HERZLIYA, Israel -- VocalTec Communications Ltd. (Nasdaq: VOCL) (the “Company”), a leading global provider of carrier-class multimedia and voice-over-IP solutions for communication service providers, today reported results for the second quarter ended June 30, 2006.

Results reflect the second full quarter since the business combination of VocalTec and Tdsoft Ltd., an Israeli privately-held company, which was completed in November 2005.

Revenues for the second quarter of 2006 were $2.2 million, representing a 30% increase compared to $1.7 million in the first quarter of 2006 and a 123% increase from $1.0 million in the second quarter of 2005.

Operating expenses were $2.9 million in the second quarter of 2006. Excluding the effect of share-based compensation expense, operating expenses were $2.6 million, similar to the first quarter. This compares with $2.0 million in the second quarter of 2005.

Net loss in the second quarter of 2006 was $1.6 million. Excluding the effect of share-based compensation expense, net loss for the second quarter of 2006 was $1.4 million. This compares to a net loss of $2.0 and $1.8 million in the first quarter of 2006, respectively, and a net loss of $1.2 million in the second quarter of 2005.

Gross margin, excluding the effect of amortization of intangible assets was 63% in the second quarter of 2006, compared to 57% in the first quarter of 2006 and 71% in the second quarter of 2005. As of June 30, 2006, cash and cash equivalents amounted to $5.9 million, compared with $2.7 million as of March 31, 2006 and with $5.3 million at the end of the fourth quarter of 2005. During the second quarter, the Company completed a private placement sale to institutional investors of 935,000 ordinary shares and warrants to purchase up to an aggregate of 374,000 ordinary shares. The Company received approximately $4.7 million net of expenses from this private placement.

Commenting on the results, Yosi Albagli, the Company's Chief Executive Officer, said, “The second quarter saw continued progress toward the integration of the VocalTec and Tdsoft businesses following the business combination in November of last year. We are beginning to see the positive effects of this business combination, notably in higher revenues, improved gross margin and an improved bottom line stemming from our ability to successfully leverage the synergies in the two businesses. Moreover, we continue to expand our product suite, bringing new features and increased value to our customers, further differentiating VocalTec and its product offering.”

Mr. Albagli added: “We recently made two important changes to our management team, adding Eli Gendler as our CFO and earlier this month, nominating Rami Amit to CTO. Messrs Gendler and Amit replace Rafi Weisler and Eytan Radian respectively, and significantly enhance our executive suite with their individual strengths. On behalf of everyone at VocalTec, I would like to thank Rafi and Eytan for their contributions during the last several years, while welcoming Eli and Rami to the team. I truly believe VocalTec is a stronger company with these additions to its management.

“Also during the quarter, we completed the private placement of our ordinary shares and warrants, generating net proceeds of approximately $4.7 million. This additional capital gives VocalTec the means by which to continue building our business and executing on our growth strategy.”

He concluded, “With continued expansion of our business in key international markets, such as Europe and Asia Pacific, we are confident in our ability to continue growing the Company, building upon the foundation we have established over the last two quarters. We are proceeding according to plan on our primary strategic initiatives, while our operational performance has remained slightly ahead of our internal goals. As the market for VoIP and NGN solutions continues to mature, we believe we have the infrastructure in place to enhance our position in the market, and we are excited about our prospects for continued growth.”

magicJack VocalTec Ltd. (Nasdaq: VOCL)