Commtouch Reports Eighth Consecutive Quarter of Revenue Growth; Second Quarter 2005 is Highlighted by Improvement in Company's Key Financial Indicators.MOUNTAIN VIEW, Calif. -- Commtouch(R) (Nasdaq:CTCH CTCH Common Traffic Channel ), the developer of ground breaking 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 for real time anti-spam Spam elimination. See spam filter, spambot and e-mail obfuscator. and zero-hour virus protection, today announced its second quarter and year to date results for the period ending June June: see month. 30, 2005. Revenues for the quarter were more than double those of the same quarter of last year, and grew by 19% in comparison to the prior quarter, from $740,000 for the first quarter to $880,000 during the second quarter of 2005. Deferred revenues as at June 30, 2005 were $1,753,000, compared to deferred revenues of $1,200,000 as at December December: see month. 31, 2004 and $1,478,000 as at March 31, 2005. Net loss for the quarter was $737,000 compared to $1,072,000 in the prior quarter, and $1,194,000 in the comparable quarter last year. Net loss attributable to ordinary and equivalently participating shareholders for the quarter was $1,368,000, which included non-cash amortization totaling $631,000 relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Series A Preferred Share beneficial conversion feature. Revenues for the six months ended June 30, 2005 and June 30, 2004 were $1,620,000 and $518,000, respectively. Total loss for the six months ended June 30, 2005 was $1,809,000, compared to $2,806,000 in the comparable period last year. Net loss attributable to ordinary and equivalently participating shareholders for the six months ended June 30, 2005 was $3,117,000, which included non-cash amortization totaling $1,308,000 relating to the Series A Preferred Share beneficial conversion feature. "We have shown that we have great products that are answering the market's needs," stated Gideon Gideon (gĭd`ēən), or Jerubbaal (jērŭb`āəl, –rəbā`əl) Mantel, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Commtouch. "Remarkably, we are growing the business while lowering expenses and significantly reducing the company's cash burn. The first half-year results are yet another example of the scalability How much a system can be expanded. See scalable. scalability - How well a solution to some problem will work when the size of the problem increases. For example, a central server of some kind with ten clients may perform adequately but with a thousand clients it of our business, and we look forward to the second half of the year with much anticipation and excitement as we continue to educate markets globally of the 'must have' features of our products." Cash at June 30, 2005 was approximately $3,878,000 compared to $4,334,000 as of March 31, 2005 on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis (includes $914,000 of the proceeds relating to the warrant exercise transaction of March 31, 2005). The company expects expenses during the third quarter to remain relatively unchanged. 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 14 years of experience developing messaging software, and is a global developer and provider of proprietary anti-spam and Zero-Hour(TM) virus protection solutions. Using core technologies including RPD(TM) -- 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, the Commtouch Detection Center analyzes 1.5 billion email messages per month to identify new spam E-mail that is not requested. Also known as "unsolicited commercial e-mail" (UCE), "unsolicited bulk e-mail" (UBE), "gray mail" and just plain "junk mail," the term is both a noun (the e-mail message) and a verb (to send it). and malware (MALicious softWARE) Software designed to destroy, aggravate and otherwise make life unhappy. See crimeware, virus, worm, logic bomb, macro virus and Trojan. outbreaks within minutes of their introduction into 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 . Integrated by approximately 28 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 partners, Commtouch technology protects thousands of organizations, with 35 million users in 100 countries. 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 has a subsidiary in Mountain View, CA. For more information, see: www.commtouch.com. 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 business conditions and growth or deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in the Internet market, commerce and the general economy, both domestic as well as international; fewer than expected new-partner relationships; fewer than expected license agreements resulting from Commtouch's exclusive rights to market DCC (1) (Direct Cable Connection) A Windows 95/98 feature that allows PCs to be cabled together for data transfer. DCC actually sets up a network connection between the two machines. ; 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; 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, such as the Zero Hour solution, 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 See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . 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.
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(USD in thousands)
June 30, December 31,
2005 2004(a)
-------- ------------
Assets
Current Assets:
Cash and cash equivalents $3,878 $4,149
Trade receivables, net 401 97(a)
Prepaid expenses 44 89
Other accounts receivable 27 22
------ ------
Total current assets 4,350 4,357
------ ------
Long-term lease deposits 40 53
Equity investment in Imatrix 171 248
Severance pay fund 481 484
Property and equipment, net 390 337
------ ------
$5,432 $5,479
------ ------
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable 256 245
Employees and payroll accruals 531 462
Accrued expenses and other liabilities 272 415
Deferred revenue 1,753 1,200(a)
------ ------
Total current liabilities 2,812 2,322
------ ------
Accrued severance pay 559 564
------ ------
Shareholders' equity 2,061 2,593
------ ------
$5,432 $5,479
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(a) Reclassed for current period presentation
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(USD in thousands, except per share amounts)
Three Months Six Months
ended ended
---------------- ----------------
June 30 June 30 June 30 June 30
---------------- ----------------
2005 2004 2005 2004
------- ------- ------- -------
Revenues $ 880 $ 358 $ 1,620 $ 518
Cost of revenues 145 161 339 305
------- ------- ------- -------
Gross profit (loss) 735 197 1,281 213
------- ------- ------- -------
Operating expenses:
Research and development, net 363 269 731 632
Sales and marketing 627 1,073 1,305 1,914
General and administrative 504 536 1,050 890
Amortization of stock-based employee
deferred compensation --- --- --- 30
------- ------- ------- -------
Total operating expenses 1,494 1,878 3,086 3,466
------- ------- ------- -------
Operating loss (759) (1,681) (1,805) (3,253)
Interest and other expense, net 63 489 56 444
Equity in (loss) earnings of
affiliate (41) (2) (60) 3
------- ------- ------- -------
Net loss (737) (1,194) (1,809) (2,806)
Amortization of beneficial conversion
feature relating to convertible
Series A Preferred Shares (631) - (1,308) -
------- ------- ------- -------
Net loss attributable to ordinary and
equivalently participating
shareholders $(1,368)$(1,194)$(3,117)$(2,806)
======= ======= ======= =======
Basic and diluted net loss per share $ (0.03)$ (0.03)$ (0.06)$ (0.08)
======= ======= ======= =======
Weighted average number of shares used
in computing basic and diluted net
loss per share 53,565 37,473 51,905 37,339
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