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TheStreet Open House

Deltathree Reports Fourth Quarter And Full Year 2010 Financial Results

About deltathree

Founded in 1996, deltathree, Inc. is a global provider of video and voice over Internet Protocol (VoIP) telephony services, products, hosted solutions and infrastructures for service providers, resellers and direct consumers. Supporting tens of thousands of active users around the world, deltathree serves customers through its service provider and reseller channel and its direct-to-consumer channel. deltathree's advanced solutions offer service providers and resellers a full spectrum of private label IP-based digital voice and video products and services, as well as a back-office suite of services. Utilizing advanced Session Initiation Protocol (SIP) technology, deltathree provides all the components to support a complete VoIP service deployment. deltathree's direct-to-consumer channel consists of the joip Mobile, joip and iConnectHere direct-to-consumer offerings.

For more information about deltathree, please visit our website at www.deltathree.com .

For more information about joip Mobile, please visit our website at www.joipmobile.com .

For more information about joip, please visit our website at www.joip.com .

For more information about iConnectHere, please visit our website at www.iconnecthere.com .

Except for historical matters contained herein, the matters discussed in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these forward-looking statements reflect numerous assumptions and involve risks and uncertainties that may affect deltathree's business and prospects and cause actual results to differ materially from these forward-looking statements. Among the factors that could cause actual results to differ are: our ability to obtain additional capital in the near-term to finance operations; our ability to reduce our costs and expenses and expand our revenues; our ability to retain key personnel and employees needed to support our services and ongoing operations; our dependence on a small number of key customers for a significant percentage of our revenue; decreasing rates of telecommunications services; the public's acceptance of VoIP telephony, and the level and rate of customer acceptance of our new products and services; the competitive environment of Internet telephony and our ability to compete effectively; fluctuations in our quarterly financial results; our ability to maintain and operate our computer and communications systems without interruptions or security breaches; our ability to operate in international markets; our ability to provide quality and reliable service, which is in part dependent upon the proper functioning of equipment owned and operated by third parties; the uncertainty of future governmental regulation; our ability to successfully seek the return of substantially all of the funds seized by the Department of Homeland Security; our ability to protect our intellectual property against infringement by others, and the costs and diversion of resources relating to any claims that we infringe the intellectual property rights of third parties; our ability to comply with governmental regulations applicable to our business; the need for ongoing product and service development in an environment of rapid technological change; and other risks referenced from time to time in our filings with the SEC and available on the Internet at http://www.sec.gov . Except as required under the federal securities laws and the rules and regulations of the SEC, deltathree does not have any intention or obligation to update publicly any forward-looking statements after the distribution of this news release, whether as a result of new information, future events, changes in assumptions or otherwise.

DELTATHREE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in thousands)
 
  December 31, 
  2010 2009
ASSETS    
Current assets:    
Cash and cash equivalents $308 $1,514
Restricted cash and short-term investments 167 366
Accounts receivable, net (including $235 and $85 as of December 31, 2010 and December 31, 2009 respectively for related party) 812 270
Prepaid expenses and other current assets 406 409
Inventory 25 29
Total current assets 1,718 2,588
     
Property and equipment, net 398 654
Deposits 80 67
     
Total assets $2,196 $3,309
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Current portion of capital leases $7 $144
Accounts payable and accrued expenses 1,554 1,912
Deferred revenues 659 657
Short-term loan from a related party 1,900 --
Other current liabilities 1,484 1,868
Total current liabilities 5,604 4,581
     
Long-term liabilities:    
Capital leases - net of current portion -- 3
Severance pay obligations 152 150
Total current liabilities 152 153
Total liabilities 5,756 4,734
     
Stockholders' equity (deficiency):    
Share capital:    
Common Stock, par value $0.001 per share; authorized 200,000,000 shares; issued and outstanding:    
 72,243,971 at December 31, 2010, and 72,030,505 at December 31, 2009. 72 72
Additional paid-in capital 174,684 174,324
Accumulated deficit (178,316) (175,821)
Total stockholders' equity (3,560) (1,425)
     
Total liabilities and stockholders' equity $2,196 $3,309
 
 
DELTATHREE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($ in thousands, except share and per share data)
 
  Three Months Ended Year Ended
  December 31,  December 31,
  2010 2009 2010 2009
         
Revenues $ 4,213 $ 3,683 $ 14,200 $ 19,002
         
Costs and operating expenses:        
Cost of revenues 3,374 3,329 11,220 16,127
Research and development expenses 367 130 1,483 464
Selling and marketing expenses 277 287 958 1,201
General and administrative expenses 549 887 2,322 3,514
Accrual for contingency -- -- 176 --
Depreciation and amortization 46 167 345 890
         
Total costs and operating expenses 4,613 4,800 16,504 22,196
         
Loss from operations (400) (1,117) (2,304) (3,194)
         
Capital gain -- -- -- 86
Other non-operating income -- -- -- 15
Interest expense 71 8 162 72
Net loss before taxes (471) (1,125) (2,466) (3,165)
Income taxes 10 5 29 34
Net loss $ (481) $ (1,130) $ (2,495) $ (3,199)
         
Basic and diluted net loss per share $ (0.01) $ (0.02) $ (0.03) $ (0.05)
         
Basic and diluted weighted average number of shares outstanding 72,242,01 71,999,255 72,231,92 67,877,743
 
 
DELTATHREE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($ in thousands)
 
  2010 2009
Cash flows from operating activities:    
Net loss $(2,495) $(3,199)
Adjustments to reconcile net loss for the year to net cash (used in) provided by operating activities:    
Depreciation and amortization 345 890
Write-off of office equipment -- 20
Tax provision -- (400)
Stock-based compensation 360 142
Capital gain, net -- (86)
Increase (decrease) in liability for severance pay, net 2 10
Provision for losses on accounts receivable 24 253
Exchange rates differences on deposits, net (13) --
     
Changes in operating assets and liabilities:    
(Increase) decrease in accounts receivable (567) 237
(Decrease) increase in prepaid expenses other current assets 3 (59)
Decrease (increase) in inventory 3 4
(Decrease) increase in accounts payable and accrued expenses (358) 427
Increase (decrease) in deferred revenues 2 (114)
(Decrease) increase in other current liabilities (384) 645
  (583) (1,969)
Net cash (used in) operating activities (3,078) (1,230)
     
Cash flows from investing activities:    
Purchase of property and equipment (89) (192)
Proceeds from sale of property and equipment -- 156
Decrease (increase) in short-term investments -- (49)
Write-off of long term deposits -- 50
Net cash (used in) investing activities (89) (35)
     
Cash flows from financing activities:    
Payment of capital leases (140) (140)
Proceeds from exercise of options -- 14
Proceeds from issuance of shares, net -- 1,070
Release of restricted cash 201 47
Short-term loan from a related party 1,900 --
Net cash provided by financing activities 1,961 991
     
(Decrease) increase in cash and cash equivalents (1,206) (274)
Cash and cash equivalents at beginning of year 1,514 1,788
Cash and cash equivalents at end of year 308 1,514
     
Supplemental disclosures of cash flow information:    
Cash paid for:    
Taxes $29  $25  
     
Cash received from:    
Proceeds from issuance of shares --  1,170 
Direct costs paid for services due to issuance of shares --  (100) 
Total proceeds --  (1,070) 
 
 
DELTATHREE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(Unaudited)
($ in thousands, except share and per share data)
     
  Three Months Ended Year Ended
  December 31, December 31,
  2010 2009 2010 2009
  ($ in thousands, except share data)
Net loss in accordance with generally accepted accounting principles  $ (481)  $ (1,130)  $ (2,495)  $ (3,199)
         
Add/(less):        
Depreciation and amortization 46 167 345 890
Telecom tax adjustment -- (400) -- (400)
Stock-based compensation  46 107 360 142
Accrual for contingency -- -- 176 --
Interest expense 71 8 162 72
Income taxes 10 5 29 34
         
Adjusted EBITDA $ (308) $ (1,243) $ (1,423) $ (2,461)
         
Basic and diluted adjusted EBITDA per share $ (0.00) $ (0.02) $ (0.02) $ (0.04)
         
Basic and diluted weighted average number of shares outstanding 72,242,021 71,999,255 72,231,942 67,877,743
 
deltathree defines adjusted EBITDA as earnings before stock-based compensation, telecom tax adjustment, interest, income taxes, depreciation and amortization, and accrual for contingency.
CONTACT: Investor Relations Contact:
         Erik Knettel
         Grayling
         1-646-284-9415
         ir@deltathree.com
         
         Company Contact:
         Arie Rand
         Chief Financial Officer and Treasurer
         1-212-500-4860
         arie.rand@deltathree.com

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