Incredimail 2013 Annual Report Download - page 48

Net Cash Provided By Operating Activities
. Net cash provided by operating activities was $7.0 million, $16.3 million and $15.9 million
for 2011, 2012 and 2013, respectively. The decrease in cash provided by operating activities in 2013 was primarily a result of net income, net of
non-cash expenses increasing by $5.2 million in 2013, compared to 2012, while non-
cash net change in operating assets and liabilities increased
in 2013 by $2.5 million, as compared to an $8.1 million increase in non-cash net change in operating assets and liabilities in 2012.
Net Cash Used In Investing Activities
. Net cash used in investing activities was $8.0 million, $8.1 million and $2.5 million in 2011,
2012 and 2013, respectively. While in 2011 and 2012 the cash used in investing activities was primarily a result of the acquisition of Smilebox
and SweetIM, respectively, in 2013 the cash used in investing activities was primarily a result of $1.6 million invested in capitalized software
(compared to $0.8 million invested in capitalized software in 2011 and 2012) and $0.7 million invested in property and equipment .
Net Cash Provided by (Used In) Financing Activities.
Net cash provided by (used in) financing activities was ($3.9) million, $2.3
million and $11.8 million in 2011, 2012 and 2013, respectively. In 2011, the cash was used primarily for the payment of dividends to
shareholders, and since that time we have discontinued our policy of paying dividends to our shareholders. In 2012, the cash was provided by a
bank loan, less payments already made on account, providing net cash of $8.9 million, less $6.6 million deferred payment for acquisitions. In
2013, the cash was used for payments made for the SweetIM acquisition in an amount of $9.5 million in addition to $2.3 million paid on account
of the bank loan received.
Credit Facilities
In September 2011, we entered into an agreement with each of Bank Leumi Le-
Israel ("Leumi") and First International Bank of Israel
("FIBI"), to secure a credit facility for up to a total of $20 million of financing. During the second quarter of 2012, we amended both agreements,
and reduced the amount of each credit facility, to $6 million provided by Leumi, and $4 million by FIBI. In December 2013, we further amended
the agreement with FIBI to remove one of the financial covenants. The repayment of the debt is structured over four and five years from the
respective draw date, and we have an option under each agreement for early repayment.
In order to secure our obligations to the banks, we granted to the banks a first priority floating charge on all of our assets and a first
priority fixed charge on certain other immaterial assets (namely, rights for unpaid shares, securities and other deposits deposited with the banks
from time to time, and rights for property insurance). The pledge agreements contain a number of customary restrictive terms and covenants that
limit our operating flexibility, such as (1) limitations on the creation of additional liens, on the incurrence of indebtedness, on the provision of
loans and guarantees and on distribution of dividends and (2) the ability of the banks to accelerate repayment in certain events, such as breach of
covenants and liquidation events. Such provisions may hinder our future operations or the manner in which we operate our business, which
could have a material adverse effect on our business, financial condition or results of operations.
On December 31, 2013, Conduit and ClientConnect entered into the Working Capital Financing Agreement pursuant to which Conduit
undertook to make available to ClientConnect a credit line of up to $20 million. Any amounts withdrawn under the credit line are required to be
used solely to finance payment related to the then-
current working capital needs of the ClientConnect business. The outstanding principal
amount under the credit line bears interest at the annual rate prescribed by Section 3(j) of the Tax Ordinance (currently 4.1% per annum). As of
March 31, 2014, ClientConnect has borrowed $12.5 million under the credit line. The credit line matures in April 2014.
C. RESEARCH, DEVELOPMENT, PATENTS AND LICENSES, ETC .
Our research and development activities are conducted internally by a 105 person research and development staff.
Research and development expenses, net were $7.5 million, $10.7 million and $13.4 million in the years ended December 31, 2011,
2012 and 2013, respectively. In 2013, our efforts were focused on developing the back-
end systems required for tracking the usage of our
products and their monetization, as well as continued development of additional mobile versions for our photo sharing product Smilebox,
available on the iPhone, as well as the mobile version of our IncrediMail-
Molto email client, introduced in the first quarter of 2013, available on
iPhone, iPad and Android platforms. In 2014 we plan on focusing our research and development efforts on creating distribution, monetization
and analytical services for mobile platforms, as well as tools for increasing advertising revenues.
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