COMMTOUCH SOFTWR LTD (CTCH)

[midastouch017]

Commtouch Provides Fourth Quarter and Year End 2005 Results

Tuesday February 21, 4:00 am ET

MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--Feb. 21, 2006--Commtouch® (NASDAQ:CTCH - News), the developer of ground breaking RPD(TM) technology for real time anti-spam and Zero-Hour(TM) virus protection, today announced its fourth quarter and 2005 year end results.

Revenues for the fourth quarter 2005 were more than double those of the fourth quarter of 2004, and grew by 20% in comparison to the third quarter 2005, from $1,048,000 for the third quarter to $1,257,000 during the fourth quarter of 2005.

Deferred revenues (long term and short term) as at December 31, 2005 were $1,919,000, compared to deferred revenues of $1,200,000 as at December 31, 2004 and $1,834,000 as at September 30, 2005.

Net loss for the quarter was $469,000 compared to $412,000 in the third quarter 2005, and $2,554,000 in the fourth quarter 2004.

Revenues for the year ended December 31, 2005 grew by approximately 158% over those of fiscal year 2004; $3,925,000 for 2005 compared to $1,523,000 in 2004. Net loss for the year ended December 31, 2005 was $2,690,000 compared to $7,193,000 in 2004. Net loss attributable to ordinary and equivalently participating shareholders for the year was $4,441,000, which included non-cash amortization totaling $1,751,000 relating to the Series A Preferred Share beneficial conversion feature.

Cash and marketable securities at December 31, 2005 was approximately $6,486,000 compared to $4,149,000 as of December 31, 2004.

"2005 was a very positive year for the company from a technological, marketing and sales standpoint," stated Gideon Mantel, CEO of Commtouch. "We were very encouraged to see that the company achieved positive cash flow from operations during the fourth quarter."

Business Updates

The company:

1. Achieved its tenth consecutive quarter of revenue growth in the
fourth quarter of 2005, and sees this trend continuing in the
first quarter of 2006.

2. Expects operational expenses to drop in the first quarter of
2006 compared to the fourth quarter of 2005.

3. Has been experiencing a high rate of renewal business,
especially with its OEM partners, which is a key element to
continued growth for the company.

4. Sees strong demand continuing for messaging security products,
with global interest in the company's products remaining high.
The company will continue to sign new OEM partners during 2006.

About Commtouch

Commtouch Software Ltd. (NASDAQ:CTCH - News) is dedicated to protecting and preserving the integrity of the world's most important communications tool -- email. Commtouch has 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, 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 over 30 OEM partners, Commtouch technology protects thousands of organizations, with over 35 million users in 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.

http://biz.yahoo.com/bw/060221/20060221005105.html?.v=1

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