Commtouch Announces Receipt of Nasdaq Deficiency Letter.

MOUNTAIN VIEW, Calif. -- Commtouch(R) (Nasdaq:CTCH), the leader in real time anti-spam and Zero-Hour(TM) virus protection technology, today announced its receipt of a Nasdaq Staff Deficiency Letter on July 17, 2006, indicating that Commtouch fails to comply with the minimum bid price requirement for continued listing, as set forth in Nasdaq's Marketplace Rule 4320(e)(2)(E)(i), and that the company will be provided 180 calendar days, or until January 16, 2007, to regain compliance.

To regain compliance, the company's ordinary shares must close at $1.00 or higher for a minimum of 10 consecutive business days within the stated 180 period.

If improvement in the company's business results will not be a sufficient driving force to overcome the current bid price deficiency, the company will alternatively consider a reverse split as a means for regaining compliance.

If the company has not been deemed in compliance prior to the expiration of the 180 day compliance period, it shall be afforded an additional 180 day compliance period, or until approximately July 16, 2007, provided, that on the 180th day of the first compliance period, the company demonstrates that it meets the criteria for initial inclusion set forth in Rule 4320(e) (except for the bid price requirement).

If Commtouch does not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq Staff will notify the company that its ordinary shares will be delisted from The Nasdaq Capital Market. Commtouch would then be entitled to appeal the Staff's determination to a Nasdaq Listing Qualifications Panel and request a hearing.

About Commtouch

Commtouch Software Ltd. (NASDAQ:CTCH) is dedicated to protecting and preserving the integrity of the world's most important communications tool -- email. Commtouch has over 15 years of experience developing messaging software and is a global developer and provider of proprietary anti-spam and Zero-Hour virus protection solutions. Using core technologies including RPD (Recurrent Pattern Detection(TM)), the Commtouch Detection Center analyzes billions of email messages per month to identify new spam and malware outbreaks within minutes of their introduction into the Internet. Integrated by more than 40 OEM partners, Commtouch technology protects thousands of organizations, with over 35 million users in over 100 countries. Commtouch is headquartered in Netanya, Israel, and has a subsidiary in Mountain View, CA. For more information, see: www.commtouch.com, including the Commtouch online lab detailing spam statistics and charts.

This press release contains forward-looking statements, including projections about our business, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements in the future tense, and statements including words such as "expect," "plan," "estimate," "anticipate," or "believe" are forward-looking statements. These statements are based on information available to us at the time of the release; 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 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; the ability of our OEM partners to successfully penetrate markets with products integrated with Commtouch technology; a slower than expected acceptance rate for real time AV solutions in general and the Commtouch Zero-Hour(TM) Virus Protection product in particular; availability of qualified staff for expansion; technological difficulties and resource constraints encountered in developing new products, such as the Zero-Hour solution; and the failure of Commtouch to meet The NASDAQ Capital Market's listing standards in the future, as well as those risks described in the text of this press release and the company's Annual Reports on Form 20-F and reports on Form 6-K, which are available through www.sec.gov.

Recurrent Pattern Detection, RPD and Zero-Hour are trademarks, and Commtouch is a registered trademark, of Commtouch Software Ltd. U.S. Patent No. 6,330,590 is owned by Commtouch.