|December 1, 2003
Commtouch Announces Private Placement of $3 Million in Convertible Notes; Lenders Retain Option to Invest Additional $3 Million within Six Months
|MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--Dec. 1, 2003--Commtouch (Nasdaq:CTCH), a global developer and provider of proprietary anti-spam solutions, today announced that it has entered into a definitive agreement for the private placement of $3 million in senior convertible notes and related warrants to a select group of institutional investors, including Smithfield Fiduciary, Cranshire Capital, Vertical Ventures and Israel Seed, an investor from the company's last private placement from this past summer. The conversion price is set at $1.153. The backing of institutional investors, along with their current investment, provides Commtouch with the type of financial stability that is oftentimes a focal point for potential customers and business partners alike when contemplating their choice of an anti-spam solution provider.
"We are extremely pleased to have secured this private placement at this time, especially with quality institutional investors willing to infuse capital at a significantly higher valuation than that which was employed in the financings we just closed this past summer," remarked Gideon Mantel, CEO of Commtouch. "Together with the monies we are to receive upon exercise of warrants by existing note holders, as announced recently, we will have the financial security necessary to level the playing field in competing in the highly competitive anti-spam market, as well as to explore other segments of the anti-spam market, and feel poised for a determined sales push in early 2004."
The closing of the financing is subject to certain closing conditions, including receipt of shareholder approval of (i) an increase in authorized share capital of the company and (ii) the recently announced pre-payment of 7.5% interest to prior convertible note holders in relation to their conversion of debt to equity. The company's annual meeting of shareholders is scheduled for December 26, 2003. The loan proceeds are earmarked for general working capital purposes.
The notes mature in 3 years and bear interest at a rate of 8% per annum. The notes are convertible at any time, at the lenders' option, into Commtouch ordinary shares at a fixed conversion price of $1.153. The lenders will also receive 600,000 warrants (constituting 20% warrant coverage), exercisable within three year at the stated conversion price. The lenders have the option to loan the company additional monies of up to $3 million during a six month period as from the declaration of effectiveness of a registration statement, upon the same terms as the initial loan.
As security for repayment of the loaned amounts, the lenders have been granted security interests in all of the assets of the company.
Commtouch has agreed to file a registration statement with the SEC within ten days following the initial closing date to allow the investors to publicly resell all shares to be issued upon conversion, including those issuable under the warrants. The initial closing date is expected to occur immediately subsequent to the annual meeting of shareholders on December 26, 2003. Commtouch has also agreed to register any additional shares that may be issued if the lenders exercise their option to lend additional monies to the company.
If the registration statement is not filed in a timely manner or does not become effective within ninety days from the initial closing date, Commtouch may be required to pay investors a cash penalty in accordance with the formula contained in the registration rights agreement entered into by the parties in connection with this transaction.
The company plans to file today with the SEC on Form 6-K copies of the private placement agreement documentation.
Commtouch Software Ltd. is a global developer and provider of proprietary anti-spam solutions. The company's core technologies reflect its decade of experience as a leading vendor of email software applications and provider of global messaging services. Commtouch is headquartered in Netanya, Israel 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:CTCH). To learn more about Commtouch's solutions visit our web site at http://www.commtouch.com.
Note: Commtouch(R) is a registered trademark of Commtouch Software Ltd. Other terms and product names in this document may be trademarks of others.
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 our 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 Annual Reports on Form 20-F and reports on Form 6-K, which are available through www.sec.gov.