deltathree defines adjusted EBITDA as earnings before stock-based compensation, telecom tax adjustment, interest, income taxes, depreciation and amortization, and accrual for contingency. deltathree uses adjusted EBITDA as a measure of the company's operating trends. The adjusted EBITDA numbers presented may not be comparable to similarly titled measures reported by other companies. Consistent with Regulation G under the U.S. federal securities laws, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, and this reconciliation is located under the heading "Reconciliation of Non-GAAP Financial Information to GAAP" following the Condensed Consolidated Statements of Cash Flows included in this press release.
As of December 31, 2010, deltathree held approximately $475,000 in cash, cash equivalents, restricted cash and short-term investments, and had negative working capital equal to approximately $3.9 million and negative stockholders' equity equal to approximately $3.6 million.
Subsequent to year-end 2010, deltathree successfully secured $1.6 million in additional financing in the form of a line of credit from the D4 Holdings LLC, the company's largest shareholder, to fund the company's operations as well as additional growth initiatives. While deltathree's cost-reduction activities continue to yield measurable improvements, the company is continuing to draw upon its cash reserves on a monthly basis. The company is continuing to explore potential capital initiatives aimed at further strengthening its balance sheet and remedying its negative working capital.
Adjusted EBITDA Financial DisclosureInvestors are cautioned that adjusted EBITDA is not a measure of liquidity or financial performance under generally accepted accounting principles ("GAAP"). In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with GAAP, or as an indicator of the company's operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that it fails to address. Adjusted EBITDA financial information is presented because deltathree believes that it is helpful to some investors as one measure of the company's operations. deltathree cautions investors that non-GAAP financial information such as adjusted EBITDA, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare deltathree's results with the results from other reporting periods and with the results of other companies.
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