control.The Series B Preferred Shares carry the same conversion rights, and in the same conversion
amounts, as the Series A Preferred Shares.Pursuant to the shareholders agreement dated April 23, 2004, upon failure to complete an IPO
of its common shares by the put date, one of the Companys Series B Preferred Shareholders,
has a right to require the Company to redeem for cash all or part of its 16,000,000 Series B
Preferred Shares held in the Company at a price of C$1.00 per preferred share, plus interest
accrued at an annual rate of 7 percent commencing on August 31, 2001 and compounded
semi-annually. On June 26, 2006 the agreement was amended to extend the put date until May 1,
2007. No additional amendments have been made and so the put option on the preferred shares
can be exercised at any time after May 1, 2007.At any date after 5 years from the original issuance date, or at any date prior to a partial
sale event other than a public offering, the majority holders of the Series B Preferred
Shares have a right to require the Company to redeem the shares for cash. The redemption
amount is equal to the original issue price of C$1.00 per preferred share times the number of
Series B Preferred Shares outstanding, plus any declared but unpaid dividends, plus the then
current fair market value of the common shares into which the Series B Preferred Shares are
convertible (other than common shares issuable under additional conversion features). At
April 30, 2006 and April 30, 2007 management has estimated that the fair market value of the
preferred shares was C$1.00 and C$2.16 per share, respectively.As a portion of the redemption price of the preferred shares is indexed to the common share
price of the Company, an embedded derivative exists which has been bifurcated and accounted
for separately, under SFAS 133. The derivative component relating to the Series B Preferred
Shares was valued at $52.0 as of April 30, 2007 (April 30, 2006  $58.6) and is recorded as a
liability. The initial value of the Series B Preferred Shares of $27.7, after allocation of
proceeds to the derivative instrument, was classified in the mezzanine section of the
Consolidated Balance Sheet. The difference between the initial carrying amount and the
redemption amount is being accreted over the five-year period to redemption. For fiscal 2006
and fiscal 2007 the amount of accreted interest was $4.8 and 4.9 respectively. Similar to the
Series A Preferred Shares, the derivative component relating to the Series B Preferred Shares
is recorded as a liability with the change in the value of the derivative being recorded as a
non-cash expense in the Consolidated Statements of Operations.
 
 25




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##### Table of Contents



Series A
    
    
    Series B
    
    
    TotalCarrying value as of April 30, 2005
    
    $
    7.0
    
    
    $
    32.1
    
    
    $
    39.1Fiscal 2006Accreted interest
    
    
    1.6
    
    
    
    4.8
    
    
    
    6.4Carrying value as of April 30, 2006
    
    $
    8.6
    
    
    $
    36.9
    
    
    $
    45.5Fiscal 2007Accreted interest
    
    
    2.1
    
    
    
    4.9
    
    
    
    7.0Carrying value as of April 30, 2007
    
    $
    10.7
    
    
    $
    41.8
    
    
    $
    52.5
 21. WARRANTS
  April 30,
    
    
    April 30,2006
    
    
    2007i) Warrants issued/issuable in connection with government funding
    
    $
    39.1
    
    
    $
    39.1ii) Warrants issued in connection with Series A Preferred Shares
    
    
    1.0
    
    
    
    1.0iii) Warrants issued to financing agent
    
    
    0.1
    
    
    
    0.1iv) Warrants issued in connection with Senior Secured Convertible Notes
    
    
    7.7
    
    
    
    7.7v) Warrants issued to Wesley Clover Corporation
    
    
    
    
    
    
    15.0Total warrants outstanding
    
    $
    47.9
    
    
    $
    62.9
     
 26




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th th st
  1 4
   22. SHARE CAPITAL
   Equity offerings
   
 27




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##### Table of Contents



Share Purchase Loans
  Stock Option Plan
     
 28




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##### Table of Contents



Fiscal 2005
    
    
    
    
    
    Transition PeriodWeighted
    
    Aggregate
    
    
    
    
    
    Weighted
    
    AggregateNumber of
    
    Average
    
    Intrinsic
    
    Number of
    
    Average
    
    IntrinsicShares
    
    Exercise Price
    
    Value
    
    Shares
    
    Exercise Price
    
    ValueOutstanding options:Balance, beginning of period:
    
    
    4,482,264
    
    
    $
    2.77
    
    
    $
    
    
    
    
    18,480,002
    
    
    $
    1.22
    
    
    $
    Granted
    
    
    15,220,873
    
    
    
    0.81
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (725,856
    )
    
    
    1.54
    
    
    
    
    
    
    
    (15,153
    )
    
    
    1.69
    
    
    
    Expired
    
    
    (497,279
    )
    
    
    2.84
    
    
    
    
    
    
    
    (8,600
    )
    
    
    2.96
    
    
    
    Balance, end of period:
    
    
    18,480,002
    
    
    $
    1.22
    
    
    $
    
    
    
    
    18,456,249
    
    
    $
    1.19
    
    
    $
    Number of options exercisable
    
    
    3,017,863
    
    
    $
    2.82
    
    
    $
    
    
    
    
    3,102,973
    
    
    $
    2.78
    
    
    $
    Weighted average fair value
of options granted during
the period using the
Black-Scholes option pricing
model
    
    
    
    
    
    $
    0.15
    
    
    
    
    
    
    
    
    
    
    $
    
 Fiscal 2006
    
    
    
    
    
    Fiscal 2007Weighted
    
    Aggregate
    
    
    
    
    
    Weighted
    
    AggregateNumber of
    
    Average
    
    Intrinsic
    
    Number of
    
    Average
    
    IntrinsicShares
    
    Exercise Price
    
    Value
    
    Shares
    
    Exercise Price
    
    ValueOutstanding options:Balance, beginning of period:
    
    
    18,456,249
    
    
    $
    1.34
    
    
    $
    
    
    
    
    20,668,538
    
    
    $
    1.06
    
    
    $
    Granted
    
    
    5,227,233
    
    
    
    0.90
    
    
    
    
    
    
    
    6,123,177
    
    
    
    1.13
    
    
    
    Exercised
    
    
    (58,174
    )
    
    
    2.81
    
    
    
    
    
    
    
    (45,624
    )
    
    
    1.18
    
    
    
    Forfeited
    
    
    (879,766
    )
    
    
    1.27
    
    
    
    
    
    
    
    (1,356,657
    )
    
    
    2.51
    
    
    
    Expired
    
    
    (2,077,004
    )
    
    
    3.07
    
    
    
    
    
    
    
    (2,944,849
    )
    
    
    0.94
    
    
    
    Balance, end of period:
    
    
    20,668,538
    
    
    $
    1.06
    
    
    $
    
    
    
    
    22,444,585
    
    
    $
    1.02
    
    
    $
    Number of options exercisable
    
    
    4,947,519
    
    
    $
    1.48
    
    
    $
    
    
    
    
    8,115,722
    
    
    $
    1.04
    
    
    $
    Weighted average fair value
of options granted during
the period using the
Black-Scholes option pricing
model
    
    
    
    
    
    $
    0.14
    
    
    
    
    
    
    
    
    
    
    $
    0.77
  
 29




---



##### Table of Contents



Total outstanding
    
    
    
    
    
    
    
    
    
    
    Total exercisableWeighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    
    
    
    
    AverageRemaining
    
    
    Aggregate
    
    
    
    
    
    
    Remaining
    
    
    AggregateExercise Price
    
    Number of Shares
    
    
    Contractual Life
    
    
    Intrinsic Value
    
    
    Number of Shares
    
    
    Contractual Life
    
    
    Intrinsic Value$0.90
    
    
    15,699,201
    
    
    2.6 years
    
    
    2,298,520
    
    
    
    7,320,196
    
    
    2.5 years
    
    
    
    1,071,750$1.02
    
    
    62,987
    
    
    4.4 years
    
    
    1,823
    
    
    
    
    
    
    
    
    
    
    
    $1.05
    
    
    227,633
    
    
    3.9 years
    
    
    418
    
    
    
    58,532
    
    
    3.9 years
    
    
    
    4,205$1.07
    
    
    4,047,900
    
    
    4.8 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $1.12
    
    
    546,305
    
    
    4.9 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $1.40
    
    
    1,042,247
    
    
    4.1 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $1.81
    
    
    141,562
    
    
    1.6 years
    
    
    
    
    
    
    108,494
    
    
    1.6 years
    
    
    
    $2.48
    
    
    676,750
    
    
    0.6 years
    
    
    
    
    
    
    628,500
    
    
    0.6 years
    
    
    
    22,444,585
    
    
    
    
    
    
    
    2,300,761
    
    
    
    8,115,722
    
    
    
    
    
    
    
    1,075,955Options expected to vest as of April 30, 2007
    
    
    
    
    
    
    19,077,897
  Earnings (loss) per share
  2005
    
    Transition 
Period
    
    2006
    
    2007Net loss, as reported
    
    $
    (49.6
    )
    
    $
    (1.6
    )
    
    $
    (44.6
    )
    
    $
    (35.0
    )Accreted interest on redeemable shares
    
    
    (5.6
    )
    
    
    (0.1
    )
    
    
    (6.9
    )
    
    
    (7.3
    )Net loss available to common shareholders
    
    $
    (55.2
    )
    
    $
    (1.7
    )
    
    $
    (51.5
    )
    
    $
    (42.3
    )Weighted average number of common shares
outstanding during the period
    
    
    113,792,829
    
    
    
    117,149,933
    
    
    
    117,230,198
    
    
    
    117,336,927Loss per common share  basic and diluted
    
    $
    (0.49
    )
    
    $
    (0.01
    )
    
    $
    (0.44
    )
    
    $
    (0.36
    )
  Transition(number of shares)
    
    2005
    
    
    Period
    
    
    2006
    
    
    2007Stock options
    
    
    
    
    
    
    
    
    
    
    1,624,155
    
    
    
    3,588,891Warrants
    
    
    28,475,127
    
    
    
    28,686,974
    
    
    
    37,695,141
    
    
    
    43,527,960Convertible, redeemable preferred shares
    
    
    87,789,300
    
    
    
    87,789,300
    
    
    
    87,789,300
    
    
    
    87,789,300116,264,427
    
    
    
    116,476,274
    
    
    
    127,108,596
    
    
    
    134,906,151
  
 30




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##### Table of Contents



Stock-based Compensation
  Performance-Based Stock Options
  Deferred Share Unit Plans
  23. OTHER INCOME (EXPENSE), NET
 Transition2005
    
    Period
    
    2006
    
    2007Foreign exchange gains (losses), net
    
    $
    (0.1
    )
    
    $
    0.2
    
    
    $
    (0.6
    )
    
    $
    (0.3
    )Interest income
    
    
    0.5
    
    
    
    
    
    
    
    0.7
    
    
    
    0.3Amortization of gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.6$
    0.4
    
    
    $
    0.2
    
    
    $
    0.4
    
    
    $
    0.6
 24. INCOME TAXES
  Transition2005
    
    Period
    
    2006
    
    2007Loss before income taxes:Canadian
    
    $
    (24.8
    )
    
    $
    (0.2
    )
    
    $
    (35.0
    )
    
    $
    (24.1
    )Foreign
    
    
    (24.0
    )
    
    
    (1.4
    )
    
    
    (11.5
    )
    
    
    (10.9
    )$
    (48.8
    )
    
    $
    (1.6
    )
    
    $
    (46.5
    )
    
    $
    (35.0
    )Income tax (expense) recovery:Current:Canadian
    
    $
    0.8
    
    
    $
    
    
    
    $
    1.2
    
    
    $
    Foreign
    
    
    (1.6
    )
    
    
    
    
    
    
    (2.1
    )
    
    
    0.2(0.8
    )
    
    
    
    
    
    
    (0.9
    )
    
    
    0.2Deferred:Canadian
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Foreign
    
    
    
    
    
    
    
    
    
    
    2.8
    
    
    
    (2.0
    )$
    (0.8
    )
    
    $
    
    
    
    $
    1.9
    
    
    $
    (1.8
    )
 
 31




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##### Table of Contents



Transition2005
    
    Period
    
    2006
    
    2007Expected tax rate
    
    
    36.0
    %
    
    
    36.0
    %
    
    
    36.0
    %
    
    
    36.0
    %Expected tax benefit
    
    $
    17.5
    
    
    $
    0.6
    
    
    $
    16.7
    
    
    $
    12.0Foreign tax rate differences
    
    
    (7.9
    )
    
    
    (0.5
    )
    
    
    (7.4
    )
    
    
    (5.2
    )Tax effect of temporary differences and losses not
recognized
    
    
    (12.2
    )
    
    
    (0.1
    )
    
    
    (1.6
    )
    
    
    (6.4
    )Use of losses not previously recognized
    
    
    9.3
    
    
    
    
    
    
    
    2.4
    
    
    
    Recognize (write-off) deferred tax asset
    
    
    
    
    
    
    
    
    
    
    2.8
    
    
    
    (2.0
    )Permanent differences
    
    
    (7.0
    )
    
    
    
    
    
    
    (12.4
    )
    
    
    (2.4
    )Tax refunds and other adjustments related to prior years
    
    
    (0.5
    )
    
    
    
    
    
    
    1.4
    
    
    
    2.2Income tax (expense) recovery
    
    $
    (0.8
    )
    
    $
    
    
    
    $
    1.9
    
    
    $
    (1.8
    )
  April 30, 
2006
    
    April 30, 
2007Assets:Net operating loss carryforwards
    
    $
    55.5
    
    
    $
    67.7Allowance for doubtful accounts
    
    
    3.0
    
    
    
    0.6Inventory
    
    
    (0.5
    )
    
    
    0.6Restructuring and other accrued liabilities
    
    
    5.1
    
    
    
    11.0Pension
    
    
    2.7
    
    
    
    3.2Lease obligations and long-term debt
    
    
    1.3
    
    
    
    1.0Property and equipment
    
    
    6.8
    
    
    
    6.7Intangible and other assets
    
    
    10.4
    
    
    
    6.8Total deferred tax assets
    
    
    84.3
    
    
    
    97.6Deferred tax liabilities
    
    
    
    
    
    
    Total gross deferred tax assets net of total deferred tax liabilities
    
    
    84.3
    
    
    
    97.6Valuation allowance
    
    
    (81.5
    )
    
    
    (97.6
    )Total deferred tax assets
    
    $
    2.8
    
    
    $
    
   April 30,
2006
    
    
    April 30,
2007Tax
    
    
    Tax
    
    
    Tax
    
    
    TaxYear of Expiry
    
    Losses
    
    
    Credits
    
    
    Losses
    
    
    Credits2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2009
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    31.9
    
    
    
    2011
    
    
    32.6
    
    
    
    
    
    
    
    55.6
    
    
    
    2012
    
    
    58.3
    
    
    
    
    
    
    
    43.9
    
    
    
    2013-2023
    
    
    136.3
    
    
    
    24.6
    
    
    
    107.1
    
    
    
    33.1Indefinite
    
    
    44.7
    
    
    
    
    
    
    
    54.5
    
    
    
    Total
    
    
    272.5
    
    
    
    24.6
    
    
    
    293.0
    
    
    
    33.1
   
 32




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##### Table of Contents



25. PENSION PLANS
    United Kingdom Defined Benefit Pension Plan
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an
amendment of FASB Statement No. 87, 88, 106 and 132(R), .
  April 30, 2007
    
    SFAS 158
    
    April 30, 2007Pre-SFAS 158
    
    Adjustments
    
    Post-SFAS 158Pension liability
    
    $
    25.4
    
    
    $
    25.1
    
    
    $
    50.5Accumulated deficit
    
    $
    (397.8
    )
    
    $
    (0.4
    )
    
    $
    (398.2
    )Accumulated other comprehensive loss
    
    $
    (31.9
    )
    
    $
    (24.7
    )
    
    $
    (56.6
    )
   
 33




---



##### Table of Contents



April 30,
    
    April 30,2006
    
    2007Change in accrued pension benefits:Benefit obligation at beginning of period
    
    $
    121.8
    
    
    $
    164.1Service cost
    
    
    1.1
    
    
    
    1.5Interest cost
    
    
    6.2
    
    
    
    8.6Plan participants contributions
    
    
    1.2
    
    
    
    1.0Actuarial (gain) loss
    
    
    41.0
    
    
    
    (15.5
    )Benefits paid
    
    
    (2.3
    )
    
    
    (1.9
    )Adjustment for change in measurement date
    
    
    
    
    
    
    0.4Foreign exchange
    
    
    (4.9
    )
    
    
    15.7Benefit obligation at end of period
    
    
    164.1
    
    
    
    173.9Change in plan assets:Fair value of plan assets at beginning of period
    
    
    82.8
    
    
    
    104.2Actual return on plan assets
    
    
    22.3
    
    
    
    6.2Employer contributions
    
    
    3.6
    
    
    
    3.2Employee contributions
    
    
    1.2
    
    
    
    1.0Benefits paid
    
    
    (2.3
    )
    
    
    (1.9
    )Foreign exchange
    
    
    (3.4
    )
    
    
    10.7Fair value of plan assets at end of period
    
    
    104.2
    
    
    
    123.4Funded status
    
    
    (59.9
    )
    
    
    (50.5
    )Unrecognized net actuarial loss
    
    
    19.8
    
    
    
    Pension Liability
    
    
    (40.1
    )
    
    
    (50.5
    )
  April 30,
    
    April 30,2006
    
    2007Projected benefit obligation
    
    $
    164.1
    
    
    $
    173.9Accumulated benefit obligation
    
    
    144.3
    
    
    
    148.8Fair value of plan assets
    
    
    104.2
    
    
    
    123.4
  Transition2005
    
    Period
    
    2006
    
    2007Current service cost  defined contribution
    
    $
    1.7
    
    
    $
    
    
    
    $
    1.5
    
    
    $
    1.5Current service cost  defined benefit
    
    
    1.8
    
    
    
    
    
    
    
    1.1
    
    
    
    1.5Interest cost
    
    
    5.9
    
    
    
    
    
    
    
    6.2
    
    
    
    8.6Expected return on plan assets
    
    
    (5.5
    )
    
    
    
    
    
    
    (6.1
    )
    
    
    (8.0
    )Recognized actuarial loss
    
    
    1.3
    
    
    
    
    
    
    
    1.1
    
    
    
    2.1Net periodic benefit cost
    
    $
    5.2
    
    
    $
    
    
    
    $
    3.8
    
    
    $
    5.7
  April 24,
    
    April 30,
    
    April 30,2005
    
    2006
    
    2007Discount rate
    
    
    5.5
    %
    
    
    5.0
    %
    
    
    5.0
    %Compensation increase rate
    
    
    2.5
    %
    
    
    2.75
    %
    
    
    2.75
    %Investment returns assumption
    
    
    7.75
    %
    
    
    7.25
    %
    
    
    7.25
    %Inflation rate
    
    
    2.5
    %
    
    
    2.75
    %
    
    
    2.75
    %Average remaining service life of employees
    
    20 years
    
    21 years
    
    20 years
 34







---



##### Table of Contents



April 24,
    
    April 30,
    
    April 30,2005
    
    2006
    
    2007Discount rate
    
    
    5.5
    %
    
    
    5.0
    %
    
    
    5.5
    %Compensation increase rate
    
    
    2.5
    %
    
    
    2.75
    %
    
    
    3.00
    %Inflation rate
    
    
    2.75
    %
    
    
    2.75
    %
    
    
    3.00
    %Average remaining service life of employees
    
    20 years
    
    21 years
    
    20 years
 Estimated Future Benefit Payments
  BenefitPayments2008
    
    $
    1.62009
    
    
    1.72010
    
    
    1.82011
    
    
    2.02012
    
    
    2.12013-2017
    
    
    13.0
 Contributions
  Plan Assets
  2006
    
    2007
    
    2007Actual
    
    Actual
    
    TargetEquities
    
    
    81
    %
    
    
    81
    %
    
    
    80
    %Bonds
    
    
    18
    %
    
    
    19
    %
    
    
    20
    %Cash
    
    
    1
    %
    
    
    
    
    
    
    
  26. FINANCIAL INSTRUMENTS
 Fair value
  
 35




---



##### Table of Contents



April 30, 2006
    
    April 30, 2007Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueLong-term receivables
    
    $
    0.4
    
    
    $
    0.4
    
    
    $
    1.9
    
    
    $
    1.9Long-term debt
    
    $
    4.1
    
    
    $
    4.1
    
    
    $
    4.0
    
    
    $
    4.0Convertible notes
    
    $
    48.7
    
    
    $
    55.1
    
    
    $
    50.2
    
    
    $
    55.2
 Credit risk
  Interest rate risk
  Foreign currency risk
   Non-derivative and off-balance sheet instruments
  
 36




---



##### Table of Contents



27. SUPPLEMENTARY CASH FLOW INFORMATION
 Transition2005
    
    Period
    
    2006
    2007Change in non-cash operating assets and liabilities:Accounts receivable
    
    $
    7.5
    
    
    $
    4.0
    
    
    $
    (12.4
    )
    
    $
    1.6Other current assets
    
    
    (7.3
    )
    
    
    (0.9
    )
    
    
    5.2
    
    
    
    (3.9
    )Inventories
    
    
    (4.2
    )
    
    
    (0.6
    )
    
    
    (8.0
    )
    
    
    1.0Income tax receivable
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    Long-term receivables
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    (1.2
    )Accounts payable and accrued liabilities
    
    
    6.6
    
    
    
    (0.6
    )
    
    
    8.7
    
    
    
    12.9Long term portion of lease termination obligations
    
    
    (1.2
    )
    
    
    
    
    
    
    (2.3
    )
    
    
    (0.9
    )Deferred revenue
    
    
    (2.8
    )
    
    
    0.5
    
    
    
    (2.5
    )
    
    
    (4.6
    )Change in pension liability
    
    
    0.9
    
    
    
    
    
    
    
    (1.7
    )
    
    
    1.0Due to related parties
    
    
    0.5
    
    
    
    (1.5
    )
    
    
    9.5
    
    
    
    (1.8
    )Income and other taxes payable
    
    
    (3.3
    )
    
    
    0.1
    
    
    
    (0.7
    )
    
    
    (1.5
    )$
    (3.3
    )
    
    $
    1.0
    
    
    $
    (3.1
    )
    
    $
    2.6Interest payments
    
    $
    1.8
    
    
    $
    
    
    
    $
    2.6
    
    
    $
    5.8Income tax payments
    
    $
    3.5
    
    
    $
    
    
    
    $
    1.4
    
    
    $
    0.7Disclosure of non-cash activities during the period:Credit note received in exchange for sale of Edict
    
    $
    
    
    
    $
    
    
    
    $
    0.3
    
    
    $
    Adjustment to minimum pension liability
    
    $
    2.4
    
    
    $
    
    
    
    $
    (15.0
    )
    
    $
    16.6Adoption of SFAS 158
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    25.1Warrants issued in connection with financing
    
    $
    
    
    
    $
    7.7
    
    
    $
    
    
    
    $
    Issuance of shares in exchange for services
    
    $
    0.1
    
    
    $
    
    
    
    $
    0.1
    
    
    $
    Accretion of interest on redeemable common and
preferred shares
    
    $
    5.6
    
    
    $
    0.1
    
    
    $
    6.9
    
    
    $
    7.3Common shares issued in exchange for employee loans
    
    $
    1.3
    
    
    $
    
    
    
    $
    
    
    
    $
    
 28. PROPOSED MERGER TRANSACTION
  29. SUBSEQUENT EVENTS
    
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##### Table of Contents



i)
    
    each existing Series A Preferred Share (as described in Note 20) was amended and
converted into 0.000871 of a Class 1 Preferred Share and 0.2679946 of a Common Share,
the entire class of shares was subsequently deleted from the Companys articles of
incorporation;
 ii)
    
    each existing Series B Preferred Share (as described in Note 20) was converted
into 1.682 Common Shares and the entire class of shares was subsequently deleted from
the Companys articles of incorporation;
 iii)
    
    the $55.0 of convertible notes (as described in Note 16) were repaid with $66.0
of cash plus accrued interest
 iv)
    
    each existing redeemable common share (as described in Note 19) was purchased for
cancellation
 v)
    
    the warrants issued for $15.0 on September 21, 2006 (as described in Note 21 (v))
were repurchased for $20.0;
   
 38