Incredimail 2013 Annual Report Download - page 24

The tax benefits available to us require us to meet several conditions and may be terminated or reduced in the future, which would
increase our costs and taxes.
We have benefited or currently benefit from a variety of government programs and tax benefits that generally carry conditions that we
must meet in order to be eligible to obtain any benefit. Our tax expenses and the resulting effective tax rate reflected in our financial statements
may increase over time as a result of changes in corporate income tax rates, other changes in the tax laws of the countries in which we operate,
non-deductible expenses, loss and timing differences, or changes in the mix of countries, where we generate profit.
If we fail to meet the conditions upon which certain favorable tax treatment is based, we would not be able to claim future tax benefits
and could be required to refund tax benefits already received. Any of the following could have a material effect on our overall effective tax rate:
Additional details are provided in "Item 5 –
Operating and Financial Review and Products" under the caption "Taxes on income", in
"Item 10 –
Additional Information" under the caption "Israeli taxation, foreign exchange regulation and investment programs" and in note 10 to
our consolidated financial statements.
If we are characterized as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences.
Non-
U.S. corporations generally may be characterized as a passive foreign investment company ("PFIC") for any taxable year, if, after
applying certain look through rules, either (1) 75% or more of such company’
s gross income is passive income, or (2) at least 50% of the average
value of all such company’s assets (determined on an average quarterly basis) are held for the production of, or produce, passive income.
If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realized on the
sale of our ordinary shares taxed at ordinary income rates, rather than capital gain rates. Similar rules apply to distributions that are “
excess
distributions.”
In addition, both gains upon disposition and amounts received as excess distributions could be subject to an additional interest
charge. A determination that we are a PFIC could also have an adverse effect on the price and marketability of our ordinary shares.
We believe that in 2013 we were not a PFIC. Whether we are a PFIC is based upon such factual matters as the valuation of our assets.
In calculating the value of our assets, we value our total assets, in part, based on our total market capitalization. We believe this valuation
approach is reasonable. There is no assurance that the IRS will not challenge our valuations. If the IRS were to successfully challenge such
valuations, we may potentially be classified as a PFIC for the 2013 taxable year or prior taxable years. Furthermore, there can be no assurance
that we will not become a PFIC in the future. See a discussion of our PFIC status in Item 10.E under “
U.S. Federal Income Tax Considerations
–
Passive Foreign Investment Company Considerations.”
Risks Related to our Ordinary Shares
We do not intend to pay cash dividends.
Although we have paid cash dividends in the past, our current policy is to retain future earnings, if any, for funding growth. If we do not
pay dividends, you will generate a return on your investment only if our stock price appreciates between your date of purchase and your date of
sale of our shares.
See "Item 8.A Consolidated Statements and Other Financial Information —
Policy on Dividend Distribution" for additional information
regarding the payment of dividends.
Several shareholders may be able to control us.
As a result of the ClientConnect Acquisition, several shareholders of Conduit became significant shareholders of Perion, including three
shareholders that each beneficially own approximately 14% of our outstanding shares. See Item 7.A for more information. To our knowledge,
these shareholders are not party to a voting agreement with respect to our shares. However, should they decide to act together, they may have the
power to control the outcome of matters submitted for the vote of shareholders. In addition, such share ownership may make certain transactions
more difficult and result in delaying or preventing a change in control of us unless approved by them. Each of these three shareholders has
signed a standstill agreement with us providing that until the earlier of (i) the last business day preceding our 2015 annual shareholder meeting or
(ii) December 30, 2015, such shareholder will not vote in favor of any proposal to change the size or structure of our board of directors or to
shorten or terminate the term of service of any member of our board of directors, unless such proposal is recommended by our board of
directors. The standstill agreements will expire if any person (other than a Conduit shareholder as of September 16, 2013 or a person who is
subject to similar standstill provisions) becomes the beneficial owner of 24.9% or more of our outstanding shares or if there occurs a change in
our board of directors of the type described in the standstill agreements despite the compliance of the parties to the standstill agreements with the
provisions thereof.
• we may be unable to meet the requirements for continuing to qualify for some programs;
•
these programs and tax benefits may be unavailable at their current levels; or
•
we may be required to refund previously recognized tax benefits if we are found to be in violation of the stipulated conditions.
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