Incredimail 2008 Annual Report Download - page 32

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impact on the Company's financial position, results of operations or cash flows.
In April 2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible Assets” (FSP 142-3). FSP 142-3 amends the
factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset
under SFAS No. 142, “Goodwill and Other Intangible Assets”. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The
adoption of FSP 142-3 did not have a material impact on the Company’s financial position, results of operations or cash flows.
In April 2009, the FASB issued FSP, No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments,
or the FSP. The FSP is intended to provide greater clarity to investors about the credit and noncredit component of an other-than-temporary
impairment event and to more effectively communicate when an other-than-temporary impairment event has occurred. The FSP applies to fixed
maturity securities only and requires separate display of losses related to credit deterioration and losses related to other market factors. When an
entity does not intend to sell the security and it is more likely than not that an entity will not have to sell the security before recovery of its cost
basis, it must recognize the credit component of an other-than-temporary impairment in earnings and the remaining portion in other
comprehensive income. upon adoption of the FSP, an entity will be required to record a cumulative-effect adjustment as of the beginning of the
period of adoption to reclassify the noncredit component of a previously recognized other-than-temporary impairment from retained earnings to
accumulated other comprehensive income. The FSP will be effective for us for the quarter ending June 30, 2009. The Company is currently
evaluating the impact of adopting the FSP.
In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, or FSP 157-4. FSP 157-4 provides additional
authoritative guidance to assist both issuers and users of financial statements in determining whether a market is active or inactive, and whether a
transaction is distressed. The FSP will be effective for us for the quarter ending June 30, 2009. The Company does not expect the adoption of FSP
157-4 to have a material impact on our consolidated financial position and results of operations.
33
The following table sets forth, for the periods indicated, our statements of operations expressed as a percentage of total revenues (the
percentages may not equal 100% because of the effects of rounding):
As shown in the above table, our operations are characterized by high margins, which are attributable mainly to two factors: (i) we do not
have manufacturing costs for our products, and (ii) we sell our products online and rely primarily on viral marketing, although in 2007 and 2008,
we increased our investment in non-
viral marketing. The continued decrease in our operating margin in 2008 compared to 2007 and 2006, resulted
primarily from our increased investment in media buying marketing expenses and goodwill impairment and other charges, as a result of our
refocusing on our core competencies, terminating and suspending others. If our revenues increase (as we expect), and we maintain a lower level of
operating expenses, as a result of the measures taken on 2008 and the subsequent reduction of our investment in media buying, we expect our
operating margins to increase already in 2009, although they may not reach the levels we had experienced in the past.
Year Ended December 31,
2006
2007
2008
Revenues from advertising, primarily search, and other services
28
%
51
%
58
%
Revenues from products
72
49
42
Revenues, net
100
%
100
%
100
%
Cost of revenues
8
9
8
Gross profit
92
91
92
Operating expenses
Research and development costs
30
33
35
Selling and marketing expenses
16
25
34
General and administrative expenses
25
20
17
Goodwill impairment and other charges
-
1
5
Total operating expenses
71
79
91
Operating income
21
12
1
Financial income (expense) and other, net
9
(19
)
21
Income (loss) before taxes on income
30
(7
)
22
Income tax expense
7
8
1
Net income (loss)
23
%
(15
)%
21
%