Incredimail 2008 Annual Report Download - page 11

effectively compete with our product. Demand for our products could be diminished by equivalent or superior products and technologies offered
by competitors. See “Item 4.B Business Overview – Competition” for additional discussion of our competitive market.
We may use a substantial portion of our invested resources to acquire an unspecified business. These acquisitions could divert our
resources, cause dilution to our shareholders and adversely affect our financial results.
We may use a portion of our invested resources to acquire complementary products, technologies or businesses. In December 2006, we
acquired the assets of a transaction processing company called BizChord Consulting Corporation and, although a relatively small acquisition, in
December 2008, we decided to terminate BizChord’s independent activities and restrict its activity to processing the Company’
s own transactions.
As a result, since the acquisition, we have written off our entire investment. Prior to such acquisition our management had no experience making
acquisitions or integrating acquired businesses. Negotiating potential acquisitions or integrating newly-acquired products, technologies or
businesses could divert our management’s attention from other business concerns and could be expensive and time-
consuming. 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. Consequently, we might not effectively integrate any acquired products,
technologies or businesses, and might not achieve anticipated revenues or cost benefits. In addition, future acquisitions could result in customer
dissatisfaction, performance problems with an acquired product, technology or company, or issuances of equity securities that cause dilution to
our existing shareholders. Furthermore, we may incur contingent liability 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 larger than the effect of the acquisition described above, our business could be materially harmed.
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Our investment portfolio may be impaired by disruptions in the financial and credit markets.
Our investment portfolio currently consists of securities of US government agencies as well as corporate debt securities, which the Company
classified at December 31, 2008 as “available-for-sale”.
As of December 31, 2008, we hold approximately $8.4 million in corporate debt securities
and and $10.4 million securities of US government agencies.
Due to recent significant disruptions in the financial and credit markets, corporate debt securities in our portfolio are subject to a possible
increased risk of default due to bankruptcy, lack of liquidity, operational failure or other factors affecting the issuers of those securities. In
addition, securities in our portfolio are subject to other risks, such as credit, liquidity, market and interest rate risks, which may be exacerbated by
the recent market disruptions. We may be required to adjust the carrying value of our investment securities due to a default, lack of liquidity or
other event, if the event constitutes an impairment which is considered to be other-than-temporary.
Any such adjustment would be recorded in our consolidated statement of operations which could materially adversely impact our
consolidated results of operations and financial condition.
If we are deemed to be not in compliance with applicable data protection laws, our operating results could be materially affected.
We collect and maintain certain information about our customers in our database. Such collection and maintenance of customer information
is subject to data protection laws and regulations in Israel, the United States and other countries. A failure to comply with applicable regulations
could result in class actions, governmental investigations and orders, and criminal and civil liabilities, which could materially affect our operating
results.
Although we strive to comply with all applicable regulations and use our best efforts to inform our customers of our business practices prior
to any installations of our software, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data
practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data practices, which in turn could
have a material effect on our business. See “Item 4.B Business Overview – Government Regulation” for additional discussion of applicable
regulations.
If there are privacy or security concerns regarding our collection, use and handling of personal information, we could incur substantial
expenses.
Although we take all reasonable steps to insure the security of personal information, concerns may be expressed, from time to time, about
whether our products compromise the privacy or confidentiality of the information of users and others. Concerns about our collection, use, sharing
or handling of personal information or other privacy related matters, even if unfounded, could damage our reputation and operating results. See
“Item 4.B Business Overview – Government Regulation” for additional discussion of applicable regulations.
We rely on online payment for our products and any limitations imposed on online payment services could increase our costs associated
with the collection of payment and could adversely affect our business.