Commtouch Doubles Revenues During Second Quarter 2004; The Company Reports Second Quarter Results and Issues Business Updates.MOUNTAIN VIEW, Calif. -- Commtouch(R) (Nasdaq:CTCHC), the innovator of anti-spam Spam elimination. See spam filter, spambot and e-mail obfuscator. solutions featuring Recurrent recurrent /re·cur·rent/ (re-kur´ent) [L. recurrens returning] 1. running back, or toward the source. 2. returning after remissions. re·cur·rent adj. 1. Pattern Detection (RPD RPD Rapid RPD Radiation Protection Dosimetry RPD Rapid Product Development RPD Rochester Police Department RPD Recurrent Pattern Detection (Commtouch anti-spam engine) RPD Relative Percent Difference RPD Removable Partial Denture )(TM) technology, today announced its second quarter results for 2004. Revenues for the quarter were $358 thousand compared to $160 thousand for the prior quarter (first quarter 2004) and $70 thousand in the comparable quarter last year. Deferred revenues as at June June: see month. 30, 2004 were $923 thousand, as compared to deferred revenues of $673 thousand as at March 31, 2004. Total loss for the quarter was $1,194 thousand compared to $1,612 thousand in the prior quarter and $1,037 thousand in the comparable quarter last year. This quarter, the company had non-cash financial income of approximately $613 thousand relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the November November: see month. 2003 convertible loan and related warrants and fair value adjustment thereof, out of which $583 thousand was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the change of terms of the November 2003 agreement pursuant to the terms of the May 2004 financing round. Revenues for the six months ended June 30, 2004 and June 30, 2003 were $518 thousand and $176 thousand, respectively. Total loss for the six months ended June 30, 2004 was $2,806 thousand, compared to $2,181 thousand in the comparable period last year. Cash at June 30, 2004 was approximately $4,143 thousand compared to $4,584 thousand as of March 31, 2004. Immediately following the close of the second quarter, we received $2,650 thousand in relation to the May 2004 private placement, representing the balance of the $3,900 thousand investment, bringing the total cash in the company to approximately $6.8 million. BUSINESS UPDATES - CURRENT TRENDS/EVENTS AND PROSPECTIVE FUTURE EVENTS: The company reported the following current trends/events: 1. Revenues of the company continued to grow (over 100% growth in the second quarter as compared to the first quarter of 2004), as well as deferred revenues, which also grew during the second quarter (by 37% as compared to those of the first quarter). 2. The company continued to allocate To reserve a resource such as memory or disk. See memory allocation. additional resources to sales and marketing efforts, which included the securing of industry analyst relationships, trade show participation, advertising and an increase in international sales and marketing personnel. This investment of resources has led to an increase in global media coverage of the company, with the company oftentimes of·ten·times also oft·times adv. Frequently; repeatedly. Adv. 1. oftentimes - many times at short intervals; "we often met over a cup of coffee" frequently, oft, often, ofttimes being referenced as an authority on spamming See spam. spamming - spam behavior and statistics. 3. The number of vendors soliciting the company for assistance in integrating the Commtouch anti-spam engine into their product offerings is rising. RPD is a very compatible technology for vendors seeking to bundle To sell hardware and software as a combined product or to combine several software packages for sale as a single unit. Contrast with unbundle. See bundled software and bundling. solutions (i.e. with anti-virus See antivirus program. solutions), and the company perceives this increased demand for it as being fueled by an increased appreciation of the advantages of RPD over other "less mature" anti-spam solutions. 4. Consolidation of providers in the anti-spam market has begun - a trend that is expected to intensify in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: in the next 12 - 18 months. Based on its read of market growth, the unique set of product offerings the company has developed and the growing awareness worldwide of the inherent advantages of Commtouch's anti-spam solutions, the company envisions the following: 1. The company will continue to see growth in new business, mainly due to: --an increase in international demand for the company's anti-spam solutions; --the release of a new version of the Enterprise Gateway solution, which will support all email platforms. This product will allow the company to approach larger enterprises, especially in the international arena; --the signing of additional distribution agreements during the third quarter; --continued demand for the Commtouch anti-spam engine on an OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and basis; and --penetration of our ISP (1) See in-system programmable. (2) (Internet Service Provider) An organization that provides access to the Internet. Connection to the user is provided via dial-up, ISDN, cable, DSL and T1/T3 lines. product in the managed services An umbrella term for third-party monitoring and maintaining of computers, networks and software. The actual equipment may be inhouse or at the third-party's facilities, but the "managed" implies an ongoing effort; for example, making sure the equipment is running at a certain quality market. 2. The company anticipates substantial growth in new business beginning with the fourth quarter of 2004 and into 2005, due to market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" of the new Enterprise Gateway version and implementation of new distribution agreements. 3. Technology and patents will be key in determining leadership in the anti-spam market. In this regard, the company not only continues to push forward with its current formal patent application and provisional Temporary; not permanent. Tentative, contingent, preliminary. A provisional civil service appointment is a temporary position that fills a vacancy until a test can be properly administered and statutory requirements can be fulfilled to make a permanent appointment. patent application, but intends to further expand its patenting activities. About Commtouch Commtouch Software Ltd. is a global developer and provider of proprietary anti-spam solutions featuring Recurrent Pattern Detection (RPD) 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 Netanya (nətän`yə), city (1994 pop. 144,900), W central Israel, on the Mediterranean Sea; also spelled Nathania. It is a beach resort and the trade center for agricultural settlements in the region. , Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. 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:CTCHC - News). 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , 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 future tense n. A verb tense expressing future time. Noun 1. future tense - a verb tense that expresses actions or states in the future future , 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 the non-occurrence of any of the company's prospective future events, the threat of or actual delisting Delisting When the stock of a company is removed from a stock exchange. Notes: Reasons for delisting include violating regulations and/or failure to meet financial specifications set out by the stock exchange. of Commtouch shares by The Nasdaq SmallCap Market, business conditions and growth or deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the 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 CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. 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 See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. .
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(USD in thousands)
June 30, December 31,
2004 2003(a)
--------- ------------
Assets
Current Assets:
Cash and cash equivalents $4,143 $4,125
Trade receivables 113 92
Prepaid expenses 137 156
Receivables on account of shares 2,650 955
Other accounts receivable 25 15
--------- ------------
Total current assets 7,068 5,343
--------- ------------
Long-term lease deposits 5 5
Equity investment in Imatrix 291 339
Deferred charges 295 353
Severance pay fund 391 391
Property and equipment, net 401 452
--------- ------------
$8,451 $6,883
--------- ------------
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable 416 479
Employees and payroll accruals 523 418
Accrued expenses and other liabilities 554 376
Deferred revenue 923 222
--------- ------------
Total current liabilities 2,416 1,495
--------- ------------
Convertible loan 2,736 2,134
Shares to be registered upon exercise of
warrants 264 372
Accrued severance pay 427 425
--------- ------------
3,427 2,931
--------- ------------
Shareholders' equity 2,608 2,457
--------- ------------
$8,890 $6,883
========= ============
(a) - Reclassified to conform to current period presentation.
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(USD in thousands, except per share amounts)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30 June 30 June 30 June 30
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues:
Email services $358 $70 $518 $176
Cost of revenues:
Email services 161 143 305 317
--------- --------- --------- ---------
Gross profit (loss) 197 (73) 213 (141)
--------- --------- --------- ---------
Operating expenses:
Research and development, net 269 362 632 708
Sales and marketing 1,073 340 1,914 528
General and administrative 536 332 890 774
Amortization of stock-based
employee deferred
compensation -- 63 30 126
--------- --------- --------- ---------
Total operating expenses 1,878 1,097 3,466 2,136
--------- --------- --------- ---------
Operating loss (1,681) (1,170) (3,253) (2,277)
Interest and other income
(expense), net 489 (105) 444 (142)
Equity in Income of Imatrix (2) 238 3 238
--------- --------- --------- ---------
Net loss $(1,194) $(1,037) $(2,806) $(2,181)
========= ========= ========= =========
Basic and diluted net loss per
share $(0.03) $(0.05) $(0.07) $(0.10)
========= ========= ========= =========
Weighted average number of
shares used in computing
basic and diluted net loss
per share 37,473 22,241 37,339 22,240
========= ========= ========= =========
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