Incredimail 2008 Annual Report Download - page 20

share, subject to Israeli court approval and a tax pre-ruling from the Israeli Tax Authority as required by Israeli law. Previously, on March 12,
2009, we announced that our board of directors and management determined that the Company’s interest for enhancing shareholder value is best
served by changing our dividend policy and instituting a revised dividend policy whereby at least 50% of annual net income of the Company will
be paid out as a dividend beginning with the net income for 2009. According to our dividend policy, the declaration and issuance of the dividend
will be subject to our board’s review of the Company’s financial conditions at the time. See Item 1A – Risk Factors – “Although we have paid
dividends in the past, and we expect to pay certain dividends in the future, our ability to pay dividends may be adversely affected by the risk
factors described in this report; if we fail to pay dividends the return on investment will be limited to the value of our stock.”
On January 23, 2008 the Company announced that its Board of Directors had resolved to adopt a share buyback plan, and on March 25, 2009,
the Company announced that it had elected to continue with the second phase of this plan that authorizes the purchase of up to an additional $1
million of its ordinary shares, subject to approval from the Israeli Tax Authority which has not yet been received. As of May 31, 2009, the
Company repurchased 346,019 ordinary shares in open market transactions.
On June 2, 2009, the Company provided notice to its shareholders of an extraordinary general meeting to approve a proposal to elect an
external director of the Company in the place of an external director whose term had expired, and to amend the terms of options granted to the
external directors and the directors of the Company. The meeting is scheduled to be held on July 9, 2009 with such terms as provided in the Notice
of Meeting filed on Form 6-K with the SEC. See “Item 10.H – Documents on Display” for information on accessing the Company’s SEC filings.
If the proposals relating to compensation of our directors are approved, our directors’ recurring annual stock option grants will have a vesting
period of three years (instead of four years) from the date of their annual stock option grant. Also, upon termination or expiration of the applicable
director’s service with the Company, provided that the termination or expiration is not “for Cause” and not resulting from the director’s
resignation, the stock options granted to such director shall retain their original termination dates, and shall not terminate 90 days after the
applicable termination date, and the next upcoming tranche of stock options, of each grant, that are scheduled to vest immediately subsequent to
the termination date, if any, shall automatically vest and become exercisable immediately prior to the termination date. In addition, to avoid a
possible conflict of interest while discussing a Change of Control of the Company (which may result in the termination of the director’s term of
office), all unvested options held by the director, shall automatically vest and become exercisable upon such “Change of Control” event. “Change
of Control” is defined for these purposes as: (i) merger, acquisition or reorganization of the Company with one or more other entities in which the
Company is not the surviving entity, (ii) a sale of all or substantially all of the assets of the Company; (iii) a transaction or a series of related
transactions as a result of which more than 50% of the outstanding shares or the voting rights of the Company are held by any party (whether
directly or indirectly).
Overview
We are an Internet content and media company, whose products we believe bring a new level of fun, personality and convenience to email,
desktops and screen savers, and have been downloaded more than eighty million times. Having secured a large active email user base, IncrediMail
is now branching out into Instant Messaging, using its unique content and approach to enhance the user experience.
Since we began operations in 2000, our products have been downloaded in more than 100 countries, and in 2008 we recorded on average
approximately 1.7 million registered downloads each month. As of December 31, 2008, we had approximately 11 million active users, and
currently, more than 350 million IncrediMail
®
emails are sent by our users each month. Our users typically use our products for as long as six
years. Through December 31, 2008, we have sold more than 1.7 million products and content licenses worldwide to our registered users. We
believe our historical track record of converting registered users to purchasing customers represents a convincing validation of our business
strategy.
20
We generate revenue primarily by:
For a breakdown of total revenues by category of activity, see “Item 5.A Operating Results – Revenues.”
To date, we have relied primarily on “viral growth” to grow our user base. Our “viral growth” has resulted from recipients of our users’
emails clicking on the link at the bottom of emails sent with IncrediMail® Xe and then downloading our products and also from word of mouth.
Our revenues were $10.9 million in 2006, $18.7 million in 2007 and $21.9 million in 2008. Our operations have been profitable since 2002, with a
gross profit margin of over 90% .
When we use the term “registered user” in this annual report, we mean an IncrediMail® user who has downloaded one of our products and
completed the registration process. Registrations are not necessarily indicative of the number of individual users as a user may register more than
B.
BUSINESS OVERVIEW
—
advertising, including primarily generating searches and sharing in the revenues with the provider of the search engine; and
—
selling our premium software products.