Commtouch Announces Receipt of Nasdaq Deficiency Letter

Commtouch(R) (Nasdaq:CTCH), the leader in real time
anti-spam and Zero-Hour(TM) virus protection technology, today
announced its receipt of a Nasdaq Staff Deficiency Letter on July 17,
2006, indicating that Commtouch fails to comply with the minimum bid
price requirement for continued listing, as set forth in Nasdaq's
Marketplace Rule 4320(e)(2)(E)(i), and that the company will be
provided 180 calendar days, or until January 16, 2007, to regain
compliance.
   To regain compliance, the company's ordinary shares must close at
$1.00 or higher for a minimum of 10 consecutive business days within
the stated 180 period.
   If improvement in the company's business results will not be a
sufficient driving force to overcome the current bid price deficiency,
the company will alternatively consider a reverse split as a means for
regaining compliance.
   If the company has not been deemed in compliance prior to the
expiration of the 180 day compliance period, it shall be afforded an
additional 180 day compliance period, or until approximately July 16,
2007, provided, that on the 180th day of the first compliance period,
the company demonstrates that it meets the criteria for initial
inclusion set forth in Rule 4320(e) (except for the bid price
requirement).
   If Commtouch does not regain compliance within the allotted
compliance period(s), including any extensions that may be granted by
Nasdaq, Nasdaq Staff will notify the company that its ordinary shares
will be delisted from The Nasdaq Capital Market. Commtouch would then
be entitled to appeal the Staff's determination to a Nasdaq Listing
Qualifications Panel and request a hearing.

   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 over 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(TM)), 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
more than 40 OEM partners, Commtouch technology protects thousands of
organizations, with over 35 million users in over 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.

   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 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; 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;
technological difficulties and resource constraints encountered in
developing new products, such as the Zero-Hour solution; and the
failure of Commtouch to meet The NASDAQ Capital Market's listing
standards in the future, 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.

   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.