updated 11/4/2010 9:15:56 AM ET 2010-11-04T13:15:56

NEW YORK, Nov. 4, 2010 (GLOBE NEWSWIRE) -- deltathree, Inc. (OTCBB:DDDC), 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, today announced financial results for the third quarter 2010, ended September 30, 2010.

Mr. Effi Baruch, Chief Executive Officer, President and Senior Vice President of Operations and Technology of deltathree, stated, "Our third quarter 2010 financial results were highlighted by our second consecutive quarter of sequential revenue growth, as deltathree's expanding portfolio of digital voice and video communications solutions gained additional traction with service provider and consumer customers. Sequential top line growth was matched with a sequential reduction in our quarterly net loss, as operating efficiency measures across the company yielded improvements in our cost structure."

"On the product development front, during the third quarter we launched several new mobile VoIP offerings aimed at penetrating the vast and growing market for cellular VoIP solutions. Our recently launched joip Mobile phone application offers cellular customers a new and flexible way to make low cost mobile calls over GSM, CDMA as well as WiFi networks. Building on the successful launch of joip Mobile, deltathree signed a sales agency agreement with ACN, Inc. for deltathree's mobile phone application. ACN is the world's largest direct seller of telecommunications and essential services for residential and business customers and will be offering a private label version of our joip Mobile phone application through thousands of independent representatives in ACN's North American distribution network under the ACN Mobile World brand. Cellular operating systems supported by joip Mobile and ACN Mobile World include the iPhone, Google Android and Nokia Symbian, with support for the Windows Mobile operating system and BlackBerry expected soon."

"During the third quarter we also strengthened the ranks of our senior management team with two key appointments. Arie Rand assumed the roles of Chief Financial Officer and Treasurer, bringing deep expertise in effectively managing financial, strategic and business activities for growth-oriented technology companies trading in the global capital markets. We also welcomed to deltathree Todd Stone as Vice President of Business Development and Sales, bringing more than 13 years of experience in selling, marketing and promoting leading edge communications solutions to major operators and carriers in North America, Europe, Latin America, Asia and Africa. Amongst other things, Todd will be leading the company in building up our affiliate program in which affiliates will locate and bring new subscribers to our joip Mobile service. These appointments bolster deltathree's leadership team as well as our ability to drive sales and increase our share in the global market for digital voice and video as well as mobile VoIP communications offerings," concluded Mr. Baruch.

For the third quarter of 2010, deltathree reported total revenues of $3.5 million compared with $3.4 million in the sequential second quarter 2010 and $4.8 million reported for the third quarter of 2009. The year-over-year decline in quarterly revenue was primarily related to the suspension of the operations of deltathree's then-largest reseller customer in the fourth quarter of 2009.

Third quarter 2010 GAAP net loss totaled $729,000, or $(0.01) per diluted share, compared to a GAAP net loss for the third quarter of 2009 of $367,000, or $(0.01) per diluted share. deltathree's GAAP net loss improved sequentially compared to a GAAP net loss of $813,000, or $(0.01) per diluted share in the second quarter of 2010. During the third quarter of 2010 the company recorded a one-time accrual for a contingency associated with certain reseller customers totaling $176,000.

Third quarter 2010 non-GAAP adjusted EBITDA (as defined below) loss was $331,000, or $(0.00) per diluted share, compared to a non-GAAP adjusted EBITDA loss of $145,000, or $(0.00) per diluted share, for the third quarter of 2009. deltathree's non-GAAP adjusted EBITDA loss improved sequentially compared to non-GAAP adjusted EBITDA loss of $550,000, or $(0.01) per diluted share in the second quarter of 2010. 

deltathree defines adjusted EBITDA as earnings before stock-based compensation, 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 September 30, 2010, deltathree held approximately $836,000 in cash, cash equivalents, restricted cash and short-term investments, and had negative working capital equal to approximately $3.5 million and negative stockholders' equity equal to approximately $3.1 million. 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.

On August 10, 2010, the company entered into a second loan and security agreement with D4 Holdings, LLC for a credit line in a principal amount of $1.0 million. On September 14 and October 28, 2010 deltathree received $300,000 and $400,000, respectively, from this credit line, providing deltathree important near-term financial flexibility. 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 Disclosure

Investors 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.

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 all or 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 defines adjusted EBITDA as earnings before stock-based compensation, interest, income taxes, depreciation and amortization, and accrual for contingency.

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