Incredimail 2012 Annual Report Download - page 26

Our capital expenditures during 2010 consisted primarily of leasehold improvements and furnishings, as well as investments in
computer hardware and software, in Israel. In 2011, capital expenditures consisted of $31.5 million for the acquisition of Smilebox and $1.2
million for investment in computer hardware and software, leasehold improvements and furnishings. In 2012, capital expenditures consisted of
$44.2 million in connection with the acquisition of SweetIM Ltd., and $1.5 million for investment in computer hardware and software, leasehold
improvements and furnishings.
In 2013, we expect to continue our growth strategy for acquiring products and businesses', in addition to organic capital investments.
Our organic investments are expected to consist primarily of acquiring computer hardware, software, peripheral equipment and installation, all
which are expected to be financed by our existing resources. To the extent we acquire new products and businesses, these acquisitions may be
financed by any of, or a combination of, cash generated from operations, -or issuances of securities or debt.
Recent Developments
On November 7, 2012 we signed a definitive agreement to acquire SweetIM Ltd., a Belize company that wholly owns SweetIM
Technologies Ltd., an Israeli consumer internet company, or SweetIM. SweetIM
produces a variety of free, fun, easy to use and safe applications
and downloadable content for everyday use under the "SweetPacks" trade name.
SweetIM produces a selection of innovative products designed to enhance the user’s
digital experience, having reached already over
150 million users and providing them with a creative outlet for online expression. SweetIM started with the 2005 launch of a single product, the
SweetIM application, and subsequently broadened its offering of emoticons and animations for online chat and communications. Utilizing
SweetIM’
s simplicity and ease of use, SweetIM now offers an impressive collection of products, which can be applied to other daily online
tasks, from synchronizing multiple online accounts and a highly accurate translation tool, to maximizing PC performance and a wide range of
free premium games.
SweetIM earns revenues from
generating searches and sharing in the revenues with the provider of the search engine, as well as from
traditional digital advertising. Under the terms of the agreement, we paid $10.0 million in cash and 1.99 million of our ordinary shares
at closing,
which occurred on November 30, 2012. A second payment of up to $7.5 million in cash is due 12 months after closing, and a third payment of
up to $7.5 million in cash is due 18 months after closing, subject to certain achievements being met.
We have moved SweetIM’s operations, with its approximayely 50 employees, to the Company’s headquarters.
On January 31, 2013, we signed an amendment to our agreement with Google extending the term of the agreement to May 31 2013, to
coincide with the expiration date of the agreement between SweetIM and Google. On April 23, 2013, we entered into a new agreement with
Google, effective from May 1, 2013 to April 30, 2015. The new agreement combines the activities of Perion and SweetIM into one agreement
and replaces both of the existing agreements with Google.
B. BUSINESS OVERVIEW
Overview
We are a global consumer internet company that develops applications to make the online experience of our users simple, safe and
enjoyable. Perion’
s three main consumer brands are: IncrediMail, Smilebox and SweetIM. IncrediMail is a unified messaging application
enabling consumers to manage multiple email accounts and Facebook messages in one place with an easy-to-
use interface and extensive
personalization features, and is available in over 100 countries in 8 languages; Smilebox is a leading photo sharing and social expression product
and service that quickly turn life's moments into digital keepsakes for sharing and connecting with friends and family, in a fun and personal way.
SweetIM is an instant messaging application that enables consumers to personalize their everyday communications with free, fun and easy to use
content.
All of our products were initially offered for use on desktop computers. As a result of the increased use of mobile platforms over the
last couple of years, we have begun to develop and market some of our products on mobile platforms as well. This effort saw its first major
results with the introdution of Smilebox for the iPhone, which has already been downloaded over 1.2 million times. In March 2013, we
introduced IncrediMail for the iPad, which registered, in its first month, over 200,000 downloads. We continue to develop additional versions of
these products for additional mobile platforms.
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