Incredimail 2009 Annual Report Download

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INCREDIMAIL LTD.
FORM 20-F
(Annual and Transition Report (foreign private issuer))
Filed 03/25/10 for the Period Ending 12/31/09
Telephone 972 3 516 0195
CIK 0001338940
Symbol MAIL
SIC Code 7371 - Computer Programming Services
Industry Computer Services
Sector Technology
http://www.edgar-online.com
© Copyright 2011, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ... LTD. (Annual and Transition Report (foreign private issuer)) FORM 20-F Filed 03/25/10 for the Period Ending 12/31/09 Telephone CIK Symbol SIC Code Industry Sector 972 3 516 0195 0001338940 MAIL 7371 - Computer Programming Services Computer Services Technology http://www.edgar-online.com...

  • Page 2
    ...(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report For the transition period from ____ to _____ Commission File No. 000-51694 IncrediMail Ltd. (Exact Name of Registrant as specified in its charter) N/A (Translation of Registrant's name into English) Israel...

  • Page 3
    ...known seasoned issuer, as defined in Rule 405 of the Securities Act Yes 4 No  If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934. Yes 4 No  Indicate...

  • Page 4
    ... Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer 4 Accelerated filer 4 Non-accelerated filer  Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP  International Financial Reporting...

  • Page 5
    ... on a limited number of possible customers in general and one dominant customer in particular for search generated revenues; our dependence on the availability and openness of other PC and Internet platforms. our ability to continually enhance our existing products and to develop new products that...

  • Page 6
    ... data, and we do not make any representation as to the accuracy of the information. Unless otherwise indicated, the information in this annual report: â- Reflects the increase in our authorized share capital to 15 million ordinary shares and a 38-for-one ordinary share split effected as a dividend...

  • Page 7
    TABLE OF CONTENTS Page PART I Item 1. Identity of Directors, Senior Management and Advisers Item 2. Offer Statistics and Expected Timetable Item 3. Key Information Item 4. Information on the Company Item Unresolved Staff Comments 4.A Item 5. Operating and Financial Review and Prospects Item 6. ...

  • Page 8
    PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. ITEM 3. A. KEY INFORMATION SELECTED FINANCIAL DATA The following tables present selected financial data and should be read in conjunction with "Item 5...

  • Page 9
    ... the Google AdSense program, pursuant to which we receive a portion of the amount paid by advertisers to Google for the activity performed through the Company's applications. This dependence continues to grow and we obtained approximately 68% of our revenues for the year ended December 31, 2009 from...

  • Page 10
    ... and services attractive to new users. In order to induce those consumers to use our products, accept the search properties offered, and subsequently, to a certain extent, purchase or license our products, we must continually enhance our existing products by offering additional features and content...

  • Page 11
    ...that provide a personalized email experience. Many of the large Internet and software companies offer their email software programs free of charge. Competition with these products could result in fewer downloads of our product, reduced prices and margins, fewer purchases of our products and services...

  • Page 12
    ... not offer a customized and entertaining email experience similar to IncrediMail ® . For example, consumers may choose to receive an extensive package of Internet and email services from a more dominant and recognized company, such as Microsoft Corporation (Outlook Express) or America Online, Inc...

  • Page 13
    ... and development and sales and marketing resources than we have. These competitors could use their greater financial resources to acquire other companies to gain enhanced name recognition and market share, as well as to develop new technologies, products or features that could effectively compete...

  • Page 14
    ... 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...

  • Page 15
    ... which to predict our future performance. The future viability of our business will depend on our ability to increase product sales, introduce new products appealing to the Internet market, increase search generated, affiliate and advertising revenues, exploit our brand name and control our costs...

  • Page 16
    ... may make the use of our products through these devices difficult. If consumers find our products difficult to access, we may fail to capture a sufficient share of an increasingly important portion of the market for online services and may fail to attract advertisers and web traffic. Exchange rate...

  • Page 17
    ... of proprietary information due to piracy, misappropriation or laws that may be less protective of our intellectual property rights than those of the United States; costs and delays associated with translating and supporting our products in multiple languages; foreign exchange rate fluctuations and...

  • Page 18
    ... this manner our potential or existing users. Many times these domains are engaged with fraudulent or spam activities and using our brand names can result in damaging our reputation and losing our clients' confidence in our products. In addition, if we or our products were for some reason perceived...

  • Page 19
    ...are providing an increasing number of services for free. The internet and internet based companies are providing an increasing number of services for free, including email clients and antispam software and services. A substantial part of our revenues comes from selling software products and services...

  • Page 20
    ... to regulate the use of "cookie" technology. Upon installation of our software, certain cookies generated by us and our advertisers are placed on our customers' computers. It has been argued that Internet protocol addresses and cookies are intrinsically personally identifiable information that is...

  • Page 21
    ... Capital Investments, 1959" for more information about these programs. Risks Related to our Ordinary Shares and their Listing on a Stock Exchange We incur significant costs as a result of being a public company. As a public company, we incur significant legal, accounting and other expenses. We incur...

  • Page 22
    ...of our Company, which could prevent a change of control and, therefore, depress the price of our shares. Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or...

  • Page 23
    ..., Suite 204, Newark, Delaware 19715. Our website addresses are www.incredimailcorp.com and www.incredimail.com . The information on our websites do not constitute part of this annual report. We completed the initial public offering of our ordinary shares in the United States on February 3, 2006...

  • Page 24
    ..., the term "active user" as used in this annual report means a registered user who has performed any activity using any IncrediMail® product or service, including opening or sending emails using IncrediMail®, logged into his instant messaging with a HiYo client, downloading content or updating the...

  • Page 25
    ..., or corporate, market. Our products target the consumer market. Both the consumer and the business markets are serviced by many of the same popular email software programs, such as Microsoft Outlook, and by web-based email services, such as Hotmail, Yahoo! ® Mail and Gmail. Security remains...

  • Page 26
    ...user base, primarily, those that are using our free products. Enhance product offerings and increase user sales. Although this area of activity has suffered in recent years, we plan to stimulate growth of our sales and enhance our cross-sale capabilities by improving our existing product and service...

  • Page 27
    ... version of IncrediMail® Xe . Users who upgrade their free version of IncrediMail through the purchase of IncrediMail ® Premium benefit from the following features no advertising banners displayed in the product; the ability to change the appearance of the product through the use of software...

  • Page 28
    ...; Windows Live Messenger ® Yahoo! Messenger and AOL Instant Messaging ("AIM"). HiYo is bringing new users and demographics into the IncrediMail ® experience. Products under Development Our research and development activities are conducted internally by our Chief Technology Officer and a 59 person...

  • Page 29
    ..., and to sell products incorporating such software and documentation. Under the agreement, we pay Commtouch an annual fee for each customer who purchases JunkFilter Plus based on the number of purchasers. The agreement had a one-year initial term, beginning with the commercial launch date of the...

  • Page 30
    ... certain special features that provide a personalized email experience, some of them offering creative graphic backgrounds, such as Yahoo! Mailâ„¢. Many of the large Internet and software companies offer their email software programs free of charge. Our Magentic and PhotoJoy products' main...

  • Page 31
    ... not offer a customized and entertaining email experience similar to IncrediMail ® . For example, consumers may choose to receive an extensive package of Internet and email services from a more dominant and recognized company, such as Microsoft Corporation (Outlook Express) or America Online, Inc...

  • Page 32
    ... have data security breach laws that impose various requirements on service providers to report to state attorneys general and send notices to affected consumers in the event of a breach of security of network and computer systems that compromise a user's personal financial and other information...

  • Page 33
    ...elsewhere in this annual report. A. OPERATING RESULTS Overview We design and market an integrated suite of customized and entertaining email software products, a graphic add-on to instant messaging software, wallpaper and screensaver software, and software for presenting digital personal photos for...

  • Page 34
    ... 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 use our products for as long as six years, based...

  • Page 35
    ... our email client, are recognized when we are entitled to receive the fee. Advertisers are charged and pay monthly, based on the number of clicks generated by users clicking on these ads. In accordance with ASC 605-50, "Customer Payments and Incentives"( formerly EITF No. 01-9) the Company accounts...

  • Page 36
    ... 30 days. Collection is probable : We are subject to a minimal amount of collection risk related to software sold to our customers as these are obtained through credit card sales. Revenues from licensing The Gold Gallery content database are recognized over the term of the licensing period. We offer...

  • Page 37
    ... income taxes. The provision for income tax is calculated based on our assumptions as to our entitlement to various benefits under the applicable tax laws. The entitlement to such benefits depends upon our compliance with the terms and conditions set out in these laws. Although we believe that our...

  • Page 38
    ... fluctuations reflecting market conditions and our efforts to maintain and even increase our products' downloads and market share. Year Ended December 31, 2009 Compared to Year Ended December 31, 2008 Revenues from advertising, primarily search, and other services . These revenues increased...

  • Page 39
    ...most of the development and marketing costs related to this product, until the viral marketing aspects were achieved. In addition, in August 2009 we released a substantially new version of our back-bone email client product IncrediMail ® , enabling us to further reduce some of our development costs...

  • Page 40
    ... large user base, primarily those using our free products. Revenues from product s. These revenues remained relatively stable, increasing less than $0.1 million. We believe the decrease in growth is attributable to decreasing popularity in purchasing downloadable software, general market conditions...

  • Page 41
    ...features for IncrediMail and HiYo products. In 2009 we released the full version of IncrediMail, which improves the graphics and numerous user- friendly functions, bringing a much more graphically advanced user interface. In addition, we released new versions of our HiYo product supporting the Yahoo...

  • Page 42
    ...supports POP3 and is compatible with e-mail clients such as IncrediMail ® . We believe that IncrediMail will benefit from Gmail's growing popularity, as users are able to access their Gmail accounts via IncrediMail ® . The storing of digital photos on personal computers, and on photo hosting sites...

  • Page 43
    ... that the need to purchase IncrediMail's Anti-Spam mechanism will sustain the current level of revenue from sales of our JunkFilter Plus product. However, offsetting this effect is the trend of freely available anti-spam services by large web based email providers such as Gmail by Google, HotMail by...

  • Page 44
    ... and since February 5, 2008, serves as the Company's Chief Executive Officer. As a Chief Executive Officer he is responsible for our day-to-day operations, business development and the overall management of IncrediMail. As a Chief Product Officer he had overall responsibility for the design and...

  • Page 45
    ... its subsidiaries, provides software consulting and development services and serves as an authorized dealer and a value-added-reseller of computer hardware. At Data Systems, Mr. Kaufman established and subsequently managed the accounting and financial departments of the company and its subsidiaries...

  • Page 46
    ... director and by IncrediMail promptly after the date of grant. In accordance with the shareholders approval of December 27, 2007 each of the directors who is not an employee of the Company, receives for each year of service by such person as a director of the Company, an option to purchase 10,000...

  • Page 47
    ... to Mr. Ofer Adler, of options to purchase 50,000 ordinary shares of the Company, under the following terms: (a) each option shall be exercisable for one Ordinary Share at an exercise price equal to the closing price of an ordinary share on December 27, 2007, as reported by the Nasdaq Global Market...

  • Page 48
    ... to our secretary and each such notice sets forth all the details and information as required to be provided under our articles of association. Shareholders may remove a director who is not an external director from office only by a resolution approved by shareholders holding more than two-thirds of...

  • Page 49
    ... votes); or the total number of shares of non-controlling shareholders voted against the election of the external director does not exceed one percent of the aggregate voting rights in the company. â- The Israeli Companies Law provides for an initial three-year term for an external director...

  • Page 50
    ... of the work of the issuer's public accountants). In addition, applicable Nasdaq Marketplace Rules require that a foreign private issuer can maintain an audit committee that meets the requirements of Rule 10A-3(b)(subject to the exemptions provided in Rule 10A-3(c)) under the Exchange Act, instead...

  • Page 51
    ... shareholder's relatives. The audit committee provides assistance to the board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by approving the services performed...

  • Page 52
    ... and Chief Product Officer Ofer Adler to retain his continuing services. The employment agreement does not provide for a specified term and may be terminated by either party upon ninety days' prior notice. Upon termination by us of the employment of the executive other than for "cause" (as set forth...

  • Page 53
    ...accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Ordinary shares that are subject to warrants or stock options that are presently exercisable or exercisable within 60 days of a specified date are deemed to...

  • Page 54
    ... plan was adopted in 2003 under Section 102 of the Israeli Income Tax Ordinance, providing certain tax benefits in connection with share-based compensation. Please also see Note 10 of our financial statements included in this annual report for information on the options issued under our plan. 49

  • Page 55
    ... may provide in individual option agreements that if the options are not substituted or exchanged by a successor company, then the vesting of the options shall accelerate. Adjustments to the number of options or exercise price shall not be made in the event of rights offering on outstanding shares...

  • Page 56
    ... to Ms. Tamar Gottlieb of options to purchase 10,000 ordinary shares of the Company, under the following terms: (a) each option shall be exercisable for one ordinary share at an exercise price equal to the closing price of an ordinary share on July 17, 2008, as reported by the Nasdaq Global Market...

  • Page 57
    ... board service, will have a vesting period applicable to one term of office of a director, which under the Company's articles of association is a term of three (3) years (instead of a vesting period of four (4) years as was formerly approved by the shareholders) from the date of grant; (b) the stock...

  • Page 58
    ...MAIL". Our ordinary shares commenced trading as a dual listed company on the Tel Aviv Stock Exchange ("TASE") on December 4, 2007 under the Hebrew letters which read "EMAIL". The following table shows, for the periods indicated, the high and low closing sale prices of our ordinarysShares as reported...

  • Page 59
    ... are the last full trading days before filing of this annual report, were $7.85 and NIS 27.15, (equal to $7.26 based on the Bank of Israel representative exchange rate as of such date), respectively. B. PLAN OF DISTRIBUTION Not applicable. C. MARKETS Our ordinary shares are quoted on the Nasdaq...

  • Page 60
    ...of ordinary shares by non-residents of Israel, except with respect to citizens of countries that are in a state of war with Israel. Under the Israeli Companies Law, an annual general meeting of our shareholders should be held once every calendar year, but no later than 15 months from the date of the...

  • Page 61
    ... and shareholder approval, in such order. Disclosure of personal interest. The Israeli Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have and all related material information known to him or her, in connection with any existing...

  • Page 62

  • Page 63
    ... the audit committee has a personal interest in the transaction, shareholder approval is also required. Shareholders The Israeli Companies Law imposes the same disclosure requirements, as described above, on a controlling shareholder of a public company that it imposes on an office holder. For these...

  • Page 64
    ... companies' shareholders resolved to approve the merger, and (ii) at least 50 days have passed from the time that the merger proposal was filed with the Israeli Registrar of Companies. Tender Offer. The Israeli Companies Law requires a purchaser to conduct a tender offer in order to purchase shares...

  • Page 65
    ... business practice in Israel is not to distribute such reports to shareholders. We do however make our audited financial statements available to our shareholders at the Company's offices and mail such reports to shareholders upon request. IncrediMail also files its annual reports with the SEC...

  • Page 66
    ... participation in Google's AdSense program, which allows us to receive a portion of the amount paid to Google by advertisers for the activity performed through the Company's applications. The July 1, 2008 agreement with Google was amended in January 2009, primarily so as to add our HiYo product to...

  • Page 67
    ... consequences of the purchase, ownership and disposition of our ordinary shares, including, in particular, the effect of any foreign, state or local taxes. General Corporate Tax Structure in Israel Israeli companies are generally subject to corporate tax at the rate of 26% in 2009. The rate was 27...

  • Page 68
    ... corporate tax in respect of the amount distributed at the rate that would have been applicable had the company not elected the alternative benefits program (generally 10% to 25%, depending on the foreign (non-Israeli) investment in it). Since 2009, this has applied to the Company as it has changed...

  • Page 69
    ... will be subject to corporate tax at the applicable rate (10%-25%) in respect of the gross amount of the dividend that we may be distributed. The company is required to withhold tax at the source at a rate of 15% from dividends distributed from income derived from the Benefited Enterprise. There can...

  • Page 70
    ... defined as an enterprise whose major activity in a given tax year is industrial production. The following corporate tax benefits, among others, are available to Industrial Companies amortization of the cost of purchased know-how and patents, which are used for the development or advancement of the...

  • Page 71
    ... and in effect as of the date of this annual report. These sources may change, possibly with retroactive effect, and are open to differing interpretations. This description does not discuss all aspects of U.S. federal income taxation that may be applicable to investors in light of their particular...

  • Page 72
    ... shares for more than 60 days during the 121 day period beginning 60 days prior to the ex-dividend date, and meet other holding period requirements for qualified dividend income. Dividends paid by a foreign corporation will not qualify for the reduced rates, if the dividend is paid in a tax year...

  • Page 73
    ..., gain from the sale or exchange of preferred shares by a U.S. person who is or was a 10-Percent Shareholder at any time during the five-year period ending with the sale or exchange is treated as dividend income to the extent of earnings and profits of the company attributable to the stock sold or...

  • Page 74
    ... States for 183 days or more in the taxable year of the sale or exchange, and other conditions are met. Passive Foreign Investment Company Considerations Special U.S. federal income tax rules apply to U.S. Holders owning shares of a passive foreign investment company. A non-U.S. corporation will be...

  • Page 75
    The rules applicable to owning shares of a passive foreign investment company are complex, and each prospective purchaser who would be a U.S. Holder should consult with its own tax advisor regarding the consequences of investing in a passive foreign investment company. Information Reporting and Back...

  • Page 76
    ... treatment of agreements pursuant to applicable law) at our principal executive offices at IncrediMail Ltd., 4 HaNechoshet Street, Tel-Aviv 69710, Israel. I. SUBSIDIARY INFORMATION Not applicable. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Exchange Rate Risk. A significant...

  • Page 77
    ... of cash, and cash equivalents and marketable securities, which are subject to risk of changes in interest rate, segregated by maturity dates as of December 31, 2009, were as follows: Up to 1 year Corporate debentures US treasuries Total $ $ 5 5,350 5,355 1 - 3 years 4 - 5 years In thousands of US...

  • Page 78
    ..., our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2009, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act and the rules thereunder, is...

  • Page 79
    ...to be provided by the independent auditor will be submitted to our Chief Financial Officer, who will determine whether such services are included within the enumerated pre-approved services. The audit committee will be informed on a timely basis of any preapproved services that were performed by the...

  • Page 80
    ... with Rule 10b5âˆ'1 of the Securities Exchange Act of 1934 that is designed to facilitate such purchases. The repurchase program has no time limit, does not require us to acquire a specific number of shares, and may be suspended from time to time or discontinued. No shares have been purchased since...

  • Page 81
    ... report are filed as part of this annual report: Page F-2 F-3 - F-4 F-5 F-6 F-7 F-8 Report of Independent Registered Public Accounting Firm Balance Sheets as of December 31, 2008 and 2009 Statements of Income for the Years Ended December 31, 2007, 2008 and 2009 Statements of Changes in Shareholders...

  • Page 82
    ... U.S. DOLLARS INDEX Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2008 and 2009 Consolidated Statements of Operations for the Years Ended December 31, 2007, 2008 and 2009 Consolidated Statements of Changes in Shareholders' Equity for the...

  • Page 83
    ... St. Tel-Aviv 67067, Israel Tel: 972 (3)6232525 Fax: 972 (3)5622555 www.ey.com/il REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of INCREDIMAIL LTD. We have audited the accompanying consolidated balance sheets of Incredimail Ltd. ("the Company") and its subsidiaries as...

  • Page 84
    INCREDIMAIL LTD . AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U .S. dollars in thousands December 31, 2008 2009 ASSETS CURRENT ASSETS: Cash and cash equivalents Marketable securities Trade receivables Deferred taxes, net Other receivables and prepaid expenses Total current assets LONG-TERM ...

  • Page 85
    INCREDIMAIL LTD . AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U .S. dollars in thousands (except share and per share data) December 31, 2008 2009 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables Deferred revenues Accrued expenses and other liabilities Total current ...

  • Page 86
    INCREDIMAIL LTD . AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS U .S. dollars in thousands (except share and per share data) Year ended December 31, 2008 2009 2007 Revenues: Advertising and other services Products $ 9,597 9,078 18,675 $ 12,748 9,158 21,906 1,795 20,111 $ 20,478 ...

  • Page 87
    ... ASC 320-10Investments-Debt and Equity Securities-Overall) at April 1, 2009 Stock based compensation expense Exercise of share options Dividends Repurchase of Ordinary shares Comprehensive income: Net income Changes in unrealized holding gains on marketable securities, net Balance as of December 31...

  • Page 88
    ... of software development costs, content costs and domain Proceeds from sales of marketable securities Investment in marketable securities Net cash provided by (used in) investing activities Cash flows from financing activities: Tax benefit in respect of issuance expenses Exercise of share options...

  • Page 89
    ...by offering search powered by search providers, to the users of its applications, as well as from selling premium versions of its email products. The Company has one major customer which accounts for 42%, 49% and 68% of total revenues, in 2007, 2008 and 2009, respectively. Losing this customer could...

  • Page 90
    ...). Management determines the appropriate classification of its investments in debt securities at the time of purchase and reevaluates such determinations at each balance sheet date. At December 31, 2008 and 2009, all marketable securities are designated as available-for-sale. Marketable securities...

  • Page 91
    ..., receiving a share of the advertising revenues from companies providing search capabilities. In addition, the Company offers advertisers the ability to place text-based ads on its website and banners in its email clients. Advertisers are charged monthly based on the number of times a user clicks...

  • Page 92
    ... of an agreement exists, delivery of the product has occurred, the fee is fixed or determinable, and collectability is probable. The Company's e-mail users may also purchase a license to its content database. This content database provides additional Incredimail content files in the form of email...

  • Page 93
    ... sold. Based on its analyses, management believes that no impairment of capitalized software development cost exist as of December 31, 2009. m. Income taxes: The Company accounts for income taxes in accordance with ASC 740, "Income Taxes" (formerly SFAS No. 109). This Statement prescribes the use of...

  • Page 94
    ... risk with respect to sales of the Company's software products and content database, as these sales are primarily obtained through credit card sales. The Company's major customer is financially sound, and the Company believes low credit risk is associated with this customer. To date, the Company...

  • Page 95
    ...The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The fair value of the Company's stock options granted to employees and directors was estimated using the following weighted average assumptions: Year ended December 31, 2007 2008 2009 4.13...

  • Page 96
    ... liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in...

  • Page 97
    ...The Company repurchases its Ordinary shares from time to time on the open market and holds such shares as treasury shares. The Company presents the cost to repurchase treasury shares as a reduction of shareholders' equity. w. Adoption of New Accounting Standards: On July 1, 2009, the FASB issued the...

  • Page 98
    ... amount of available-for-sale debt marketable securities as of December 31, 2009 was $5,225,000 of which $355,000 is scheduled to mature within one year and the remaining $4,870,000 is scheduled to mature after one year and up to five years. NOTE 4:OTHER RECEIVABLES AND PREPAID EXPENSES December...

  • Page 99
    ... and $625,000 for the years ended December 31, 2007, 2008 and 2009, respectively. NOTE 6:OTHER INTANGIBLE ASSETS a. Composition: December 31, 2008 2009 U.S. dollars in thousands Original amounts: Capitalized software development costs Capitalized content costs Domain Accumulated amortization Other...

  • Page 100
    ... be required to refund the amount of the benefits, in whole or in part, including interest. As of December 31, 2009, management believes that the Company meets all conditions of the approvals. On April 1, 2005, an amendment to the Law came into effect ("the Amendment") and has significantly changed...

  • Page 101
    ...the net income for 2009. Declaring and issuing the dividend will be subject to the Board's review of the Company's financial condition at the time. As a result of the dividend policy, the Company records a deferred tax liability with respect to its tax-exempt income generated starting 2009 under its...

  • Page 102
    ...FINANCIAL STATEMENTS NOTE 9:INCOME TAXES (Cont.) d. A reconciliation of the Company's effective tax rate to the statutory tax rate in Israel is as follows: Year ended December 31, 2007 2008 2009 U.S. dollars in thousands, except for per share data $ (1,369) $ 4,714 $ 11,558 29% 27% 26% $ (397) $ (77...

  • Page 103
    ... Stock based compensation amounted to $63,000 in the year ended December 31, 2007. c. Treasury shares: In July 2008, the Company's Board of Directors authorized the repurchase of up to $3,750,000 in the open market, subject to normal trading restrictions. During 2008 and 2009, the Company purchased...

  • Page 104
    ...the balance-sheet date. A summary of the activity in the share options granted to employees and directors for the year ended December 31, 2009 and related information is as follows: Weighted average exercise price Weighted average remaining contractual term Number of options Outstanding at January...

  • Page 105
    ...641) $ $ Net income (loss) available to Ordinary shareholders 2. Denominator: $ Denominator for basic net earnings (loss) per share Weighted average number of Ordinary shares, net of treasury stock Effect of dilutive securities: Add - stock options Denominator for diluted net earnings (loss) per...

  • Page 106
    ... revenues from external customers divided on the basis of the Company's product lines are as follows: Year ended December 31, 2007 2008 2009 U.S. dollars in thousands Search Software license Content database Advertising and collaborations Anti-Spam Bizchord - clearing house services $ 7,855 3,128...

  • Page 107
    SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. IncrediMail Ltd. By: /s/ Ofer Adler Ofer Adler Chief Executive Officer Date: March 25, 2010 76

  • Page 108
    ...Services Agreement, dated as of January 20, 2009** 4.6 Amendment No. 2 to the Google Services Agreement, dated as of July 1, 2009** 8 List of all subsidiaries. 11 Code of Ethics (4) 12.1 Certification required by Rule 13a-14(a) or Rule 15d-14(a) executed by the Chief Executive Officer of the Company...

  • Page 109
    ... Search Service Applications by End Users in accordance with Google's reasonable directions from time to time. Google may direct Customer to modify any Approved Search Service Application in order to improve user experience, in which event Customer shall make such modifications within 5 working days...

  • Page 110
    ... TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. 3. Additional URLs From the Amendment Effective Date, the following URLs shall be the WebSearch Sites and the AdSense for Search Sites: [***] 4. Additional Terms and Conditions The following clauses...

  • Page 111
    ... THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. (a) (b) 7.2 notify Google of this (in writing or by email sent to the Google Account Manager) and submit a proposed new mockup and any other relevant...

  • Page 112
    PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. EXHIBIT A [***]

  • Page 113
    PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. EXHIBIT B [***]

  • Page 114
    PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit C [***]

  • Page 115
    PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit D [***]

  • Page 116
    ... the GSA: "13.4 Should the Customer notify Google in writing (or by email) of its wish to receive Google's service known (as at 1 July 2009) as IBA (Interest Based Advertising), the Customer will ensure that at all times during the applicable Services Term, Customer has a clearly labelled and easily...

  • Page 117
    ... so pursuant to applicable law or the rules of the relevant stock exchange (the " Disclosure Requirements ") provided that: 13.5.1 13.5.2 Customer shall only disclose such parts of the Agreement as are expressly required by the Disclosure Requirements; and at least 5 business days prior to any such...

  • Page 118
    ... Order Form Effective Date: 1 July 2009 +972 3 7696106 1 1 1 1 1 +972 3 6474601 1 1 1 1 1 [email protected] 1 1 1 1 1 [email protected] 1 1 1 1 1 Initial Services Term: From the Order Form Effective Date until 30 June 2011 SEARCH SERVICES [***] annual service monthly search fee and support...

  • Page 119
    ... TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. ADSENSE SERVICES ADSENSE FOR SEARCH [***] Net AdSense for Search specifications [***] optional AdSense for Search features: [***] (check the applicable boxes) [***] Payment Information Details currency...

  • Page 120
    ...set out in Exhibits A and B of this Order Form. Special Conditions 1. 1.1 1.2 1.3 Customer Homepages and Browsers Customer shall not encourage or allow end users to change their default homepage and/or default browser search to the Search Services in any manner or in connection with any application...

  • Page 121
    ... THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. 2. 2.1 Additional Obligations Customer shall ensure that the user interface of each page on the Site (including the home page and Results Page) is (at all times) clearly different from the home page and search results page on Google.com...

  • Page 122
    ... Order Form. Further changes to the User Interface of the Sites. In the event that Customer wishes to make any material changes to the user interface for the implementation of the Services on the Sites it will: (a) (b) notify Google of this (in writing or by email sent to the Google Account Manager...

  • Page 123
    ... email) at least 90 days prior to such date. [***] such links shall link directly to such services (of the same name) as are provided from time to time by Google in the territory of the End User making the request ("Links"); Customer shall not edit, modify, append or filter, add to or alter End User...

  • Page 124
    PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit A [***]

  • Page 125
    PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit B [***]

  • Page 126
    PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit C [***]

  • Page 127
    EXHIBIT 8 List of all subsidiaries 1. 2. IncrediMail Inc., a Delaware corporation. BizChord Ltd., a company incorporated in Israel.

  • Page 128
    ... (d) 5. The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions): (a) All...

  • Page 129

  • Page 130
    ... (d) 5. The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions): (a) All...

  • Page 131
    ... CERTIFICATION OF PERIODIC FINANCIAL REPORTS UNDER 18 U.S.C 1350 In connection with the Annual Report on Form 20-F of IncrediMail Ltd., (the "Issuer"), for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby...

  • Page 132
    ...connection with the Annual Report on Form 20-F of IncrediMail Ltd., (the "Issuer") for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies that: 1. 2. The Report containing the financial statements...

  • Page 133
    ...the 2003 Israeli Share Option Plan of Incredimail Ltd., of our report dated March 25, 2010, with respect to the consolidated financial statements of IncrediMail Ltd. and its subsidiaries included in this Annual Report on Form 20-F for the year ended December 31, 2009. Tel Aviv, Israel March 25, 2010...