8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: November 13, 2006

(Date of earliest event reported)

CRITICAL PATH, INC.

(Exact name of registrant as specified in its charter)

California	0-25331	94-1788300
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2 Harrison Street, 2nd Floor, San Francisco, California	94105
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (415) 541-2500

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On November 13, 2006, Critical Path, Inc. issued a press release announcing financial results for its fiscal quarter ended September 30, 2006. A copy of the press release is furnished herewith as Exhibit 99.1.

The information contained in this Item 2.02 and in the accompanying exhibit shall not be deemed filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
99.1	Press Release dated November 13, 2006.

SIGNATURE

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 hereunto duly authorized.

Dated: November 13, 2006

CRITICAL PATH, INC.
By:	/s/ James A. Clark
	James A. Clark
	Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated November 13, 2006.

EX-99.1

Exhibit 99.1

Critical Path Announces Third Quarter 2006 Results

Continues Expansion of Mobile Customer Base

SAN FRANCISCO, Calif. (November 13, 2006) – Critical Path, Inc. (OTC: CPTH), a leading provider of messaging software and services, today announced unaudited financial results for the fiscal third quarter ended September 30, 2006.

Revenue and Gross Margins

For the third quarter of 2006, revenues were $10.9 million, compared to $12.0 million in the second quarter of 2006 and $17.1 million in the third quarter of 2005. Gross margins, based upon U.S. Generally Accepted Accounting Principles (GAAP), for the third quarter of 2006 were 53%, compared to 56% in the second quarter of 2006 and 52% in the third quarter of 2005. On an adjusted EBITDA basis, gross margins in the third quarter of 2006 were 55%, compared to 58% in the second quarter of 2006 and 57% in the third quarter of 2005.

Adjusted EBITDA is a non-GAAP metric used by management to measure the Company’s operating performance and its earnings before interest income (expense), provision for income taxes, depreciation and amortization adjusted to exclude other items, such as other income (expense), gain on sale of assets, restructuring and other expenses, stock-based expenses and accretion on mandatorily redeemable preferred stock.

Net Results

Net loss on a GAAP basis, which excludes the accretion of mandatorily redeemable preferred stock (a non-cash item related to outstanding preferred stock), for the third quarter of 2006, was $2.0 million, compared to a net loss of $2.6 million in the second quarter of 2006 and a net loss of $1.0 million in the third quarter of 2005. For the third quarter of 2006, total cost of net revenues and operating expenses, on a GAAP basis, was $12.2 million, compared to $14.3 million in the second quarter of 2006 and $18.2 million in the third quarter of 2005.

Net loss attributable to common shareholders based on GAAP, which includes the accretion of mandatorily redeemable preferred stock, for the third quarter of 2006, was $5.6 million or $0.15 per share, compared to a net loss of $6.1 million or $0.17 per share in the second quarter of 2006 and a net loss of $4.5 million or $0.13 per share in the third quarter of 2005.

Net loss on an adjusted EBITDA basis for the third quarter of 2006, was $1.7 million, or $0.05 per share, compared to net loss of $1.5 million or $0.04 per share in the second quarter of 2006 and net income of $0.4 million or $0.01 per share in the third quarter of 2005. For the third quarter of 2006, total cost of net revenues and operating expenses on an adjusted EBITDA basis was $12.5 million, compared to $13.5 million for the second quarter of 2006 and $16.7 million for the third quarter of 2005.

“We acquired new customers in each of our brand segments in the quarter, including signing a new mobile operator customer in Southeast Asia,” said Mark Ferrer, CEO and Chairman, Critical Path. “We continue to closely manage our expenses and we are encouraged that we have signed a growing number of operators who are intending to launch their respective consumer mobile email services in the next three to six months.”

Cash and Cash Equivalents

As of September 30, 2006, the Company’s cash and cash equivalents totaled $19.4 million, compared to $20.1 million at June 30, 2006.

Third Quarter 2006 Highlights

• Memova® Mobile – Critical Path welcomed another new Memova Mobile customer in Q3, expanding the solution’s reach to mobile operators serving more than 40 million subscribers. The new operator customer, Hutch Indonesia, plans to deploy Memova Mobile to provide mobile email and content services to consumers on its 3G network. Additionally, a leading international telecommunications company (to be announced) agreed to terms for Memova Mobile for all of its subsidiaries.

• Memova® Messaging – Along with announcing the addition of the largest ISP in Vietnam – Vietnam Datacommunication Company (VDC) – to its roster of broadband customers, Critical Path closed new deals in Q3 for its Universal Contacts and Digital Life solutions.

• Memova® Anti-Abuse – In the third quarter, Critical Path saw its premium anti-abuse appliance – Memova Anti-Abuse C-2000 – gain momentum, with three additional customers purchasing the new C-2000. In addition, VDC, as part of its platform deployment, implemented Memova Anti-Abuse A-1000.

Regulation G

The Company uses both GAAP and non-GAAP metrics to measure its financial results. The non-GAAP metrics used are: income (loss) on an adjusted EBITDA basis and both cost of revenues and operating expenses on an adjusted EBITDA basis. The most directly comparable GAAP measures are the net loss attributable to common shareholders and cost of net revenues and operating expenses, respectively. The adjusted EBITDA results exclude interest income (expense), provision for income taxes, depreciation and amortization as well as other items such as other income (expense), net, gain on sale of assets, restructuring and other expenses, stock-based expenses and accretion on mandatorily redeemable preferred stock. There is no difference between adjusted EBITDA and GAAP revenues. Management believes that, in addition to GAAP metrics, these non-GAAP metrics assist the Company in measuring its cash-based performance. In addition, management believes these non-GAAP metrics are useful to investors because they remove unusual and nonrecurring charges that occur in the affected period and provide a basis for measuring the Company’s financial condition against other quarters. Since the Company has historically reported non-GAAP results to the investment community, management also believes the inclusion of non-GAAP measures provides consistency in its financial reporting. However, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The calculations for these non-GAAP metrics are in the alternative measurement reconciliation table below.

Pre-Recorded Conference Call

Critical Path provides pre-recorded reviews of its quarterly financial results. The pre-recorded review discussing financial results for the third quarter ended September 30, 2006 will be available via Webcast or telephone. The Webcast will be available on Critical Path’s Web site at http://www.criticalpath.net/en/31/webcasts/ today, Monday, November 13, immediately following the distribution of this press release. Additionally, telephone access to the pre-recorded review will be available beginning today, November 13, shortly following the distribution of this press release, through November 27 by dialing +1 800-642-1687 (within the U.S. and Canada) or +1 706-645-9291 (from outside the U.S. and Canada) and use conference ID 1838829.

Questions about the quarter’s results may be submitted to ir@criticalpath.net. Any questions regarding the quarterly results that are submitted by 6 PM Eastern time, November 15, 2006 may be publicly responded to by the company on the Investor Relations section of the company’s Web site (http://www.criticalpath.net/investors). The company does not undertake to publicly respond to all such questions submitted.

About Critical Path, Inc.

Critical Path’s Memova® solutions provide a new and improved email experience for millions of consumers worldwide, helping mobile operators, broadband and fixed-line service providers unlock the potential of email in the mass market. Memova® Mobile gives consumers instant, on-the-go access to the messages that matter most. Featuring industry-leading anti-spam and anti-virus technology, Memova® Anti-Abuse is designed to protect consumers against viruses and spam. Memova® Messaging provides consumers with a rich email experience, enabling service providers to develop customized offerings for high-speed subscribers. Headquartered in San Francisco with offices around the globe, Critical Path’s solutions are deployed by more than 200 customers throughout the world. More information is available at www.criticalpath.net.

Cautionary Note Regarding Forward-Looking Statements:

This press release contains forward-looking statements by the Company and its executives regarding the performance of our product and service offerings, our expected revenue results, gross margins, operating expenses, net results and cash balances for the third quarter of 2006, the timing and scope of our customers’ deployment of our products, the Company’s expectation of signing a binding agreement with a leading international telecommunications company for the provision of Memova Mobile, industry trends, market and customer requirements, the ability of our products and services to meet the business needs of our customers and compete favorably in the marketplace, management of spending levels, the market for products and services like ours and the performance of our senior management in achieving strategic goals. The words and expressions “look forward to,” “will,” “expect,” “plan,” “believe,” “seek,” “strive for,” “anticipate,” “hope,” “estimate” and similar expressions are intended to identify the Company’s forward-looking statements. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks include, but are not limited to, our evolving business strategy and the emerging and changing nature of the market for our products and services, our ability to deliver on our sales objectives, the ability of our technology and our competitors’ technologies to address customer demands, changes in economic and market conditions, our ability to negotiate binding agreements with potential customers, and software and service design defects. These and other risks and uncertainties are described in more detail in the Company’s filings with the U.S. Securities and Exchange Commission (www.sec.gov) made from time to time including Critical Path’s Quarterly Report on Form 10-Q for the three months ended March 31 and June 30, 2006, Annual Report on Form 10-K for the fiscal year ended December 31, 2005, its Current Reports on Form 8-K, as may be amended from time to time, and all subsequent filings with the United States Securities and Exchange Commission (www.sec.gov). The Company makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made.

Note to Editors: Critical Path, the Critical Path logo, Memova and the Memova logo are the trademarks of Critical Path, Inc., registered in various jurisdictions. All other trademarks are the property of their respective holders.

Contact Information

For Reporters and Editors:	For Investors:
Critical Path, Inc.	Critical Path, Inc.
Michelle Weber	Investor Relations
415.541.2575	415.541.2619
pr@criticalpath.net	ir@criticalpath.net
www.criticalpath.net	www.criticalpath.net

Critical Path, Inc.

Condensed Consolidated Balance Sheets

	September 30, 2005			December 31, 2005			September 30, 2006
	(in thousands; unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	20,486		$	18,707		$	19,414
Accounts receivable, net		13,274			10,096			8,945
Current assets held for sale		—			2,782			—
Other current assets		3,391			2,411			2,716
Total current assets		37,151			33,996			31,075
Property and equipment, net		6,302			2,625			2,515
Goodwill		6,613			7,047			7,310
Other assets		1,956			1,756			835
Total assets	$	52,022		$	45,424		$	41,735
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ DEFICIT
Current liabilities
Accounts payable	$	2,439		$	2,726		$	2,763
Accrued expenses		20,726			19,727			18,892
Deferred revenue		9,489			6,574			9,694
Capital lease and other obligations, current		137			106			39
Current liabilities held for sale		—			219			—
Total current liabilities		32,791			29,352			31,388
Deferred revenue long-term		970			710			522
Notes payable, long-term		17,585			18,493			21,370
Capital lease and other obligations, long-term		46			50			—
Embedded derivative liability		2,527			1,534			690
Total liabilities		53,919			50,139			53,970
Mandatorily redeemable preferred stock		116,874			120,293			130,811
Total shareholders’ deficit		(118,771	)		(125,008	)		(143,046	)
Total liabilities, mandatorily redeemable preferred stock and shareholders’ deficit	$	52,022		$	45,424		$	41,735

Critical Path, Inc.

Condensed Consolidated Statement of Operations on a United States GAAP Basis

	Three months ended									Nine months ended
	September 30, 2005			June 30, 2006			September 30, 2006			September 30, 2005			September 30, 2006
	(in thousands, except per share amounts; unaudited)
NET REVENUE
Software licensing	$	5,593		$	3,481		$	2,688		$	14,810		$	9,097
Hosted messaging		3,309			1,167			1,220			12,048			3,609
Professional services		3,119			2,828			2,257			9,929			7,660
Maintenance and support		5,059			4,548			4,687			14,842			13,524
Total net revenue		17,080			12,024			10,852			51,629			33,890
COST OF NET REVENUE
Software licensing		1,364			1,060			1,105			3,606			3,470
Hosted messaging		3,047			758			740			11,972			2,275
Professional services		2,307			2,220			1,943			7,100			6,139
Maintenance and support		1,457			1,224			1,303			4,558			3,820
Total cost of net revenue		8,175			5,262			5,091			27,236			15,704
GROSS PROFIT		8,905			6,762			5,761			24,393			18,186
OPERATING EXPENSES
Selling and marketing		4,239			3,326			2,728			12,852			9,544
Research and development		3,013			2,525			2,375			11,579			7,219
General and administrative		2,714			3,019			2,850			10,373			9,140
Restructuring expense		40			126			137			1,847			1,178
Gain on sale of assets		—			—			(1,007	)		—			(2,978	)
Total operating expenses		10,006			8,996			7,083			36,651			24,103
OPERATING LOSS		(1,101	)		(2,234	)		(1,322	)		(12,258	)		(5,917	)
Other income, net		1,357			537			469			5,598			547
Interest expense, net		(918	)		(900	)		(911	)		(2,483	)		(2,664	)
Loss before provision for income taxes		(662	)		(2,597	)		(1,764	)		(9,143	)		(8,034	)
Provision for income taxes		(364	)		(45	)		(280	)		(789	)		(594	)
NET LOSS		(1,026	)		(2,642	)		(2,044	)		(9,932	)		(8,628	)
Accretion on mandatorily redeemable preferred stock		(3,519	)		(3,505	)		(3,551	)		(15,311	)		(10,518	)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(4,545	)	$	(6,147	)	$	(5,595	)	$	(25,243	)	$	(19,146	)
Net loss per share attributable to common	$	(0.13	)	$	(0.17	)	$	(0.15	)	$	(0.83	)	$	(0.53	)
Shares used in the per share calculations		34,557			36,267			36,533			30,452			36,248

Critical Path, Inc.

Condensed Consolidated Statement of Operations on a Non-GAAP (Adjusted EBITDA*) Basis

	Three months ended								Nine months ended
	September 30, 2005		June 30, 2006			September 30, 2006			September 30, 2005			September 30, 2006
	(in thousands, except per share amounts; unaudited)
NET REVENUE
Software licensing	$	5,593	$	3,481		$	2,688		$	14,810		$	9,097
Hosted messaging		3,309		1,167			1,220			12,048			3,609
Professional services		3,119		2,828			2,257			9,929			7,660
Maintenance and support		5,059		4,548			4,687			14,842			13,524
Total net revenue		17,080		12,024			10,852			51,629			33,890
COST OF NET REVENUE
Software licensing		1,364		1,060			1,105			3,606			3,470
Hosted messaging		2,286		680			583			9,179			1,824
Professional services		2,260		2,167			1,917			6,931			6,030
Maintenance and support		1,435		1,202			1,290			4,507			3,776
Total cost of net revenue		7,345		5,109			4,895			24,223			15,100
GROSS PROFIT		9,735		6,915			5,957			27,406			18,790
OPERATING EXPENSES
Selling and marketing		4,140		3,249			2,679			12,423			9,350
Research and development		2,721		2,391			2,285			9,072			6,904
General and administrative		2,521		2,729			2,648			9,355			8,426
Total operating expenses		9,382		8,369			7,612			30,850			24,680
ADJUSTED EBITDA INCOME (LOSS)	$	353	$	(1,454	)	$	(1,655	)	$	(3,444	)	$	(5,890	)
Basic adjusted EBITDA income (loss) per share	$	0.01	$	(0.04	)	$	(0.05	)	$	(0.11	)	$	(0.16	)
Diluted adjusted EBITDA income (loss) per share	$	0.01	$	(0.04	)	$	(0.05	)	$	(0.11	)	$	(0.16	)
Shares used in the basic per share calculations		34,557		36,267			36,533			30,452			36,248
Shares used in the diluted per share calculations		34,604		36,267			36,533			30,452			36,248

* Excludes interest expense, net, provision for income taxes, depreciation and amortization adjusted to exclude other items such as gain on sale of assets, other income, net, restructuring expenses, stock-based expenses and accretion on mandatorily redeemable preferred stock.

Critical Path, Inc.

Alternative Measurements Reconciliation

The following table provides a reconciliation between the Company’s Non-GAAP results and Adjusted EBITDA Loss to the Company’s Condensed Consolidated Statement of Operations on a United States GAAP basis.

	Three months ended									Nine months ended
	September 30, 2005			June 30, 2006			September 30, 2006			September 30, 2005			September 30, 2006
	(in thousands, except per share amounts; unaudited)
Adjusted EBITDA income (loss)	$	353		$	(1,454	)	$	(1,655	)	$	(3,444	)	$	(5,890	)
Interest expense, net		(918	)		(900	)		(911	)		(2,483	)		(2,664	)
Provision for income taxes		(364	)		(45	)		(280	)		(789	)		(594	)
Depreciation and amortization		(1,059	)		(364	)		(421	)		(6,050	)		(1,277	)
Other income, net		1,357			537			469			5,598			547
Gain on sale of assets		—			—			1,007			—			2,978
Restructuring expenses		(40	)		(126	)		(137	)		(1,847	)		(1,178	)
Stock-based expenses		(355	)		(290	)		(116	)		(917	)		(550	)
Net loss		(1,026	)		(2,642	)		(2,044	)		(9,932	)		(8,628	)
Accretion on mandatorily redeemable preferred stock		3,519			3,505			3,551			15,311			10,518
Net loss attributable to common shareholders	$	(4,545	)	$	(6,147	)	$	(5,595	)	$	(25,243	)	$	(19,146	)
Net loss per share attributable to common	$	(0.13	)	$	(0.17	)	$	(0.15	)	$	(0.83	)	$	(0.53	)
Shares used in the per share calculations		34,557			36,267			36,533			30,452			36,248
The following table provides a reconciliation between the total cost of net revenues and operating expenses on an Adjusted EBITDA basis to the Company’s cost of revenues and operating expense on a United States GAAP basis.
	Three months ended									Nine months ended
	September 30, 2005			June 30, 2006			September 30, 2006			September 30, 2005			September 30, 2006
	(in thousands, except per share amounts; unaudited)
Total cost of net revenues and operating expenses on an adjusted EBITDA basis	$	16,727		$	13,478		$	12,507		$	55,073		$	39,780
Depreciation and amortization		(1,059	)		(364	)		(421	)		(6,050	)		(1,277	)
Gain on sale of assets		—			—			1,007			—			2,978
Restructuring expenses		(40	)		(126	)		(137	)		(1,847	)		(1,178	)
Stock-based expenses		(355	)		(290	)		(116	)		(917	)		(550	)
Total cost of net revenues and operating expenses on a United States GAAP basis	$	18,181		$	14,258		$	12,174		$	63,887		$	39,807