Incredimail 2014 Annual Report Download - page 68

Download and view the complete annual report

Please find page 68 of the 2014 Incredimail annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 166

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166

ITEM 8. FINA NCIA L INFORMATION
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
Our Financial Statements are incorporated by reference into this annual report pursuant to Item 18. As described in Item 3.A above,
commencing in 2014, the ClientConnect Acquisition is reflected in our financial statements as a reverse acquisition of all of our outstanding
shares and options by ClientConnect in accordance with Accounting Standards Codification Topic 805, "Business Combinations" ("ASC 805"),
using the acquisition method of accounting whereby ClientConnect is the deemed accounting acquirer and Perion is the deemed accounting
acquiree. In accordance with the ASC 805 presentation requirements, our financial statements include ClientConnect’
s comparative numbers, but
not Perion's comparative numbers, for the years preceding 2014.
Legal Proceedings
In November 2013, we were served with a lawsuit filed in the Tel Aviv District Court (Economic Department) against us and our
directors by an individual claiming to be a holder of 150 of our ordinary shares. The plaintiff alleged certain flaws in the process, price and
disclosure in connection with the ClientConnect Acquisition. The plaintiff requested that the court certify the lawsuit as a valid class action, a
declaratory judgment confirming the plaintiff's allegations and certain remuneration for the purported plaintiff, including legal fees. In October
2014, we filed an answer denying all the allegations and moving to dismiss the lawsuit. In December 2014, the Court ordered the dismissal of
the case, without prejudice, at the request of the parties. Pursuant to a stipulation among the parties, the plaintiff agreed not to file another
lawsuit relating to the transaction, and we agreed not to seek the recovery of costs, fees or sanctions from the plaintiff or his attorneys in
connection with the case. We did not pay any consideration in connection with the case or its dismissal.
In November 2013, MyMail, Ltd., a non-
practicing entity, filed a lawsuit in the Eastern District of Texas alleging that ClientConnect's
toolbar technology infringes one of its U.S. patents issued in September 2012 and demanding an injunction and monetary payments. On
November 2014, ClientConnect Ltd. filed a petition for
inter partes
review ("IPR") in the United States Patent & Trademark Office, challenging
the patentability of the asserted claims of the patent in question. On December 31, 2014, MyMail filed an unopposed motion to stay the district
court case pending resolution of the petition for IPR. On January 9, 2015, the court granted a stay pending resolution of the petition for IPR. We
are unable to predict the outcome or range of possible loss at this stage. We believe that we have strong defenses against this lawsuit and we
intend to defend against it vigorously.
On November 7, 2012, we entered into a Share Purchase Agreement with SweetIM Ltd., SweetIM Technologies Ltd., the shareholders
of SweetIM and Nadav Goshen, as Shareholders' Agent, according to which we purchased 100% of the issued and outstanding shares of
SweetIM Ltd. Under the terms of the Share Purchase Agreement, among other things, a third payment of up to $7.5 million in cash was due in
May 2014, if certain milestones were met. The milestones are based on our revenues in the fiscal year of 2013 and the absence of certain changes
in the industry in which we operate. We believe that that the terms of the Share Purchase Agreement require us to pay only $2.5 million with
respect to the contingent payment, which we have paid. However, the Shareholders' Agent has demanded payment of an additional $5.0 million.
We believe that the claim is without merit and plan to defend against it vigorously. Until this dispute is resolved, we will maintain the $5.0
million liability in our financial statements that we recorded at the time that we entered into the Share Purchase Agreement.
Policy on Dividend Distribution
In November 2010, we announced that as we are focusing on growth and intend to utilize our cash and investments to achieve that
growth. Accordingly, we decided to change our dividend policy to no longer distribute dividends.
B. SIGNIFICANT CHANGES
Since the date of our audited Financial Statements incorporated by reference in this report, there have not been any significant changes
other than as set forth in this report under Item 4.A. – "Recent Developments."
63