FORM 6-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 OF
THE SECURITES EXCHANGE ACT OF 1934
For the month of July 2000
(containing quarterly information for the quarter ended March 31, 2000)
Commtouch Software Ltd.
(Translation of registrant's name into English)
6 Hazoran Street
Poleg Industrial Park, P.O. Box 8511
Netanya 42504, Israel
011-972-9-863-6888
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing
the information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes No X
----- -----
<PAGE>
COMMTOUCH SOFTWARE LTD.
FORM 6-K
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
December 31, 1999 (Audited) and March 31, 2000 (Unaudited)
Condensed Consolidated Statements of Operations for the Three
months ended March 31, 2000 and 1999 (Unaudited)
Condensed Consolidated Statements of Cash Flows for the Three
months ended March 31, 2000 and 1999 (Unaudited)
Note to Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 3. Information Incorporated by Reference
Item 4. Exhibit
Exhibit Description of Document
------- -----------------------
1 April 18, 2000 Press Release: "Commtouch Reports
91% Growth in Revenues for Q1 2000"
Signatures
Exhibit Index
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
March 31, December 31,
2000 1999
--------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 58,944 $ 65,996
Marketable securities 14,784 18,050
Trade receivables 3,779 2,378
Prepaid marketing expenses 2,567 4,508
Prepaid expenses and other accounts receivable 3,017 1,648
--------- ---------
Total current assets 83,091 92,580
Other assets 1,738 1,608
Long-term Investment 3,000 --
Property and Equipment, net 8,146 6,148
--------- ---------
$ 95,975 $ 100,336
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of bank loans and capital leases 92 120
Accounts payable 2,640 1,510
Employees and payroll accruals 1,293 1,032
Other liabilities and accrued expenses 2,697 1,865
--------- ---------
Total current liabilities 6,722 4,527
--------- ---------
Long-term Portion Capital Leases 40 44
Accrued Severance Pay 656 453
--------- ---------
696 497
--------- ---------
Shareholders' Equity
Ordinary shares 218 213
Additional paid-in capital 135,501 133,403
Deferred compensation (5,016) (5,779)
Notes receivable from shareholders (2,126) (1,060)
Unrealized holding gains (losses) (32) 63
Accumulated deficit (39,988) (31,528)
--------- ---------
Total shareholders' equity 88,557 95,312
--------- ---------
$ 95,975 $ 100,336
========= =========
<FN>
The accompanying note is an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
-------- --------
(unaudited) (unaudited)
<S> <C> <C>
Revenues ........................................... $ 4,272 $ 346
Cost of revenue .................................... 2,121 435
-------- --------
Gross profit(loss) ................................. 2,151 (89)
-------- --------
Operating expenses:
Research and development, net .................... 1,993 340
Sales and marketing .............................. 4,746 608
General and administrative ....................... 2,106 617
Amortization of the prepaid marketing expenses 1,941 --
Amortization of deferred compensation ............ 763 386
-------- --------
Total operating expenses ................. 11,549 1,951
-------- --------
Operating loss ..................................... (9,398) (2,040)
Interest and other income (expense), net ........... 938 (271)
-------- --------
Net loss ........................................... $ (8,460) $ (2,311)
======== ========
Basic and diluted net loss per share ............... $ (0.56) $ (1.54)
======== ========
Weighted average number of shares used in
computing basic and diluted net loss per
share ............................................ 15,119 1,498
======== ========
<FN>
The accompanying note is an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
COMMTOUCH SOFTWARE LTD.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Three Months
ended
March 31,
-------------------------
2000 1999
-------- --------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ....................................................... $ (8,460) $ (2,311)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ............................... 1,180 173
Amortization of deferred compensation and warrants
issued for service received and bank line of credit ... 763 641
Amortization of the prepaid marketing expenses .............. 1,941 --
Increase in trade receivables ............................... (1,401) (188)
Increase in other accounts receivable and prepaid expenses . (1,369) (285)
Increase in accounts payable ................................ 1,130 18
Increase in other liabilities ............................... 1,147 167
Increase (Decrease) in deferred revenue ..................... (54) 58
Increase in accrued severance pay, net ...................... 73 44
-------- --------
Net cash used in operating activities ..................... (5,050) (1,683)
-------- --------
Cash flows from investing activities:
Proceeds from sale of available for sale marketable securities 3,171 --
Purchase of Long-term investment ............................... (3,000) --
Purchase of property and equipment ............................. (3,178) (950)
-------- --------
Net cash used in investing activities ..................... (3,007) (950)
-------- --------
Cash flows from financing activities:
Short-term bank line of credit, net ............................ -- (242)
Payment of capital lease ....................................... (32) (25)
Proceeds from issuance of shares ............................... 1,037 5,292
-------- --------
Net cash provided by financing activities ................. 1,005 5,025
-------- --------
Increase (Decrease) in cash and cash equivalents ................. (7,052) 2,392
Cash and cash equivalents at the beginning of the period ......... 65,996 834
-------- --------
Cash and cash equivalents at the end of the period ............... $ 58,944 $ 3,226
======== ========
Supplemental disclosure of cash flows activity:
Cash paid during the year:
Interest ......................................................... $ 5 $ 33
======== ========
Ordinary shares issued for notes receivable from shareholders .... $ 1,066 $ 887
======== ========
<FN>
The accompanying note is an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
COMMTOUCH SOFTWARE LTD.
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The condensed consolidated financial statements have been prepared by
Commtouch Software Ltd., without audit, and include the accounts of
Commtouch Software Ltd. and its wholly-owned subsidiaries (collectively
"the Company"). Certain information and footnote disclosures, normally
included in financial statements prepared in accordance with generally
accepted accounting principles, have been condensed or omitted pursuant
to such rules and regulations. In the opinion of the Company, the
financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the
financial position at March 31, 2000 and the operating results and cash
flows for the reported periods. These financial statements and notes
should be read in conjunction with the Company's audited financial
statements and notes thereto for the year ended December 31, 1999,
which were filed with the Securities and Exchange Commission on Form
20-F.
The results of operations for the three months ended March 31, 2000 are
not necessarily indicative of the results that may be expected for
future quarters or the year ending December 31, 2000.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed
consolidated financial statements and the note thereto in Part I, Item 1 of this
quarterly report and with Management's Discussion and Analysis of Financial
Conditions and Results of Operations contained in the Company's Annual Report on
Form 20-F for the year ended December 31, 1999.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements based upon current
expectations that involve risks and uncertainties. Any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements. For example, the words "believes," "anticipates,"
"plans," "expects," "intends" and similar expressions are intended to identify
forward-looking statements. Commtouch's actual results and the timing of certain
events may differ significantly from those projected in the forward-looking
statements. Factors that might cause future results to differ materially from
those projected in the forward-looking statements include, but are not limited
to, those discussed in "Risk Factors" in the Company's Annual Report on Form
20-F for the year ended December 31, 1999.
Overview
Commtouch Software Ltd. ("Commtouch" or "the Company") and its subsidiaries are
a leading global provider of outsourced integrated Web-based email and messaging
solutions to businesses. Our solutions are flexible, highly customizable and
enable us to satisfy the unique email and messaging needs of our customers
worldwide. Our customers are large and small businesses who offer our Web-based
email through their website to their end users. As of March 31, 2000, we had
more than 300 global customers. Through our customers' sites we serve
approximately 13.5 million active emailboxes. We also serve over 1.2 million
active emailboxes to small businesses and websites through our ZapZone Network.
Results of Operations
The following table sets forth financial data for the three months ended March
31, 2000 and 1999 (in thousands):
Three Months Ended
March 31,
--------------------
2000 1999
-------- --------
(unaudited) (unaudited)
Revenues ........................................... $ 4,272 $ 346
Cost of revenues ................................... 2,121 435
-------- --------
Gross profit (loss) ................................ 2,151 (89)
-------- --------
Operating expenses:
Research and development, net .................... 1,993 340
Sales and marketing .............................. 4,746 608
General and administrative ....................... 2,106 617
Amortization of the prepaid marketing expenses 1,941 --
Amortization of deferred compensation ............ 763 386
-------- --------
Total operating expenses ................. 11,549 1,951
-------- --------
Operating loss ..................................... (9,398) (2,040)
Interest and other income (expense), net ........... 938 (271)
-------- --------
Net loss ........................................... $ (8,460) $ (2,311)
======== ========
Comparison of the Three Months Ended March 31, 2000 and 1999
Revenues. Revenues increased from $346,000 for the three months ended March 31,
1999 to $4,272,000 for the three months ended March 31, 2000. The key factor
contributing to the growth of our revenues for the three month period ended
March 31, 2000 is the increase in the number of business partners that have
contracts that are generating revenue for the Company. As of March 31, 2000, the
Company had backlog from minimum service fee contracts amounting to
approximately $22,000,000, which will be recognized as revenue over future
quarters.
Cost of Revenues. Cost of revenues increased from $435,000 for the three months
ended March 31, 1999 to $2,121,000 for the three months ended March 31, 2000
because of the increase in the number of business partners and one time charges
for headhunter fees. Costs of revenues consisted primarily of costs related to
Internet data center services from a third-party provider, depreciation of
equipment, Internet access, personnel and related costs. We expect cost of
revenues to increase on an absolute basis, primarily as a
<PAGE>
result of an increase in our email service revenues, but to decrease as a
percentage of email service revenues due to economies of scale.
Research and Development Costs, Net. Research and development costs consist
primarily of personnel and related costs, depreciation of equipment, supply
costs and royalties paid to the Israeli Government for grants received in prior
years for research and development activities. These royalties are paid at rates
ranging from 3% to 5% of total revenues. We do not expect to receive further
grants from the Israeli Government. Our research and development costs increased
from $340,000 for the three months ended March 31, 1999 to $1,993,000 for the
three months ended March 31, 2000 due primarily to higher personnel and related
costs. We expect that research and development costs, net, will increase in
absolute dollar amounts due to increases in personnel costs related directly to
new employees being hired to develop new service offerings, however such costs
will decrease as a percentage of revenues.
Sales and Marketing. Sales and marketing expenses consist primarily of personnel
and related costs, public relations and direct sales efforts, including travel
expenses. Our sales and marketing expenses increased from $608,000 for the three
months ended March 31, 1999 to $4,746,000 for the three months ended March 31,
2000 due primarily to marketing and other costs to support the growth of our
email service revenues. We expect sales and marketing expenses to significantly
increase in the future in absolute dollar amounts due to increases in personnel
costs related directly to new employees being hired to conduct sales to business
partners and the related market support to further develop our brand. We expect
that for the next several quarters, the increase in sales and marketing expenses
will be somewhat proportionate to the increase in revenues. If we achieve
significant revenue growth, we expect that sales and marketing expenses will
start to decline as a percentage of total revenues as we hire additional
personnel and continue to support and develop the email service business.
General and Administrative. General and administrative costs consist primarily
of personnel and related costs, professional services and facility costs. Our
general and administrative expenses increased from $617,000 for the three months
ended March 31, 1999 to $2,106,000 for the three months ended March 31, 2000 due
primarily to substantially higher personnel and related costs, facility costs,
higher fees for outside professional services and other costs to support the
growth of our email service revenues. We expect general and administrative costs
to increase on an absolute basis due to increased personnel and related costs,
higher facility costs associated with additional personnel and other costs
necessary to support and develop the email service business. We expect that
general and administrative expenses will increase in absolute dollar amounts but
as a percentage of total revenues will start to decline in the next several
quarters.
Amortization of the Prepaid Marketing Expenses. Amortization of the prepaid
marketing expenses relating to the Go2Net and Microsoft warrants was $1,941,000
for the three months ended March 31, 2000. The prepaid marketing expense is
being amortized using the straight line method over the minimum term of the
commercial agreements with these two companies, or one year.
Amortization of Deferred Compensation. Stock-based employee deferred
compensation expenses increased from $386,000 for the three months ended March
31, 1999 to $763,000 for the three months ended March 31, 2000. The deferred
compensation is being amortized using the sum-of-digits method over the vesting
schedule, generally four years.
Interest and other income (expense), net. Interest and other income (expense),
net, fluctuated from a net expense of $271,000 for the three months ended March
31, 1999 to a net income of $938,000 for the three months ended March 31, 2000
due primarily to interest income earned from cash and cash equivalents generated
from the initial public offering.
Liquidity and Capital Resources
We have financed our operations principally from the sale of equity securities
and to a lesser extent from bank loans and research and development and
royalty-bearing marketing grants from the Israeli government. On July 16, 1999,
the Company raised $70,786,000, net of underwriters commission ($66,177,000 net
of expenses), from the public offering (including the exercise of the
underwriters' overallotment option) and the private placement that was part of
the strategic partnership with Go2Net, Vulcan Ventures and Microsoft. As of
March 31, 2000, we had $58,944,000 in cash and cash equivalents.
Net cash provided by financing activities was $1,005,000 for the three months
ended March 31, 2000. Net cash provided by financing activities primarily
consisted of cash received from employees related to the exercise of stock
options. Net cash used in operating activities was $5,050,000 for the three
months ended March 31, 2000. Net cash used for operating activities is comprised
of net loss for the three months, partially offset by depreciation and
amortization expenses. Net cash used in investing activities was $3,007,000 for
the three months ended March 31, 2000. These investing activities consisted of
purchases of property and equipment, sale of available for sale securities, and
purchase of a long-term investment.
As of March 31, 2000, we had net working capital of $76,369,000.
<PAGE>
Effective Corporate Tax Rates
Our tax rate will reflect a mix of the U.S. statutory tax rate on our U.S.
income and the Israeli tax rate discussed in our Annual Report on form 20-F
filed with the Commission in June 2000. We expect that most of our taxable
income will be generated in Israel. Israeli companies are generally subject to
corporate tax at the rate of 36% of taxable income. The majority of our income,
however, is derived from our company's capital investment program with Approved
Enterprise status under the Law for the Encouragement of Capital Investments in
two separate plans, and is therefore eligible for certain tax benefits. Pursuant
to these benefits, we will enjoy a tax exemption on income derived during the
first two years in which such investment plans produce taxable income (provided
that we do not distribute such income as a dividend) and a reduced tax rate of
10% to 25% for an additional period of five to eight years depending on the
level of foreign investment in Commtouch. All of these tax benefits are subject
to various conditions and restrictions. There can be no assurance that we will
obtain approval for additional Approved Enterprise programs, or that the
provisions of the law will not change. Moreover, notwithstanding these tax
benefits, to the extent we receive income from countries other than Israel, such
income may be subject to withholding tax. Since we have incurred tax losses
through December 31, 1999, we have not yet used the tax benefits for which we
are eligible.
Proposed Tax Reform
On May 4, 2000, a committee chaired by the Director General of the Israeli
Ministry of Finance, Avi Ben-Bassat, issued a report recommending a sweeping
reform in the Israeli system of taxation. The proposed reform would
significantly alter the taxation of individuals, and would also affect corporate
taxation. In particular, the proposed reform would reduce, but not eliminate,
the tax benefits available to approved enterprises such as ours. The Israeli
cabinet has approved the recommendations in principle, but implementation of the
reform requires legislation by Israel's Knesset. The Company cannot be certain
whether the proposed reform will be adopted, when it will be adopted or what
form any reform will ultimately take.
Impact of Inflation and Currency Fluctuations
Most of our sales are in dollars. However, a large portion of our costs relates
to our operations in Israel. A substantial portion of our operating expenses,
primarily our research and development expenses, is denominated in NIS. For the
purposes of our financial statements, costs not effectively denominated in
dollars are translated to dollars when recorded, at prevailing exchange rates
and will increase if the rate of inflation in Israel exceeds the devaluation of
the NIS as compared to the dollar or if the timing of such devaluations lags
considerably behind inflation. Consequently, we are and will be affected by
changes in the prevailing NIS/dollar exchange rate. We might also be affected by
the dollar exchange rate to the major European and Asian currencies, due to the
fact that we derive revenues from business partners in Europe and Asia.
In recent years (until 1997), inflation in Israel generally exceeded the
devaluation of the NIS against the dollar and the Company experienced increases
in the dollar cost of its operations in Israel. Because exchange rates between
the NIS and the dollar fluctuate continuously (albeit with a historically
declining trend in the value of the NIS), exchange rate fluctuations and
especially larger periodic devaluations will have an impact on our profitability
and period-to-period comparisons of our results. The effects of foreign currency
remeasurements are reported in our 1999 Consolidated Financial Statements in
current operations.
The representative exchange rate, as reported by the Bank of Israel, was NIS
4.026 for one dollar on March 31, 2000.
Qualitative and Quantitative Disclosure about Market Risk
We develop our technology in Israel and provide our services in North America,
India, Europe and the Far East. As a result, our financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in foreign markets. As most of our sales are currently made
in U.S. dollars, a strengthening of the dollar could make our services less
competitive in foreign markets. Our interest expense on our capital lease
obligations with a U.S. leasing company is sensitive to changes in the general
level of U.S. interest rates. Due to the nature and level of our debts, we have
concluded that there is currently no material market risk exposure. Therefore,
no quantitative tabular disclosures are required.
PART II. OTHER INFORMATION
Item 3. Information Incorporated by Reference
The information in this Report on Form 6-K is incorporated by reference into all
Registration Statements which we have filed or which we will file in the future
under the Securities Act of 1933, as amended, which permit such reports to be so
incorporated.
<PAGE>
Item 4. Exhibits
The document attached hereto as Exhibit 1 is incorporated by
reference.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMMTOUCH SOFTWARE, LTD.
-------------------------------------
(Registrant)
Date By
------------------------------ -----------------------------------
James E. Collins
Chief Financial Officer
<PAGE>
Exhibit Index
Exhibit Description of Document
------- -----------------------
1 April 18, 2000 Press Release: "Commtouch Reports 91% Growth
in Revenues for Q1 2000"
<PAGE>
EXHIBIT 1
Commtouch Reports 91% Growth in Revenues for Q1 2000
RECORD GROSS PROFIT MARGIN OF 50%
Santa Clara, California (April 18, 2000) -- Commtouch (Nasdaq: CTCH), the
worldwide leader in integrated email outsourcing services today announced
results for the first quarter 2000. Revenues for the first quarter of 2000 were
$4.3 million, a 91% increase over fourth quarter 1999 revenues of $2.2 million.
As of March 31, 2000, the Company had a backlog from contracts amounting to
approximately $22 million that will be recognized as revenue over future
quarters.
"Our strong Q1 2000 results once again illustrate the power of Commtouch," said
Gideon Mantel, CEO of Commtouch. "The Commtouch value proposition--providing the
best integrated messaging outsourcing services to a global market--is what
separates Commtouch in the Internet space and what will continue to drive our
revenue and profitability." Mantel added, "Our strategic partnerships and the
release of Commtouch Wireless Services in Q1 has expanded both our global reach
and our integrated product offerings and access points. Commtouch is
strategically positioned today to build a Web-based global communications
company."
Gross profit for the first quarter of 2000 was $2.2 million representing a gross
profit margin of 50% compared to a gross profit margin of 30% for the fourth
quarter of 1999.
Net loss for the quarter ended March 31, 2000, excluding amortization of the
prepaid marketing asset resulting from warrants issued to Go2Net and Microsoft
and stock-based employee deferred compensation, was $0.38 per share compared
with a net loss, excluding charges, of $0.32 per share, in the fourth quarter of
1999.
Net loss for the quarter ended March 31, 2000 was $8.5 million compared to $7.4
million for the quarter ended December 31, 1999. Net loss per share for the
quarter ended March 31, 2000, was $0.56 per share compared to net loss per share
of $0.51 for the fourth quarter, 1999.
-MORE-
<PAGE>
About Commtouch
Commtouch is a leading global provider of outsourced integrated Web-based email
and messaging solutions, currently serving more than 14 million individual
active email boxes worldwide. Commtouch messaging solutions enable more than 300
global customers, including large and small corporations, service providers,
portal and online companies, to outsource email and messaging operations.
Founded in 1991, Commtouch has offices in Silicon Valley, New York City, London
and Tel Aviv. Additional Company information may be obtained by visiting
www.commtouch.com.
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 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 registration statement on Form F-1 filed with the SEC
on March 6, 2000, as amended, which is available through www.sec.gov.
(C) 2000 Commtouch Software, Ltd. All rights reserved.
Commtouch is a registered trademark of Commtouch Software Ltd.
Terms and product names in this document may be trademarks of others.
--More--
<PAGE>
<TABLE>
COMMTOUCH SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
March 31, December 31,
2000 1999
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and short term investments $ 73,728 $ 84,046
Trade receivables 3,779 2,378
Prepaid marketing expenses relating to Go2Net and Microsoft warrants 2,565 4,508
Prepaid expenses and other accounts receivable 3,019 1,648
-------- --------
Total current assets 83,091 92,580
Severance Pay Fund 484 354
Security Deposit 1,254 1,254
Investment - at Equity 3,000 --
Property and Equipment, net 8,146 6,148
-------- --------
$ 95,975 $100,336
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,640 $ 1,510
Employees and payroll accruals 1,293 1,032
Deferred revenue 507 561
Other liabilities 2,282 1,424
-------- --------
Total current liabilities 6,722 4,527
-------- --------
Long-term Portion of Bank Loans and Capital Leases 40 44
Accrued Severance Pay 656 453
-------- --------
696 497
-------- --------
Shareholders' Equity 88,557 95,312
-------- --------
$ 95,975 $100,336
======== ========
</TABLE>
-MORE-
<PAGE>
COMMTOUCH SOFTWARE LTD.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
-------- --------
<S> <C> <C>
Email Services - revenue ......................... $ 4,272 $ 346
Cost of Email services - revenue ................. 2,121 435
-------- --------
Gross profit/(loss) .............................. 2,151 (89)
-------- --------
Operating expenses:
Research and development, net .................. 1,993 340
Sales and marketing ............................ 4,746 608
General and administrative ..................... 2,106 617
Amortization of the prepaid marketing expenses
relating to Go2Net and Microsoft warrants .... 1,941 --
Amortization of stock-based employee
deferred compensation ....................... 763 386
-------- --------
Total operating expenses ............... 11,549 1,951
-------- --------
Operating loss ................................... (9,398) (2,040)
Interest income (expense) and other, net ......... 938 (271)
-------- --------
Net loss ......................................... $ (8,460) $ (2,311)
======== ========
Basic and diluted net loss per share ............. $( $0.56) $ (1.54)
======== ========
Weighted average number of shares used in
computing basic and diluted net loss per share . 15,119 1,498
======== ========
Net Loss
- as adjusted (1) ................................ $ (5,756) $ (1,925)
======== ========
Basic and diluted net loss per share
- as adjusted (1) ............................... $ (0.38) $ (1.29)
======== ========
<FN>
(1) Excludes charges for amortization of stock-based employee compensation and
Go2Net & Microsoft Warrants.
</FN>
</TABLE>
