Deltathree (DDDC) Inactive 10-Q14 May 152015 Q1 Quarterly reportFinancial data

Company Profile

Document_And_Entity_Informatio

Document And Entity Information	3 Months Ended
Document And Entity Information	Mar. 31, 2015	6-May-15
Document And Entity Information [Abstract]
Entity Registrant Name	DELTATHREE INC
Entity Central Index Key	1086740
Current Fiscal Year End Date	-19
Entity Filer Category	Smaller Reporting Company
Trading Symbol	DDDC
Entity Common Stock, Shares Outstanding		72,311,025
Document Type	10-Q
Amendment Flag	FALSE
Document Period End Date	31-Mar-15
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2015

CONDENSED_CONSOLIDATED_BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2015	Dec. 31, 2014
In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$163	$286
Restricted cash and short-term investments	4	4
Accounts receivable, net	260	229
Prepaid expenses and other current assets	140	118
Inventory	11	11
Total current assets	578	648
Property and equipment, net	74	92
Deposits	45	45
Total assets	697	785
Current liabilities:
Accounts payable - trade	1,046	734
Accounts payable - related party	1,855	1,772
Deferred revenues	157	295
Short-term loan from a related party	5,865	5,609
Other current liabilities	1,117	1,106
Total current liabilities	10,040	9,516
Long-term liabilities:
Severance pay obligations	65	63
Total long-term liabilities	65	63
Total liabilities	10,105	9,579
Stockholders' deficiency:
Common stock, par value $0.001 per share; authorized: 225,000,000 shares; issued and outstanding: 72,311,025 at March 31, 2015, and 72,311,025 at December 31, 2014	72	72
Additional paid-in capital	177,874	177,860
Accumulated deficit	-187,354	-186,726
Total stockholders' deficiency	-9,408	-8,794
Total liabilities and stockholders' deficiency	$697	$785

CONDENSED_CONSOLIDATED_BALANCE1

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
CONDENSED CONSOLIDATED BALANCE SHEETS [Abstract]
Common stock, par value (in dollars per share)	$0.00	$0.00
Common stock, shares authorized	225,000,000	225,000,000
Common stock, shares issued	72,311,025	72,311,025
Common stock, shares outstanding	72,311,025	72,311,025

CONDENSED_CONSOLIDATED_STATEME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended
In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]
Revenues	$2,042	$4,319
Costs and operating expenses:
Cost of revenues	1,691	3,548
Research and development expenses	145	275
Selling and marketing expenses	89	224
General and administrative expenses	403	330
Depreciation and amortization	18	25
Total costs and operating expenses	2,346	4,402
Loss from operations	-304	-83
Interest expense, net	-318	-242
Loss before income taxes	-622	-325
Income taxes	6	6
Net loss	($628)	($331)
Net loss per share - basic and diluted (in dollars per share)	($0.01)	$0
Basic and diluted weighted average number of shares outstanding (in shares)	72,311,025	72,311,025

CONDENSED_CONSOLIDATED_STATEME1

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net loss for the period	($628)	($331)
Adjustments to reconcile loss for the period to net cash (used in) operating activities:
Accumulated interest on short-term loan	180	158
Depreciation and amortization	18	25
Amortization related to convertible notes	76	49
Stock-based compensation	14	6
Increase in liability for severance pay, net	2	34
Exchange rates differences on deposits, net		1
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	-31	171
(Increase) decrease in prepaid expenses and other current assets	-22	47
Increase in accounts payable	395	77
(Decrease) in deferred revenues	-138	-80
Increase (decrease) in other current liabilities	11	-19
Adjustments to reconcile loss for the period to net cash (used in) provided by operating activities, Total	505	469
Net cash (used in) operating activities	-123	138
Cash flows from investing activities:
Release of restricted cash and short-term investment, net		30
Net cash provided by investing activities		30
Cash flows from financing activities:
Proceeds from exercise of options		1
Net cash provided by financing activities		1
Decrease (increase) in cash and cash equivalents	-123	169
Cash and cash equivalents at beginning of period	286	158
Cash and cash equivalents at end of period	$163	$327

Basis_of_Presentation

Basis of Presentation

3 Months Ended

Mar. 31, 2015

Basis of Presentation [Abstract]

Basis of Presentation

Financial Statement Preparation

The unaudited condensed consolidated financial statements of deltathree, Inc. and its subsidiaries (collectively referred to in this Quarterly Report on Form 10-Q as the “Company”, “we”, “us”, or “our”), of which these notes are a part, have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. In the opinion of our management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation of the financial information as of and for the periods presented have been included.

The results for the interim periods presented are not necessarily indicative of the results that may be expected for any future period. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2014, included in our Annual Report on Form 10-K filed with the SEC on March 31, 2015, and all of our other periodic filings, including Current Reports on Form 8-K, filed with the SEC after the end of our 2014 fiscal year and through the date of this Report.

Going Concern

The Company has sustained significant operating losses in recent periods, which has resulted in a significant reduction in its cash reserves. The Company and its subsidiaries have entered into four loan agreements with D4 Holdings, LLC, its majority stockholder, pursuant to which D4 Holdings agreed to provide the Company with loans in the aggregate principal amount of $4,300,000.

On March 1, 2010, the Company and its subsidiaries entered into a Loan and Security Agreement, or the “First Loan Agreement”, with D4 Holdings pursuant to which D4 Holdings agreed to provide the Company and its subsidiaries a line of credit in a principal amount of $1,200,000. On August 10, 2010, the Company and its subsidiaries entered into the Second Loan and Security Agreement, or the “Second Loan Agreement”, with D4 Holdings, pursuant to which D4 Holdings agreed to provide the Company and its subsidiaries an additional line of credit in a principal amount of $1,000,000. In connection with the Second Loan Agreement, the Company issued to D4 Holdings a warrant to purchase up to 4,000,000 shares of its common stock at an exercise price of $0.1312 per share. The Company has drawn down all amounts available to be borrowed under the two lines of credit.

On March 2, 2011, the Company and its subsidiaries entered into the Third Loan and Security Agreement, or the “Third Loan Agreement”, with D4 Holdings, pursuant to which D4 Holdings agreed to provide the Company and its subsidiaries an additional line of credit in a principal amount of $1,600,000. Pursuant to the terms of the Convertible Promissory Note, or the “Convertible Note”, issued by the Company in connection with the Third Loan Agreement, D4 Holdings may elect to convert all or any portion of the outstanding principal amount under the Convertible Note into that number of shares of the Company's common stock determined by dividing such principal amount by $0.08 (as may be adjusted under the terms of the Convertible Note). Simultaneous with the Company's entering into the Third Loan Agreement, D4 Holdings and the Company and its subsidiaries entered into an amendment of the First Loan Agreement, pursuant to which (among other things) the maturity date for repayment of principal under the First Loan Agreement was extended from March 1, 2011, to March 1, 2012, and subsequently extended by oral agreement of the parties to July 1, 2012, and then subsequently orally extended again to January 2, 2014, pending the parties finalizing and entering into a formal amendment. In connection with the Third Loan Agreement, the Company issued D4 Holdings a warrant to purchase up to 1,000,000 shares of the Company's common stock at an exercise price of $0.096 per share. The Company has drawn down the aggregate principal amount available under the Third Loan Agreement, the principal amount of which can be converted by D4 Holdings into an aggregate of 20,000,000 shares of the Company's common stock.

On September 12, 2011, the Company and its subsidiaries entered into the Fourth Loan and Security Agreement, or the “Fourth Loan Agreement”, with D4 Holdings, pursuant to which D4 Holdings agreed to provide the Company and its subsidiaries an additional line of credit in a principal amount of $300,000. The Company has drawn down all amounts available to be borrowed under the Fourth Loan Agreement.

On November 13, 2012, the Company and its subsidiaries entered into the Third Amendment to Loan and Security Agreements, or the "Third Amendment", and the Amendment to Warrant Agreements, or the "Warrants Amendment", with D4 Holdings. Pursuant to the Third Amendment and the Warrants Amendment:

•

the maturity date for repayment of principal and interest under the First Loan Agreement was extended to January 2, 2014;

•

the maturity date for repayment of principal and interest under the Second Loan Agreement was extended to January 2, 2015;

•

the maturity date for repayment of principal and interest under each of the Third and Fourth Loan Agreements was extended to January 2, 2016;

•

all interest outstanding under each of the loan agreements was added to the principal amount outstanding under the respective loan agreement and the promissory notes issued pursuant to each respective loan agreement was increased by such amount; and

•

the exercise price under each of the Warrant Agreements entered into by the Company and D4 Holdings as of February 12, 2009, August 10, 2010, and March 2, 2011 was amended to $0.02 per share.

In connection with the extension of the maturity dates under the Third Amendment, the Company issued to D4 Holdings a warrant, exercisable for ten years, to purchase up to 10,000,000 shares of the Company's common stock at an exercise price of $0.02 per share.

On January 2, 2014, the Company did not repay to D4 Holdings the outstanding principal and interest due under the First Loan Agreement, which constituted an event of default thereunder and a cross-default under all our other loan agreements with D4 Holdings. On March 28, 2014, the Company and its subsidiaries entered into a Forbearance Agreement with D4 Holdings, or the "D4 Holdings Forbearance Agreement". Pursuant to the terms and conditions of the D4 Holdings Forbearance Agreement, D4 Holdings agreed to forbear from taking any action with respect to the events of default until the earlier of (i) December 31, 2014, (ii) the occurrence of a breach or default by the Company or its subsidiaries under the D4 Holdings Forbearance Agreement (which, in the event of certain undertakings of the Company's under the D4 Holdings Forbearance Agreement, are not cured within three days) or (iii) the occurrence of any new or additional event of default under the Company's loan agreements with D4 Holdings. In addition, to the extent not yet perfected the Company and its subsidiaries pledged and granted as a security interest to D4 Holdings all of their right, title and interest in the collateral described in the D4 Holdings Forbearance Agreement. In connection with the D4 Holdings Forbearance Agreement the Company also issued to D4 Holdings a warrant, exercisable for ten years, to purchase up to 10,000,000 shares of our common stock at an exercise price of $0.02 per share.

On June 12, 2014, each of the Company and its wholly-owned subsidiaries Delta Three Israel, Ltd., or "Delta Three Israel", and DME Solutions, Inc., or "DME", and together with the Company and Delta Three Israel, the "deltathree Entities", and ACN, Inc., or "ACN", ACN Europe B.V., or "ACN Europe", ACN Digital Phone Service, LLC, or "ACN Digital Phone Service", and together with ACN, Inc. and ACN Europe, the "ACN Entities", entered into the Amended and Restated Agreement Concerning Outstanding/Future Commissions and Security Agreement, or the "ACN Forbearance Agreement". The ACN Forbearance Agreement amends that certain letter amendment, dated as of April 3, 2012, to each of the Sales Agency Agreement dated as of September 27, 2010, and amended as of January 26, 2011, or the "Sales Agency Agreement", between the deltathree Entities and ACN, and the Introducer Agreement, dated as of April 13, 2011, between the deltathree Entities and ACN Europe B.V., or the "Introducer Agreement", in regards to outstanding commissions due to be paid by the Company to ACN and ACN Europe under those agreements. The ACN Forbearance Agreement also amends that certain License Assignment entered into on February 7, 2013 between the Company and DPS and the outstanding license assignment payment due to be paid by the Company to DPS.

The terms of the ACN Forbearance Amendment provide as follows:

•

commencing with the date of the ACN Forbearance Agreement, a late fee in the amount of one percent (1%) per month accrues on any unpaid commissions and the license assignment payment, and commencing on July 15, 2014, and continuing on the 15^th day of each month thereafter the deltathree Entities are obligated to pay to ACN and ACN Europe the interest that accrued during the previous month;

•

in addition, commencing on July 15, 2014, and continuing on the 15^th day of each month thereafter, the deltathree Entities are required to (i) pay down any outstanding obligations, provided that the amount of each monthly payment will be equal to at least $114,000, and (ii) pay all then-current commissions under the Sales Agency Agreement and Introducer Agreement and any cure periods provided for under the respective agreements for non-payment will no longer apply;

•

so long as the deltathree Entities fulfill the terms of the ACN Forbearance Agreement, the ACN Entities will forbear from exercising any rights they may have for any breach by the deltathree Entities under the Sales Agency Agreement and the Introducer Agreement and permit the Company to pay the license assignment payment over time in accordance with the terms and conditions of the ACN Forbearance Agreement until July 31, 2014, or the "Initial Forbearance Period". Following the expiration of the Initial Forbearance Period, the ACN Entities' obligation to forbear automatically renews on a monthly basis unless terminated by either party under the terms of the ACN Forbearance Agreement until July 15, 2015, following which such the ACN Entities' obligation to forbear will not automatically renew;

•

upon the expiration of the Initial Forbearance Period or any subsequent renewals, unless the ACN Entities' requirement to forbear is renewed, all unpaid obligations will become immediately due and payable;

•

each of Delta Three Israel and DME guaranteed the payment and performance of the Company's obligations under the license assignment and under the ACN Forbearance Agreement;

•

to secure the payment and performance in full of all of their obligations under the agreement, the deltathree Entities granted to the ACN Entities a continuing security interest in, and pledged to the ACN Entities, all of their right, title and interest in, to and under the collateral set forth on Exhibit A of the ACN Forbearance Agreement; and

•

in the event of any Event of Default (as defined in the ACN Forbearance agreement), all unpaid amounts due from the deltathree Entities will become immediately due and payable and the ACN Entities may in their sole discretion terminate the ACN Forbearance Agreement and exercise their rights and pursue all remedies available to them as a secured creditor and at law or in equity.

The Company did not make the payments it was required to make to the ACN Entities on July 15, 2014, described in the first and second bullet points above and is currently in default under the ACN Forbearance Agreement. On September 29, 2014 the Company and ACN entered into the Second Amendment to the ACN Forbearance Agreement. The amendment modified the initial due date of July 15, 2014 under the ACN Forbearance Agreement to December 15, 2014 and provided that the Company is obligated to pay a fee of $50,000 on or before December 15, 2014. The Company has not paid such amount to the ACN Entities, and pursuant to the terms of the Second Amendment a late payment penalty fee of one percent (1%) of such amount is accruing on a monthly basis.

The Company does not know when it will resume making such payments again, and there is no assurance that it will be able to do so in the near future (if at all) or that until such time ACN and ACN Europe will continue to consent to its not making any such required payments and not exercise any rights they may have under the Company's respective agreements with them or under applicable law. In addition, in the event of certain insolvency-related events defined in the agreements, all unpaid amounts will become immediately due and payable effective immediately prior to such event. Such events include the filing of any petition or action for relief under law relating to debtors; application or consent for the appointment of a receiver, trustee, or the like over substantial assets; execution of a general assignment to creditors; general inability to pay debts as they come due; or the filing of any involuntary petition against a party that is not dismissed within 60 days of its filing.

On February 25, 2015, D4 Holdings sent a letter to the Company's board of directors that indicated that within three to four weeks of the date of the letter D4 Holdings intended to initiate a tender offer to purchase all of the outstanding shares of the Company's common stock not owned by D4 Holdings at a purchase price of $0.01 per share in cash. D4 Holdings stated that it is not willing to enter into further forbearance arrangements with the Company or to provide the Company additional financing. Finally, D4 Holdings indicated that, in its capacity as majority stockholder of the Company, it is presently not interested in either selling its shares or voting in favor of any alternative transaction, including a merger or sale of the Company's assets or business or similar transaction.

On March 26, 2015, D4 Holdings sent a letter to the Company's board of directors that indicated that D4 Holdings withdraws its previous offer and instead proposes to acquire the company through a merger of the Company with a newly-formed acquisition subsidiary of D4 Holdings. The transaction will be structured as a stock purchase, pursuant to which D4 Holdings will purchase all of the outstanding shares of the Company's common stock not owned by D4 Holdings. D4 Holdings restated its previous offer of $0.01 per share, to be paid in cash from its own funds, and accordingly there will be no financing contingency. In addition, D4 Holdings will assume all of the Company's outstanding debt, currently valued at approximately $7.9 million. The completion of the transaction will be conditioned upon, among other things, approval by a special committee of the Company's board of directors consisting of independent directors. If the transaction is completed, the Company's common stock will no longer be registered under Section 12 of the Exchange Act.

On April 23, 2015, each of the Deltathree Entities entered into the Amendment to Fourth Loan and Security Agreement and Promissory Note, dated as of April 23, 2015 (the “Amendment”) with D4 Holdings. The Amendment amended the Fourth Loan Agreement and the promissory note executed in connection therewith and the D4 Holdings Forbearance Agreement. Pursuant to the terms of the Amendment, the maximum principal amount under the Fourth Loan Agreement was increased from $300,000 to $500,000 and the principal sum in the related promissory note was amended from $300,000 to $500,000. On April 23, 2015, the Company received $200,000 from D4 Holdings pursuant to a notice of borrowing under the Fourth Loan Agreement, as amended.

As of March 31, 2015, the Company had negative working capital equal to approximately $9.5 million as well as negative stockholders' equity equal to approximately $9.4 million. The Company believes it is probable that it will continue to experience losses and increased negative working capital and negative stockholders' equity in the near future and will not be able to return to positive cash flow before it requires additional cash in the immediate term. The Company may experience difficulties accessing the equity and debt markets and raising additional capital, and there can be no assurance that the Company will be able to raise such additional capital on favorable terms or at all. If additional funds are raised through the issuance of equity securities, the Company's existing stockholders will experience significant further dilution. Because of the Company's significant losses to date and the Company's limited tangible assets, the Company does not fit traditional credit lending criteria, which could make it difficult for the Company to obtain loans or to access the capital markets. If the Company issues additional equity or convertible debt securities to raise funds, the ownership percentage of the Company's existing stockholders would be reduced and they may experience significant dilution. New investors may demand rights, preferences or privileges senior to those of existing holders of the Company's common stock.

The Company believes that, unless it is able to increase revenues and generate additional cash, its current cash and cash equivalents will not satisfy its current projected cash requirements beyond the immediate future. As a result, there is substantial doubt about the Company's ability to continue as a going concern.

In addition, unless the Company is able to increase revenues and generate additional cash flows, based on currently projected cash flows the Company believes that it will be unable to pay future scheduled interest and/or principal payments under the various loan agreements with D4 Holdings as these obligations become due, and beginning January 2013 the Company suspended making scheduled interest payments with the oral consent of D4 Holdings. On January 2, 2014, the Company did not repay to D4 Holdings the outstanding principal and interest due under the First Loan Agreement, which constituted an event of default thereunder and a cross-default under all the Company's other loan agreements with D4 Holdings, following which the Company and its subsidiaries entered into the D4 Holdings Forbearance Agreement. In the event the Company is unable to resume making interest payments and to pay the outstanding principal when due following the termination of the D4 Holdings Forbearance Agreement, if D4 Holdings is not willing to waive compliance or otherwise modify our obligations such that the Company is able to avoid defaulting on such obligations, because D4 Holdings has a lien on all of the Company's assets to secure our obligations under the loan agreements it could take actions under the loan agreements and seek to take possession of or sell the Company's assets to satisfy the Company's obligations thereunder. Any of these actions would likely have an immediate material adverse effect on the Company's business, financial condition or results of operations.

Due to the Company's ongoing losses and reduction in cash, the Company initiated restructuring activities beginning in the second quarter of 2011 in an effort to cut operating costs significantly and better align the Company's operations with its current business model. In accordance with the restructuring, the Company instituted a reduction in force and decreased the number of full time employees from approximately 53 to 32, reduced the salaries of all remaining employees by five percent, and decreased non-material expenses as well as payments to be made to vendors and other third parties. In addition, in December 2013 the Company instituted an additional, smaller reduction in force. As of March 31, 2015, the Company had 11 full time employees. During March 2014, as an incentive for the Company's remaining employees the Company reversed the five-percent reduction in salaries that it instituted in 2011.

In view of the Company's current cash resources, nondiscretionary expenses, debt and near term debt service obligations, the Company has begun exploring strategic alternatives available to it and may explore all such alternatives available to it, including, but not limited to, a sale or merger of the Company, a sale of its assets, recapitalization, partnership, debt or equity financing, voluntary deregistration of its securities, financial reorganization, liquidation and/or ceasing operations. In the event that the Company requires but is unable to secure additional funding, the Company may determine that it is in its best interests to voluntarily seek relief under Chapter 11 of the U.S. Bankruptcy Code. Seeking relief under the U.S. Bankruptcy Code, even if the Company is able to emerge quickly from Chapter 11 protection, could have a material adverse effect on the relationships between the Company and its existing and potential customers, employees, and others. Further, if the Company was unable to implement a successful plan of reorganization, the Company might be forced to liquidate under Chapter 7 of the U.S. Bankruptcy Code. There can be no assurance that exploration of strategic alternatives will result in the Company pursuing any particular transaction or, if the Company pursues any such transaction, that it will be completed.

Use of Estimates

The Company's consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates.

Concentration of Credit and Business Risks

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history, age of the balance and the customer's current credit worthiness, as determined by a review of the customer's current credit information. The Company monitors collections and payments from its customers and maintains an allowance for doubtful accounts based upon historical experience and any specific customer collection issues that have been identified. A considerable amount of judgment is required in assessing the ultimate realization of these receivables. Customer receivables are generally unsecured.

Gross revenues from sales to material customers for each of the three months ended March 31, 2015 and 2014, and accounts receivables as of March 31, 2015 and December 31, 2014, were as follows:

Revenues

Accounts Receivable

Three Months Ended March 31,

As of

Customer

2015

2014

31-Mar-15

31-Dec-14

Reseller A

Reseller B

Affiliate A

Affiliate B

Service Provider A

Earnings per Common Share

Basic earnings per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income by the combination of dilutive common share equivalents, comprised of shares issuable under the Company's stock option and stock incentive compensation plans, and the weighted-average number of shares of common stock outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money shares, which is calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of a share, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the amount of estimated tax benefits that would be recorded in additional paid-in capital, if any, when the share is exercised are assumed to be used to repurchase shares in the current period.

Commitments_and_Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2015
Commitments and Contingencies [Abstract]
Commitments and Contingencies	2	Commitments and Contingencies

	Pursuant to an Assignment and Assumption of Rights, Duties and Interests Agreement between the Company and ACN Digital Phone Services, ACN Digital assigned to the Company (the "Assignment") the licenses it acquired pursuant to that certain Software License and Distribution Agreement, or the "CounterPath Agreement", between ACN Digital and CounterPath Corporation, or "CounterPath", subject to the finalization of the terms of the Assignment. On August 27, 2013, the Company's Board of Directors resolved that the consideration, or the "Consideration", to be paid by the Company to ACN Digital for the Assignment would be equal to $287,000, which ACN Digital informed us was equal to ACN Digital's cost under the CounterPath Agreement, and finalized the terms of the Assignment. Pursuant to a Reassignment and Assumption of Rights, Duties and Interests Agreement entered into between the Company and ACN Digital on March 13, 2014, the Company reassigned to ACN Digital most of the licenses the Company had received pursuant to the Assignment and the amount of the Consideration was reduced to $113,000.

	The amount of the Consideration was added to the outstanding amounts owed by the Company to ACN under, and is to be paid in accordance with, the Sales Agency Agreement between (inter alia) the Company and ACN dated September 27, 2010, as amended by that certain Letter Amendment, dated as of April 3, 2012, and by the ACN Forbearance Agreement.

	Lease Commitments

	The Company leases its executive offices at 1 Bridge Plaza, Fort Lee, New Jersey, and storage and equipment space at 8301 River Road, North Bergen,‎ New Jersey‎. The Company leases each of these facilities on a month-to-month basis. The aggregate rent expense, net, for the two locations for the three months ended March 31, 2015, was $1,000.

	Delta Three Israel leases an office that houses the Company's research and development facilities in Jerusalem, Israel. The term of the lease is until September 30, 2016. Rent expense, net for Delta Three Israel for the three months ended March 31, 2015, was $22,000.

	Legal Proceedings

	On July 5, 2011, the Company received a notice from the New York City Department of Finance, or the Department of Finance, which claimed that the Company had not paid commercial rent tax required under the New York City Administrative Code from June 1998 through May 2008 for the two offices that the Company had leased during that time. The notice stated that the Company is obligated to pay the outstanding tax amounts, as well as significant interest and penalties that were assessed on the unpaid amounts as well as for the failure to file the applicable tax returns. The Company engaged outside counsel, which began discussions with the Department of Finance, and contested the assessment and simultaneously attempted to negotiate a significant reduction in the amounts to be paid. The Company's appeal was rejected in July 2012 by an examiner in the Department of Finance, and the Company subsequently engaged and begun discussions with a manager in the Department of Finance and submitted additional supporting materials.

	In June 2013 the Company submitted a settlement offer, which the Department of Finance did not accept, and discussions continued. In November 2013 the Company filed a request for a conciliation conference with the Department of Finance, which was held in February 2014. Following the conference the parties continued to engage in discussions. The parties met again in September 2014 and the Department of Finance made a counter-offer, which the Company did not accept. On February 24, 2015, the Company received a notice of conciliation decision from the Department of Finance, which stated that at as a result of the Company's failure to accept the Department of Finance's settlement offer the statutory notice issued by the Department of Finance on July 5, 2011 was affirmed. The Company intends to file a petition on or before May 22, 2015 to request a hearing with the New York City Tax Appeals Tribunal.

	The final outcome of this assessment and the Company's negotiations with the Department of Finance cannot be determined at this time. In the event that the Company is required to pay all or most of the amounts claimed by the Department of Finance this would have a material adverse effect on the Company's financial condition. During 2011 the Company recorded $300,000 as a provision for commercial rent tax. The Company has determined that $300,000 is the minimum amount that would settle the claim according to ASC 450-20. The amount claimed by the Department of Finance was approximately $912,000; as a result, there is a reasonable possibility that a loss in excess of the $300,000 would be incurred.

	On April 26, 2015, the Company was informed that a complaint had been filed in the United States District Court for the Eastern District Court of Texas by UrgenSync, LLC against the Company, claiming infringement of a patent claimed to be owned by UrgenSync. The Company is currently investigating the matter and reviewing the alleged complaint and intends to defend itself vigorously.

	In addition, from time to time the Company is a party to legal proceedings, much of which is ordinary routine litigation incidental to the business, and is regularly required to expend time and resources in connection with such proceedings. Accordingly, the Company, in consultation with its legal advisors, accrues amounts that management believes it is probable the Company will be required to expend in connection with all legal proceedings to which it is a party.

	Regulatory Taxes, Fees and Surcharges

	Some state and local regulatory authorities believe they retain jurisdiction to regulate the provision of, and impose taxes, fees and surcharges on, intrastate Internet and VoIP telephony services, and have attempted to impose such taxes, fees and surcharges, such as a fee for providing E-911 service. Rulings by the state commissions on the regulatory considerations affecting Internet and IP telephony services could affect our operations and revenues, and we cannot predict whether state commissions will be permitted to regulate the services we offer in the future.

	The Company paid approximately $6,000 of state and local taxes and other fees during the three months ended March 31, 2015. To the extent the Company increases the cost of services to our customers to recoup some of the costs of compliance this will have the effect of decreasing any price advantage the Company may have over traditional telecommunications companies.

	In addition, it is possible that the Company will be required to collect and remit taxes, fees and surcharges in other states and local jurisdictions where it has not done so, and which such authorities may take the position that it should have collected. If so, they may seek to collect those past taxes, fees and surcharges from the Company and impose fines, penalties or interest charges on the Company. The Company's payment of these past taxes, fees and surcharges, as well as penalties and interest charges, could have a material adverse effect on the Company.

Warrants_and_Convertible_Note

Warrants and Convertible Note	3 Months Ended
Warrants and Convertible Note	Mar. 31, 2015
Warrants and Convertible Note [Abstract]
Warrants and Convertible Note	3	Warrants and Convertible Note

	We accounted for the Second Loan Agreement and the Third Loan Agreement in accordance with "Debt with Conversion and Other Options" [ASC 470-20-25]. We accounted for the Second Loan Agreement as a debt instrument with stock warrants. Under ASC 470-20-25, issuers of certain debt instruments with stock warrants are required to separately account for the liability components and the equity components based on the relative fair value of the debt instrument without the warrants and of the warrants themselves at the time of issuance, which the Company did.

	We accounted for the Third Loan Agreement as a convertible debt instrument with stock warrants and a beneficial conversion features. As required under ASC 470-20-25, the Company separated the debt instruments and the warrants based on their relative fair value for the liability components and for the equity components. The Company concluded that the liability component includes beneficial conversion features. Under ASC 470-20-25, issuers of certain debt instruments with beneficial conversion features need to allocate to an equity component an amount based on the amount that the feature is in-the-money at the commitment date, which the Company did.

	Pursuant to the Third Amendment and the Warrants Amendment, the Company considered the restructured short-term debt to D4 Holdings under the criteria of, and accounted for the restructured short-term debt as, a troubled debt restructuring in accordance with ASC Subtopic 470-60, “Debt-Troubled Debt Restructurings by Debtors”, which requires that the gross future cash flows of principal and interest be reflected in the balance sheet.

	The interest expenses relating to both the contractual interest coupon and amortization of the discount on the liability component are as follows:
			For the three months ended March 31,
			2015		2014
			($ in thousands)
	Contractual interest coupon			180		158
	Amortization of the discount on the liability components			76		49
	Total interest expense on short-term loans			256		207

	On March 28, 2014, we and our subsidiaries entered into the D4 Forbearance Agreement with D4 Holdings. In connection with the extension of the maturity dates under the Third Amendment, the Company issued to D4 Holdings a warrant, exercisable for ten years, to purchase up to 10,000,000 shares of the Company's common stock at an exercise price of $0.02 per share. We accounted for the Warrants amendment as a modification of debt terms as required under EITF 86-18 “Debtor's accounting for a Modification of Debt Terms” and with accordance with ASC 470-50-40. As instructed, we established a new effective interest rate based on the carrying value of the debt and the revised cash flows under the new terms of debt.

Basis_of_Presentation_Policies

Basis of Presentation (Policies)