Incredimail 2008 Annual Report Download - page 35

partially offset by financial income of $1 million of interest income and net return on our investments. Our investment policy was updated in 2007
so as to purchase debentures of a limited sum and relatively short-term maturity, rated at A and higher, dollar denominated or linked. This policy
was further updated in 2008 as indicated above and in addition, we sold the ARS for its cost in the fourth quarter of 2008 as mentioned above.
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Income (Loss) before Tax. The loss before tax in 2007 was $1.4 million, compared to income before tax of $3.2 million in 2006. The loss in
2007 was primarily attributable to the $4.9 million expense to the write-down of our investment, as described above, partially offset by other
financial income.
Taxes on Income. Income tax in 2007 was $1.4 million, compared to $0.8 million in 2006. Although the Company had a loss before tax in
2007, it still recorded a tax expense. This is due to our recording a valuation allowance with respect to deferred tax assets related to other-than-
temporary impairment on marketable securities and ARS, due to current uncertainty of whether we will produce sufficient capital gains in the
future, which are considered a source of income required to offset losses from marketable securities under the Israeli Tax Law. In addition, the
effective tax rate on the other income increased, compared to 2006, as the benefits from the Company’s Approved Enterprise program were
greatly reduced in 2007, compared to 2006. As the Approved Benefit Program for 2008 has already been approved, we expect these benefits to
return to a great extent in 2008.
Net Income (Loss). The Net Loss in 2007 was $2.8 million, compared to Net Income of $2.5 million in 2006. The Net Loss in 2007 was
primarily attributable to the aforementioned $4.9 million other-than-temporary loss from our investment, and creating valuation allowance against
the deferred tax asset from that expense.
From inception until consummation of our initial public offering we funded our operations principally from private placements of ordinary
and preferred shares that resulted in aggregate net proceeds of approximately $3.3 million and cash flow from operations. We received net
proceeds of $16.8 million from our initial public offering, consummated in February 2006.
As of December 31, 2008, we had working capital of $25.1 million and our primary source of liquidity was $26.6 million in cash, cash
equivalents, deposits and marketable securities. As of December 31, 2007, we had working capital of $19.8 million, and our primary source of
liquidity was $23.4 million in cash, cash equivalents and marketable securities. The increase in working capital and cash, cash equivalents and
marketable securities was primarily due to the $4.8 million net proceeds from the sale of our Auction Rate Security in October 2008, previously
written-off in 2007 as described above, in addition to working capital generated by our operations.
We believe that our cash balances and cash generated from operations will be more than sufficient to meet our anticipated cash requirements
for at least the next 12 months.
Net Cash Provided By Operating Activities . Net cash provided by operating activities was $5.2 million, $4.0 million and $0.9 million for
2006, 2007 and 2008, respectively. The change in net cash provided by operating activities reflects primarily a $3.8 million net change in the
carrying value of marketable securities.
Net Cash Provided By (Used In) Investing Activities . Net cash provided by (used in) investing activities was ($16.1) million, ($7.9) million
and $3.0 million in 2006, 2007 and 2008, respectively. In 2008, net cash provided by investing activities consisted primarily from the net proceeds
from the sale of marketable securities and short term deposits of $3.8 million, net of $0.6 million investment in property and equipment.
Net Cash Provided by (Used In) Financing Activities.
Net cash provided by (used in) financing activities was $16.8 million in 2006 resulting
from issuance of shares in our initial public offering in January 2006, $0.3 million in 2007, and ($0.7) million used in 2008, primarily for the
repurchase of the Company’s shares .
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Our research and development activities are conducted internally by our Chief Technology Officer and a 47-person research and
development staff. Our research and development efforts are currently focused on the completing the development of new products and upgrading
the software and new features for existing products. In 2008 this included developing a new version of Magentic , PhotoJoy
, development activity
which has been substantially completed and continuing development efforts have been currently suspended in order to focus on our core
competencies. In addition, in 2008 we launched HiYo , our graphic and communication enhancement tool for instant messaging products. In
December 2008, we also released the Beta of a new version of our back-bone email client product IncrediMail
®
. Although we have released
numerous upgrades to this product, this will be the first full makeover, improving the graphics and numerous user
-
friendly functions, bringing a
B.
LIQUIDITY AND CAPITAL RESOURCES
C.
RESEARCH, DEVELOPMENT, PATENTS AND LICENSES, ETC.