Incredimail 2014 Annual Report Download - page 13

If we either fail to detect and stop misrepresentations of our site and products or are unsuccessful in preventing and combating the onset
of malicious applications in our products, we could lose the confidence of the users of our products and services.
We are exposed to the risk of domains using our brand names in various ways, and attracting in this manner our potential or existing
users. These domains often engage in fraudulent or spam activities and their use of our brand names can result in damage to our reputation and
loss of our clients' confidence in our products. In addition, downloadable applications through which a search asset may be installed by an end-
user are also subject to attack by viruses, worms and other malicious software programs, which could jeopardize the security of information
stored in users' computers or in our systems and networks. Additionally, search websites to which end users may be directed may be adversely
affected by such attacks, resulting in changes to users' computers and interference with the overall experience of our products and services, such
as the hijacking of queries to these websites or the modification or replacement of search results generated. No assurances can be given that our
efforts to combat these malicious applications will be successful and/or that our products and services will not have (or will not be perceived to
have) vulnerabilities in this regard. If we are unable to effectively detect and terminate this misrepresentation of others or the way that we and
our products are perceived, we may lose users and our ability to produce revenues will be harmed.
We have acquired and intend to continue to acquire other businesses. These acquisitions divert a substantial part of our resources and
management attention and have in the past and could in the future, cause further dilution to our shareholders and adversely affect our
financial results.
We acquired Smilebox in August 2011, SweetIM in November 2012, ClientConnect in January 2014, Grow Mobile in July 2014 and
Make Me Reach in February 2015, and we intend to continue to acquire complementary products, technologies or businesses. Seeking and
negotiating potential acquisitions to a certain extent diverts our management’s attention from other business concerns, and is expensive and time-
consuming. New acquisitions could expose our business to unforeseen liabilities or risks associated with the business or assets acquired or with
entering new markets. In addition, we might lose key employees while integrating new organizations and may not effectively integrate the
acquired products, technologies or businesses, or achieve the anticipated revenues or cost benefits. Future acquisitions could result in customer
dissatisfaction, performance problems with an acquired product, technology or company. Paying the purchase price for acquisitions in the form
of cash, debt or equity securities could weaken our cash position, increase our leverage or dilute our existing shareholders, as the case may be.
Furthermore, a substantial portion of the price paid for these acquisitions is typically for intangible assets. We may incur contingent liabilities,
amortization expenses related to intangible assets or possible impairment charges related to goodwill or other intangible assets or other
unanticipated events or circumstances relating to the acquisition, and we may not have, or may not be able to enforce, adequate remedies in order
to protect our Company. If any of these or similar risks relating to acquiring products, technologies or businesses should occur in the future on a
scale that is greater than the positive effects of the acquisition described above, our business could be materially harmed.
If we fail to comply with the terms and covenants of our convertible bonds our financial position may be adversely affected.
As of December 31, 2014, we had convertible bonds outstanding having an aggregate principal amount of approximately ILS 143.5
million (then equivalent to $36.9 million). In the event that we fail to comply with the terms and/or covenants of our convertible respective debt
instruments and cannot obtain a waiver of noncompliance, we may be required to immediately repay all of our outstanding indebtedness and the
bond trustee may be entitled to exercise the remedies available under the debt instruments and applicable law.
There is no assurance that we will be able to generate the cash necessary to fund the scheduled payments from operations or from
additional equity or debt financing or other funding sources or that our operating results will enable us to meet our covenants and financial ratios
as of the end of each fiscal quarter. Our inability to comply with the repayment schedules, covenants or financial ratios under our debt
instruments could result in a material adverse effect on us.
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