Incredimail 2008 Annual Report Download - page 27

international privacy-related laws and regulations could result in proceedings by governmental or regulatory bodies that could potentially harm
our business, results of operations and financial condition. In this regard, there are a large number of legislative proposals before the European
Union, as well as before the United States Congress and various state legislative bodies regarding privacy issues related to our business. It is not
possible to predict whether or when such legislation may be adopted, and certain proposals, if adopted, could harm our business through a
decrease in user registrations and revenues. These decreases could be caused by, among other possible provisions, the required use of disclaimers
or other requirements before users can utilize our services.
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During 2006, we formed a wholly-owned subsidiary in Delaware, operating out of New York, for marketing and other activities, and formed
another wholly owned subsidiary in Israel to acquire the business of our transaction processing provider, operating primarily out of Israel. The
current activity in these subsidiaries is minimal. Except for such subsidiaries, we do not have other subsidiaries.
We lease our facility, located in Tel Aviv, Israel, pursuant to a lease that was entered into during 2006 and expires in 2011, with an option to
extend the lease for 2 more years. The lease is for a total area of 2,300 square meters, at a monthly rent of approximately $22.9 per square meter.
We own 63 servers that are hosted in a server farm by Bezeq International Ltd., which we refer to herein as “Bezeq”. Our servers include
mainly web servers, application servers, ad servers, mail servers and database servers. Bezeq provides the Internet and related telecommunications
services, including hosting and location facilities, needed to operate our website. Bezeq is Israel’s largest provider of such services and is a
member of Bezeq Group, Israel’s national telecommunications provider. Bezeq provides these services through standard purchase orders and
invoices. We add servers and expand our systems located at their facilities as our operations require. We have no current intention to replace
Bezeq or to employ an additional provider for these services. We believe there are many alternative providers of these services both within and
outside of Israel.
Not applicable.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and
the related notes to the financial statements included elsewhere in this annual report. In addition to historical financial information, the following
discussion and analysis contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, including, without limitation, statements regarding the Company’s expectations, beliefs, intentions, or future
strategies that are signified by the words “expects,” “anticipates,” “intends,” “believes,” or similar language.These forward looking statements
involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these
forward looking statements as a result of many factors, including those discussed under
“Item 3.D Risk Factors” and elsewhere in this annual
report.
Overview
We design and market an integrated suite of customized and entertaining email software products for the consumer or home user markets.
We believe we are a global technology leader in enriching email interactions by offering users the ability to design highly personalized email
presentations. We believe that our innovations in entertaining email technology, along with our large collection of multimedia content for email
communication, have made our website one of the top Internet destinations in the world for downloading entertaining email solutions.
Since we began operations in 2000, we have recorded approximately 110 million registered downloads of our free products in more than 100
countries, and in 2008, we recorded an average of approximately 1.7 million registered downloads each month. As of December 31, 2008, we had
approximately 11 million active users, and currently, our email users send over 300 million IncrediMail® emails each month. We define an
“active” user as any user who has performed any activity using any IncrediMail® product or service, including opening or sending emails using
IncrediMail®, sending a message utilizing our HiYo tool, downloading content or updating the product, in the 30 days prior to the measurement
date. Our users typically use our products for as long as five years, based on current statistics (this was estimated in the past as three years).
Through December 31, 2008, we have sold over 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, as well as the use of our search properties, represent a convincing
validation of our business strategy.
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C.
ORGANIZATIONAL STRUCTURE
D.
PROPERTY, PLANTS AND EQUIPMENT
ITEM 4.A
UNRESOLVED STAFF COMMENTS
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A.
OPERATING RESULTS