Incredimail 2013 Annual Report Download - page 22

Due to rapid changes in technology and the inconsistent interpretations of privacy and data protection laws, we may be required to
materially change the way we do business. For example, we may be required to implement physical, administrative and technological security
measures different from those we have now, such as different data access controls or encryption technology. In addition, we use cloud based
computing, which is not without substantial risk, particularly at a time when businesses of almost every kind are finding themselves subject to an
ever expanding range of state and federal data security and privacy laws, document retention requirements, and other standards of accountability.
Compliance with such existing and proposed laws and regulations can be costly and can delay, or impede the development of new products,
result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to inquires or
investigations, claims or other remedies, including fines or demands that we modify or cease existing business practices.
For more information regarding government regulations we are subject to, see "Item 4.B Business Overview —
Government
Regulation" for additional discussion of applicable regulations affecting our business.
Risks Related to Our Operations in Israel
Political, economic and military instability in the Middle East may impede our ability to operate and harm our financial results.
Our principal executive offices are located in Israel. Accordingly, political, economic and military conditions in the Middle East may
affect our business directly. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and
its Arab neighbors, Hamas (an Islamist militia and political group in the Gaza Strip) and Hezbollah (an Islamist militia and political group in
Lebanon). Recent political uprisings, social unrest and violence in various countries in the Middle East and North Africa, including Israel’
s
neighbors Egypt and Syria, are affecting the political stability of those countries. This instability may lead to deterioration of the political
relationships that exist between Israel and these countries and have raised concerns regarding security in the region and the potential for armed
conflict. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a
strong influence among the Syrian government, Hamas and Hezbollah. These situations may potentially escalate in the future to more violent
events which may affect Israel and us. These situations, including conflicts which involved missile strikes against civilian targets in various parts
of Israel, have in the past negatively affected business conditions in Israel. Any hostilities involving Israel or the interruption or curtailment of
trade between Israel and its present trading partners could have a material adverse effect on our business, operating results and financial
condition. Although such hostilities did not in the past have a material adverse impact on our business, we cannot guarantee that hostilities will
not be renewed and have such an effect in the future. Ongoing and revived hostilities and the attempts to resolve the conflict between Israel and
its Arab neighbors often results in political instability that affects the Israeli capital markets and can cause volatility in interest rates, exchange
rates and stock market quotes. The political and security situation in Israel may result in parties with whom we have contracts claiming that they
are not obligated to perform their commitments under those agreements pursuant to force majeure provisions. These or other Israeli political or
economic factors could harm our operations and product development and cause our sales to decrease. Any hostilities involving Israel or the
interruption or curtailment of trade between Israel and its present trading partners could adversely affect our operations and could make it more
difficult for us to raise capital. Furthermore, several countries, principally those in the Middle East, still restrict business with Israel and Israeli
companies and, although the impact of these restrictions is not as important for a company such as ours that sells its products through the
Internet, it may nevertheless have an adverse effect on our results of operations. Since many of our facilities are located in Israel, we could
experience serious disruptions if acts associated with this conflict result in any serious damage to our facilities. Our business interruption
insurance may not adequately compensate us for losses that may occur and any losses or damages incurred by us could have a material adverse
effect on our business. Any future armed conflicts or political instability in the region would likely negatively affect business conditions and
harm our results of operations.
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