RETALIX LTD.

Antitrust scrutiny of e-marketplace initiatives may adversely affect our business.
The establishment and operation of e-marketplace initiatives may raise issues under various countries’ antitrust laws. To the extent that antitrust
regulators take adverse action with respect to business-to-business e-commerce exchanges or establish rules or regulations governing these exchanges, or
that there is a perception that regulators may do any of the foregoing, the establishment and growth of our e-marketplace initiatives may be delayed, which
may adversely affect our business.
Because we operate in international markets, we are subject to additional risks.
We currently sell our software products and ASP services in a number of countries and we intend to enter additional geographic markets. Our business
is subject to risks that often characterize international markets, including:
potentially weak protection of intellectual property rights;
economic and political instability;
import or export licensing requirements;
trade restrictions;
difficulties in collecting accounts receivable;
longer payment cycles;
unexpected changes in regulatory requirements and tariffs;
seasonal reductions in business activities in some parts of the world, such as during the summer months in Europe;
fluctuations in exchange rates; and
potentially adverse tax consequences.
Our business and operating results could be harmed if we fail to protect and enforce our intellectual property rights.
The laws of some countries in which our products are or may be developed, manufactured or sold may not protect our products or intellectual property
rights, increasing the possibility of piracy of our technology and products. We currently have no patents or patent applications pending. We rely on a
combination of trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights.
Our competitors could also independently develop technologies that are substantially equivalent or superior to our technology.
It may be necessary to litigate to enforce our copyrights and other intellectual property rights, to protect our trade secrets or to determine the validity of
and scope of the proprietary rights of others. Such litigation can be time consuming, distracting to management, expensive and difficult to predict. Our
failure to protect or enforce our intellectual property could have an adverse effect on our business and results of operation.
Our technology may infringe on the intellectual property rights of third parties and we may lose our rights to it, which would harm our
business.
We may be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in
different industry segments overlap. It is possible that we will inadvertently violate the intellectual property rights of other parties and that other parties will
assert infringement claims against us. If we violate the intellectual property rights of other parties, we may be required to modify our products or
intellectual property or obtain a license to permit their continued use. Any future litigation to defend ourselves against allegations that we have infringed
the rights of others could result in substantial cost to us, even if we ultimately prevail, and a determination against us in any such litigation could subject us
to significant liabilities to other parties and could prevent us from manufacturing, selling or using our products. If we lose any of our rights to our
proprietary technology, we may not be able to continue our business.
We have not yet completed the evaluation of our internal control over financial reporting in compliance with Section 404 of the Sarbanes-
Oxley Act.
We are required to comply with internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act by no later then the
end of our 2006 fiscal year. We are in the process of evaluating whether our existing internal control over financial reporting systems are compliant with
Section 404. As a result of this evaluation, we may be required to implement new internal control procedures over financial reporting. We estimate that this
process may take an additional several months to complete. We may experience higher than anticipated operating expenses and fees in this context and we
may need to hire additional qualified personnel in order to achieve compliance with Section 404. If we are unable to implement these changes effectively
or efficiently, it could harm our operations, financial reporting or financial results and could result in our being unable to obtain an unqualified report on
internal controls from our independent auditors.
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