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 SECURITIES EXCHANGE ACT OF 1934
For the month of April 2003
Commission File No. 000-26495
Commtouch Software Ltd.
(Translation of registrant's name into English)
1A 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 if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Note: Regulation S-T Rule 101(b)(1) only permits the submission in
paper of a Form 6-K if submitted solely to provide an attached annual report to
security holders.
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7): ____
Note: Regulation S-T Rule 101(b)(7) only permits the submission in
paper of a Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws of
the jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant 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|
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- ________
Index
Item 1. Recent Developments
Item 2. Information incorporated by Reference
Item 3. Exhibits
Item 1. Recent Developments
The following discussion 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 Software Ltd.'s (all references herein to
"Commtouch," "the Company," "we," "us" or "our" are to Commtouch Software Ltd.)
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, 2001,
as amended.
On January 29, 2003 Commtouch entered into a Convertible Loan Agreement
("Convertible Loan Agreement"), including certain ancillary agreements and
documents attached as exhibits thereto, with certain lenders identified in
Exhibit "A" to such Convertible Loan Agreement. While the Convertible Loan
Agreement allowed for a maximum possible loan amount of $1,250,000, as of March
26, 2003, the lenders had agreed to advance Commtouch a loan of $905,000. On
March 28, 2003, by way of Addendum 1 to the Convertible Loan Agreement, the
Company and the lenders amended the Convertible Loan Agreement to provide an
option to certain of the lenders, their affiliates and investors from the
Company's previous round of financing the right to loan the Company an amount of
up to $345,000, representing the difference between the maximum loan amount
originally contemplated and the amount of the loan as at March 26, 2003. The
option will lapse unless it is exercised by no later than May 15, 2003. The
Convertible Loan Agreement and Addendum 1 thereto are hereinafter referred to as
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"Agreement". The following discussion is qualified in its entirety by reference
to the text of the Agreement, which is attached as an exhibit to this report.
The loan amount is to be paid in two tranches, with the first and second
tranches set at $362,000 and $543,000 respectively. As of the filing of this
report, the first tranche closing conditions had been met and closing of the
first tranche occurred on March 4, 2003. Shortly thereafter, the Company
received loan proceeds of $362,000. Also, all of the lenders have notified the
Company of their intention to fund the second tranche of the loan agreement. If
the option under Addendum 1 is exercised, the additional loan amount shall be
treated as if it were originally a portion of the second tranche funds, with all
relevant terms and conditions of the Agreement being applicable thereto. The
Company will use the proceeds of advances made under the Agreement for general
corporate purposes.
The closing of the second tranche is subject to the fulfillment of the
following closing conditions:
a. approval of the board of directors and shareholders of the Company of
any necessary increase in the authorized share capital of the Company (in an
amount as determined by the Board of Directors of the Company), which amount
shall provide for an adequate reserve of Shares for issuance upon conversion of
the loan into equity and exercise of the warrants relating to the second tranche
funds advanced by the lenders, and (whether or not the authorized share capital
needs to be increased) any necessary approval by the shareholders of the Company
of the second tranche funding (including disclosure as part of the materials
relating to the vote, of as much information as is necessary to ensure
compliance with NASDAQ or SEC regulations);
b. the representations and warranties made by the Company in the
Agreement, shall be true when made, and shall be true and correct at the date of
the second closing with same force and effect as if they had been made and as of
the same date and no event of default (as defined in the promissory note
attached as Exhibit B to the Agreement) shall exist;
c. the Company shall have sent by fax to the relevant lenders the
promissory notes and warrants reflecting the amount of the second tranche of the
loan (including any rights of "Defaulting Lenders" to which "Non-Defaulting
Lenders" are entitled, as such terms are defined in the Agreement); and
d. the Company shall, in a manner satisfactory to the "Collateral Agent"
(as defined in the Agreement), provide for and perfect the security interests in
the second tranche funds in a manner identical to the security interests in the
first tranche funds.
The loan is to be repaid after three years, unless converted into equity
by the lenders or a defined event triggering early repayment is met, and it
bears interest at a rate of ten percent per annum. Furthermore, the loan
principal and interest may be converted by the lenders into equity in the
Company at any time during the loan term, at a conversion price of $.25 per
Ordinary Share ("Conversion Price").
Warrants exercisable for the company's ordinary shares will be issued to
the lenders as loan amounts are advanced to Commtouch, based on such loan
amounts advanced divided by the
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Conversion Price. Each one-third of the warrants are exercisable at prices per
Ordinary Share of $.25, $.33 and $.50 respectively, and the warrants are
exercisable at any time within five years of issuance. Warrants shall also be
issued on an annual basis for any accumulated interest on the loan.
As security for repayment of the loaned amounts, the lenders have been
granted security interests in all of the assets of the Company. Also, the
lenders are entitled to nominate one director for election to the Board of
Directors of the Company or appoint one observer to the Board.
Even though the lenders have exercised their option to fund the second
tranche of the loan, we might not be able to satisfy all of the conditions to
closing of the second tranche of the loan, as described hereinabove. If this
occurs, we likely would need to raise money from alternative sources to continue
to fund our operations. Such alternative funding might not be available.
Also, the Company has agreed that, among other things, until all loans are
repaid, it will not pay any dividends or make any distribution on its
outstanding Ordinary Shares, or redeem any Shares for consideration without the
prior written consent of 50% of all the lenders. Also, the Company has agreed
not to alter its capital structure or permit any corporate reorganization and/or
disposal of assets outside the ordinary course of business, except as authorized
by vote of its board of directors and shareholders. The Company will be required
to secure approval of 50% of the lenders before issuing preferred shares or
other preferential liquidation rights. The Company has agreed not to create any
security interests on indebtedness that will rank prior to advances under the
Agreement and the security interest granted under the instruments provided for
in the Agreement, without approval of 50% of the lenders. The Company has agreed
that it and its subsidiaries will continue to engage substantially in the same
businesses and not to enter into certain business combination transactions. The
Company's total funding received or receivable from the Israeli Office of Chief
Scientist is limited to a maximum in the aggregate of $1,500,000. The Company
has given a security interest to the lenders in all its present and future
assets
The lenders comprising not less than 50% of all the lenders may require
the Company to register with the Securities and Exchange Commission the resale
of all Ordinary Shares issuable to the lenders under the Agreement. The lenders
may also sell their shares in other registration statements that the Company
files for its own benefit or that of third parties who wish to sell shares. This
right expires three (3) months after the third anniversary of the last
applicable Warrant issuance date. The maximum number of shares that may be
registered is 13,310,000. The Company will pay the expenses of these
registrations, except for underwriting discounts and commissions and the fees
and expenses of any lender's counsel. The Company has also agreed to indemnify
the lenders against certain liabilities arising from the public offer and sale
of their shares pursuant to the registration.
Nothing in this discussion should be taken as an indication or projection
by us that the price of our Ordinary Shares will attain any particular levels.
While the Company believes that it has sufficient funds to launch its anti-Spam
solutions, the Company is continually searching for additional sources of
financing, whether from financial institutions or strategic partners.
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Item 2. Information Incorporated by Reference
The information in this Report on Form 6-K and the exhibits herein are
incorporated by reference in 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.
Item 3. Exhibits
The exhibits listed on the Exhibit Index attached hereto are 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 _________________________________
Name: Devyani Patel
Title: VP Finance
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Exhibit Index
Exhibit Description of Document
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1. Convertible Loan Agreement ("Agreement"), inclusive of
Exhibits "A" through D thereto
2. Exhibit "F" to the Agreement - Form of Guaranty
3. Exhibit "G" to the Agreement - Form of U.S. Subsidiary
Security Agreement
4. Exhibit "H" to the Agreement - Form of Company Security
Agreement
5. Exhibit "I" to the Agreement - Form of Collateral Agency
Agreement
6. Exhibit "J" to the Agreement - Form of Patent and Trademark
Security Agreement
7. Exhibit "K" to the Agreement - Opinion of Israeli Counsel to
the Company
8. Exhibit "L" to the Agreement - Opinion of US Counsel to the
Company
9. Addendum 1 to Convertible Loan Agreement