Commtouch Announces Receipt of Nasdaq Continued Listing Notification.

MOUNTAIN VIEW, Calif. -- Commtouch(R) (Nasdaq:CTCH), the innovator of industrial-strength anti-spam solutions featuring Recurrent Pattern Detection (RPD)(TM) technology, today announced that following a hearing on June 17, 2004 in front of the Nasdaq Listing Qualifications Panel (the "Panel"), the Panel determined that the company's ordinary shares will continue to be listed on The Nasdaq SmallCap Market pursuant to an exception from the requirement that the company maintain at least $2.5 million in shareholders equity. The Panel made the continuing availability of the exception conditioned on the following specific criteria, as well as continuing satisfaction of all other listing requirements of the Small Cap Market:

a. On or before July 15, 2004, the company must make a public filing with the Securities and Exchange Commission and Nasdaq evidencing compliance with the $2.5 million shareholders' equity requirement.

b. On or before July 31, 2004, October 31, 2004 and January 31, 2005, the company is required to submit to Nasdaq evidence of continued compliance with the $2.5 million shareholders' equity requirement for the quarters ending June 30, September 30 and December 31, 2004 respectively.

In the coming days, it is the intention of the company to close the financing transaction announced on May 18, 2004, which would allow it to satisfy the above criteria in the near term. The financing transaction is subject to certain conditions to closing, including with respect to favorable resolution of the Company's delisting process, as detailed in the share purchase agreement of May 18, 2004 (filed with the SEC on May 19, 2004 on Form 6K -- which may be accessed at www.sec.gov).

There can be no assurance that the investors under the financing transaction will agree with the company that all conditions to closing have been met and, therefore, there can be no assurance of the company's ability to meet the Nasdaq's condition "a" to the exception.

The company may seek additional equity in the Third Quarter in order to continue to satisfy the Nasdaq minimum shareholder requirement.

As from the open of business on Wednesday, June 30, 2004 and for the duration of the Nasdaq exception, Commtouch's Nasdaq symbol will be changed from CTCH to CTCHC.

About Commtouch

Commtouch Software Ltd. is a global developer and provider of proprietary anti-spam solutions featuring Recurrent Pattern Detection (RPD)(TM) technology. Its mission is to protect and preserve the integrity of the world's most important communications tool -- email. The company's core technologies reflect its 13 years of experience as a leading vendor of email software applications and provider of global messaging services. Commtouch's patent-pending technologies are employed in solutions that are sold through channels and resellers. In addition, Commtouch anti-spam technologies are incorporated in software applications of security and messaging OEMs. Commtouch is headquartered in Netanya, Israel and its subsidiary, Commtouch Inc., is based in Mountain View, CA. The company was founded in 1991 and has been publicly traded since 1999 (Nasdaq:CTCH). To learn more about Commtouch visit www.commtouch.com.

Recurrent Pattern Detection and RPD are trademarks and Commtouch is a registered trademark of Commtouch Software Ltd.

This press release contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include statements relating to Commtouch's intent to meet the Nasdaq Listing Qualifications Panel exception to the listing requirements under relevant Nasdaq Marketplace Rules, Commtouch's intent to close the financing under securities purchase agreement of May 18, 2004 (the "Current PIPE Financing") and the company's plans and ability to achieve sustained compliance with Nasdaq listing standards. These statements are based on information available to us at the time of this release and we assume no obligation to update any of them. The statements in this release are not guarantees of future performance and actual results could differ materially from our current expectations as a result of numerous factors, including our ability to meet all closing conditions for the Current PIPE Financing, our ability to raise additional equity in the Third Quarter to meet the minimum shareholders' equity requirement for continued listing on the Small Cap Market, business conditions and growth or deterioration in the Internet market, commerce and the general economy both domestic as well as international; fewer than expected new-partner relationships; competitive factors including pricing pressures; technological developments, and products offered by competitors; availability of qualified staff for expansion; and technological difficulties and resource constraints encountered in developing new products as well as those risks described in the company's Annual Reports on Form 20-F and reports on Form 6-K, which are available through www.sec.gov.