Nevada
|
4899
|
11-3618510
|
||
(State
or other jurisdiction of incorporation or organization)
|
(Primary
Standard Industrial Classification Code Number)
|
(I.R.S.
Employer Identification Number)
|
Large
accelerated filer o
|
Accelerated
filer
o
|
Non-accelerated
filer o (Do not check if
smaller reporting company)
|
Smaller
reporting company x
|
Title
of each class of securities to be registered
|
Amount to be registered
(1)(2)
|
Proposed maximum offering price
per share (3)
|
Proposed maximum aggregate
offering price (3)
|
Amount
of registration fee
|
||||||||||||
Shares
of Common Stock, $.001 par value per share, issuable upon exercise of
Warrants to purchase Common Stock
|
271,219
|
$
|
2.70
|
$
|
732,291.30
|
$
|
28.78
|
|||||||||
Total
|
271,219
|
$
|
732,291.30
|
$
|
28.78
|
(1)
|
The
shares of our Common Stock being registered hereunder are being registered
for resale by the Selling Stockholders named in the Prospectus. In
accordance with Rule 416(a), the Registrant is also registering
hereunder an indeterminate number of shares that may be issued and resold
to prevent dilution resulting from stock splits, stock dividends or
similar transactions.
|
(2)
|
The
total number of shares of Common Stock being registered is
6,177,239. The registration fee for 5,906,020 of the shares was
paid with the initial filing of the Registration Statement on Form S-1
filed on April 18, 2008. This table reflects the fee applicable
only to the additional 271,219 shares of Common Stock being registered
hereunder.
|
(3)
|
Estimated
solely for the purpose of calculating the amount of the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933. The price per
share and aggregate offering price are based upon the average high and low
prices of our Common Stock on July 31, 2008 as reported on the American
Stock Exchange. It is not known how many shares will be purchased under
this Registration Statement or at what price such shares will be
purchased.
|
The
information in this Prospectus is not complete and may be changed. The
Selling Stockholders may not distribute or otherwise sell these securities
until the Registration Statement filed with the Securities and Exchange
Commission is effective. This Prospectus is not an offer to sell these
securities, and it is not soliciting offers to buy these securities in any
state where the offer or sale is not
permitted.
|
Page
|
|
5
|
|
8
|
|
12
|
|
13
|
|
13
|
|
13
|
|
13
|
|
13
|
|
14
|
|
25
|
|
27
|
|
30
|
|
32
|
|
32
|
|
32
|
|
32
|
|
51
|
|
56
|
|
F-1
|
|
57
|
|
77
|
|
77
|
|
77
|
|
83
|
|
92
|
|
95
|
|
108
|
|
108
|
|
Part
II - Information not Required in Prospectus
|
|
110
|
|
110
|
|
111
|
|
121
|
|
126
|
|
128
|
Shares
of Common Stock, $0.001 par value per share, offered by the Selling
Stockholders:
|
6,177,239 shares
|
Shares
of Common Stock, $0.001 par value per share, outstanding prior to this
offering:
|
18,376,075
shares (30,656,784 shares on a fully diluted basis)
|
Shares
of Common Stock, $0.001 par value per share, outstanding after this
offering:
|
18,376,075
shares (30,656,784 shares on a fully diluted
basis)
|
Use
of proceeds:
|
We
will not receive any of the proceeds from the sale of shares of common
stock by the Selling Stockholders identified in this Prospectus. The
Selling Stockholders will receive all net proceeds from the sale of the
shares of our Common Stock offered by this Prospectus.
We
will receive proceeds from the exercise of any warrants and options if and
to the extent that any such warrants and options are exercised by the
Selling Stockholders.
|
Risk
Factors:
|
An
investment in our Common Stock is subject to significant risks. You should
carefully consider the information set forth in the “Risk Factors” section
beginning on page 8 as well as other information set forth in this
Prospectus, including our financial statements and related
notes.
|
Dividend
policy:
|
We
have not paid any dividends on our Common Stock during the last three
fiscal years, and we do not anticipate the declaration or payment of any
dividends at any time in the foreseeable future.
|
American
Stock Exchange Symbol:
|
XFN
|
IN
POUNDS and US DOLLARS
|
December
31, 2007
(Audited)
|
December
31, 2006
(Audited)
|
December
31, 2005
(Audited)
|
December
31, 2004
(Audited)
|
December
31, 2003
(Audited)
|
|||||||||||||||
Revenues
|
£
|
19,353,771
|
£
|
14,113,748
|
£
|
11,330,116
|
£
|
7,282,181
|
||||||||||||
$
|
44,723,934
|
$
|
37,914,037
|
$
|
24,346,215
|
$
|
21,867,124
|
$
|
12,962,282
|
|||||||||||
Operating
Profit (loss)
|
|
|
£
|
528,342
|
£
|
(45,746
|
)
|
£
|
112,782
|
£
|
666,367
|
|||||||||
$
|
(1,029,442
|
)
|
$
|
1,035,022
|
$
|
(78,913
|
)
|
$
|
217,670
|
$
|
1,186,134
|
|||||||||
Net
Income (loss)
|
|
|
£
|
337,262
|
£
|
26,078
|
£
|
39,874
|
£
|
421,445
|
||||||||||
$
|
(1,283,892
|
)
|
$
|
660,696
|
$
|
44,983
|
$
|
76,958
|
$
|
750,172
|
||||||||||
Basic
EPS
|
|
|
£
|
0.033
|
£
|
0.004
|
£
|
0.007
|
£
|
0.08
|
||||||||||
$
|
(0.109
|
)
|
$
|
0.065
|
$
|
0.007
|
$
|
0.013
|
$
|
0.15
|
||||||||||
Total
Assets
|
|
£
|
16,859,083
|
£
|
11,907,114
|
£
|
5,343,284
|
£
|
3,290,227
|
|||||||||||
$
|
67,049,327
|
$
|
33,026,944
|
$
|
20,539,772
|
$
|
10,312,537
|
$
|
5,856,603
|
|||||||||||
Long-Term
Liability
|
£
|
1,191,337
|
£
|
1,471,211
|
£
|
651,863
|
£
|
125,838
|
||||||||||||
$
|
23,279,296
|
$
|
2,333,830
|
$
|
2,537,839
|
$
|
1,258,096
|
$
|
223,991
|
·
|
any
actual or anticipated fluctuations in our or our competitors' revenues and
operating results;
|
·
|
shortfalls
in our operating results from levels forecast by us or by securities
analysts;
|
·
|
public
announcements concerning us or our
competitors;
|
·
|
the
introduction or market acceptance of new products or service offerings by
us or by our competitors;
|
·
|
changes
in product pricing policies by us or our
competitors;
|
·
|
changes
in security analysts' financial
estimates;
|
·
|
changes
in accounting principles;
|
·
|
sales
of our shares by existing shareholders;
and
|
·
|
the
loss of any of our key personnel.
|
·
|
1.0%
of the number of shares of our Common Stock then outstanding;
and
|
·
|
if
the shares of Common Stock are listed on a national securities exchange,
the average weekly trading volume of the shares during the four calendar
weeks preceding the filing of a notice on Form 144 with respect to the
sale.
|
Name
of Selling
Stockholder
|
Number
of Shares Beneficially Owned Prior to the Offering
|
Percentage
of Shares Beneficially Owned Prior to the Offering
|
Number
of Shares
Being
Offered
Hereby
|
Number
of Shares to be Beneficially Owned After the Offering
|
Percentage
of Shares to be Beneficially Owned After the Offering
|
|||||||||||||||
Barbara
Baldwin(1)
|
912,773
|
4.90
|
%
|
250,000
|
662,773
|
3.56
|
%
|
|||||||||||||
Brad
Worthington(2)
|
454,787
|
2.42
|
%
|
400,000
|
54,787
|
0.29
|
%
|
|||||||||||||
Jerry
Hoover(3)
|
411,928
|
2.19
|
%
|
400,000
|
11,928
|
0.06
|
%
|
|||||||||||||
Total:
|
1,779,488
|
9.16
|
%
|
1,050,000
|
729,488
|
3.76
|
%
|
(1)
|
Ms.
Baldwin is the President, Chief Executive Officer and Director of Xfone
USA, Inc. and NTS Communications, Inc., two of the Company’s wholly owned
subsidiaries. The address for Ms. Baldwin is 6005 88th Street, Lubbock, TX
79424, U.S.A.
|
(2)
|
Mr.
Worthington is an Executive Vice President, Chief Operating Officer and
Director of NTS Communications, Inc. The address for Mr. Worthington is
3517 158th Street, Lubbock, TX 79423,
U.S.A.
|
(3)
|
Mr.
Hoover is an Executive Vice President, and Chief Financial Officer of NTS
Communications, Inc. The address for Mr. Hoover is 4818 100th Street,
Lubbock, TX 79424, U.S.A.
|
Name
of Selling
Stockholder
|
Number
of Shares Purchased as part of the Units in connection with the December
13, 2007 Subscription Agreements
|
Number
of Shares Issuable Upon Exercise of Warrants received in connection with
the December 13, 2007 Subscription Agreements
|
Total
Number of Shares Beneficially Owned Prior to the Offering
|
Percentage
of Shares Beneficially Owned Prior to this Offering
|
Number
of Shares
Being
Offered
Hereby
|
Number
of Shares to be Beneficially Owned After the Offering
|
Percentage
of Shares to be Beneficially Owned After the Offering
|
|||||||||||||||||||||
Atkinson
Investment Management(1)(2)
|
20,115
|
10,057
|
49,181
|
0.27
|
%
|
30,172
|
19,009
|
0.10
|
%
|
|||||||||||||||||||
Benjamin
Atkinson & Paula Atkinson JTWROS(1)(2)
|
1,645
|
823
|
2,468
|
0.01
|
%
|
2,468
|
0
|
--
|
||||||||||||||||||||
Mr.
Neil J. Gagnon & Mrs. Lois E. Gagnon JTWROS(1)(3)
|
3,435
|
1,717
|
5,152
|
0.03
|
%
|
5,152
|
0
|
--
|
||||||||||||||||||||
Gagnon
Securities LLC P/S Plan & Trust DTD 4/26/01, Neil Gagnon & Maureen
Drew(1)(3)
|
1,165
|
583
|
1,748
|
0.01
|
%
|
1,748
|
0
|
--
|
||||||||||||||||||||
Mrs.
Wendy L. Allen & Mr. Peter L. Allen JTWROS(1)(4)
|
2,500
|
1,250
|
7,250
|
0.04
|
%
|
3,750
|
3,500
|
(11)
|
0.02
|
%
|
||||||||||||||||||
Brian
Joseph Gagnon(1)(5)
|
5,000
|
2,500
|
14,500
|
0.08
|
%
|
7,500
|
7,000
|
(11)
|
0.04
|
%
|
||||||||||||||||||
Darwin
Partnership(1)(3)
|
20,000
|
10,000
|
61,771
|
0.34
|
%
|
30,000
|
31,771
|
(11)
|
0.17
|
%
|
||||||||||||||||||
Fallen
Angel Partnership(1)(3)
|
40,000
|
20,000
|
109,570
|
0.60
|
%
|
60,000
|
49,570
|
(11)
|
0.27
|
%
|
||||||||||||||||||
Gagnon
Family Partnership(1)(3)
|
35,000
|
17,500
|
107,500
|
0.58
|
%
|
52,500
|
55,000
|
(11)
|
0.30
|
%
|
||||||||||||||||||
The
Lois E. & Neil J. Gagnon Foundation Inc. (1)(3)
|
20,690
|
10,345
|
66,035
|
0.36
|
%
|
31,035
|
35,000
|
(11)
|
0.19
|
%
|
||||||||||||||||||
Mr.
Neil Gagnon(1)
|
150,000
|
75,000
|
430,000
|
2.33
|
%
|
225,000
|
205,000
|
(11)
|
1.11
|
%
|
||||||||||||||||||
Neil
J. Gagnon IRA/R/O Bear Stearns Sec Corp Cust(1)(3)
|
25,000
|
12,500
|
72,500
|
0.39
|
%
|
37,500
|
35,000
|
(11)
|
0.19
|
%
|
||||||||||||||||||
Mrs.
Lois E. Gagnon(1)(3)
|
100,000
|
50,000
|
295,000
|
1.60
|
%
|
150,000
|
145,000
|
(11)
|
0.79
|
%
|
||||||||||||||||||
Mrs.
Virginia Gagnon(1)(3)
|
1,200
|
600
|
3,300
|
0.02
|
%
|
1,800
|
1,500
|
(11)
|
0.01
|
%
|
||||||||||||||||||
Gagnon
1999 Grandchildren's Trust STS 2/1/99 Maureen Drew
TTEE(1)(6)
|
32,000
|
16,000
|
91,426
|
0.50
|
%
|
48,000
|
43,426
|
(11)
|
0.24
|
%
|
||||||||||||||||||
Gagnon
Securities LLC P/S Plan & Trust DTD 10/1/00 N. Gagnon &
M. Drew TTEES(1)(3)
|
1,600
|
800
|
5,900
|
0.03
|
%
|
2,400
|
3,500
|
(11)
|
0.02
|
%
|
||||||||||||||||||
Gagnon
Investment Associates Master Fund(1)(3)
|
326,000
|
163,000
|
922,446
|
4.98
|
%
|
489,000
|
433,446
|
(11)
|
2.34
|
%
|
||||||||||||||||||
Amy
Lynn Stauffer(1)(4)
|
3,300
|
1,650
|
9,950
|
0.05
|
%
|
4,950
|
5,000
|
(11)
|
0.03
|
%
|
||||||||||||||||||
Darwin
Partnership(1)(7)
|
31,515
|
15,757
|
79,036
|
0.43
|
%
|
47,272
|
31,764
|
0.17
|
%
|
|||||||||||||||||||
Fallen
Angel Partnership(1)(7)
|
54,365
|
27,183
|
137,833
|
0.75
|
%
|
81,548
|
56,285
|
0.31
|
%
|
|||||||||||||||||||
Neil
J. Gagnon IRA(1)(3)
|
6,490
|
3,245
|
9,735
|
0.05
|
%
|
9,735
|
0
|
--
|
Mr.
Neil Gagnon & Mrs. Lois Gagnon JTWROS(1)(3)
|
7,785
|
3,892
|
11,677
|
0.06
|
%
|
11,677
|
0
|
--
|
||||||||||||||||||||
Gagnon
Securities LLC P/S Plan and Trust DTD 4/26/01 Neil Gagnon &
Maureen Drew(1)(3)
|
685
|
343
|
1,028
|
0.01
|
%
|
1,028
|
0
|
--
|
||||||||||||||||||||
Upland
Associates L. P. (1)(7)
|
59,755
|
29,877
|
148,465
|
0.81
|
%
|
89,632
|
48,833
|
0.27
|
%
|
|||||||||||||||||||
Maureen
Keyes Revocable Living Trust Agreement DTD 6/28/07, Maureen Keyes
Trustee(1)(8)
|
640
|
320
|
960
|
0.01
|
%
|
960
|
0
|
--
|
||||||||||||||||||||
Mr,
Dwight Lee IRA/SEP Bear Stearns Sec
CorpCust(1)(7)
|
115
|
58
|
338
|
0.00
|
%
|
173
|
165
|
0.00
|
%
|
|||||||||||||||||||
Mr.
Henry C. Beinstein(1)(9)
|
50,000
|
25,000
|
75,000
|
0.41
|
%
|
75,000
|
0
|
--
|
||||||||||||||||||||
XFN-RLSI
Investments, LLC(10)
|
1,600,000
|
800,000
|
3,000,000
|
15.64
|
%
|
2,400,000
|
600,000
|
(11)
|
3.13
|
%
|
||||||||||||||||||
TOTAL:
|
2,600,000
|
1,300,000
|
5,719,769
|
29.07
|
%
|
3,900,000
|
1,809,769
|
9.20
|
%
|
(1)
|
The
address for these Selling Stockholders is 1370 Avenue of the Americas,
24th Floor, New
York, NY 10019.
|
(2)
|
We
have been advised that Benjamin Atkinson exercises voting and investment
control over the shares owned by this selling stockholder. Mr.
Atkinson is a principal of FINRA registered broker-dealer, Gagnon
Securities, LLC.
|
(3)
|
We
have been advised that Neil Gagnon exercises voting and investment control
over the shares owned by this selling stockholder. Mr. Gagnon is principal
of FINRA registered broker-dealer, Gagnon Securities,
LLC.
|
(4)
|
Ms.
Wendy Allen and Ms. Any Lynn Stauffer are emancipated daughters of Mr.
Neil Gagnon, a principal of FINRA registered broker-dealer Gagnon
Securities LLC.
|
(5)
|
Mr.
Brian Gagnon is a principal of FINRA registered broker-dealer Gagnon
Securities, LLC.
|
(6)
|
We
have been advised that Maureen Drew exercises voting and investment
control over the shares owned by this selling stockholder. Ms. Drew is a
principal of FINRA registered broker-dealer Gagnon Securities,
LLC.
|
(7)
|
We
have been advised that Dwight Lee exercises voting and investment control
over the shares owned by this selling stockholder. Mr. Lee is a principal
of FINRA registered broker-dealer Gagnon Securities,
LLC.
|
(8)
|
We
have been advised that Maureen Keyes exercises voting and investment
control over the shares owned by this selling stockholder. Ms. Keyes is an
employee of FINRA registered broker-dealer Gagnon Securities,
LLC.
|
(9)
|
Mr.
Beinstein is a principal of FINRA registered broker-dealer Gagnon
Securities, LLC. Certain of these shares have been transferred
to memebers of Mr. Beinstein’s immediate
family.
|
(10)
|
The
address for this selling stockholder is 1400 Gulfshore Blvd. N., Suite
148, Naples, Florida 34102. This entity is affiliated with
Richard L. Scott Investments, LLC, a U.S. institutional
investor. We have been advised that Richard L. Scott exercises
voting and investment control over the shares owned by this selling
stockholder.
|
(11)
|
Represents
shares purchased by the Selling Stockholders in the open market, as well
as shares purchased in an offering of the Company’s common stock on
October 23, 2007, and on November 4, 2007. The October 23,
2007 and Novem ber 4, 2007 offerings were made by the Company, acting
without a placement agent, pursuant to the Registrant’s Registration
Statement on Form SB-2 (File No. 333-143618) which was declared effective
by the U.S. Securities and Exchange Commission on August 6,
2007. Following the effectiveness of the Registration Statement
on Form SB-2, the Company did not file a prospectus supplement within the
required time period containing the final fixed offering price of $3.00
per share due to an unintentional error. This constituted a
technical violation of Section 5(b)(2) of the Securities Act. The Company
filed Current Reports on Form 8-K on October 23, 2007 and November 5, 2007
following its entry into the related subscription agreements with the
purchasers of the shares, and filed a Post-Effective Amendment on November
7, 2007, each of which disclosed such final fixed price. The
Post-Effective Amendment filed on November 7, 2007 was never declared
effective by the SEC. The Company is relying upon the cure
provision provided by Rule 424(b)(8) under the Securities Act in
order to cure such violation. The Company believes that such
violation was cured under Rule 424(b)(8) upon filing of the Post-Effective
Amendment, as it made a good faith effort to file such Post-Effective
Amendment as soon as practicable upon discovery of the unintentional
failure to file the prospectus supplement, and because the filing with the
SEC of the Post-Effective Amendment and other filings related to the sale
of the shares satisfied the prospectus delivery requirements of Section
5(b)(2) under the “access equals delivery” model adopted by the
SEC.
|
Name
of Selling
Stockholder
|
Number
of Shares Beneficially Owned Prior to the Offering
|
Percentage
of Shares Beneficially Owned Prior to the Offering
|
Number
of Shares
Being
Offered
Hereby
|
Number
of Shares to be Beneficially Owned After the Offering
|
Percentage
of Shares to be Beneficially Owned After the Offering
|
|||||||||||||||
Provident
fund of the employees of the Hebrew University of Jerusalem
Ltd(1)
|
10,000
|
0.05
|
%
|
10,000
|
0
|
--
|
||||||||||||||
Millennium
provident/education funds(2)
|
20,000
|
0.11
|
%
|
20,000
|
0
|
--
|
||||||||||||||
Millennium
provident funds(2)
|
45,000
|
0.24
|
%
|
45,000
|
0
|
--
|
||||||||||||||
Millennium
employees termination funds(2)
|
1,900
|
0.01
|
%
|
1,900
|
0
|
--
|
||||||||||||||
Shomera
Insurance Co. Ltd(3)
|
10,000
|
0.05
|
%
|
10,000
|
0
|
--
|
||||||||||||||
Bank
of Jerusalem(4)
|
19,500
|
0.11
|
%
|
19,500
|
0
|
--
|
||||||||||||||
Provident
fund of the Union Bank(5)
|
49,598
|
0.27
|
%
|
9,000
|
40,598
|
(19)
|
0.22
|
%
|
||||||||||||
Hilat
Shoam - Shoam tagmulim(6)
|
8,350
|
0.05
|
%
|
8,350
|
0
|
--
|
||||||||||||||
Hilat
Shoam - Shoam pitsuim(6)
|
6,000
|
0.03
|
%
|
6,000
|
0
|
--
|
||||||||||||||
Hilat
Shoam - Shoam ishtalmut(6)
|
2,150
|
0.01
|
%
|
2,150
|
0
|
--
|
||||||||||||||
Prisma
provident fund - Prisma Si'on - Savings fund for self-employed
persons(7)
|
10,000
|
0.05
|
%
|
10,000
|
0
|
--
|
||||||||||||||
Prisma
provident fund - Prisma Ya'ad - Savings fund for self-employed
persons(7)
|
3,000
|
0.02
|
%
|
3,000
|
0
|
--
|
||||||||||||||
Prisma
provident fund - Prisma Pitzuyim - General Track II - Central Severance
Pay Fund(7)
|
25,000
|
0.14
|
%
|
25,000
|
0
|
--
|
||||||||||||||
Prisma
provident fund - Signon Savings Fund Bond Track(7)
|
1,500
|
0.01
|
%
|
1,500
|
0
|
--
|
||||||||||||||
Prisma
provident fund - Signon Savings Fund Index Track(7)
|
3,500
|
0.02
|
%
|
3,500
|
0
|
--
|
||||||||||||||
Prisma
provident fund - Prisma Zahav - Cautious Investments(7)
|
2,500
|
0.01
|
%
|
2,500
|
0
|
--
|
||||||||||||||
Prisma
provident fund - Prisma Katzir(7)
|
9,500
|
0.05
|
%
|
9,500
|
0
|
--
|
||||||||||||||
Prisma
provident fund - Prisma Teutsa(7)
|
5,000
|
0.03
|
%
|
5,000
|
0
|
--
|
||||||||||||||
Prisma
provident fund - Prisma Keren Or(7)
|
30,000
|
0.16
|
%
|
30,000
|
0
|
--
|
||||||||||||||
Union
bank of Israel – Nostro(8)
|
10,500
|
0.06
|
%
|
10,500
|
0
|
--
|
||||||||||||||
IBI
provident fund general(9)
|
9,870
|
0.05
|
%
|
9,870
|
0
|
--
|
||||||||||||||
Perfect
provident fund Ltd - Perfect Central Compensation Fund(10)
|
1,300
|
0.01
|
%
|
1,300
|
0
|
--
|
||||||||||||||
Perfect
provident fund Ltd - Perfect Provident Fund(10)
|
28,950
|
0.16
|
%
|
28,950
|
0
|
--
|
||||||||||||||
Perfect
provident fund Ltd - Perfect Study Fund(10)
|
17,350
|
0.09
|
%
|
17,350
|
0
|
--
|
||||||||||||||
Tamir
Fishman Provident and Education Funds Ltd., for Tamir Fishman Severance
Pay Fund – General(11)
|
920
|
0.01
|
%
|
920
|
0
|
--
|
||||||||||||||
Tamir
Fishman Provident and Education Funds Ltd., for Tamir Fishman Provident
Fund – General(11)
|
9,690
|
0.05
|
%
|
9,690
|
0
|
--
|
||||||||||||||
Tamir
Fishman Provident and Education Funds Ltd., for Tamir Fishman Provident
Fund – Shares(11)
|
810
|
0.00
|
%
|
810
|
0
|
--
|
Tamir
Fishman Provident and Education Funds Ltd., for Tamir Fishman Provident
Fund – Bonds(11)
|
1,360
|
0.01
|
%
|
1,360
|
0
|
|
--
|
|||||||||||||
Tamir
Fishman Provident and Education Funds Ltd., for Tamir Fishman Education
Fund – General(11)
|
7,640
|
0.04
|
%
|
7,640
|
0
|
--
|
||||||||||||||
Tamir
Fishman Provident and Education Funds Ltd., for Tamir Fishman Education
Fund – Shares(11)
|
510
|
0.00
|
%
|
510
|
0
|
--
|
||||||||||||||
Tamir
Fishman Provident and Education Funds Ltd., for Tamir Fishman Severance
Pay Fund – Value(11)
|
1,060
|
0.01
|
%
|
1,060
|
0
|
--
|
||||||||||||||
Tamir
Fishman Provident and Education Funds Ltd., for Tamir Fishman Education
Fund – Bonds(11)
|
810
|
0.00
|
%
|
810
|
0
|
--
|
||||||||||||||
Menora
Mivtachim Participating Policies(12)
|
70,000
|
0.38
|
%
|
70,000
|
0
|
--
|
||||||||||||||
Menora
Mivtachim Participating Policies(12)
|
6,000
|
0.03
|
%
|
6,000
|
0
|
--
|
||||||||||||||
Menora
Mivtachim Participating Policies(12)
|
4,000
|
0.02
|
%
|
4,000
|
0
|
--
|
||||||||||||||
Menora
Mivtachim Insurance ltd(12)
|
40,000
|
0.22
|
%
|
40,000
|
0
|
--
|
||||||||||||||
Menora
mivtachim heshtalmut ("Mivtachim" - Maba Le'mishtalem)
(12)
|
5,000
|
0.03
|
%
|
5,000
|
0
|
--
|
||||||||||||||
Masad
heshtalmut(12)
|
800
|
0.00
|
%
|
800
|
0
|
--
|
||||||||||||||
Morag
- meerkazit le'pizuim(12)
|
2,500
|
0.01
|
%
|
2,500
|
0
|
--
|
||||||||||||||
Menora
Gemel Amir Dalled(12)
|
6,000
|
0.03
|
%
|
6,000
|
0
|
--
|
||||||||||||||
Menora
Gemel Amir Allef(12)
|
700
|
0.00
|
%
|
700
|
0
|
--
|
||||||||||||||
Menora
Gemel Peles Allef(12)
|
1,000
|
0.01
|
%
|
1,000
|
0
|
--
|
||||||||||||||
Menora
Gemel Peles Dalled(12)
|
3,000
|
0.02
|
%
|
3,000
|
0
|
--
|
||||||||||||||
Menora
Gemel clali(12)
|
4,000
|
0.02
|
%
|
4,000
|
0
|
--
|
||||||||||||||
Menora
Gemel General B(12)
|
1,500
|
0.01
|
%
|
1,500
|
0
|
--
|
||||||||||||||
Menora
heshtalmut clali(12)
|
3,000
|
0.02
|
%
|
3,000
|
0
|
--
|
||||||||||||||
Menora
heshtalmut General B(12)
|
1,000
|
0.01
|
%
|
1,000
|
0
|
--
|
||||||||||||||
Menora
merkazit lepituim clali(12)
|
1,300
|
0.01
|
%
|
1,300
|
0
|
--
|
||||||||||||||
Menora
merkazit lepituim clali b(12)
|
200
|
0.00
|
%
|
200
|
0
|
--
|
||||||||||||||
Hadas
Mercantile provident fund – Index.(13)
|
1,100
|
0.01
|
%
|
1,100
|
0
|
--
|
||||||||||||||
Hadas
Mercantile education fund - General. (13)
|
15,350
|
0.08
|
%
|
15,350
|
0
|
--
|
||||||||||||||
Hadas
Mercantile education fund – Bonds. (13)
|
300
|
0.00
|
%
|
300
|
0
|
--
|
||||||||||||||
Hadas
Mercantile illnes payment fund. (13)
|
850
|
0.00
|
%
|
850
|
0
|
--
|
||||||||||||||
Hadas
Mercantile provident fund - General. (13)
|
8,000
|
0.04
|
%
|
8,000
|
0
|
--
|
||||||||||||||
Mercantile
Workers Provident fund. (13)
|
5,500
|
0.03
|
%
|
5,500
|
0
|
--
|
||||||||||||||
Bar
Yaziv Provident fund Ltd. (13)
|
42,000
|
0.23
|
%
|
42,000
|
0
|
--
|
||||||||||||||
Hadas
Mercantile central severance fund. (13)
|
5,900
|
0.03
|
%
|
5,900
|
0
|
--
|
||||||||||||||
Yevul
Kibutz Members Provident fund. (13)
|
1,000
|
0.01
|
%
|
1,000
|
0
|
--
|
||||||||||||||
Keren
hahisachon litsva hakeva limited(14)
|
28,600
|
0.16
|
%
|
28,600
|
0
|
--
|
Migdal
Platinum Tagmulim Klali(15)
|
5,300
|
0.03
|
%
|
5,300
|
0
|
--
|
||||||||||||||
Migdal
Platinum Kaal Maoz(15)
|
3,800
|
0.02
|
%
|
3,800
|
0
|
--
|
||||||||||||||
Migdal
Gemel Platinum Ltd –Bonds(15)
|
7,500
|
0.04
|
%
|
7,500
|
0
|
--
|
||||||||||||||
Migdal
Gemel Platinum Ltd – General(15)
|
5,300
|
0.03
|
%
|
5,300
|
0
|
--
|
||||||||||||||
Yashir
investment house (provident funds) trustee account for Yashir hishtalmut
klali(16)
|
9,900
|
0.05
|
%
|
9,900
|
0
|
--
|
||||||||||||||
Yashir
investment house (provident funds) trustee account for Yashir gemel
klali(16)
|
16,000
|
0.09
|
%
|
16,000
|
0
|
--
|
||||||||||||||
Yashir
investment house (provident funds) trustee account for Yashir pitzuim
klali(16)
|
1,680
|
0.01
|
%
|
1,680
|
0
|
--
|
||||||||||||||
Yashir
investment house (provident funds) trustee account for Yashir hishtalmut
agach(16)
|
900
|
0.00
|
%
|
900
|
0
|
--
|
||||||||||||||
Yashir
investment house (provident funds) trustee account for Yashir gemel
agach(16)
|
1,400
|
0.01
|
%
|
1,400
|
0
|
--
|
||||||||||||||
Yashir
investment house (provident funds) trustee account for etgarim gemel
klali(16)
|
9,540
|
0.05
|
%
|
9,540
|
0
|
--
|
||||||||||||||
Yashir
investment house (provident funds) trustee account for etgarim pitzuim
klali(16)
|
4,380
|
0.02
|
%
|
4,380
|
0
|
--
|
||||||||||||||
Yashir
investment house (provident funds) trustee account for etgarim gemel
madad(16)
|
220
|
0.00
|
%
|
220
|
0
|
--
|
||||||||||||||
Yashir
investment house (provident funds) trustee account for etgarim pitzuim
madad(16)
|
1,030
|
0.01
|
%
|
1,030
|
0
|
--
|
||||||||||||||
Yashir
I.D.I insurance company - Nostro(16)
|
21,200
|
0.11
|
%
|
21,200
|
0
|
--
|
||||||||||||||
Yashir
I.D.I insurance company trustee account for agach
klali(16)
|
1,600
|
0.01
|
%
|
1,600
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir miron(16)
|
16,200
|
0.09
|
%
|
16,200
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir merkazit le
Pitzuim(16)
|
13,000
|
0.07
|
%
|
13,000
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir atidot(16)
|
13,000
|
0.07
|
%
|
13,000
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir Mishtalem B(16)
|
12,500
|
0.07
|
%
|
12,500
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir teuza(16)
|
300
|
0.00
|
%
|
300
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir matan(16)
|
300
|
0.00
|
%
|
300
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir menifa(16)
|
300
|
0.00
|
%
|
300
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir keren
hashefa(16)
|
21,000
|
0.11
|
%
|
21,000
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir Mishtalem A(16)
|
18,000
|
0.10
|
%
|
18,000
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir hamelacha(16)
|
200
|
0.00
|
%
|
200
|
0
|
--
|
||||||||||||||
Yashir
Provident fund trustee account for Yashir pitzuim
hamelacha(16)
|
200
|
0.00
|
%
|
200
|
0
|
--
|
||||||||||||||
The
Phoenix Insurance Company Ltd - Unit
Link(17)
|
38,000
|
0.21
|
%
|
38,000
|
0
|
--
|
||||||||||||||
The
Phoenix Provident Fund(17)
|
7,600
|
0.04
|
%
|
7,600
|
0
|
--
|
The
Phoenix Provident Fund - For Education(17)
|
11,400
|
0.06
|
%
|
11,400
|
0
|
--
|
||||||||||||||
The
Phoenix Pension and provident fund(17)
|
38,000
|
0.21
|
%
|
38,000
|
0
|
--
|
||||||||||||||
Harel
Insurance Company Ltd(18)
|
28,000
|
0.15
|
%
|
28,000
|
0
|
--
|
||||||||||||||
Harel
Insurance Company Ltd(18)
|
11,900
|
0.06
|
%
|
11,900
|
0
|
--
|
||||||||||||||
Dikla
Insurance Company Ltd(18)
|
2,400
|
0.01
|
%
|
2,400
|
0
|
--
|
||||||||||||||
Dikla
Insurance Company Ltd(18)
|
660
|
0.00
|
%
|
660
|
0
|
--
|
||||||||||||||
Harel
Pension Fund Management Company Ltd(18)
|
16,700
|
0.09
|
%
|
16,700
|
0
|
--
|
||||||||||||||
Harel
Pension Fund Management Company Ltd(18)
|
400
|
0.00
|
%
|
400
|
0
|
--
|
||||||||||||||
Harel
Insurance Company Ltd(18)
|
4,360
|
0.02
|
%
|
4,360
|
0
|
--
|
Harel
Insurance Company Ltd(18)
|
180
|
0.00
|
%
|
180
|
0
|
--
|
||||||||||||||
Harel
Insurance Company Ltd(18)
|
120
|
0.00
|
%
|
120
|
0
|
--
|
||||||||||||||
Nativ
Keren Pensia Shel Poalei Veovdei Mifelei Meshek Hahistadrut
Ltd(18)
|
2,000
|
0.01
|
%
|
2,000
|
0
|
--
|
||||||||||||||
Harel
Provident Funds ltd(18)
|
25,280
|
0.14
|
%
|
25,280
|
0
|
--
|
||||||||||||||
Harel
Provident Funds ltd(18)
|
5,740
|
0.03
|
%
|
5,740
|
0
|
--
|
||||||||||||||
Harel
Provident Funds ltd(18)
|
400
|
0.00
|
%
|
400
|
0
|
--
|
||||||||||||||
Atidit
Provident Funds ltd(18)
|
160
|
0.00
|
%
|
160
|
0
|
--
|
||||||||||||||
Harel
Provident Funds ltd(18)
|
2,800
|
0.02
|
%
|
2,800
|
0
|
-
|
||||||||||||||
Harel
Provident Funds ltd(18)
|
2,960
|
0.02
|
%
|
2,960
|
0
|
--
|
||||||||||||||
Harel
Provident Funds ltd(18)
|
380
|
0.00
|
%
|
380
|
0
|
--
|
||||||||||||||
Atidit
Provident Funds ltd(18)
|
180
|
0.00
|
%
|
180
|
0
|
--
|
||||||||||||||
Atidit
Provident Funds ltd(18)
|
100
|
0.00
|
%
|
100
|
0
|
--
|
||||||||||||||
Atidit
Provident Funds ltd(18)
|
280
|
0.00
|
%
|
280
|
0
|
--
|
||||||||||||||
Total
|
996,618
|
5.16
|
%
|
956,020
|
40,598
|
0.21
|
%
|
(1)
|
The
address for this selling stockholder is High Tech Village 2/2, Campus
Giv'at Ram, Jerusalem, 91904,
Israel.
|
(2)
|
The
address for this selling stockholder is 14 Nahmani St. (Ofer House), 9th
Floor, Tel Aviv, 65794, Israel.
|
(3)
|
The
address for this selling stockholder is 23 Hasibim St. (Shomera house),
3rd Floor, Petach Tikva, 49170, Israel. We have been advised
that Menora Mivtachim Insurance Ltd exercises voting and investment
control over the shares beneficially owned by this selling
stockholder.
|
(4)
|
The
address for this selling stockholder is 9 Ahad Ha-am St. (Shalom Tower),
Tel Aviv, 61291, Israel.
|
(5)
|
The
address for this selling stockholder is 9 Ahad Ha-am St. (Shalom Tower),
19th Floor, Tel
Aviv, 65251, Israel.
|
(6)
|
The
address for this selling stockholder is Ben Gourion 2 (Tower B.S.R 1),
Ramat-Gan, 52573, Israel. We have been advised that the
Managing Company of this Selling Stockholder is Gaon Gemel
Ltd.
|
(7)
|
The
address for this selling stockholder is 52 Menachem Begin St. (Sonol
Tower), 19th Floor, Tel Aviv, 67137, Israel. We have been
advised that the Managing Company of this Selling Stockholder is Prizma
Provident Funds Ltd / Prizma New Provident Funds
Ltd.
|
(8)
|
The
address for this selling stockholder is 9 Ahad Ha-am St. (Shalom Tower),
1st Floor, Tel Aviv, 65251, Israel.
|
(9)
|
The
address for this selling stockholder is 9 Ahad Ha-am St. (Shalom Tower),
27th Floor, Tel Aviv, 61291, Israel. We have been advised that
the Managing Company of this Selling Stockholder is IBI Gemel
Ltd.
|
(10)
|
The
address for this selling stockholder is 65 Rothschild St., 3rd Floor, Tel
Aviv, 65785, Israel. We have been advised that Managing Company
of this Selling Stockholder is Perfect provident fund
Ltd.
|
(11)
|
The
address for this selling stockholder is 21 Ha'arbaa St. (Platinum Tower),
19th Floor, Tel Aviv, 64739, Israel. We have been advised that
Eldad Tamir, Danny Fishman, Ayre Friedman, Ben-Zion Levi, Arik Boider, and
Yaniv Aharon exercise voting and investment control over the shares
beneficially owned by this selling stockholder. We have been
advised that these Selling Stockholders are indirectly controlled by an
entity that is a part of RBC Financial Group, which includes a registered
broker-dealer entity.
|
(12)
|
The
address for this selling stockholder is 115 Allenby St. (Menora House),
12th Floor, Tel Aviv, 61008, Israel. We have been advised that
Menora Mivtachim Holdings Ltd. / Menora Mivtachim Finance Ltd exercise
voting and investment control over the shares beneficially owned by this
selling stockholder.
|
(13)
|
The
address for this selling stockholder is 56 Maze St., 1st Floor, Tel Aviv,
65789, Israel. We have been advised that the Selling
Shareholder is an affiliate of Middlegate Securities Ltd., registered
broker-dealer.
|
(14)
|
The
address for this selling stockholder is 11 Menachem Begin St. (Ayalon
Tower), 9th Floor, Ramat-Gan, 52521, Israel. We have been
advised that the Managing Company of this Selling Stockholder is Keren
Hahisachon Ltzva Hakeva - Provident Funds Management Company Ltd. and that
Mr. Yoav Kabeblom and Mrs. Viki Zvolon share voting and investment control
over the shares beneficially owned by this selling
stockholder.
|
(15)
|
The
address for this selling stockholder is 28 Ahad Ha-am St., 1st Floor, Tel
Aviv, 67135, Israel. We have been advised that the Managing
Company of this Selling Stockholder is Migdal Portfolio Management
Ltd. Affiliated entities of these Selling
Stockholders purchased an aggregate 350,000 shares of our Common Stock in
an offering on November 4, 2007. We made this offering without
a placement agent, pursuant to our Registration Statement on Form SB-2
(File No. 333-143618) which was declared effective by the U.S. Securities
and Exchange Commission on August 6, 2007. Following the
effectiveness of the Registration Statement, the Company did not
file a prospectus supplement within the required time period containing
the final fixed offering price of $3.00 per share due to an unintentional
error. This constituted a technical violation of Section
5(b)(2) of the Securities Act. The Company filed Current Reports on Form
8-K on October 23, 2007 and November 5, 2007 following its entry into the
related subscription agreements with the purchasers of the shares, and
filed a Post-Effective Amendment on November 7, 2007, each of which
disclosed such final fixed price. The Post-Effective Amendment
filed on November 7, 2007 was never declared effective by the
SEC. The Company is relying upon the cure provision provided by
Rule 424(b)(8) under the Securities Act in
order to cure such violation. The Company believes that such
violation was cured under Rule 424(b)(8) upon filing of the Post-Effective
Amendment, as it made a good faith effort to file such Post-Effective
Amendment as soon as practicable upon discovery of the unintentional
failure to file the prospectus supplement, and because the filing with the
SEC of the Post-Effective Amendment and other filings related to the sale
of the shares satisfied the prospectus delivery requirements of Section
5(b)(2) under the “access equals delivery” model adopted by the SEC. We
have been advised that Bear Steans is one of the entities that holds
Migdel.
|
(16)
|
The
address for this selling stockholder is 35 Efal St., 11th Floor, Kiryat
Arye, Petach Tikva, 49511, Israel. Yashir Investment House
Providence Funds Ltd., an affiliated entity of these Selling Stockholders,
purchased an aggregate 125,000 shares of our Common Stock in an offering
on November 4, 2007 We made this offering without a placement agent,
pursuant to our Registration Statement on Form SB-2 (File No. 333-143618)
which was declared effective by the U.S. Securities and Exchange
Commission on August 6, 2007. Following the effectiveness of
the Registration Statement, the Company did not file a prospectus
supplement within the required time period containing the final fixed
offering price of $3.00 per share due to an unintentional
error. This constituted a technical violation of Section
5(b)(2) of the Securities Act. The Company filed Current Reports on Form
8-K on October 23, 2007 and November 5, 2007 following its entry into the
related subscription agreements with the purchasers of the shares, and
filed a Post-Effective Amendment on November 7, 2007, each of which
disclosed such final fixed price. The Post-Effective Amendment
filed on November 7, 2007 was never declared effective by the
SEC. The Company is relying upon the cure provision provided by
Rule 424(b)(8) under the Securities Act in
order to cure such violation. The Company believes that such
violation was cured under Rule 424(b)(8) upon filing of the Post-Effective
Amendment, as it made a good faith effort to file such Post-Effective
Amendment as soon as practicable upon discovery of the unintentional
failure to file the prospectus supplement, and because the filing with the
SEC of the Post-Effective Amendment and other filings related to the sale
of the shares satisfied the prospectus delivery requirements of Section
5(b)(2) under the “access equals delivery” model adopted by the
SEC.
|
(17)
|
The
address for this selling stockholder is Hashalom Rd., Vered Tower (20th
floor) 53, Givataim, 53454, Israel. We have been advised that
The Phoenix Gemel Ltd exercises voting and investment control over the
shares beneficially owned by this selling stockholder. Israeli
Phoenix Assurance Company Ltd., an affiliated entity of these Selling
Stockholders, purchased 110,000 restricted shares of our Common Stock on
April 6, 2006, in connection with a Securities Purchase Agreement dated
November 23, 2005. Such entity also purchased 27,500 warrants
exercisable at $3.00 per share, and 27,500 warrants exercisable at $3.25
per share, each of which is exercisable for a period of 5
years.
|
(18)
|
The
address for this selling stockholder is 3 Abba Hillel St. (Harel Building)
8th Floor, Ramat Gan, 52118, Israel. We have been advised that
Managing Company of this Selling Stockholder is Harel Gemel Ltd / Atidit
Gemel Ltd.
|
(19)
|
Represents
shares purchased by the Selling Stockholders in an offering of our Common
Stock on November 4, 2007. We made this offering without a
placement agent, pursuant to our Registration Statement on Form SB-2 (File
No. 333-143618) which was declared effective by the U.S. Securities and
Exchange Commission on August 6, 2007. Following the effectiveness of the
Registration Statement, the Company did not file a prospectus supplement
within the required time period containing the final fixed offering price
of $3.00 per share due to an unintentional error. This
constituted a technical violation of Section 5(b)(2) of the Securities
Act. The Company filed Current Reports on Form 8-K on October 23, 2007 and
November 5, 2007 following its entry into the related subscription
agreements with the purchasers of the shares, and filed a Post-Effective
Amendment on November 7, 2007, each of which disclosed such final fixed
price. The Post-Effective Amendment filed on November 7, 2007
was never declared effective by the SEC. The Company is relying
upon the cure provision provided by Rule 424(b)(8) under the Securities
Act in
order to cure such violation. The Company believes that such
violation was cured under Rule 424(b)(8) upon filing of the Post-Effective
Amendment, as it made a good faith effort to file such Post-Effective
Amendment as soon as practicable upon discovery of the unintentional
failure to file the prospectus supplement, and because the filing with the
SEC of the Post-Effective Amendment and other filings related to the sale
of the shares satisfied the prospectus delivery requirements of Section
5(b)(2) under the “access equals delivery” model adopted by the
SEC.
|
Name
of Selling
Stockholder
|
Number
of Shares Issuable Upon Exercise of Equitalk Warrants
|
Total
Number of Shares Beneficially Owned Prior to the Offering
|
Percentage
of Shares Beneficially Owned Prior to this Offering
|
Number
of Shares
Being
Offered
Hereby
|
Number
of Shares to be Beneficially Owned After the Offering
|
Percentage
of Shares to be Beneficially Owned After the Offering
|
||||||||||||||||||
David
Abel-Smith
|
5,386 | 5,386 | 0.03 | % | 5,386 | 0 | 0.00 | % | ||||||||||||||||
James
Aird
|
1,011 | 2,454 | 0.01 | % | 1,011 | 1,443 | 0.01 | % | ||||||||||||||||
Lady
M Aird
|
1,687 | 4,094 | 0.02 | % | 1,687 | 2,407 | 0.01 | % | ||||||||||||||||
Rebecca
Aird
|
676 | 1,641 | 0.01 | % | 676 | 965 | 0.01 | % | ||||||||||||||||
Sir
John Aird
|
11,221 | 27,231 | 0.15 | % | 11,221 | 16,010 | 0.09 | % | ||||||||||||||||
Norma
Barrett
|
3,358 | 8,150 | 0.04 | % | 3,358 | 4,792 | 0.03 | % | ||||||||||||||||
Bell
Group Pension Scheme(1)
|
5,878 | 14,265 | 0.08 | % | 5,878 | 8,387 | 0.05 | % | ||||||||||||||||
Jennifer
Susan Burton(2)
|
3,358 | 8,150 | 0.04 | % | 3,358 | 4,792 | 0.03 | % | ||||||||||||||||
John
Mark Burton(2)
|
22,198 | 53,871 | 0.29 | % | 22,198 | 31,673 | 0.17 | % | ||||||||||||||||
Cantay
Investments Limited(3)
|
2,693 | 6,535 | 0.04 | % | 2,693 | 3,842 | 0.02 | % | ||||||||||||||||
John
Lucius Arthur Cary
|
11 | 26 | 0.00 | % | 11 | 15 | 0.00 | % | ||||||||||||||||
Angela
Cronk
|
5,618 | 13,635 | 0.07 | % | 5,618 | 8,017 | 0.04 | % | ||||||||||||||||
JJT
Cronk
|
1,757 | 4,265 | 0.02 | % | 1,757 | 2,508 | 0.01 | % | ||||||||||||||||
Michael
AJ Cronk
|
19,472 | 47,257 | 0.26 | % | 19,472 | 27,785 | 0.15 | % | ||||||||||||||||
Fast
Guides Limited(4)
|
7,695 | 18,675 | 0.10 | % | 7,695 | 10,980 | 0.06 | % | ||||||||||||||||
Pamela
Hillyard
|
141 | 342 | 0.00 | % | 141 | 201 | 0.00 | % | ||||||||||||||||
John
BH Jackson
|
1,968 | 4,777 | 0.03 | % | 1,968 | 2,809 | 0.02 | % | ||||||||||||||||
Simon
Donald Meiklejohn
|
6,110 | 14,829 | 0.08 | % | 6,110 | 8,719 | 0.05 | % | ||||||||||||||||
Mint
House Nominees Limited(5)
|
3,710 | 3,710 | 0.02 | % | 3,710 | 0 | 0.00 | % | ||||||||||||||||
Farshid
and Maria Louise Nowshadi
|
32 | 78 | 0.00 | % | 32 | 46 | 0.00 | % | ||||||||||||||||
Mind
CTI Limited(6)
|
2,352 | 5,708 | 0.03 | % | 2,352 | 3,356 | 0.02 | % | ||||||||||||||||
Oxford
Technology 2 Venture Capital Trust plc(7)
|
56,568 | 137,283 | 0.74 | % | 56,568 | 80,715 | 0.44 | % | ||||||||||||||||
Oxford
Technology 3 Venture Capital Trust plc(7)
|
37,826 | 91,798 | 0.50 | % | 37,826 | 53,972 | 0.29 | % | ||||||||||||||||
Oxford
Technology Venture Capital Trust plc(7)
|
14,768 | 35,840 | 0.19 | % | 14,768 | 21,072 | 0.11 | % | ||||||||||||||||
John
Duncan Price
|
2,942 | 7,139 | 0.04 | % | 2,942 | 4,197 | 0.02 | % | ||||||||||||||||
Jonathan
Christopher Price
|
4,786 | 11,614 | 0.06 | % | 4,786 | 6,828 | 0.04 | % | ||||||||||||||||
Rachel
Elizabeth Price
|
4,786 | 11,614 | 0.06 | % | 4,786 | 6,828 | 0.04 | % | ||||||||||||||||
James
Joseph Ruane(8)
|
22,041 | 53,491 | 0.29 | % | 22,041 | 31,450 | 0.17 | % | ||||||||||||||||
Richard
Vessey(1)
|
21,170 | 51,377 | 0.28 | % | 21,170 | 30,207 | 0.16 | % | ||||||||||||||||
TOTAL:
|
271,219 | 645,235 | 3.46 | % | 271,219 | 374,016 | 2.01 | % |
(1)
|
Richard
Vessey serves as the Trustee for the Bell Group Pension Scheme and
accordingly has voting and/or investment control over the securities it
holds.
|
(2)
|
Mr.
Burton is Managing Director of Xfone's UK based
subsidiaries. Please see “Significant Employees” below. In
addition to the shares reflected in the table, Mr. Burton holds options to
purchase 300,000 shares of Xfone’s common stock. These options were
granted on July 11, 2006 under the Company’s 2004 Plan and in conjunction
with a July 3, 2006 Service Agreement between Xfone, Swiftnet Limited and
Mr. Burton. The options are convertible on a one to one basis into
restricted shares of Xfone's common stock, at an exercise price of $3.50,
and have a term of ten years. The vesting of the options will be over a
period of 4 years as follows: 75,000 options are vested on July 3, 2007.
Thereafter, 18,750 options are vested every 3 months for the following 3
years. Jennifer Susan Burton is Mr. Burton’s
wife.
|
(4)
|
Michael
Crock, a director of Fast Guide Limited, has voting and/or investment
control over the securities held by Fast Guide
Limited.
|
(6)
|
MIND
CTI Limited was formerly known as Omnicom Comunication Limited. Itay
Barzilay has voting and investment control over the securities held by
this Selling Stockholder.
|
·
|
block
trades in which the broker or dealer so engaged will attempt to sell the
shares of Common Stock as agent but may position and resell a portion of
the block as principal to facilitate the
transaction;
|
·
|
purchases
by broker or dealer as principal and resale by the broker or dealer for
its account pursuant to this
Prospectus;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
ordinary
brokerage transactions and transactions in which the broker solicits
purchasers;
|
·
|
privately
negotiated transactions;
|
·
|
market
sales (both long and short to the extent permitted under the federal
securities laws);
|
·
|
at
the market to or through market makers or into an existing market for the
shares;
|
·
|
through
transactions in options, swaps or other derivatives (whether exchange
listed or otherwise); and
|
·
|
a
combination of any of the aforementioned methods of
sale.
|
1.
|
To
make an effort and to take all actions that are reasonably required,
subject to the law and the rules of the Tel Aviv Stock Exchange Ltd. (the
“TASE”), to list the Bonds for trading on the TASE, such that restrictions
on resale will not apply in accordance with Section 15c of the Israeli
Securities Law 5728-1968 (the “Israeli Securities Law”) on the holders of
the Bonds, no later than 12 months from the Date of
Issuance.
|
2.
|
Immediately
after the issuance the Company will apply to the TASE to list the Bonds as
a “non-tradable security” with the TASE Clearing House, at the discretion
of the Company, subject to the law and the rules of the
TASE.
|
3.
|
Starting
from the date of the Bonds’ listing for trade on the TASE, to the extent
such listing occurs, the interest rate payable for the unpaid balance of
the Bonds will be reduced by 1% (to an annual interest rate of
8%).
|
4.
|
Until
the Bonds are listed for trade on the TASE, in the event that the rating
of the Bonds is reduced from the rating given them at their issuance - A3
by Midroog - to Baa1 (or an equivalent rating by another rating company),
the annual rate of interest on the Bonds will increase by
0.25%.
|
5.
|
If
the Bonds are not listed for trading within 12 months from the Date of
Issuance, any holder of the Bonds will be allowed (but not required), to
redeem his Bonds, in whole or in part, in an early
redemption.
|
6.
|
In
the event that by March 31, 2008 the conditions for the release of the
proceeds of the offering by the Trustee, as set forth in the Indenture of
the Bonds, are not met, the issuance will be canceled and the Trustee will
return the proceeds of the offering to the holders of the Bonds, along
with interest at an annual rate of 9%, linked to the CPI, for the period
from the Date of Issuance until the date of the return of the proceeds as
stated. The interest from the proceeds of the offering that
have accumulated in the trust account will be transferred to the Company.
The applicable conditions are: (i) that the Company raises an aggregate of
at least $20.0 million in equity financings (this condition has been
satisfied subject to the receipt of certain regulatory approvals); and
(ii) that the conditions (which are not related to the financing of the
acquisition) for the consummation of the NTS Acquisition have been
met.
|
7.
|
The
occurrence of certain events in connection with the Company may lead to
the requirement to immediately redeem the Bonds. Among those events are:
(1) customary events such as non-payment, the appointment of a liquidator
or temporary or permanent conservator, whose appointment is not canceled
within a certain period of time, the placement of a lien on substantive
assets of the Company, the realization of pledges on substantive assets of
the Company, the termination of the Company and when a bank requires
immediate repayment of a substantive amount of credit; (2) specific events
that relate to the period before the Bonds are listed for trade on the
TASE such as the reduction of the rating of the Bonds to Baa2 of Midroog
(or an equivalent rating of another rating company) or to a lower rating,
if the Company issues additional bonds in a manner that causes the current
rating of the Bonds to be reduced, if the Bonds cease to be rated for a
period greater than 30 days, if the proportion of the debt to EBITDA
increases above 4:1, if the Company ceases to control (directly and/or
indirectly) NTS Communications (for this purpose “control” has the meaning
as defined in the Israeli Securities Law) and in the event that Mr. Guy
Nissenson ceases to serve as President and CEO of the Company; (3)
additional specific events such as the payment of a dividend that will
cause the proportion of the shareholders equity to the Company’s balance
sheet to be lower than 25%.
|
Director
|
Class
|
Abraham
Keinan
|
Class
A
|
Guy
Nissenson
|
Class
A
|
Shemer
Shimon Schwarz
|
Class
A
|
Eyal
Josef Harish
|
Class
B
|
Aviu
Ben-Horrin
|
Class
B
|
Itzhak
Almog
|
Class
B
|
Morris
Mansour
|
Class
C
|
Israel
Singer
|
Class
C
|
Period
|
Low
|
High
|
||||||
2008
|
||||||||
Second
Quarter
|
$
|
2.90
|
$
|
3.90
|
||||
First
Quarter
|
$
|
2.82
|
$
|
3.60
|
||||
2007
|
||||||||
Fourth
Quarter
|
$
|
2.84
|
$
|
3.88
|
||||
Third
Quarter
|
$
|
2.34
|
$
|
3.05
|
||||
Second
Quarter
|
$
|
2.50
|
$
|
3.70
|
||||
First
Quarter
|
$
|
2.40
|
$
|
2.89
|
2006
|
||||||||
Fourth
Quarter
|
$
|
2.26
|
$
|
2.90
|
||||
Third
Quarter
|
$
|
2.18
|
$
|
2.85
|
||||
Second
Quarter
|
$
|
2.65
|
$
|
3.01
|
||||
First
Quarter
|
$
|
2.68
|
$
|
3.84
|
||||
2005
|
||||||||
Fourth
Quarter
|
$
|
2.30
|
$
|
3.09
|
||||
Third
Quarter
|
$
|
2.90
|
$
|
3.40
|
||||
Second
Quarter
|
$
|
2.80
|
$
|
3.30
|
||||
First
Quarter
|
$
|
2.50
|
$
|
4.29
|
||||
2004
|
||||||||
Fourth
Quarter
|
$
|
1.95
|
$
|
3.35
|
||||
Third
Quarter
|
$
|
3.00
|
$
|
3.75
|
||||
Second
Quarter
|
$
|
3.20
|
$
|
3.95
|
||||
First
Quarter
|
$
|
3.45
|
$
|
5.75
|
||||
2003
|
||||||||
Fourth
Quarter
|
$
|
3.15
|
$
|
6.00
|
||||
Third
Quarter
|
$
|
0.69
|
$
|
3.45
|
||||
Second
Quarter
|
$
|
0.39
|
$
|
0.75
|
||||
First
Quarter
|
$
|
0.35
|
$
|
0.90
|
Plan
category
|
Number
of Securities to be Issued upon Exercise of Outstanding Options, Warrants
and Rights
|
Weighted
Average Exercise Price of Outstanding Options, Warrants and
Rights
|
Number
of Securities Remaining Available for Future Issuance under the
Plan
|
|||||||||
(a)
|
(b)
|
(c)
|
||||||||||
Equity
compensation plans approved by security holders(1)
|
11,519,159
|
$
|
3.69
|
8,078,700
|
||||||||
Equity
compensation plans not approved by security holders
|
--
|
--
|
--
|
|||||||||
Total
|
11,519,159
|
$
|
3.69
|
8,078,700
|
·
|
$35,414,715
was paid in cash; and
|
·
|
2,366,892
shares of our Common Stock were issued to certain NTS Sellers who elected
to reinvest all or a portion of their allocable sale price in our Common
Stock, pursuant to the terms of the NTS Purchase Agreement. Our Board of
Directors determined, in accordance with the NTS Purchase Agreement, the
number of shares of our Common Stock to be delivered to each participating
NTS Seller by dividing the portion of such NTS Seller’s allocable sale
price that the NTS Seller elected to receive in shares of our Common Stock
by 93% of the average closing price of our Common Stock on the American
Stock Exchange for the ten consecutive trading days preceding the trading
day immediately prior to the Closing Date (i.e., $2.74). The aggregate
sales price reinvested by all such NTS Sellers was
$6,485,284.
|
·
|
On
the closing date, NIS 15,500,000 (approximately $4,374,824) (the “First
Installment”);
|
·
|
By
November 20, 2008, NIS 15,500,000 (approximately $4,374,824), subject to
adjustment resulting from linkage to the Consumer Price
Index (the “Second Installment”);
and
|
·
|
By
November 1, 2009, NIS 13,000,000 (approximately $3,669,207), subject to
adjustment resulting from linkage to the Consumer Price Index (the
“Third Installment”).
|
·
|
Carrier Pre Select
(CPS): CPS is a telephony service which enables customers to
benefit from our low call usage charges, without having to make any
changes to their existing telephone lines or numbers. The service allows
customers to route all their outgoing calls over our network. This gives
them access to competitive call rates and a wide range of services.
Customers using CPS only pay line rental to their service operator, while
we bill them for all call charges. CPS is available nationally provided
the customer is connected to a BT local
exchange.
|
·
|
Indirect Access: This is
a telephony service which enables customers to benefit from our low call
usage charges, without having to make any changes to their existing
telephone lines or numbers. The service allows customers to route a
specific outgoing call over our network by using the prefix code
“1689.”
|
·
|
Calling Cards: This
service is available to all our subscribers. The Calling Card works by
using an access number and a PIN code, and offers a convenient and easy
way to make calls virtually anywhere in the UK, as well as from 27 other
destinations worldwide.
|
·
|
Email2Fax: Allows users
to send fax messages directly from their email or web
software.
|
·
|
Cyber-Number: Allows
users to receive fax messages directly to their email software via a
personal number.
|
·
|
Email/Fax Broadcast:
This service allows the user to send multiple personalized faxes and
emails to thousands of users in
minutes.
|
·
|
Our
Internet based customer service and on-line registration (found at
www.swiftnet.co.uk) includes full details on all our products and
services.
|
·
|
Carrier Pre Select
(CPS): CPS is a telephony service which enables customers to
benefit from our low call usage charges, without having to make any
changes to their existing telephone lines or numbers. The service allows
customers to route all their outgoing calls over our network. This gives
them access to competitive call rates and a wide range of services.
Customers using CPS only pay line rental to their service operator, while
we bill them for all call charges. CPS is available nationally provided
the customer is connected to a BT local
exchange.
|
·
|
Indirect Access: This is
a telephony service which enables customers to benefit from our low call
usage charges, without having to make any changes to their existing
telephone lines or numbers. The service allows customers to route a
specific outgoing call over our network by using the prefix code
“1664.”
|
·
|
Internet/Data Service:
We provide high-speed Internet access to residential customers utilizing
the digital data network of Griffin Internet. Our ADSL service provides up
to 8 Mbps of streaming speed combined with Static IP addresses, as well as
multiple mailboxes. Our Internet/Data services are bundled with our voice
services for residential and business
customers.
|
·
|
Conference Service: We
provide web-managed low cost teleconferencing services through our
partnership with Auracall Limited. Up to 10 people can call in to a
conference circuit and be joined together by dialing the same PIN. There
is no need to reserve a conference call in advance and each caller pays
for their own call.
|
·
|
Our
Internet based customer service and billing interface (found at
www.equitalk.co.uk) includes on-line registration, full account control,
and payment and billing functions and information
retrieval.
|
·
|
Prepaid
Calling Cards: Story Telecom initiates, markets and distributes Prepaid
Calling Cards that are served by our switch and systems. Story Telecom
supplies the Prepaid Calling Cards to retail stores through its network of
dealers. The Calling Card enables the holder to call anywhere in the world
by dialing either a toll free number or a local access number from any
telephone that routes the holder’s call to our Interactive Voice Response
System that automatically asks for the holder’s private PIN code,
validates the code dialed by the customer, and tells the credit balance of
the card. The holder is then instructed to dial to his or her desired
destination, at which time our Interactive Voice Response System tells the
holder how long he or she can speak according to the balance on the card
and what the cost per minute is. The holder of the card can use the card
repeatedly until the balance is
zero.
|
·
|
Story
Direct and Story Mobile: These services allow any individual with either a
BT line or a mobile phone to make international calls at a lower cost and
without prepayment for setting up an account with another carrier. These
services can be accessed by any business or residential user through Story
Telecom website, found at www.storytelecom.com. When customers need to
make an international or national call they can dial the appropriate
designed number for that country and save on calling rates over the
current BT published rates or their network operator’s rates by gaining
access to our switch and providing savings on a per minute
basis.
|
·
|
Text
& Talk: This service allows any individual with a mobile phone to make
international calls at a lower cost by purchasing calling credit via a
Premium Rate Text. When customers need to make an international or
national call they can dial an access number followed by their destination
number.
|
·
|
Our
Internet based customer service (found at www.storytelecom.co.uk) includes
full details on all our products and
services.
|
·
|
Free
Time: This service allows any individual with a BT line to make
international calls at a lower cost and without prepayment for setting up
an account with another carrier. The Auracall service can be accessed by
any business or residential user through our website at www.auracall.com.
When customers need to make an international or national call they can
dial the appropriate designed number for that country and save on calling
rates over the current BT published rates by gaining access to our switch
and providing savings on a per minute
basis.
|
·
|
T-Talk: This
service allows any individual with a mobile phone to make international
calls at a lower cost by purchasing calling credit via a Premium Rate
Text. When customers need to make an international or national call they
can dial an access number followed by their destination
number.
|
·
|
Our
Internet based customer service (found at www.auracall.co.uk) includes
full details on all our products and
services.
|
·
|
Local Telephone Service:
Using
our own network in concentrated local areas throughout Mississippi and
Louisiana and utilizing the underlying network of BellSouth
Telecommunications, Inc. (the new ATT), outside of our local areas, we
provide local dial tone and calling features, such as hunting, call
forwarding and call waiting to both business and residential customers
throughout Louisiana and Mississippi, including T-1 and PRI local
telephone services to business
customers.
|
·
|
Long Distance Service:
We use our own network where available and QWEST, a nationwide long
distance carrier, as our underlying long distance network provider. In
conjunction with Local Telephone Services, we provide Long Distance
Services to our residential and business customers. We provide two
different categories of long distance services - Switched Services to both
residential and small business customers, which include 1+ Outbound
Service, Toll Free Inbound Service and Calling Card Service. For larger
business customers we also provide Dedicated Services such as T-1 and PRI
Services. Our long distance services are only available to customers who
use our local telephone services.
|
·
|
Internet/Data Service:
We provide high-speed broadband Internet access to residential and
business customers utilizing our own integrated digital data network and
utilizing the broadband gateway network of the new ATT. Our DSL service
provides up to 3 Mbps of streaming speed combined with Dynamic IP
addresses, as well as multiple mailboxes and Web space. Our DSL services
also include spam filter, instant messaging, pop-up blocking, web mail
access, and parental controls. We also provide dial-up Internet access
service for quick and dependable connection to the web. Our Internet/Data
services are stand-alone products or are bundled with our voice services
for residential and business
customers.
|
·
|
Customer Service:
Customer Service is paramount at Xfone USA and is one of our major
differentiating characteristics, thus tantamount to being one of our
product offerings. Customers have been conditioned to accept poor customer
service from the larger monopoly companies because they have never had any
real choice in service providers, especially in the residential market.
Our attentive customer service department is an additional “product
offering” which sells - as well as retains - customers. The full scope of
communications service entails network service, customer service, and
repair service.
|
·
|
Customer Premise Equipment
(“CPE”): Xfone USA also resells a variety of CPE and CPE related
services to its customers. Primarily, these sales involve
acting with NTS Comunications, Inc. as an authorized dealer for Toshiba
phone systems. These systems are sold to customers either on a stand-alone
basis, or in conjunction with the purchase of local, long distance, and/or
data services from the company.
|
·
|
Local
Services: NTS delivers local telephony service to its customers through an
“on-net” UNE-L connection, including voice mail, caller ID, forwarding,
3-way calling, blocking, and PBX services. In addition, NTS
sells ”off-net” total service resale lines which contribute less than 7%
of total local service revenue. NTS provides UNE-L services in
Lubbock, Abilene, Amarillo, Midland, Odessa, Pampa, Plainview, and Wichita
Falls, Texas. NTS provides local services via FTTP in Lubbock
and Wolfforth. NTS provides resold local services throughout
Texas via its resale agreement with
AT&T.
|
·
|
Retail
Long Distance Services: NTS offers a full range of long distance services
to its customers, including competitively priced switched long distance
(including intrastate, interstate, and international), toll-free service,
dedicated T-1 long distance and calling cards. The vast
majority of its customers are concentrated in West
Texas. Approximately 10% of long distance customers are in
Arizona, New Mexico, Oklahoma, Kansas, and
Colorado.
|
·
|
Internet
Data Services: NTS began offering broadband service in
1999. Download speeds range from 500 Kilobits to 100 Megabits
per second, depending on the end user’s distance from an NTS collocation
or the type of facilities used to deliver the service. NTS
launched dial-up service in 1985. NTS provides broadband and
dial-up Internet service in all of its Texas
markets.
|
·
|
Fiber-Based
Services (“Fiber to the Premise or FTTP”): As an integrated telecom
provider, NTS is capable of providing quality triple play (voice, digital
video & data) on one bill at competitive prices to its FTTP
customers. NTS offers a full selection of video services,
including basic cable, video on demand, HDTV and DVR. NTS is a
member of the National Cable Television Cooperative and as a member
obtains favorable programming rates from most major
networks. NTS provides FTTP service in Lubbock and Wolfforth,
Texas.
|
·
|
Customer
Premise Equipment (“CPE”): NTS resells a variety of CPE and CPE related
services to its customers. Primarily, these sales involve NTS
acting as an authorized dealer for Toshiba phone systems. These systems
are sold to customers either on a stand-alone basis, or in conjunction
with the purchase of local, long distance, and/or data services from the
company.
|
·
|
Private
Line Services: NTS offers aggregation and resale of leased fiber transport
network from AT&T and other fiber network operators. This
service is mostly provided for carrier customers that need direct network
connectivity, as well as enterprises that require dedicated branch office
connections. Services are generally offered under 1-year
contracts for a fixed amount per month. NTS provides private
line service nationwide.
|
·
|
Wholesale
Switched Termination Services: NTS sells its wholesale-switched minutes to
local telecom companies who do not have the volume to warrant attractive
pricing from AT&T and other large carriers. NTS provides
multi-regional switched termination, switched toll free origination and
wholesale Internet access services to various carrier
customers. Services are generally offered for a fixed amount
per minute. NTS provides wholesale switched termination
services to customers via network connections in NTS POPs and switch
sites.
|
·
|
Our
Internet based customer service (found at www.ntscom.com) includes full
details on all our retail products and
services.
|
·
|
International Telephony
Services: We provide international telephony services with the
prefix code of “018”. We provide these services both to our subscribers
and to subscribers of other Israeli carriers. The service is offered to
both residential and business
customers.
|
·
|
Local Telephony
Services: We provide to Israeli subscribers local telephony
services with the prefix code of “078”. The service is offered
to both residential and business customers in the framework of an
experimental deployment of Local Telephone Services utilizing Voice over
Broadband (VoB) technology.
|
·
|
XFONECARD: We provide an
international toll free calling card service, available in over 40
countries around the globe.
|
·
|
SIMPLE: The SIMPLE is a
pre programmed, rechargeable, mobile SIM card which can be used with any
unlocked GSM (Global System for Mobiles) mobile phone virtually anywhere
in the world. SIMPLE allows us to deliver call savings, by diverting the
customer dialing command away from the local mobile operator that the
phone is connected to, and instead, it sends the call to one of the mobile
operators with whom we hold a special agreement. We offer for sale or rent
two types of SIM Cards - a local SIM Card which may be used only from a
specific country, and a global SIM Card which may be used from over 90
countries around the globe.
|
·
|
International Telephony
Access: We provide international telephony access to the Israeli
telephone network by selling incoming call minutes to various
international operators across the
globe.
|
·
|
Our
Internet based customer service and on-line registration (found at
www.018.co.il) includes full details on all our products and
services.
|
·
|
We
use employed, direct sales executives to sell to medium to large size
business customers; these sales executives have quota attainment
requirements and receive a monthly salary, allowance and are paid
commissions;
|
·
|
We
actively recruit independent contractor agents and resellers who purchase
telephone traffic directly from us at a discount, and who then resell this
telephone traffic to their customers at a mark-up according to their own
price lists;
|
·
|
We
utilize agents that sell our services directly to customers at our
established prices; these agents receive a commission of approximately
5%-12% of the total sale amount less any bad
debts;
|
·
|
We
use third party direct sales organizations (telesales and door-to-door) to
register new customers;
|
·
|
We
cooperate with major companies and worker’s
councils;
|
·
|
We
have retail and wholesale sales offices; employees at these sales offices
receive annual salaries and
commissions;
|
·
|
We
use direct marketing, including by newspaper, radio and television
advertisements;
|
·
|
We
attend telecommunications trade shows to promote our services;
and
|
·
|
We
utilize the Internet as an additional distribution channel for our
services.
|
·
|
Partner Division – Our
Partner Division operates as a separate profit center by attempting to
recruit new resellers and agents to market our products and services and
to provide support and guidance to resellers and
agents.
|
·
|
Customer Service Division
– In the United Kingdom and the United States we operate a live
customer service center that operates 24 hours a day, 7 days a week. In
Israel our customer service center operates 6 days a
week.
|
·
|
Operations Division –
Our Operations Division provides the following operational functions to
our business: (a) 24 hour/7 day a week technical support;
(b) inter-company network; (c) hardware and software
installations; and (d) operating switch and other
platforms.
|
·
|
Administration Division
– Our Administration Division provides the billing, collection,
credit control, and customer support aspects of our
business.
|
·
|
Research and Development
Division – The function of our Research and Development Division is
to develop and improve our billing system, switch and telephony platforms,
websites and special projects.
|
·
|
Marketing Division – Our
Marketing Division is responsible for our marketing and selling campaigns
that target potential and existing retail
customers.
|
·
|
AT&T
Inc. - 25%
|
·
|
British
Telecommunications - 20%
|
·
|
Bezeq
The Israel Telecommunication Corp -
7%
|
·
|
Residential – in the
U.S. - pre-subscribed customers, including for local, long distance,
internet and cable television services; outside of the U.S. -
pre-subscribed customers and customers who must dial a special code to
access our switch or acquire a box that dials
automatically.
|
·
|
Commercial – we serve
small to complex business customers around the
world.
|
·
|
Governmental agencies –
Including the United Nations World Economic Forum, certain embassies and
the Bank of Israel. We also provide cities, counties, schools and
universities in Texas with a host of services, including local, long
distance, internet and private line
services.
|
·
|
Resellers – We provide
resellers with our telephone and messaging services for a wholesale
price. We also provide long haul switched termination to a
variety of companies throughout the United States who resell our
services.
|
·
|
Telecommunications companies
– We provide our services through telecommunication companies (such
as British Telecom and Bezeq The Israel Telecommunication Corp) which
collect the fees relating to such services and forward them to
us.
|
·
|
Mobile Users – including
customers who can access our switch utilizing our access number and
thereafter are able to make low-cost international calls; customers who
purchase, via a reversed billed SMS, pre-paid credit for international
calls and those using our international roaming SIM
cards.
|
·
|
Naked
ADSL: A proposal has been made to separate between the telephony and
internet access in the "Last Mile". If adopted, this could be
beneficial to Xfone 018, as it would provide Xfone 018 with the
opportunity to penetrate the market with its VOB local calls
services.
|
·
|
Unbundling:
A proposal has been made to force the existing infrastructure providers to
enable other providers to use their infrastructure in fair prices to
encourage competition. If adopted, this could affect Xfone 018’s business
by allowing it to offer a wider range of services at attractive
prices.
|
·
|
MVNO: A
proposal has been made to open the Israeli market to new virtual players
in the mobile arena. If adopted, this could affect Xfone 018’s
business by allowing it to penetrate a new market, which constitutes more
than 50% of the Israeli communication
market.
|
·
|
International
Calls: A proposal has been made to enable mobile operators to supply
international calls based on agreed access charge from the international
carriers. If adopted, this could negatively affect Xfone 018’s business by
enlarging the number of its
competitors.
|
·
|
WIMAX: A
proposal has been made to issue WIMAX frequencies in order to establish
new access networks in Israel. If adopted, this could be beneficial
to Xfone 018’s business by allowing it to penetrate and gain a new market
share by direct access.
|
·
|
NTS
corporate offices, Network Control Center, Customer Care, and Internet
help desk are located at 5307 W. Loop 289, Lubbock, TX, between NTS
Communications, Inc. and Shareholder Value, Ltd., measuring 45,072 sq. ft.
on three floors with annual triple net base rent of
$518,328. The lease expires July 31, 2013 and contains three
(3) options for five (5) year renewal terms. The building was
built and completed in 1998 and is in good condition. NTS
believes the building has sufficient space for its
operations.
|
·
|
Local
sales offices located at 801 S. Fillmore, Suite 130, Amarillo, TX, between
NTS and Amarillo Place One Properties, measuring 3,958 sq. ft. with annual
rent of $45.516. The lease expires on 11/20/2010 and has no
renewal option.
|
·
|
Point
of Presence (“POP”) site and fiber node located at 201 E Main, Ste. 104,
El Paso Texas, between NTS and Borderplex LLC, measuring 950 sq. ft.
(including 850 linear feet of conduit) with annual rent of
$52,250. The lease expires 02/28/2010 and contains one (1)
option for five (5) year renewal term.
|
·
|
Local
sales office located at 450E 10 Desta Drive Midland, TX, between NTS and
Claydesta Buildings, L.P., measuring 2,981 sq. ft. with annual rent of
$27,574. The lease expires 02/29/2011 and contains one (1)
option for a two (2) year renewal term.
|
·
|
POP,
switch site and fiber node located at 500 Chestnut, Suite 936, Abilene,
TX, between NTS and Enterprise Building Abilene, L.P., measuring 4,763 sq.
ft. (including roof space for one (1) GPS antenna) with annual rent of
$47,520. The lease expires 12/30/2009 and contains one (1)
option for four (4) year renewal term.
|
·
|
Local
sales office located at 400 Pine Street, Suites 500 and 310W, Abilene, TX,
between NTS and First Financial Bank, N.A., measuring 4,971 sq. ft. with
annual rent of $52,692. The lease expired on July 31, 2008,
and has no renewal option. We are now on a month-to-month term. NTS has
signed a new lease effective September 1, 2008 to lease Suite 980 at 400
Pine Street. The space measures 2,205 sq. ft. with annual rent of
$52,920.00 through August 2010 and $28,872 from September 2010 through
August 2011. The lease will expire August 2011, with an option to renew
for one (1) additional year.
|
·
|
POP
located at 201 Robert S. Kerr, Suite 1070, Oklahoma City, OK, between NTS
and BOKP Tower, LLC, measuring 4,092 sq. ft. with annual rent of
$16,926. The lease expires 04/30/2011 and we now rent on a
month-to-month basis.
|
·
|
Equipment
room located at 8212 Ithaca, Room W-12, Lubbock, TX, between NTS and
Megaron approximately 16 sq. ft. of wall space with annual rent of
$480. The lease is on a month to month term.
|
·
|
Sales
and technician offices, POP, switch site and fiber node local provisioning
offices, and record storage at Metro Tower, 1220 Broadway, Lubbock, TX,
between NTS and NTS Management Co., LLC, measuring 29,110 sq. ft. with
annual rent of $93,000. The lease is on a month to month
term.
|
·
|
Local
sales and technician offices located at 4214 Kell, Suite 104 Wichita
Falls, TX, between NTS and Skyline Developers, Inc., measuring 2,400 sq.
ft. with annual rent of $39,600. The lease expires in
August 2008 and has no renewal option.
|
·
|
POP
site located at United Center, 1049 N. 3rd, Abilene, TX, between NTS and
State National Bank, measuring approximately300 sq. ft. with annual rent
of $6,600. The lease is on a month to month
term.
|
·
|
POP,
switch site, and fiber node located at Petroleum Building, 203 W. 8th
Street Suite 102, Amarillo, TX, between NTS and TNT Properties, Inc.
measuring 3,056 sq. ft. with annual rent of $36,672. The lease
is on a month to month term.
|
·
|
POP,
switch site, and fiber node located at 710 Lamar Street, Suite 10-25,
Wichita Falls, TX, between NTS and White Realty Management Co., measuring
approximately 890 sq. ft. plus 200 sq. ft. to house a gas generator at 714
Travis, 6 th Floor, Wichita Falls. Annual rent for both spaces
totals $11,377. The lease expires 04/30/2010 and has two (2)
options for three (3) year renewal terms.
|
·
|
POP
and switch site located at 4316 Bryan, Dallas, TX, between NTS and XC
Networks measuring 3,816 sq. ft. with annual rent of
$155,870. The lease expires on 10/31/2009 and has no renewal
option.
|
·
|
NTS
has established the following collocations with
AT&T:
|
o
|
Abilene
Orchard, 343 Cedar Street, Abilene, TX 79601
|
o
|
Abilene
Owen, 2626 Post Oak Road, Abilene, TX 79605
|
o
|
Amarillo
Drake, 113 W. 10th Street, Amarillo,
TX 79101
|
o
|
Amarillo
Evergreen, 1700 E. Hastings Ave., Amarillo, TX 79108
|
o
|
Amarillo
Fleetwood, 3312 Western Ave., Amarillo, TX 79109
|
o
|
Amarillo
Osage, 10609 Osage, Amarillo, TX 79118
|
o
|
Lubbock
Frankford, 5711 98th St., Lubbock, TX 79424
|
o
|
Lubbock
Parkview, 1601 82nd St., Lubbock, TX 79423
|
o
|
Lubbock
Porter Sherwood, 1405 Main, Lubbock, TX 79401
|
o
|
Lubbock
Swift, 4402 34th St., Lubbock, TX 79414
|
o
|
Midland
Mutual, 410 W. Missouri, Midland, TX 79701
|
o
|
Midland
Oxford, 305 Midland Dr., Midland, TX 79703
|
o
|
Odessa
Emerson, 3801 Dawn, Odessa, TX 79762
|
o
|
Odessa
Lincoln, 301 W. 7th, Odessa, TX 79761
|
o
|
Pampa,
311 N. Ballard, St., Pampa, TX 79065
|
o
|
Plainview,
916 Denver St., Plainview, TX 79072
|
o
|
Terminal,
2806 LaForce Dr., Midland 79703
|
o
|
Wichita
Falls Callfield, 4010 Callfield Rd., Wichita Falls, TX
76308
|
o
|
Wichita
Falls Lamar, 812 9th, Wichita Falls, TX 76301
|
o
|
Wichita
Falls Tank Farm/Airport, 3145 Airport Dr., Wichita Falls, TX
79306
|
·
|
NTS
has established the following collocation with Verizon:
|
|
o
|
San
Angelo Main, 14 W. Twohig Ave., San Angelo, TX
79603
|
·
|
Perpetual
Construction and Utility Easement from Benny Judah for facility hut at
10508 Topeka, Lubbock, Texas, 79424.
|
·
|
Right
of Way Use Permit: City of Midland, Texas, Right of Way Use Permit for S.
Marienfeld Street and W. Missouri
Avenue.
|
209
E CAPITOL ST
|
Jackson,
MS
|
306
VALENTOUR RD
|
Jackson,
MS
|
209
E CAPITOL ST
|
Jackson,
MS
|
209
E CAPITOL ST
|
Jackson,
MS
|
410
MEADOWBROOK RD
|
Jackson,
MS
|
5602
CLINTON BLVD
|
Jackson,
MS
|
6021
RIDGEWOOD RD
|
Jackson,
MS
|
2706
BELVDERE RD
|
Jackson,
MS
|
913
HWY 51
|
Madison,
MS
|
2551
PASS RD
|
Biloxi,
MS
|
320
W THOMAS ST
|
Hammond,
LA
|
566
LOBDELL AV
|
Baton
Rouge, LA
|
208
STARING LN
|
Baton
Rouge, LA
|
530
S BUCHANAN ST
|
Lafayette,
LA
|
410
E RUTLAND ST
|
Covington,
LA
|
978
JACKSON ST
|
New
Orleans
|
602
CROCKETT ST
|
Shreveport,
LA
|
Xfone,
Inc. and Subsidiaries
|
||||||||||||||
CONSOLIDATED
FINANCIAL STATEMENTS
|
||||||||||||||
As
of December 31, 2007
|
||||||||||||||
CONTENTS
|
F-2
|
|
F-3 | |
F-4
|
|
F-6
|
|
F-7
|
|
F-8
|
|
F-11
|
Yarel
+ Partners
C.P.A
(Isr.)
|
|
Tel-Aviv,
Israel
March
24, 2008
|
An
Independent Member of BKR
International
|
Xfone, Inc. and
Subsidiaries
|
|||||
|
|||||
BALANCE
SHEET
|
|||||
|
|||||
December
31,
|
|||||
2007
|
|||||
|
|||||
CURRENT
ASSETS:
|
|||||
Cash
|
$ | 5,835,608 | |||
Restricted
cash
|
25,562,032 | ||||
Accounts
receivable, net
|
5,886,499 | ||||
Prepaid
expenses and other receivables (Note 3)
|
3,985,307 | ||||
Total
current assets
|
41,269,446 | ||||
MINORITY
INTEREST
|
7,190 | ||||
LONG
TERM ASSETS (including $1,753,503 of bonds issuance cost,
net)
|
2,076,061 | ||||
FIXED
ASSETS, NET (NOTE 4)
|
5,747,758 | ||||
OTHER
ASSETS, NET (NOTE 5)
|
17,948,872 | ||||
Total
assets
|
$ | 67,049,327 | |||
Xfone,
Inc. and Subsidiaries
|
||||
|
||||
BALANCE
SHEET
|
||||
|
||||
December
31,
|
||||
2007
|
||||
|
||||
CURRENT
LIABILITIES:
|
||||
Notes
payable - current portion (Note 7)
|
$
|
1,094,339
|
||
Trade
payables
|
8,287,420
|
|||
Other
liabilities and accrued expenses (Note 6)
|
5,322,045
|
|||
Obligations
under capital leases - current portion (note 9)
|
89,654
|
|||
Current
maturities of Bonds (note 8)
|
3,268,476
|
|||
Total
current liabilities
|
18,061,934
|
|||
DEFERRED
TAXES (NOTE 10)
|
1,103
|
|||
NOTES
PAYABLE (NOTE 7)
|
1,013,808
|
|||
BONDS
(NOTE 8)
|
22,083,892
|
|||
OBLIGATIONS
UNDER CAPITAL LEASES (NOTE 9)
|
31,893
|
|||
SEVERANCE
PAY
|
148,600
|
|||
Total
liabilities
|
41,341,230
|
|||
COMMITMENTS
AND CONTINGENT LIABILITIES (NOTE 11)
|
||||
SHAREHOLDERS'
EQUITY:
|
||||
Common
stock:
|
||||
75,000,000
shares authorized
|
||||
13,467,928
issued and outstanding
|
13,468
|
|||
Contributions
in excess of par value
|
26,494,985
|
|||
Foreign
currency translation adjustment
|
(1,564,814
|
)
|
||
Deferred
stock compensation
|
(295,155
|
)
|
||
Retained
earnings
|
1,059,613
|
|||
Total
shareholders' equity
|
25,708,097
|
|||
Total
liabilities and shareholders' equity
|
$
|
67,049,327
|
||
The
accompanying notes are an integral part of these consolidated financial
statements
|
Xfone, Inc. and
Subsidiaries
|
|||||||
STATEMENTS
OF OPERATIONS
|
Years
Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Revenues
|
$ | 44,723,934 | $ | 37,914,037 | ||||
Cost
of revenues
|
19,626,322 | 21,968,998 | ||||||
Gross
profit
|
25,097,612 | 15,945,039 | ||||||
Operating
expenses:
|
||||||||
Research
and development
|
47,609 | 45,709 | ||||||
Marketing
and selling
|
10,886,883 | 4,937,007 | ||||||
General
and administrative
|
12,335,759 | 9,927,301 | ||||||
Non-
recurring loss (note
11)
|
2,856,803 | - | ||||||
Total
operating expenses
|
26,127,054 | 14,910,017 | ||||||
Operating
profit (loss)
|
(1,029,442 | ) | 1,035,022 | |||||
Financing
expenses, net
|
(515,562 | ) | (540,688 | ) | ||||
Equity
in income of affiliated company
|
132,867 | 60,574 | ||||||
Loss
from a change of holding of affiliated company
|
- | (58,472 | ) | |||||
Other
income
|
- | 84,723 | ||||||
Income
(loss) before minority interest and taxes
|
(1,412,137 | ) | 581,159 | |||||
Minority
interest
|
(297,860 | ) | 81,802 | |||||
Income
(loss) before taxes
|
(1,709,997 | ) | 662,961 | |||||
Income
tax benefit (expense)
|
426,105 | (2,265 | ) | |||||
Net
income (loss)
|
$ | (1,283,892 | ) | $ | 660,696 | |||
Basic
net profit (loss) per share
|
$ | (0.109 | ) | $ | 0.065 | |||
Diluted
net profit (loss) per share
|
$ | (0.109 | ) | $ | 0.065 | |||
Weighted
average number of shares used for computing:
|
||||||||
Basic
profit (loss) per share
|
11,777,645 | 10,135,874 | ||||||
Diluted
profit (loss) per share
|
11,777,645 | 10,135,874 |
The
accompanying notes are an integral part of these consolidated financial
statements
|
Xfone, Inc. and Subsidiaries
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY
|
Number
of Ordinary Shares
|
Share Capital
|
Contributions in excess of par value |
Foreign
currency
translation adjustments
|
Deferred
Stock Compensation
|
Retained Earnings | Total Shareholders' Equity | ||||||||||||||||||||||
Balance
at January 1, 2006
|
8,172,671 | $ | 8,684 | $ | 8,354,964 | $ | (228,043 | ) | $ | - | $ | 1,682,809 | $ | 9,818,414 | ||||||||||||||
Deferred
stock compensation, net
|
- | - | 739,131 | - | (739,131 | ) | - | - | ||||||||||||||||||||
Amortization
of deferred compensation
|
- | - | - | - | 227,738 | - | 227,738 | |||||||||||||||||||||
Redemption
of stock
|
(100,000 | ) | (100 | ) | (269,762 | ) | - | - | - | (269,862 | ) | |||||||||||||||||
Stock
issued during the period, net of issuance expenses :
|
||||||||||||||||||||||||||||
For
services
|
40,629 | 47 | 27,381 | - | - | - | 27,428 | |||||||||||||||||||||
For
cash
|
663,825 | 709 | 1,020,717 | - | - | - | 1,021,426 | |||||||||||||||||||||
For
acquisitions
|
1,544,761 | 1,610 | 5,920,870 | - | - | - | 5,922,480 | |||||||||||||||||||||
For
loan repayment
|
831,931 | 204 | 2,790,652 | - | - | - | 2,790,856 | |||||||||||||||||||||
Warrants
granted to consultants for services and others
|
- | - | 425,740 | - | - | - | 425,740 | |||||||||||||||||||||
Currency
translation
|
- | - | - | (1,152,658 | ) | - | - | (1,152,658 | ) | |||||||||||||||||||
Net
income
|
- | - | - | - | - | 660,696 | 660,696 | |||||||||||||||||||||
Balance
at December 31, 2006
|
11,153,817 | $ | 11,154 | $ | 19,009,693 | $ | (1,380,701 | ) | $ | (511,393 | ) | $ | 2,343,505 | $ | 19,472,258 | |||||||||||||
Balance
at January 1, 2007
|
11,153,817 | $ | 11,154 | $ | 19,009,693 | $ | (1,380,701 | ) | $ | (511,393 | ) | $ | 2,343,505 | $ | 19,472,258 | |||||||||||||
Deferred
stock compensation, net
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Amortization
of deferred compensation
|
- | - | - | - | 216,238 | 216,238 | ||||||||||||||||||||||
Stock
issued during the period, net oof
|
- | - | - | - | - | - | - | |||||||||||||||||||||
of
issuance expenses :
|
||||||||||||||||||||||||||||
For
cash
|
2,294,828 | 2,295 | 6,489,955 | - | - | - | 6,492,250 | |||||||||||||||||||||
For
acquisitions
|
20,026 | 20 | (20 | ) | - | - | - | - | ||||||||||||||||||||
Exercise
of options options
|
6,300 | 6 | 22,044 | - | - | - | 22,050 | |||||||||||||||||||||
Shares cancelled | (7,043) | (7) | 7 | - | - | - | - | |||||||||||||||||||||
Fair
value of warrants granted to bonds holders
|
- | - | 973,306 | - | - | - | 973,306 | |||||||||||||||||||||
Currency
translation
|
- | - | - | (184,113 | ) | - | - | (184,113 | ) | |||||||||||||||||||
Net
loss
|
- | - | - | - | - | (1,283,892 | ) | (1,283,892 | ) | |||||||||||||||||||
Balance
at December 31, 2007
|
13,467,928 | $ | 13,468 | $ | 26,494,985 | $ | (1,564,814 | ) | $ | (295,155 | ) | $ | 1,059,613 | $ | 25,708,097 | |||||||||||||
Xfone, Inc. and Subsidiaries
|
||||||||
|
||||||||
STATEMENTS
OF CASH FLOWS
|
||||||||
|
||||||||
Years
Ended
|
||||||||
December
31 ,
|
||||||||
2007
|
2006
|
|||||||
Cash
flow from operating activities:
|
||||||||
Net
income (loss)
|
$ | (1,283,892 | ) | $ | 660,696 | |||
Adjustments
required to reconcile net income
|
||||||||
to
net cash provided by (used in)
|
||||||||
operating
activities:
|
||||||||
Depreciation
and amortization
|
1,211,798 | 1,092,085 | ||||||
Compensation in
connection with the issuance of warrants and options issued for
professional services
|
216,238 | 255,166 | ||||||
Minority
interest
|
297,860 | (81,802 | ) | |||||
Currency
differences on convertible notes and loans
|
- | 368 | ||||||
Loss
from a change of holding of affiliated company
|
- | 58,472 | ||||||
Changes
in earnings of equity investments
|
(132,868 | ) | (60,574 | ) | ||||
Decrease
(increase) in account receivables
|
2,796,353 | (1,335,519 | ) | |||||
Decrease
(increase) in long term assets
|
373,258 | - | ||||||
Decrease
(increase) in other receivables
|
(1,703,548 | ) | 771,517 | |||||
Decrease
in shareholder loans receivable
|
- | 242,847 | ||||||
Increase
(decrease) in trade payables
|
663,601 | (1,305,973 | ) | |||||
Increase
(decrease) in other liabilities and accrued expenses
|
2,523,797 | (390,947 | ) | |||||
Increase
(decrease) in severance pay
|
57,160 | 63,305 | ||||||
Decrease
in deferred taxes
|
(180,026 | ) | (51,657 | ) | ||||
Net
cash provided by (used in) operating activities
|
4,839,731 | (82,016 | ) | |||||
Cash
flow from investing activities:
|
||||||||
Investment
in short- term deposit
|
(24,998,173 | ) | - | |||||
Purchase
of other assets
|
- | (1,258 | ) | |||||
Purchase
of equipment
|
(1,322,908 | ) | (871,998 | ) | ||||
Change
in prepaid acquisition costs
|
(479,502 | ) | - | |||||
Change
in long- term receivables
|
- | (106,254 | ) | |||||
Acquisition
of EBI
|
- | (99,372 | ) | |||||
Acquisition
of Canufly
|
- | (506,684 | ) | |||||
Acquisition
of I-55 Internet Services
|
- | (104,560 | ) | |||||
Acquisition
of I-55 Telecommunications
|
- | (30,196 | ) | |||||
Net
cash acquired from the acquisition of Equitalk
|
- | 146,878 | ||||||
Net
cash acquired from the acquisition of Story Telecom
|
- | 65,579 | ||||||
Net
cash acquired from the acquisition of Auracall
|
(612,607 | ) | - | |||||
Net
cash (used in) investing activities
|
(27,413,190 | ) | (1,507,865 | ) |
Xfone,
Inc. and Subsidiaries
|
||||||||
|
||||||||
STATEMENTS
OF CASH FLOWS (Continued)
|
||||||||
|
||||||||
Years
Ended
|
||||||||
December 31
,
|
||||||||
2007
|
2006
|
|||||||
|
||||||||
Cash flow from financing
activities:
|
||||||||
Repayment
of long term loans from banks and others
|
(1,051,079 | ) | (2,544,945 | ) | ||||
Increase
in capital lease obligation
|
(105,968 | ) | 52,511 | |||||
Increase
(decrease) in short-term bank credit, net
|
(1,821,597 | ) | 240,647 | |||||
Proceeds
from long term loans from banks
|
199,437 | 307,412 | ||||||
Repayment
of convertible notes
|
- | (623,812 | ) | |||||
Issuance
of bonds, net of issuance expenses
|
22,821,827 | - | ||||||
Proceeds
from exercise of options
|
22,050 | - | ||||||
Proceeds
from issuance of shares and detachable warrants, net of issuance
expenses
|
7,465,555 | 751,564 | ||||||
Net
cash provided by (used in) financing activities
|
27,530,225 | (1,816,623 | ) | |||||
Effect
of exchange rate changes on cash and cash equivalents
|
(339,550 | ) | (262,660 | ) | ||||
Net
increase (decrease) in cash and cash equivalents
|
4,617,216 | (3,669,164 | ) | |||||
Cash
and cash equivalents at the beginning of year
|
1,218,392 | 4,887,556 | ||||||
Cash
and cash equivalents at the end of year
|
$ | 5,835,608 | $ | 1,218,392 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements
|
Supplemental disclosure of non cash investing and
financing activities:
|
||||||||
Cash
paid for:
|
||||||||
Interest
paid
|
$ | 129,308 | $ | 290,404 | ||||
Tax
paid
|
$ | 986 | $ | 111,859 | ||||
Acquisition
of EBI
|
$ | - | $ | 176,326 | ||||
Acquisition
of Canufly
|
$ | - | $ | 354,412 | ||||
Acquisition
of I-55 Internet Services
|
$ | - | $ | 3,195,299 | ||||
Acquisition
of I-55 Telecommunication
|
$ | - | $ | 818,513 | ||||
Acquisition
of Equitalk
|
$ | - | $ | 279,475 | ||||
Purchase
of fixed assets
|
$ | 830,000 | $ | - | ||||
Purchase of fixed assets via capital lease | $ | 26,510 | $ | - | ||||
Capitalization
of finance expenses related with acquisition costs of NTS
Communications
|
$ | 213,179 | $ | - | ||||
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
A.
|
Xfone,
Inc. ("Xfone") was
incorporated in Nevada, U.S.A. in September 2000 and is a provider of
voice, video and data telecommunications services, including: local, long
distance and international telephony services; prepaid and postpaid
calling cards; cellular services; Internet services; messaging services
(Email/Fax Broadcast, Email2Fax and Cyber-Number); and reselling
opportunities, with operations in the United States, the United
Kingdom and Israel.
|
·
|
Swiftnet
Limited ("Swiftnet") - wholly
owned U.K. subsidiary.
|
·
|
Equitalk.co.uk
Limited ("Equitalk") - wholly
owned U.K. subsidiary.
|
·
|
Auracall
Limited ("Auracall") - wholly owned U.K. subsidiary of
Swiftnet.
|
·
|
Xfone
USA, Inc. and its two wholly owned subsidiaries, eXpeTel Communications,
Inc. and Gulf Coast Utilities, Inc. (collectively, " Xfone USA ") - wholly
owned U.S. subsidiary.
|
·
|
Story
Telecom, Inc. and its wholly owned U.K. subsidiary, Story Telecom Limited
(collectively, " Story
Telecom ") - majority owned U.S. subsidiary, in which Xfone holds a
69.6% ownership share.
|
·
|
Xfone
018 Ltd. ("Xfone
018") - majority owned Israeli subsidiary in which Xfone holds a
69% ownership share.
|
B.
|
On
January 1, 2006, Xfone USA, Inc., entered into an Agreement with EBI Comm,
Inc. (“EBI”), a privately held Internet Service Provider, to purchase the
assets of EBI. EBI provided a full range of Internet access options for
both commercial and residential customers in north Mississippi. Based in
Columbus, Mississippi, EBI's services included Dial-up, DSL, T1 Dedicated
Access and Web Hosting. The customer base, numbering approximately 1,500
Internet users, is largely concentrated in the Golden Triangle area, which
includes Columbus, West Point and Starkville, Mississippi. The acquisition
was structured as an asset purchase, providing for Xfone USA to pay EBI
total consideration equal to 50% of the monthly collected revenue from the
customer base during the first 12 months, beginning January 2006. Acquired
assets include the customer base and customer lists, trademarks and all
related intellectual property, fixed assets and all account receivables.
Xfone USA paid a total consideration for this acquisition in the amount of
$85,699 in monthly payments of $10,000 until paid in full, and made the
first of such payments on June 1, 2007 and final payment on January 25,
2008. Payment for this acquisition was recorded as other
assets.
|
EBI
Comm, Inc.
|
||||
Current
assets, excluding cash acquired
|
$ | - | ||
Total
assets acquired
|
- | |||
Total
liabilities
|
176,326 | |||
Net
liabilities assumed
|
$ | 176,326 | ||
Purchase
price:
|
||||
Cash
paid
|
$ | 85,698 | ||
Acquisition
costs
|
13,674 | |||
$ | 99,372 | |||
Goodwill
|
$ | 275,698 |
Xfone,
Inc. and Subsidiaries
|
|||||||||||||
|
|||||||||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
|||||||||||||
Note
1 - Organization
and Nature of Business (Cont.)
|
|||||||||||||
C.
|
On
January 10, 2006 (effective as of January 1, 2006), Xfone USA, Inc.,
entered into an Asset Purchase Agreement with Canufly.net, Inc.
(“Canufly.net”), an Internet Service Provider based in Vicksburg,
Mississippi, and its principal shareholder, Mr. Michael Nassour.
Canufly.net provided residential and business customers with high-speed
Internet services and utilized the facilities-based network of Xfone USA,
as an alternative to BellSouth, to provide Internet connectivity to its
customers. Canufly.net also provided Internet services through a small
wireless application in certain areas in Vicksburg, Mississippi. The
transaction was closed on January 24, 2006. Xfone agreed to pay a total
purchase price of up to $710,633, payable as follows: (i) $185,000 in cash
payable in twelve equal monthly payments, the first installment was paid
at closing, and as of December 31, 2006, the entire amount was paid in
full and in accordance with the Asset Purchase Agreement; (ii) $255,633 in
cash, paid at closing, to pay off the loan with the B&K Bank;
(iii) 33,768 restricted shares of common stock and 24,053 warrants
exercisable at $2.98 per share for a period of five years were issued to
the shareholders of Canufly.net during May 2006. Following the closing in
2006 and due to the satisfaction of certain earnout provisions in the
Asset Purchase Agreement Xfone issued in March 2007 additional 20,026
restricted shares of common stock and 14,364 warrants exercisable at $2.98
per share for a period of five years to the shareholders of
Canufly.net.
|
Canufly.net,
Inc.
|
||||
Current
assets, excluding cash acquired
|
$
|
-
|
||
Fixed
assets
|
36,753
|
|||
Total
assets acquired
|
36,753
|
|||
Current
liabilities
|
-
|
|||
Long-term
liabilities
|
-
|
|||
Total
liabilities
|
-
|
|||
Net
assets assumed
|
$
|
36,753
|
||
Purchase
price:
|
||||
Cash
acquired or commitment in cash, net
|
$
|
495,524
|
||
Acquisition
costs
|
11,160
|
|||
Fair
market value of stock and warrant issued
|
193,951
|
|||
Total
|
700,635
|
|||
Goodwill
|
$
|
663,882
|
||
D.
|
On
May 10, 2006, Xfone, Story Telecom, Inc., Story Telecom Limited, Story
Telecom (Ireland) Limited, Nir Davison, and Trecastle Holdings Limited, a
company controlled by Mr. Davison, entered into the Stock Purchase
Agreement. Pursuant to the Stock Purchase Agreement, Xfone increased its
ownership interest in Story Telecom from 39.2% to 69.6% in a cash
transaction valued at $1,200,000. $900,000 of the total consideration was
applied to payables owed by Story Telecom to Xfone and its subsidiary
Swiftnet Limited for back-end telecommunications services. The
balance of $300,000 was paid to Story Telecom, to be used as working
capital. Story Telecom, Inc., a telecommunication service provider,
operated in the United Kingdom through its two wholly owned subsidiaries,
Story Telecom Limited and Story Telecom (Ireland) Limited (which was
dissolved on February 23, 2007). Story Telecom operates as a division of
Xfone's operations in the United Kingdom. The stock purchase pursuant to
the Stock Purchase Agreement was completed on May 16,
2006. (See Note 18).
Pursuant
to the above-mentioned Stock Purchase Agreement, at certain dates and
provided Story Telecom meets certain business and financial covenants, Nir
Davison and Trecastle Holdings Limited shall have the option to sell to
the Company all of their shares in Story Telecom for U.S. $450,000 in
cash, or equivalent in the Company's common stock (to be decided by the
Company). In addition, at certain dates and provided Story Telecom meets
certain business and financial covenants, the Company shall have the
option to buy from Nir Davison and Trecastle Holdings Limited all of their
shares in Story Telecom for U.S. $900,000 in cash, or equivalent in the
Company's common stock (to be decided by the Company). The Stock Purchase
Agreement further provides that upon request from Story Telecom, and
provided certain conditions are met, the Company shall provide all
consents necessary to make Story Telecom a publicly traded company through
a distribution of its shares as a dividend to the shareholders of the
Company, or a similar transaction. If the Company will fail to provide all
necessary consents it shall have to buy from Nir Davison and Trecastle
Holdings Limited all their shares of Story Telecom for $1,000,000, paid
70% in the Company's shares, valued at market price on an average of 30
trading days, and 30% in cash.
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Story
Telecom, Inc.
|
||||
Current
assets, excluding cash acquired
|
$ | 710,194 | ||
Fixed
assets
|
2,200 | |||
Other
assets
|
- | |||
Total
assets acquired
|
712,394 | |||
Current
liabilities
|
3,541,719 | |||
Long-term
liabilities
|
- | |||
Total
liabilities
|
3,541,719 | |||
Net
liabilities assumed
|
$ | 2,829,325 | ||
Purchase
price:
|
||||
Cash
acquired, net
|
$ | (65,579 | ||
Acquisition
costs
|
- | |||
Total
|
$ | (65,579 | ||
Goodwill
|
$ | 2,690,786 | ||
Trade
name
|
$ | 72,960 |
E.
|
As
of May 10, 2006 the Company had a £1,010,030 receivable from Global VOIP
Services Limited ("Global VOIP"), an Irish company which provided telecom
services. Story Telecom, Inc. and/or its subsidiaries owed £1,010,030 to
Global VOIP. In separate agreements, subsequent to the May 10,
2006 Stock Purchase Agreement, Story Telecom, Inc and/or its subsidiaries
were assigned the £1,010,030 receivable and payable on Global
VOIP's books. The assignment of Global VOIP's receivable and payable
resulted in a non-cash transaction that removed Globe VOIP's receivable
from the books of the Company and results in inter-company receivables and
payables that eliminate in consolidation. There is no income
statement effect to these
transactions.
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
F.
|
On
May 25, 2006, Xfone and the shareholders of Equitalk.co.uk Limited, a
privately held telephone company based in the United Kingdom ("Equitalk")
entered into an Agreement relating to the sale and purchase of Equitalk
(the "Equitalk Agreement"). The Equitalk Agreement provided for Xfone to
acquire Equitalk in a restricted common stock and warrant transaction
valued at $1,650,000. The acquisition was completed on July 3, 2006,
and on that date Equitalk became Xfone's wholly owned subsidiary. In
conjunction with the completion of the acquisition and in exchange for all
of the capital stock of Equitalk, Xfone issued a total of 402,192
restricted shares of its common stock and a total of 281,872 warrants
exercisable at $3.025 per share for a period of five years. Founded in
December 1999, Equitalk, a VC-financed company, was the first fully
automated e-telco in the United Kingdom. Equitalk provides both
residential and business customers with low-cost IDA and CPS voice
services, broadband and
teleconferencing.
|
Equitalk.co.uk
Limited
|
||||
Current
assets, excluding cash acquired
|
$ | 276,442 | ||
Fixed
assets
|
4,251 | |||
Other
assets
|
- | |||
Total
assets acquired
|
280,693 | |||
Current
liabilities
|
446,478 | |||
Long-term
liabilities
|
141,200 | |||
Total
liabilities
|
587,678 | |||
Net
liabilities assumed
|
$ | (306,985 | ||
Purchase
price:
|
||||
Cash
acquired, net
|
$ | (155,030 | ||
Acquisition
costs
|
13,875 | |||
Fair
market value of stock and warrant issued
|
1,420,567 | |||
Total
|
$ | 1,279,412 | ||
Goodwill
|
$ | 1,395,513 | ||
Customer
relations
|
$ | $190,884 |
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
G.
|
On
August 15, 2007, the Company, Swiftnet, and the majority shareholder of
Auracall Limited ("Majority Shareholder") entered into a definitive Share
Purchase Agreement, pursuant to which Swiftnet purchased from the Majority
Shareholder the 67.5% equity interest in Auracall, thereby increasing
Swiftnet’s ownership interest in Auracall from 32.5% to 100%. The purchase
price for the shares was £810,918 (approximately $1,616,158), payable
as follows: £500,000 (approximately $996,500) was paid in cash upon
signing of the Share Purchase Agreement, and the remaining £304,000, plus
interest of £6,918 (approximately $619,658), was payable in monthly
installments which commenced in September 2007 and
continued through March 2008. In connection with the acquisition,
Auracall and Swiftnet entered into an Inter-Company Loan Agreement,
pursuant to which Auracall agreed to lend Swiftnet £850,000 (approximately
$1,694,050) for the sole purpose of and in connection with Swiftnet’s
acquisition of the Auracall shares. The loan is unsecured,
bears interest at a rate of 5% per annum, and is to be repaid in five
years, but may be repaid earlier without charge or penalty.
|
Auracall
Limited
|
||||
Current
assets, excluding cash acquired
|
$
|
875,510
|
||
Fixed
assets
|
30,051
|
|||
Total
assets acquired
|
905,561
|
|||
Current
liabilities
|
1,018,229
|
|||
Net
liabilities assumed
|
(112,668
|
)
|
||
Acquired
net assets (67.5%)
|
(76,051
|
)
|
||
Purchase
price:
|
||||
Cash
acquired, net
|
233,541
|
|||
Deferred
liabilities
|
604,158
|
|||
Acquisition
costs
|
140,900
|
|||
978,599
|
||||
Goodwill
|
$
|
1,054,650
|
||
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
A.
|
Principles of
Consolidation and Basis of Financial Statement
Presentation
|
B.
|
Foreign
Currency
Translation
|
C.
|
Restricted cash
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
D.
|
Accounts
Receivable
|
E.
|
Fixed
Assets
|
Useful
Life
|
||||
Communication
equipment
|
10
years
|
|||
Equipment
held under lease
|
4 years
|
|||
Office
furniture and equipment
|
4-14
years
|
|||
Development
costs
|
3
years
|
|||
Computer
equipment
|
3-4
years
|
|||
Motor
vehicles
|
4
years
|
|||
Building
and plant
|
4-14
years
|
F.
|
Other
Intangible
Assets
|
G.
|
Long-Lived
Assets
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
H.
|
Revenue
Recognition
|
I.
|
Use of
Estimates
|
J.
|
Earnings Per
Share
|
K.
|
Income
Taxes
|
L.
|
Stock-Based
Compensation
|
M.
|
Goodwill and
Indefinite-Lived Purchased Intangible
Assets
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
N.
|
Reclassification
|
O.
|
Recent
Accounting
Pronouncements
|
|
|
|||
|
||||
Deferred
taxes
|
$
|
430,876
|
||
Prepaid
acquisition costs
|
692,681
|
|||
Accrued
income
|
280,364
|
|||
Prepaid
expenses
|
1,453,910
|
|||
Tax
authorities
|
331,105
|
|||
Other
receivables
|
796,371
|
|||
$
|
3,985,307
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Cost
|
||||
Communication
equipment
|
$
|
5,214,315
|
||
Equipment
held under capital lease
|
103,392
|
|||
Office
furniture and equipment
|
2,121,971
|
|||
Development
costs
|
781,614
|
|||
Computer
equipment
|
686,955
|
|||
Motor
vehicles
|
179,041
|
|||
Building
and plant
|
685,730
|
|||
9,773,018
|
||||
Accumulated
Depreciation
|
||||
Communication
equipment
|
1,372,233
|
|||
Equipment
held under capital lease
|
24,267
|
|||
Office
furniture and equipment
|
1,690,335
|
|||
Development
costs
|
344,800
|
|||
Computer
equipment
|
414,712
|
|||
Motor
vehicles
|
30,324
|
|||
Building
and Plant
|
148,589
|
|||
4,025,260
|
||||
$
|
5,747,758
|
|
||||
Cost:
|
||||
Goodwill
|
$
|
16,872,088
|
||
Customer
relations
|
982,448
|
|||
Trade
name
|
73,478
|
|||
License
|
330,365
|
|||
18,258,379
|
||||
Accumulated
amortization:
|
||||
Customer
relations
|
232,475
|
|||
Trade
name
|
17,145
|
|||
License
|
59,887
|
|||
309,507
|
||||
Other
assets, net
|
$
|
17,948,872
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Corporate
taxes
|
$ | 62,648 | ||
Government
authorities
|
372,156 | |||
Payroll
and other taxes
|
94,232 | |||
Accrued
expense (1)
|
4,495,861 | |||
Others
|
297,148 | |||
$ | 5,322,045 |
Annual
Interest
|
|||||
rate
|
|
||||
Convertible
note (1)
|
Prime
+ 1.5%
|
$
|
623,643
|
||
Note
payable to others, due on demand, monthly interest payments
only
|
5%
- 7%
|
327,587
|
|||
Bank
loans
|
0%
|
50,120
|
|||
Loans
payable over 5 years
|
Prime
+ 1.0%
|
615,041
|
|||
Loan
(2)
|
Israeli
Consumer Price Index + 4.0%
|
491,756
|
|||
2,108,147
|
|||||
less
current portion
|
1,094,339
|
||||
Long
term portion
|
$
|
1,013,808
|
|||
1.
|
On
September 27, 2005, a Securities Purchase Agreement (the "Securities
Purchase Agreement") was entered for a $2,000,000 financial transaction by
and among the Company, Xfone USA, Inc., eXpeTel Communications, Inc., Gulf
Coast Utilities, Inc. and Laurus Master Fund, Ltd. The investment, which
took the form of a Convertible Term Note secured by the Company's United
States assets, has a 3 year term and bears interest at a rate equal to
prime plus 1.5% per annum. The Term Note is convertible, under certain
conditions, into shares of the Company's common stock at an initial
conversion price equal to $3.48 per share. In conjunction with this
financial transaction, we issued to Laurus Master Fund 157,500 warrants
which are exercisable at $3.80 per share for a period of five years. The
closing of the financial transaction was on September 28, 2005. The
Securities Purchase Agreement provides that for so long as twenty five
percent (25%) of the principal amount of the Term Note is outstanding, the
Company, without the prior written consent of Laurus Master Fund, shall
not, and shall not permit any of the Subsidiaries (as defined in the
Securities Purchase Agreement) to directly or indirectly declare or pay
any dividends, other than dividends paid to the Company or any of its
wholly-owned Subsidiaries.
|
2.
|
According
to the agreement between the Company, Xfone 018 Ltd. and our 26% minority
interest partner in Xfone 018 (the “Minority Partner”), the Minority
Partner provided in the fourth quarter of 2004, a shareholder loan of
approximately $400,000 to Xfone 018 (the “Minority Partner Loan”). The
Minority Partner Loan is payable after four years with annual interest of
4% and linkage to the Israeli consumer price index. As of December
31, 2007, the balance of the Minority Partner Loan is 1,891,293 NIS
($491,756).
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Year
|
||||
2008
|
$
|
1,094,339
|
||
2009
|
325,607
|
|||
2010
|
134,307
|
|||
2011
|
553,894
|
|||
$
|
2,108,147
|
A.
|
Issuance
of Bonds
|
Bonds
Series A (1)
|
$
|
24,588,726
|
||
Stock
Purchase Warrants (2)
|
973,306
|
|||
Total
|
$
|
25,562,032
|
||
(1)
|
As
of December 31, 2007, the outstanding balance increased by $763,642 due to
interest accrued, linkage to the CPI and effect of the exchange rate of
the new Israeli Shekel.
|
(2)
|
Presented
as part of shareholders' equity.
|
2008
|
$
|
89,654
|
||
2009
|
31,893
|
|||
Total
|
$
|
121,547
|
||
Total
minimum lease payments
|
$
|
136,274
|
||
Less:
amount representing interest
|
(14,727
|
)
|
||
Present
value of net minimum lease payment
|
$
|
121,547
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Deferred
Tax Liabilities:
|
||||
Accelerated
tax write off of fixed assets
|
$ | 1,103 | ||
Deferred
Tax Assets:
|
||||
Carry
forward losses
|
363,768 | |||
Accrued
vacation and severance pay
|
67,108 | |||
Net
deferred taxes liabilities
|
$ | 429,773 |
Income
tax computed at statutory rate
|
$
|
(628,809
|
)
|
|
Effect
of tax authority adjustments
|
35,642
|
|||
Current
income (losses) for which no deferred tax expense (benefit) has been
recorded
|
39,860
|
|||
Difference
between income reported for tax purposes and income for financial
reporting purposes - net
|
30,073
|
|||
Deferred
taxes on losses (utilization of losses)
|
(506,877
|
)
|
||
Taxes
on losses for which a valuation allowance was not provided
|
603,686
|
|||
Taxes
in respect of prior years
|
320
|
|||
Provision
for income taxes
|
$
|
(426,105
|
)
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
A.
|
The
holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The common
stock has no pre-emptive or conversion rights or other subscription
rights. There are no sinking fund provisions applicable to the common
stock.
|
|
|
B.
|
On
March 28, 2006, Xfone issued to Gersten Savage, LLP 755 restricted shares
of its common stock as consideration for legal services with a value of
£1,480 ($2,900).
|
C.
|
On
March 28, 2006, Xfone issued to Oberon Securities, LLC 30,144 shares of
its common stock pursuant to that certain Letter Agreement dated November
15, 2005, between Xfone and Oberon Securities with a value of £54,302
($106,378).
|
|
D.
|
On
March 31, 2006, and in conjunction with a Letter Agreement dated October
10, 2005 with MCG Capital Corporation, a major creditor of I-55 Internet
Services, Xfone issued to MCG Capital 667,998 shares of its common stock,
valued at fair value of $2,010,006, in return for retiring its loan
with I-55 Internet Services.
|
|
E.
|
On
April 6, 2006, Xfone sold 80,000 restricted shares of its common stock,
20,000 warrants exercisable at $3.00 per share, and 20,000 warrants
exercisable at $3.25 per share to Mercantile Discount-Provident Funds. The
warrants are exercisable for a period of 5 years. The total value of the
shares and warrants is £110,072 ($215,630).
|
|
F.
|
On
April 6, 2006, Xfone sold 90,000 restricted shares of its common stock,
22,500 warrants exercisable at $3.00 per share, and 22,500 warrants
exercisable at $3.25 per share to Hadar Insurance Company Ltd. The
warrants are exercisable for a period of 5 years. The total value of the
shares and warrants is £123,831 ($242,584).
|
|
G.
|
On
April 6, 2006, Xfone sold 110,000 restricted shares of its common stock,
27,500 warrants exercisable at $3.00 per share, and 27,500 warrants
exercisable at $3.25 per share to the Israeli Phoenix Assurance Company
Ltd. The warrants are exercisable for a period of 5 years. The total value
of the shares and warrants is £151,348 ($296,492).
|
|
H.
|
On
April 6, 2006, Xfone sold 44,000 restricted shares of its common stock,
11,000 warrants exercisable at $3.00 per share, and 11,000 warrants
exercisable at $3.25 per share to Gaon Gemel Ltd. The warrants are
exercisable for a period of 5 years. The total value of the shares and
warrants is £60,539 ($118,597).
|
|
I.
|
During
May 2006, and in conjunction with a January 10, 2006 Asset Purchase
Agreement by and among Xfone USA, Inc. and Canufly.net, Inc., Xfone issued
to the shareholders of Canufly.net 33,768 restricted shares of its common
stock and 24,053 warrants, exercisable at $2.98 per share for a period of
five years. The total value of the shares and warrants is £60,752
($112,330).
|
|
J.
|
On
May 10, 2006, Xfone issued in exchange for services 25,000 warrants
exercisable at $4.00 per share, 25,000 warrants exercisable at $4.50 per
share, 25,000 warrants exercisable at $5.00 per share, and 25,000 warrants
exercisable at $5.50 per share to Elite Financial Communications Group,
LLC. The term of the warrants shall expire at the later of: (i) 36 months
from the day of grant; (ii) 6 months after the underlying shares are
effective.
|
|
K.
|
During
May 2006, and in conjunction with the merger that consummated on March 31,
2006, Xfone issued to the shareholders of I-55 Internet Services, Inc.
789,863 restricted shares of its common stock valued at $2,380,178 and
603,939 warrants valued at $1,284,722, based on the Black Scholes
option-pricing model. The warrants are convertible on a one to one basis
into restricted shares of Xfone's common stock at an exercise price of
$3.31 per share, and have a term of five years.
|
|
L.
|
During
May 2006, and in conjunction with the merger that consummated on March 31,
2006, Xfone issued to the sole shareholder of I-55 Telecommunications,
LLC. 223,702 restricted shares of its common stock valued at $671,687 and
79,029 warrants valued at $166,667, based on the Black Scholes
option-pricing model. The warrants are convertible on a one to one basis
into restricted shares of Xfone's common stock at an exercise price of
$3.38 per share, and have a term of five years.
|
|
M.
|
During
May 2006, and in conjunction with Agreements to Purchase Promissory Notes
dated October 31, 2005 / February 3, 2006 with certain creditors of I-55
Telecommunications, LLC, Xfone issued to the creditors of I-55
Telecommunications 163,933 restricted shares of its common stock and
81,968 warrants at a total value of $492,220, in return for retiring their
individual loans with I-55 Telecommunications. The warrants are
convertible on a one to one basis into restricted shares of Xfone's common
stock at an exercise price of $3.38 per share, and have a term of five
years.
|
|
N.
|
On
May 30, 2006, Xfone issued 2,736 restricted shares of its common stock to
Elite Financial Communications Group, LLC in exchange for services. The
value of the shares is £4,955
($9,707).
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
O.
|
On
June 28, 2006, Xfone cancelled 5,000 restricted shares of its common stock
which were issued in 2000 to Ofer Weisglass. The shares were issued to Mr.
Weisglass in return for services; however Mr. Weisglass failed to provide
the services to Xfone.
|
|
P.
|
On
July 3 2006, Xfone issued to Preiskel & Co LLP 5,236 restricted shares
of its common stock as consideration for legal services. The value of the
shares is £7,500 ($1,469).
|
|
Q.
|
On
July 5, 2006, and in conjunction with the acquisition that was completed
on July 3, 2006, Xfone issued to the shareholders of Equitalk.co.uk
Limited a total of 402,192 restricted shares of its common stock and a
total of 281,872 warrants exercisable at $3.025 per share for a period of
five years. The total value of the shares and warrants is £717,167
($1,404,930).
|
|
R.
|
On
July 11, 2006, and in conjunction with a March 10, 2005 Employment
Agreement between Xfone USA, Inc. and Wade Spooner, its President and
Chief Executive Officer at that time, Xfone issued to Mr. Spooner an
“Acquisition Bonus” of 32,390 warrants. Xfone was advised by AMEX that the
approval of the shareholders of Xfone is required in order to allow the
issuance and listing of the shares underlying said warrants. The required
approval was obtained on December 28, 2006. The warrants are convertible
on a one to one basis into restricted shares of Xfone's common stock at an
exercise price of $3.285, and have a term of five years. The value of the
warrants is £11,010 ($21,569).
|
|
S.
|
On
July 11, 2006, and in conjunction with a March 10, 2005 Employment
Agreement between Xfone USA, Inc. and Ted Parsons, its Vice President and
Chief Marketing Officer, Xfone issued to Mr. Parsons an “Acquisition
Bonus” of 16,195 warrants. Xfone was advised by AMEX that the approval of
the shareholders of Xfone is required in order to allow the issuance and
listing of the shares underlying said warrants. The required approval was
obtained on December 28, 2006. The warrants are convertible on a one to
one basis into restricted shares of Xfone's common stock at an exercise
price of $3.285, and have a term of five years. The value of the warrants
is £5,506 ($10,785).
|
|
T.
|
On
July 11, 2006, and in conjunction with a Letter Agreement dated June 15,
2006 between Xfone and Oberon Securities, LLC, Xfone issued to Oberon
Securities 243,100 warrants at an exercise price of $2.86 and 37,200
warrants at an exercise price of $3.34. The warrants are convertible on a
one to one basis into restricted shares of Xfone's common stock, and have
a term of five years. The value of the warrants is £180,140
($352,895).
|
|
U.
|
On
July 11, 2006, and in conjunction with a June 19, 2006 Securities Purchase
Agreement Xfone issued to several investors an aggregate of 172,415
warrants. The warrants are convertible on a one to one basis into
restricted shares of Xfone's common stock, at an exercise price of $3.40,
and have a term of five years. The value of the warrants is £91,186
($178,633).
|
|
V.
|
On
September 5, 2006, and in conjunction with a June 19, 2006 Securities
Purchase Agreement Xfone issued to several investors an aggregate of
344,825 restricted shares of common stock. The value of the shares is
£531,163 ($1,040,549).
|
|
W.
|
On
September 19, 2006, and in conjunction with a Letter Agreement dated June
15, 2006 between Xfone and Oberon Securities, LLC, Xfone issued to Oberon
Securities 90,000 restricted shares of common stock. The value of the
shares is £119,512 ($234,124).
|
|
X.
|
On
September 19, 2006, and pursuant to the Service Agreement dated December
6, 2005, that was terminated on August 28, 2006, Xfone cancelled 64,360 of
the 100,000 warrants which were issued to Elite Financial Communications
Group, LLC on May 10, 2006.
|
|
Y.
|
On
November 1, 2006, Xfone issued 6,994 restricted shares of its common stock
to Elite Financial Communications Group, LLC in exchange for services. The
value of the shares is £9,044 ($17,717).
|
|
Z.
|
On
November 20, 2006, Xfone issued in exchange for services 36,000 warrants
exercisable at $3.50 per share, 36,000 warrants exercisable at $4.00 per
share, and 36,000 warrants exercisable at $4.50 per share to Institutional
Marketing Services, Inc. The warrants have a term of five years. In the
event Xfone elects early termination of its agreement with Institutional
Marketing Services, then any warrants that have not yet reached their
vesting date will be cancelled. The value of the warrants is
£27,341($53,561).
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
AA.
|
On
November 27, 2006, Xfone issued in exchange for services 117,676 warrants
exercisable at $3.50 per share to Crestview Capital Master, LLC. The
warrants have a term of five years and shall vest as follows: 29,419
warrants immediately, 29,419 warrants on February 10, 2007, 29,419
warrants on May 10, 2007, and 29,419 warrants on August 10, 2007. The
value of the warrants is £89,662 ($175,648).
|
|
BB.
|
On
December 26, 2006, and in conjunction with a December 25, 2006 oral stock
purchase agreement, Xfone repurchased from Abraham Keinan, its Chairman of
the Board, 100,000 restricted shares of its common stock at a price of
$2.70 per share (market price at that day was $2.80 per share). The
100,000 shares were returned to Xfone for cancellation. The Agreement was
approved by all non-interested members of the Board of Directors,
following a review and discussion by Xfone's Audit
Committee.
|
|
CC.
|
On
January 16, 2007, and in conjunction with a December 24, 2006 Securities
Purchase Agreement the Company issued an aggregate of 172,414 warrants to
Halman-Aldubi Provident Funds Ltd. and Halman-Aldubi Pension Funds Ltd.
The warrants are exercisable on a one to one basis into restricted shares
of our common stock, at an exercise price of $3.40, and have a term of
five years. On
February 1, 2007, and in conjunction with a December 24, 2006 Securities
Purchase Agreement the Company issued an aggregate of 344,828 restricted
shares of our common stock, at a purchase price of $2.90 per share, to
Halman-Aldubi Provident Funds Ltd. and Halman-Aldubi Pension Funds
Ltd.
|
|
DD.
|
On
March 20, 2007, following the closing of the acquisition of the assets of
Canufly.net in 2006, and due to the satisfaction of certain earn out
provisions in the Asset Purchase Agreement, the Company issued to the
shareholders of Canufly.net additional 20,026 restricted shares of common
stock and 14,364 warrants exercisable at $2.98 per share for a period of
five years.
|
|
EE.
|
On
October 23, 2007, the Company entered into Subscription Agreements with 15
investors affiliated with Gagnon Securities, Inc. which agreed to
purchase an aggregate of 1,000,000 shares of the Company's common stock at
a price of $3.00 per share, for a total subscription amount of
$3,000,000. The 1,000,000 shares were issued on November 6,
2007.
|
|
FF.
|
On
November 4, 2007, the Company entered into Subscription Agreements with:
(i) XFN - RLSI Investments, LLC, an entity affiliated with Richard L.
Scott Investments, LLC, a U.S. institutional investor, which agreed to
purchase 250,000 shares of the Company's common stock at a price of
$3.00 per share, for a total subscription amount of $750,000; and (ii)
certain Israeli institutional investors, which agreed to purchase an
aggregate of 700,000 shares of the Company's common stock, at a price
of $3.00 per share, for a total subscription amount of $2,100,000 . The
950,000 shares were issued on November 13, 2007.
|
|
GG.
|
In
conjunction with the consummation of the merger and in exchange for all of
the capital stock of I-55 Telecommunications, LLC, the Company issued
a total of 223,702 shares of common stock valued at $671,687 and 79,029
warrants exercisable for a period of five years into shares of common
stock, with an exercise price of $3.38 (the “Xfone Stock and Warrant
Consideration”). A portion of the Xfone Stock and Warrant Consideration
issued at closing was placed in an escrow. The Company determined a breach
of the representations and warranties in the Merger Agreement resulting
from the failure of I-55 Telecommunications to disclose the liability due
and payable to the Louisiana Universal Service Fund (“LA USF”)
through the period of October 2005, at which time Xfone USA undertook the
management role of I-55 Telecommunications. Pursuant to Section 1(g) of
the Escrow Agreement dated as of March 31, 2006 by and among Xfone
USA, the Escrow Agent, and the President and Sole Member of I-55
Telecommunications, and in accordance with Article 6.02 of the Merger
Agreement, Xfone USA notified the other parties that it believed that it
had suffered a loss of $30,626 pursuant to the provisions of Article 6.02
of the Merger Agreement dated as of August 26, 2005. Having not received
any response from the President and Sole Member of I-55
Telecommunications, nor from his counsel, on October 15, 2007, and after
the allotted response time allowed, Xfone USA instructed the Escrow Agent
(Trustmark National Bank) to deliver from the Escrow Fund of the President
and Sole Member of I-55 Telecommunications, to the Company, 7,043 shares
of Common Stock and 4,838 Xfone Stock Warrants. The 7,043 shares of Common
Stock and 4,838 Xfone Stock Warrants were returned to the Company for
cancellation on October 31, 2007.
|
|
HH. |
On
February 26, 2008, the Company completed the issuance of 800,000 Units (as
defined below) to XFN-RLSI Investments, LLC, an entity affiliated with
Richard L. Scott Investments, LLC, a U.S. institutional investor, and
500,000 Units to certain investors affiliated with or who are customers of
Gagnon Securities LLC, pursuant to Subscription Agreements entered into
with each of the investors on December 13, 2007. Each “Unit”
consists of two shares of the Company’s Common Stock and one warrant to
purchase one share of Common Stock, exercisable for a period of five years
from the date of issuance at an exercise price of $3.10 per
share. The Units were sold at a price of $6.20 per Unit, for an
aggregate purchase price of $8,060,000, which was held in escrow for the
benefit of the Company pending the receipt by the Company of approvals
from the American Stock Exchange and the Tel Aviv Stock Exchange for the
listing of the shares (including those underlying the warrants), as well
as the closing of the acquisition of NTS (see also note 18).
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Number
of warrants
|
Weighted
average exercise price
|
|||||||
Warrants outstanding
at the beginning of the year
|
4,622,219 | $ | 3.91 | |||||
Granted
|
1,486,778 | $ | 3.13 | |||||
Forfeited
|
(4,838 | ) | $ | 3.38 | ||||
Warrants outstanding
and exercisable at the end of the year
|
6,104,159 | $ | 3.72 |
A.
|
In
November 2004, Xfone's board of directors approved the adoption of the
principal items forming Xfone's 2004 stock option plan (The “2004 Plan”)
for the benefit of employees, officers, directors, consultants and
subcontractors of the Company including its subsidiaries. The 2004
Plan was approved by a special meeting of shareholders on March 13, 2006.
The purpose of the 2004 Plan is to enable the Company to attract and
retain the best available personnel for positions of substantial
responsibility, to provide an incentive to such persons presently engaged
with the Company and to promote the success of the Company business. The
2004 Plan will provides for the grant of options an aggregate of 5,500,000
shares of Xfone's common stock. The 2004 Plan is administered by the
board that determines the persons to whom options are granted, the number
of options that are granted, the number of shares to be covered by each
option, the options may be exercised and whether the options is an
incentive or non-statutory option.
|
|
B.
|
At
November 24, 2004 3,200,000 options were granted under the 2004 Plan
according to the following terms: Option exercise price - $3.50, vesting
date - 12 month from the date of grant, expiration date - 5 years from the
vesting date.
|
|
C.
|
On
February 6, 2005, Xfone's board of directors approved a grant to employees
of 730,000 options under and subject to the 2004 Plan according to the
following terms: Option exercise price of $3.50; Vesting Date - the
vesting of the options will be over a period of 4 years as follows: 25% of
the options are vested after a year from the Date of Grant. Thereafter,
1/16 of the options are vested every 3 months for the following 3 years;
Expiration Date
- 5.5 years from the Grant Date.
|
|
D.
|
On
November 13, 2005, Xfone's Board of Directors ratified the grant
of 600,000 options to Wade Spooner and 300,000 options to Ted
Parsons on March 10, 2005, under the 2004 Plan, pursuant to the terms
described in their March 10, 2005 employment agreements. The stock options
provided for a five (5) year term from the vesting date, a strike price
that is 10% above the closing price of the Company's common stock on the
date of issue of the Options.
|
|
|
E.
|
On
June 8, 2005, Xfone's board of directors approved a grant to Xfone's Chief
Financial Officer, of 300,000 options under and subject to the 2004 Plan
of Xfone according to the following terms: Option exercise price of $3.50;
Vesting Date - the
vesting of the options will be over a period of 4 years as follows: 25% of
the options are vested after a year from the Date of Grant. Thereafter,
1/16 of the options are vested every 3 months for the following 3 years;
Expiration Date - 5.5 years
from the grant date.
|
|
F.
|
On
July 11, 2006, and in conjunction with a July 3, 2006 Service Agreement
between Xfone, Swiftnet Limited and John Mark Burton, the Managing
Director of Xfone's UK based subsidiaries, Xfone's Board of Directors
approved the grant of 300,000 options, under and subject to its 2004 Plan,
to Mr. Burton. The options are convertible on a one to one basis into
restricted shares of Xfone's common stock, at an exercise price of $3.50,
and have a term of ten years. The vesting of the options will be over a
period of 4 years as follows: 75,000 options are vested on July 3, 2007.
Thereafter, 18,750 options are vested every 3 months for the following 3
years.
|
|
G.
|
On
October 30, 2006, Xfone's Board of Directors approved a grant of 25,000
options to Itzhak Almog under and subject to Xfone's 2004 Plan. The
options were granted according to the following terms: Date of Grant -
October 30, 2006; Option exercise price - $3.50; Vesting Date - 12 months
from the Date of Grant; Expiration Date - 5 years from the Vesting
Date.
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
H.
|
On
June 5, 2007, the Company’s Board of Directors approved a grant of 20,000
options to Israel Singer, and a grant of 20,000 options to Morris Mansour.
The options were granted under and subject to the Company’s 2004 Stock
Option Plan with the following terms: Date of Grant - June 5, 2007;
Exercise Price - $3.50 per share; Vesting Date - 12 months from the Date
of Grant; Expiration Date - 5 years from the Vesting
Date.
|
|
I.
|
On
June 5, 2007, the Company’s Board of Directors approved a grant of 200,000
options to Brian Acosta under the Company’s 2004 Plan. The options are
granted under the following terms: Date of Grant - June 5, 2007; Exercise
Price - $3.146 per share; Vesting Date - (a) 25,000 options on March 31,
2009; (b) 50,000 options on March 31, 2010; and (c) 125,000 options on
March 31, 2011; Expiration Date - 5 years from the Vesting Date;
Termination - in the event of termination of employment prior to the
completion of Mr. Acosta’s second year of employment with Xfone USA, then
175,000 of the aforementioned options shall automatically terminate; in
the event of termination of employment during Mr. Acosta’s third year of
employment with Xfone USA, then 125,000 of the aforementioned options
shall automatically terminate. Mr. Acosta is the Chief Technical Officer
of our subsidiary, Xfone USA.
|
|
J.
|
On
June 5, 2007, the Company’s Board of Directors approved a grant of 200,000
options to Hunter McAllister under the Company’s 2004 Plan. The options
are granted under the following terms: Date of Grant - June 5, 2007; Exercise
Price - $3.146 per
share; Vesting Date - (a) 25,000 options on
March 31, 2009; (b) 50,000 options on March 31, 2010; and (c) 125,000
options on March 31, 2011; Expiration Date - 5 years from the
Vesting Date; Termination - in the event of
termination of employment prior to the completion of Mr. McAllister’s
second year of employment with Xfone USA, then 175,000 of the
aforementioned options shall automatically terminate; in the event of
termination of employment during Mr. McAllister’s third year of employment
with Xfone USA, then 125,000 of the aforementioned options shall
automatically terminate. Mr. McAllister is the Vice President Business
Development of our subsidiary, Xfone USA.
|
|
K.
|
On
October 28, 2007, our Board of Directors adopted and approved the
Company’s 2007 Stock Incentive Plan (the "2007 Plan") which is designated
for the benefit of employees, directors, and consultants of the Company
and its affiliates. The 2007 Plan was approved on December 17, 2007, at an
Annual Meeting of shareholders of the Company. The 2007 Plan authorizes
the issuance of awards for up to a total of 8,000,000 shares of our common
stock underlying such awards.
|
|
L.
|
On
August 26, 2007, the Company entered into a contractual obligation to
grant the General Manager of Xfone 018 the following number of options to
purchase shares of the Company’s common stock under the 2007 plan, (the
“Plan”):
(1) Within
30 days of adoption of the Plan, the Company will grant options to
purchase 300,000 shares of Common Stock, at an exercise price of $3.50 per
share, of which (i) options to purchase 75,000 shares will vest on August
26, 2008,; and (ii) options to purchase 18,750 shares will be vest at the
end of every 3 month period thereafter.
(2) At
the end of each calendar year between 2008 and 2011, and upon the
achievement by Xfone 018 100% of its Targets for each such year, the
General Manager of Xfone 018 will be granted options to purchase 25,000
shares of the Company’s Common Stock under the Plan, for an exercise price
of $3.50 per share, which will be exercisable 30 days after the Company
publishes its annual financial statements for such
year.
The
options will expire 120 days after termination of employment with Xfone
018.
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Number
of options
|
Weighted
average exercise price
|
|||||||
Options
outstanding at the beginning of the year
|
5,350,000 | $ | 3.69 | |||||
Granted
(a)
|
740,000 | $ | 3.31 | |||||
Exercised
|
(6,300 | ) | $ | 3.50 | ||||
Forfeited
|
(368,700 | ) | $ | 3.50 | ||||
Options
outstanding at the end of the year
|
5,715,000 | $ | 3.65 | |||||
Options
vested and exercisable
|
3,689,063 | $ | 3.50 | |||||
Weighted
average fair value of options granted
|
$ | 1.13 |
Options
vested and exercisable
|
|||
Range
price ($)
|
Number
of options
|
Weighted
average remaining contractual life (years)
|
Weighted
average exercise price
|
3.50
|
3,689,063
|
4.8
|
$3.02
|
Year
Ended December 31 , 2007
|
|||||||||
Weighted
Average
|
|||||||||
Income
|
Shares
|
Per
Share
|
|||||||
|
Amounts
|
||||||||
|
|||||||||
Net
Income
|
$
|
(1,283,892)
|
|||||||
Basic
EPS:
|
|||||||||
Income
available to common stockholders
|
$
|
(1,283,892)
|
11,777,645
|
$
|
(0.109)
|
||||
Effect
of dilutive securities:
|
|||||||||
Options
and
warrants
(*)
|
-
|
-
|
|||||||
Diluted
EPS:
|
|||||||||
Income
available to common stockholders
|
$
|
(1,283,892)
|
11,777,645
|
$
|
(0.109)
|
Year
Ended December 31 , 2006
|
||||||||||
Weighted
Average
|
||||||||||
Income
|
Shares
|
Per
Share
|
||||||||
|
Amounts
|
|||||||||
|
||||||||||
Net
Income
|
$
|
660,696
|
||||||||
Basic
EPS:
|
||||||||||
Income
available to common stockholders
|
$
|
660,696
|
10,135,874
|
$
|
0.065
|
|||||
Effect
of dilutive securities:
|
||||||||||
Options
and
warrants
(*)
|
-
|
-
|
-
|
|||||||
Diluted
EPS:
|
||||||||||
Income
available to common stockholders
|
$
|
660,696
|
10,135,874
|
$
|
0.065
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Years
ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Campbeltown
Business Ltd.:
|
||||||||
Fees
|
$ | 4,302 | $ | 163,381 | ||||
Accrued
Expenses
|
- | 13,615 | ||||||
Vision
Consultants Limited:
|
||||||||
Fees
|
- | 163,381 | ||||||
Accrued
expenses
|
- | - | ||||||
Abraham
Keinan
|
||||||||
Fees
|
254,350 | 100,710 | ||||||
Accrued
expenses
|
20,050 | 11,568 | ||||||
Guy
Nissensson
|
||||||||
Fees
|
242,490 | - | ||||||
Accrued
expenses
|
20,050 | - | ||||||
Story
Telecom Limited:
|
||||||||
Revenues
(*)
|
- | 2,883,942 | ||||||
Commissions
(*)
|
- | 312,300 | ||||||
Auracall
Limited:
|
||||||||
Related
revenues (*)
|
3,324,726 | 1,501,092 | ||||||
Commissions
(*)
|
417,907 | 1,061,259 | ||||||
Due
(to) from Auracall (net)**
|
(142,633 | ) | ||||||
Short-term
loan from Auracall Limited**
|
47,016 | |||||||
Dionysos
Investments (1999) Limited:
|
||||||||
Fees
|
183,363 | 70,524 | ||||||
Accrued
Expenses
|
146,542 | 5,877 | ||||||
Balance:
|
||||||||
Guy
Nissenson
|
- | (22,611 | ) | |||||
Abraham
Keinan
|
(7,205 | ) | (62,670 | ) |
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
A.
|
The
Company leases its facilities in the UK, USA and Israel under operating
lease agreement, which will expire in 2009 through 2012. The minimum lease
payments under non-cancelable operating leases are as
follows:
|
Year
ended December 31,
|
||||
2008
|
$
|
365,649
|
||
2009
|
280,805
|
|||
2010
|
193,257
|
|||
2011
|
178,935
|
|||
2012
|
118,612
|
|||
1,137,258
|
B.
|
Pursuant
to a Company’s Board of Directors’ resolution dated December 25, 2006, on
March 28, 2007, the Company and Mr. Keinan entered into a consulting
agreement, to be effective as of January 1, 2007 (the “Keinan Consulting
Agreement”).
The
Keinan Consulting Agreement provides that Mr. Keinan shall render the
Company advisory, consulting and other services in relation to the
business and operations of the Company (excluding its business and
operations in the United Kingdom).
In
consideration of the performance of the Services pursuant to the Keinan
Consulting Agreement, the Company shall pay Mr. Keinan a monthly fee of
£10,000 ($21,044) (the “Fee”). Mr. Keinan shall invoice the Company at the
end of each calendar month and the Company shall make the monthly payment
immediately upon receiving such
invoice".
|
C.
|
Pursuant
to a Company’s Board of Directors’ resolution dated December 25, 2006, on
March 28, 2007, the Company and Mr. Nissenson entered into a consulting
agreement, to be effective as of January 1, 2007 (the “Nissenson
Consulting Agreement”).
The
Nissenson Consulting Agreement provides that Mr. Nissenson shall render
the Company advisory, consulting and other services in relation to the
business and operations of the Company (excluding its business and
operations in the United Kingdom).
In
consideration of the performance of the Services pursuant to the Nissenson
Consulting Agreement, the Company shall pay Mr. Nissenson a monthly fee of
£10,000 ($21,044) (the “Fee”). Mr. Nissenson shall invoice the Company at
the end of each calendar month and the Company shall make the monthly
payment immediately upon receiving such
invoice.
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
·
|
Abraham
Keinan confirmed that all his businesses activities and initiatives in the
field of telecommunications are conducted through Swiftnet, and would
continue for at least 18 months after the conclusion of this
transaction.
|
||
·
|
Campbeltown
Business declared that it is not involved in any business that competes
with Swiftnet and would not be involved in such business at least for 18
months after this transaction is concluded.
|
||
·
|
Campbeltown
Business would invest $100,000 in Swiftnet, in exchange for 20% of the
total issued shares of Swiftnet;
|
||
·
|
Campbeltown
Business would also receive 5% of the Company's issued and outstanding
shares following the Company's acquisition with Swiftnet. In June 2000,
Campbeltown Business invested the $100,000 in Swiftnet. Xfone acquired
Swiftnet and Campbeltown received 720,336 shares of the Company's common
stock for its 20% interest in Swiftnet.
|
||
·
|
Swiftnet
and Abraham Keinan would guarantee that Campbeltown Business' 20% interest
in the outstanding shares of Swiftnet would be exchanged for at least 10%
of the Company's outstanding shares and that Campbeltown Business would
have in total at least 15% of the Company's total issued shares after the
Company's acquisition occurred.
|
||
·
|
Campbeltown
Business would have the right to nominate 33% of the members of the
Company's board of directors and Swiftnet's board of directors. When
Campbeltown Business ownership in the Company's common stock was less than
7%, Campbeltown Business would have the right to nominate only 20% of the
Company's board members but always at least one member. In the case that
Campbeltown Business ownership in the Company's common stock was less than
2%, this right would expire.
|
||
·
|
Campbeltown
Business would have the right to nominate a vice president in Swiftnet.
Mr. Guy Nissenson was nominated as of the time of the June 19, 2000
agreement. If for any reason Guy Nissenson will leave his position,
Campbeltown Business and Abraham Keinan will agree on another nominee. The
Vice President will be employed with suitable
conditions.
|
||
·
|
Campbeltown
Business will have the right to participate under the same terms and
conditions in any investment or transaction that involve equity rights in
Swiftnet or us conducted by Abraham Keinan at the relative ownership
portion.
|
||
·
|
Keinan
and Campbeltown Business have signed a right of first refusal agreement
for the sale of their shares.
|
D.
|
Mr.
Haim Nissenson, father of Mr. Guy Nissenson, our President, Chief
Executive Officer, and Director, is the Managing Director of Dionysos
Investments. Dionysos Investments is owned and controlled by certain
members of the Nissenson family, other than Mr. Guy Nissenson. On February
8, 2007, pursuant to the recommendations of the Audit Committee of the
Company and the resolutions of its Board of Directors dated December 25,
2006, and February 4, 2007, the Company and Dionysos Investments entered
into a First Amendment to the of the Dionysos Investments Consulting
Agreement from earlier date. As a result, Dionysos Investments will be
compensated by the Company for the Services provided to the Company in the
amount of GBP 8,000 ($16,876) per month, beginning on January 1, 2007 and
will entitled for a success fee for any future investments in the Company
made by Israeli investors during fiscal year 2007, provided such
investments were a direct or indirect result of the Services provided to
the Company. The success fee will be equal to 0.5% (half percent) of the
gross proceeds of such investments. On January 28, 2008, in accordance
with the recommendation of the Audit Committee and in recognition of and
following the successful efforts of Dionysos in raising capital for the
Company in Israel during the Company’s 2007 fiscal year, the Board of
Directors of the Company approved and confirmed by resolution the
engagement of Dionysos to serve as the Company’s consultant for the fiscal
year ended December 31, 2008 at the same level of compensation which was
agreed to and paid for the fiscal year ended December 31,
2007.
|
E.
|
The
Company has commission agreements with various agents that are entitled to
commission of approximately 5%-12% of the total sale amount less any bad
debts.
|
A.
|
Certain
Telecommunication operators act as collection channels for the Company. In
2007 the Company had two major collection channels, one in the U.K. and
one in Israel. Collections through these channels accounted to
approximately 22% and 6% of the Company's total revenues in 2007,
respectively, and 18% and 5% of the Company's total revenues in
2006, respectively. With respect to collection of monies for the
Company, these Telecommunication operators are not deemed to be customers
of the Company.
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
B.
|
Approximately,
25%, 20% and 7% of the Company's purchases are from three suppliers for
the year ended December 31, 2007, and 31%, 28%, 5% are from three
suppliers for the year ended December 31,
2006.
|
Years
Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Revenues:
|
||||||||
United
Kingdom
|
$ | 24,263,610 | $ | 16,951,119 | ||||
United
States
|
12,290,891 | 15,474,206 | ||||||
Israel
|
8,169,433 | 5,488,712 | ||||||
Total
revenues
|
44,723,934 | 37,914,037 | ||||||
Cost
of revenues
|
||||||||
United
Kingdom
|
10,696,915 | 11,834,466 | ||||||
United
States
|
5,904,797 | 7,684,708 | ||||||
Israel
|
3,024,610 | 2,449,824 | ||||||
Total
cost of revenues
|
19,626,322 | 21,968,998 | ||||||
Direct
Gross Profit:
|
||||||||
United
Kingdom
|
13,566,695 | 5,116,653 | ||||||
United
States
|
6,386,094 | 7,789,497 | ||||||
Israel
|
5,144,823 | 3,038,889 | ||||||
25,097,612 | 15,945,039 | |||||||
Operating
expenses:
|
||||||||
United
Kingdom
|
12,556,993 | 3,582,173 | ||||||
United
States
|
* 6,466,501 | * 6,658,270 | ||||||
Israel
|
2,963,461 | 3,209,436 | ||||||
* 21,986,955 | * 13,449,879 | |||||||
Operating
Profit:
|
||||||||
United
Kingdom
|
1,009,702 | 1,534,480 | ||||||
United
States
|
* (80,407 | ) | * 1,131,227 | |||||
Israel
|
2,181,362 | (170,547 | ) | |||||
* 3,110,657 | * 2,495,160 | |||||||
Non-
recurring loss
|
2,856,803 | - | ||||||
Expenses
related to Headquarter in the US
|
* 1,283,296 | * 1,460,138 | ||||||
Operating
Income (Loss)
|
$ | (1,029,442 | ) | $ | 1,035,022 |
|
(*)
Amounts were reclassified in order to present segment information without
the effect of expenses related to operating a Headquarters in the
US.
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
o
|
On
the closing date, NIS 15,500,000 (approximately $4,404,660) (the “First
Installment”);
|
o
|
By
November 20, 2008, NIS 15,500,000 (approximately $4,404,660), subject to
adjustment resulting from linkage to the Consumer Price
Index (the “Second Installment”);
and
|
o
|
By
November 1, 2009, NIS 13,000,000 (approximately $3,694,231), subject to
adjustment resulting from linkage to the Consumer Price Index (the
“Third Installment”).
|
Xfone,
Inc. and Subsidiaries
|
|||||||
|
|||||||
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Xfone,
Inc. and Subsidiaries
|
CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
|
June
30, 2008
|
CONTENTS
|
PAGE
|
5
|
|
7
|
|
8
|
|
9
|
Xfone,
Inc. and Subsidiaries
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Unaudited
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
|
$
|
5,447,700
|
$
|
5,835,608
|
||||
Restricted
cash
|
-
|
25,562,032
|
||||||
Accounts
receivable, net
|
8,672,620
|
5,886,499
|
||||||
Prepaid
expenses and other receivables
|
7,548,721
|
3,985,307
|
||||||
Total current
assets
|
21,669,041
|
41,269,446
|
||||||
INVENTORY
|
335,640
|
-
|
||||||
MINORITY
INTEREST
|
-
|
7,190
|
||||||
LONG
TERM ASSETS
|
1,922,373
|
2,076,061
|
||||||
FIXED
ASSETS, NET
|
47,748,078
|
5,747,758
|
||||||
OTHER
ASSETS, NET
|
3,298,259
|
1,076,784
|
||||||
GOODWILL
|
27,151,710
|
16,872,088
|
||||||
Total assets
|
$
|
102,125,101
|
$
|
67,049,327
|
||||
Xfone,
Inc. and Subsidiaries
|
CONSOLIDATED
BALANCE SHEETS
|
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Unaudited
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Short-term
bank credit and current maturities of notes payable
|
$
|
4,791,497
|
$
|
1,094,339
|
||||
Trade
payables
|
8,332,911
|
8,287,420
|
||||||
Other
liabilities and accrued expenses
|
8,475,737
|
5,322,045
|
||||||
Current
maturities of obligations under capital leases
|
105,791
|
89,654
|
||||||
Current
maturities of Bonds
|
3,925,758
|
3,268,476
|
||||||
Total current
liabilities
|
25,631,694
|
18,061,934
|
||||||
DEFERRED
TAXES
|
5,519,503
|
1,103
|
||||||
NOTES
PAYABLE
|
3,538,725
|
1,013,808
|
||||||
BONDS
|
26,069,791
|
22,083,892
|
||||||
OBLIGATIONS
UNDER CAPITAL LEASES
|
26,983
|
31,893
|
||||||
SEVERANCE
PAY
|
106,768
|
148,600
|
||||||
MINORITY
INTEREST
|
171,869
|
-
|
||||||
Total
liabilities
|
61,065,333
|
41,341,230
|
||||||
COMMITMENTS
AND CONTINGENT LIABILITIES
|
||||||||
SHAREHOLDERS'
EQUITY:
|
||||||||
Common
stock of $0.001 par value:
|
||||||||
75,000,000
shares authorized June 30, 2008;
|
||||||||
13,467,928
and 18,376,075 issued and outstanding at December 31, 2007 and June
30, 2008, respectively
|
18,376
|
13,468
|
||||||
Additional
paid-in capital
|
43,295,304
|
26,494,985
|
||||||
Foreign
currency translation adjustment
|
(1,596,032
|
)
|
(1,564,814
|
)
|
||||
Stock
compensation fund
|
(835,265
|
) |
(295,155
|
)
|
||||
Retained
earnings
|
177,385
|
|
1,059,613
|
|||||
Total shareholders'
equity
|
41,059,768
|
25,708,097
|
||||||
Total liabilities and
shareholders' equity
|
$
|
102,125,101
|
$
|
67,049,327
|
||||
The
accompanying notes are an integral part of these consolidated financial
statements.
|
Xfone,
Inc. and Subsidiaries
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited)
|
Six months
ended
|
Three months
ended
|
|||||||||||||||
June
30,
|
June 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues
|
$ | 41,645,820 | $ | 23,153,522 | $ | 25,852,722 | $ | 11,629,806 | ||||||||
Cost
of revenues
|
21,017,261 | 10,323,243 | 13,360,988 | 5,130,021 | ||||||||||||
Gross
profit
|
20,628,559 | 12,830,279 | 12,491,734 | 6,499,785 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
32,580 | 31,796 | 17,570 | 16,018 | ||||||||||||
Marketing
and selling
|
6,138,804 | 5,474,506 | 3,473,175 | 2,742,530 | ||||||||||||
General
and administrative
|
11,415,388 | 5,846,730 | 7,103,668 | 2,959,944 | ||||||||||||
Total
operating expenses
|
17,586,772 | 11,353,032 | 10,594,413 | 5,718,492 | ||||||||||||
Operating
profit
|
3,041,787 | 1,477,247 | 1,897,321 | 781,293 | ||||||||||||
Financing
expenses, net
|
(3,995,580 | ) | (306,695 | ) | (3,092,411 | ) | (166,826 | ) | ||||||||
Equity
profit in income of affiliated company
|
- | 112,585 | - | 33,449 | ||||||||||||
Income
(loss) before minority interest and taxes
|
(953,793 | ) | 1,283,137 | (1,195,090 | ) | 647,916 | ||||||||||
Minority
interest
|
(179,059 | ) | (173,131 | ) | (96,585 | ) | (80,996 | ) | ||||||||
Income
(loss) before taxes
|
(1,132,852 | ) | 1,110,006 | (1,291,675 | ) | 566,920 | ||||||||||
Income
tax expense (benefit)
|
250,624 | (254,172 | ) | 328,317 | (155,481 | ) | ||||||||||
Net
income (loss)
|
$ | (882,228 | ) | $ | 855,834 | $ | (963,358 | ) | $ | 411,439 | ||||||
Earnings
(Loss) Per Share:
|
||||||||||||||||
Basic
|
$ | (0.052 | ) | $ | 0.075 | $ | (0.052 | ) | $ | 0.036 | ||||||
Diluted
|
$ | (0.052 | ) | $ | 0.075 | $ | (0.052 | ) | $ | 0.036 | ||||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
16,864,161 | 11,481,080 | 18,404,632 | 11,521,916 | ||||||||||||
Diluted
|
16,864,161 | 11,481,080 | 18,404,632 | 11,531,220 | ||||||||||||
Xfone,
Inc. and Subsidiaries
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
Six
Months Ended
June
30,
|
||||||||
2008
|
2007
|
|||||||
Cash
flow from operating activities
|
||||||||
Net
income (loss)
|
$ | (882,228 | ) | $ | 855,834 | |||
Adjustments
required to reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
||||||||
Depreciation
and amortization
|
1,747,552 | 526,688 | ||||||
Compensation
in connection with the issuance of warrants and options
|
342,206 | 121,610 | ||||||
Interest
and currency differences on bonds
|
4,016,886 | - | ||||||
Minority
interest
|
179,059 | 173,131 | ||||||
Equity
in earnings of affiliated company
|
- | (112,585 | ) | |||||
Decrease
(increase) in account receivables
|
872,769 | (1,548,524 | ) | |||||
Decrease
in inventories
|
25,750 | - | ||||||
Increase
(decrease) in severance pay
|
(56,388 | ) | 66,313 | |||||
Increase
in prepaid expenses and other receivables
|
(1,322,344 | ) | (173,028 | ) | ||||
Decrease
in long term receivables
|
111,316 | - | ||||||
Increase
in trade payables
|
76,319 | 906,804 | ||||||
Decrease in
accrual for non-recurring loss (note 6)
|
(3,890,191 | ) | - | |||||
Increase
in other payables
|
93,213 | 259,037 | ||||||
Increase
(decrease) in deferred taxes
|
(852,917 | ) | 1,083 | |||||
Net
cash provided by operating activities
|
461,002 | 1,076,363 | ||||||
Cash
flow from investing activities
|
||||||||
Purchase
of equipment
|
(3,793,465 | ) | (598,246 | ) | ||||
Proceeds
from short term deposit
|
27,467,049 | - | ||||||
Change
in other assets and long-term receivables
|
- | 128,203 | ||||||
Change
in prepaid expenses and other receivables
|
(116,513 | ) | ||||||
Acquisition
of minority interest in Story Telecom, Inc.
|
(690,207 | ) | - | |||||
Acquisition
of NTS Communications, Inc.
|
(39,180,509 | ) | - | |||||
Net
cash (used in) investing activities
|
(16,313,645 | ) | (470,043 | ) | ||||
Cash
flow from financing activities
|
||||||||
Repayment
of long term loans from banks and others
|
(458,874 | ) | (484,170 | ) | ||||
Proceeds
from issuance of shares and detachable warrants, net of issuance
expenses
|
14,496,036 | 853,649 | ||||||
Proceeds
from long term loans from banks
|
3,488,679 | 20,466 | ||||||
Proceeds
from exercise of options
|
14,368 | 22,050 | ||||||
Changes
in capital lease obligation
|
10,125 | 22,545 | ||||||
Payment
of first installment interest on Bonds
|
(1,334,924 | ) | - | |||||
Repayment
of convertible notes
|
(400,000 | ) | (397,025 | ) | ||||
Increase
(decrease) in short term loan and bank credit
|
- | (584,786 | ) | |||||
Net
cash provided by (used in) financing activities
|
15,815,410 | (547,271 | ) | |||||
Effect
of exchange rate changes on cash and cash equivalents
|
(350,675 | ) | (75,355 | ) | ||||
Net
(decrease) in cash
|
(387,908 | ) | (16,306 | ) | ||||
Cash
at the beginning of the period
|
5,835,608 | 1,218,392 | ||||||
Cash
at the end of the period
|
$ | 5,447,700 | $ | 1,202,086 |
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
A.
|
Xfone,
Inc. ("Xfone") was incorporated in Nevada, U.S.A. in September 2000 and is
a provider of voice, video and data telecommunications services,
including: local, long distance and international telephony services;
video; prepaid and postpaid calling cards; cellular services; Internet
services; messaging services (Email/Fax Broadcast, Email2Fax and
Cyber-Number); and reselling opportunities, with operations in the United
States, the United Kingdom and
Israel.
|
●
|
Swiftnet
Limited ("Swiftnet") - wholly owned U.K.
subsidiary.
|
●
|
Equitalk.co.uk
Limited ("Equitalk") - wholly owned U.K.
subsidiary.
|
●
|
Auracall
Limited ("Auracall") - wholly owned U.K.
subsidiary.
|
●
|
Xfone
USA, Inc. and its two wholly owned subsidiaries, eXpeTel Communications,
Inc. and Gulf Coast Utilities, Inc. - wholly owned U.S.
subsidiary.
|
●
|
Story
Telecom, Inc. and its wholly owned U.K. subsidiary, Story Telecom Limited
(collectively, " Story Telecom ") - wholly owned U.S.
subsidiary.
|
●
|
NTS
Communications, Inc. and its six wholly owned subsidiaries, NTS
Construction Company, Garey M. Wallace Company, Inc., Midcom of Arizona,
Inc., Communications Brokers Inc., NTS telephone Company, LLC and NTS
management Company, LLC - wholly owned U.S.
subsidiary.
|
●
|
Xfone
018 Ltd. ("Xfone 018") - majority owned Israeli subsidiary in which Xfone
holds a 69% ownership share.
|
B.
|
On
July 12, 2007, Story Telecom Limited (“Story Telecom UK”), notified
Mr. Davison, its Managing Director, that it was terminating his
employment, effective as of September 10, 2007. On July 25, 2007, the
Company received notification of a claim filed on July 23, 2007 by Mr.
Davison with the United Kingdom Employment Tribunals against Story Telecom
UK, alleging wrongful termination of his employment as Managing Director.
The claim did not seek any specific damages. On August 21, 2007, the
Company responded to the United Kingdom Employment Tribunal by rejecting
Mr. Davison's claim.
On
March 25, 2008, Story Telecom UK settled the above mentioned
claim.
In
connection with the settlement, the Company purchased the shares of common
stock of Story Telecom, Inc., the parent company of Story Telecom UK
("Story Telecom US"), owned by Mr. Davison and owned by Trecastle Holdings
Limited, a company owned and controlled by Mr. Davison, which increased
the Company's ownership interest in Story Telecom US from 69.6% to
100%. The aggregate purchase price was £270,000 ($538,083). As a
result, Story Telecom US became a wholly owned subsidiary of the
Company.
|
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
As
part of the settlement, Story Telecom UK agreed to pay Mr. Davison £30,000
($59,787) as compensation for loss of employment, which payment was made
without admission of liability. In addition, Mr. Davison agreed
to file a Withdrawal of Claim with the United Kingdom Employment Tribunal
which was filed on March 31,
2008.
|
Story
Telecom, Inc.
|
|||
Current
Assets, excluding cash acquired
|
$
|
1,820,479
|
|
Fixed
assets
|
9,970
|
||
Total
Assets acquired
|
1,830,449
|
||
Current
liabilities
|
(1,679,409
|
)
|
|
Long
term liabilities
|
(2,400,809
|
)
|
|
Total
liabilities acquired
|
4,080,218
|
||
Net
liabilities assumed
|
$
|
(2,249,769
|
)
|
Acquired
net assets (30.4%)*
|
$
|
-
|
|
Purchase
price:
|
|||
Cash
acquired, net
|
$
|
410,598
|
|
Acquisition
costs
|
279,609
|
||
Total
|
690,207
|
||
Goodwill
|
$
|
690,207
|
|
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
C.
|
On
February 26, 2008 (the “Closing Date”), the Company completed its
acquisition of NTS Communications, Inc. ("NTS") pursuant to that
certain Stock Purchase Agreement (the “Purchase Agreement”) entered into
on August 22, 2007 with NTS, and the equity owners of NTS as sellers (the
“NTS Shareholders”), as amended on February 14, 2008 and February 26, 2008
.
Upon
closing of the acquisition, NTS and its six wholly owned subsidiaries, NTS
Construction Company, Garey M. Wallace Company, Inc., Midcom of Arizona,
Inc., Communications Brokers, Inc., NTS Telephone Company, LLC, and NTS
Management Company, LLC, became the Company's wholly owned
subsidiaries.
The
purchase price for the acquisition was approximately $42,000,000
(excluding acquisition related costs), plus (or less) (i) the difference
between NTS’ estimated working capital and the working capital target for
NTS as set forth in the Purchase Agreement, and (ii) the difference
between amounts allocated by NTS for its fiber optic network build-out
project anticipated in Texas and any indebtedness incurred by NTS in
connection with this project, each of which was subject to the Company’s
advance written approval. After applying this formula, the
final aggregate purchase price was calculated as $41,900,000, and was paid
by the Company as follows: $35,414,715 was paid in cash; and 2,366,892
shares of the Company’s common stock, were issued to certain NTS
Shareholders who elected to reinvest all or a portion of their allocable
sale price in the Company’s Common Stock, pursuant to the terms of the
Purchase Agreement. The Company’s Board of Directors determined, in
accordance with the Purchase Agreement, the number of shares of the
Company’s Common Stock to be delivered to each participating NTS
Shareholder by dividing the portion of such NTS Shareholder’s allocable
sale price that the NTS Shareholder elected to receive in shares of the
Company’s Common Stock by 93% of the average closing price of the
Company’s Common Stock on the American Stock Exchange for the ten
consecutive trading days preceding the trading day immediately prior to
the Closing Date (i.e., $2.74). The aggregate sales price reinvested by
all such NTS Shareholders was $6,485,284.
On
April 25, 2008, we entered into a Third Amendment to the purchase
agreement, pursuant to which we agreed to an extension of time
for the calculation and payment of the post closing working
capital adjustment under the NTS Purchase
Agreement.
|
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
NTS
Communications, Inc.
|
||||
Current
Assets, excluding cash acquired
|
$
|
5,913,441
|
||
Fixed
assets
|
39,631,997
|
|||
Total
Assets acquired
|
45,545,438
|
|||
Current
liabilities
|
8,076,112
|
|||
Long
Term liabilities
|
9,237,411
|
|||
Total
liabilities acquired
|
17,313,523
|
|||
Net
assets assumed
|
$
|
28,231,915
|
||
Acquired
net assets (100%)
|
$
|
28,231,915
|
||
Purchase
price:
|
||||
Cash
paid, net(*)
|
$
|
34,860,688
|
||
Fair
market value of stock and options issued
|
1,412,507
|
|||
Acquisition
costs
|
3,951,154
|
|||
Total
|
40,224,329
|
|||
Customer
Relationship
|
2,153,000
|
|||
License
|
250,000
|
|||
Goodwill
|
$
|
9,589,414
|
||
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
A.
|
Principles
of Consolidation and Basis of Financial Statement
Presentation
|
B.
|
Foreign
Currency Translation
|
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
C.
|
Accounts
Receivable
|
D.
|
Other
Intangible Assets
|
E.
|
Long
Term Assets
|
F.
|
Earnings
Per Share
|
Xfone,
Inc. and Subsidiaries
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
G.
|
Stock-Based
Compensation
|
H.
|
Goodwill
and Indefinite- Lived Purchased Intangible
Assets
|
I.
|
Reclassification
|
J.
|
Basis
of Presentation
|
K.
|
Income
Taxes
|
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
Six
months ended
June
30, 2008
|
||||||||
Number
of options
|
Weighted
average exercise price
|
|||||||
Options
outstanding at the beginning of the period (a)
|
5,715,000
|
$
|
3.65
|
|||||
Granted
(b)
|
1,851,000
|
$
|
3.75
|
|||||
Exercised
|
(4,105
|
)
|
$
|
3.50
|
||||
Forfeited
|
(1,195,895
|
)
|
$
|
4.34
|
||||
Options
outstanding at the end of the period
|
6,366,000
|
$
|
3.55
|
|||||
Options
vested and exercisable
|
4,644,688
|
$
|
2.71
|
|||||
Weighted
average fair value of options granted
|
$
|
1.24
|
Range
price ($)
|
Number
of options
|
Weighted
average remaining contractual life (years)
|
Weighted
average exercise price
|
2.794-5.00
|
4,644,688
|
3.50
|
$2.71
|
A.
|
On
August 26, 2007, the Company entered into a contractual obligation to
grant the General Manager of Xfone 018 the following number of options to
purchase shares of the Company’s common stock, $0.001 par value per share
(“Common Stock”), under the Company’s 2007 Stock Incentive
Plan (the “Plan”):
|
i.
|
Within
30 days of adoption of the Plan, the Company will grant options to
purchase 300,000 shares of Common Stock, at an exercise price of $3.50 per
share, of which (i) options to purchase 75,000 shares will vest on August
26, 2008; and (ii) options to purchase 18,750 shares will be vest at the
end of every 3 month period thereafter.
|
ii.
|
At
the end of each calendar year between 2008 and 2011, and upon the
achievement by Xfone 018 100% of its Targets (as determined in the General
Manager's employment agreement) for each such year, the General Manager of
Xfone 018 will be granted options to purchase 25,000 shares of the
Company’s Common Stock under the Plan, for an exercise price of $3.50 per
share, which will be exercisable 30 days after the Company publishes its
annual financial statements for such
year.
|
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
B.
|
On
February 26, 2008, NTS Communications, Inc. entered into Employment
Agreements with each of Barbara Baldwin, who, prior to the closing, served
as NTS’ President and CEO, Jerry Hoover, who, prior to the closing, served
as NTS’ Executive Vice President - Chief Financial Officer, and Brad
Worthington, who, prior to the closing, served as NTS’ Executive Vice
President - Chief Operating Officer (each an “Officer,” and collectively
the “Officers”). The Employment Agreements provide for
continued employment of the Officers with NTS in their respective
capacities, and are for five-year terms each, effective as of the Closing
Date.
Pursuant to the terms of the Employment
Agreements, the Officers were granted the following stock option awards
under the Company’s 2007 Stock Incentive Plan on the Closing Date: Ms.
Baldwin was granted options to purchase 250,000 shares of the Company’s
Common Stock, and each of Messrs. Hoover and Worthington was granted
options to purchase 400,000 shares of the Company’s Common
Stock. Each option is immediately exercisable, expires five
years from the grant date, and has an exercise price of
$2.794. The total value of the options, based on Black-Scholes
option pricing model is $1,412,507. Additionally, at the end of each
Officer’s second year employment, the officer will be granted options
to purchase 267,000 shares of the Company’s Common Stock, which will be
immediately exercisable at $5.00 per share, and will expire five years
from such grant date. The total value of the options, based on
Black-Scholes option-pricing-model is
$882,316.
|
Six
months ended
June
30, 2008
|
||||||||
Number
of Warrants
|
Weighted
average exercise price
|
|||||||
Warrants
outstanding at the beginning of the period
|
6,104,159
|
$
|
3.72
|
|||||
Granted
|
956,020
|
$
|
3.5
|
|||||
Forfeited
|
(44,470
|
)
|
$
|
3.31
|
||||
Warrants
outstanding at the end of the period
|
7,015,709
|
$
|
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
Six
months ended
|
Three
months ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues:
|
||||||||||||||||
United
Kingdom
|
$
|
9,520,525
|
$
|
12,574,190
|
$
|
4,713,101
|
$
|
6,478,252
|
||||||||
United
States
|
27,470,618
|
6,610,958
|
18,763,114
|
3,191,865
|
||||||||||||
Israel
|
4,654,677
|
3,968,374
|
2,376,507
|
1,959,689
|
||||||||||||
Total
revenues
|
41,645,820
|
23,153,522
|
25,852,722
|
11,629,806
|
||||||||||||
Cost
of revenues:
|
||||||||||||||||
United
Kingdom
|
3,525,538
|
5,751,199
|
1,826,414
|
2,871,329
|
||||||||||||
United
States
|
15,591,329
|
3,145,489
|
10,603,460
|
1,551,663
|
||||||||||||
Israel
|
1,900,394
|
1,426,555
|
931,114
|
707,029
|
||||||||||||
Total
cost of revenues
|
21,017,261
|
10,323,243
|
13,360,988
|
5,130,021
|
||||||||||||
Direct
gross profit:
|
||||||||||||||||
United
Kingdom
|
5,994,987
|
6,822,991
|
2,886,687
|
3,606,923
|
||||||||||||
United
States
|
11,879,289
|
3,465,469
|
8,159,654
|
1,640,202
|
||||||||||||
Israel
|
2,754,283
|
2,541,819
|
1,445,393
|
1,252,660
|
||||||||||||
20,628,559
|
12,830,279
|
12,491,734
|
6,499,785
|
|||||||||||||
Operating
expenses:
|
||||||||||||||||
United
Kingdom
|
4,481,117
|
5,834,126
|
2,377,073
|
3,011,607
|
||||||||||||
United
States
|
10,159,870
|
3,129,573
|
6,704,701
|
1,602,168
|
||||||||||||
Israel
|
1,962,378
|
1,314,942
|
1,038,247
|
655,956
|
||||||||||||
16,603,365
|
10,278,641
|
10,120,021
|
5,269,731
|
|||||||||||||
Operating
Profit
|
||||||||||||||||
United
Kingdom
|
1,513,870
|
988,865
|
509,614
|
595,316
|
||||||||||||
United
States
|
1,719,419
|
335,896
|
1,454,953
|
38,034
|
||||||||||||
Israel
|
791,905
|
1,226,877
|
407,146
|
596,704
|
||||||||||||
4,025,194
|
2,551,638
|
2,371,713
|
1,230,054
|
|||||||||||||
Operating
expenses related to the Headquarters in the US
|
983,407
|
1,074,391
|
474,392
|
448,761
|
||||||||||||
Operating
Profit
|
$
|
3,041,787
|
$
|
1,477,247
|
$
|
1,897,321
|
$
|
781,293
|
||||||||
Xfone,
Inc. and Subsidiaries
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008
(Unaudited)
|
·
|
On
the closing date, NIS 15,500,000 (approximately $4,374,824) (the “First
Installment”);
|
·
|
By
November 20, 2008, NIS 15,500,000 (approximately $4,374,824), subject to
adjustment resulting from linkage to the Consumer Price
Index (the “Second Installment”);
and
|
·
|
By
November 1, 2009, NIS 13,000,000 (approximately $3,669,207), subject to
adjustment resulting from linkage to the Consumer Price Index (the
“Third Installment”).
|
Page
|
|
F-60
|
|
Financial
statements
|
|
|
|
F-61
|
|
F-63
|
|
F-64
|
|
F-65
|
|
F-67
|
|
Supplementary
information
|
|
F-79
|
|
F-80
|
|
F-81
|
2007
|
2006
|
|||||||
Current
assets
|
||||||||
Cash and cash
equivalents
|
$ |
6,635,181
|
$ |
5,387,759
|
||||
Accounts receivable -
trade
|
3,041,221
|
3,039,745
|
||||||
Allowance for bad
debts
|
(202,735 | ) | (216,181 | ) | ||||
Other receivables
|
224,550
|
221,864
|
||||||
Unbilled revenue
|
1,399,650
|
1,776,210
|
||||||
Prepaid expenses
|
664,082
|
723,248
|
||||||
Accrued interest
|
251
|
142,940
|
||||||
Inventory
|
508,042
|
605,811
|
||||||
Deferred tax
benefit
|
1,154,897
|
237,265
|
||||||
Total current
assets
|
13,425,139
|
11,918,661
|
||||||
Investments
|
4,998
|
639,958
|
||||||
Property,
equipment and improvements
|
100,700,076
|
97,394,616
|
||||||
Less accumulated depreciation
& amortization
|
(72,327,212 | ) | (68,536,765 | ) | ||||
28,372,864
|
28,857,851
|
|||||||
Property, equipment and
improvements in
|
||||||||
development
|
838,345
|
1,206,023
|
||||||
Total property, equipment and
improvements
|
29,211,209
|
30,063,874
|
||||||
Other
assets
|
||||||||
Note receivable – Shareholder
Value, Ltd.
|
- |
1,983,192
|
||||||
Goodwill
|
5,686,997
|
5,686,997
|
||||||
Less amortization of
goodwill
|
(1,278,809 | ) | (1,278,809 | ) | ||||
Deferred tax
benefit
|
- |
438,403
|
||||||
Other assets
|
23,717
|
29,406
|
||||||
Total other
assets
|
4,431,905
|
6,859,189
|
||||||
Total
assets
|
$ |
47,073,251
|
$ |
49,481,682
|
2007
|
2006
|
|||||||
Current
liabilities
|
||||||||
Accounts payable – trade and
carrier charges
|
$ |
2,445,915
|
$ |
3,000,197
|
||||
Note payable
|
- |
1,155,365
|
||||||
Current maturities of long-term
debt
|
445,397
|
693,258
|
||||||
Accrued other
liabilities
|
2,131,113
|
2,187,241
|
||||||
Deferred revenues
|
898,469
|
844,591
|
||||||
Customer deposits
|
50,142
|
50,047
|
||||||
Total current
liabilities
|
5,971,036
|
7,930,699
|
||||||
Long-term
liabilities
|
||||||||
Long-term debt, less current
portion
|
421,432
|
764,999
|
||||||
Deferred income
taxes
|
1,501,474
|
- | ||||||
Total long-term
liabilities
|
1,922,906
|
764,999
|
||||||
Total
liabilities
|
7,893,942
|
8,695,698
|
||||||
Stockholders’
equity
|
||||||||
Common stock, no par value,
authorized
|
||||||||
11,000,000 shares, 1,962,029
shares issued
|
||||||||
in 2007 and 2006
|
4,959,938
|
4,959,938
|
||||||
Additional paid-in
capital
|
1,814,620
|
1,814,620
|
||||||
Retained earnings –
unrestricted
|
55,149,546
|
56,756,221
|
||||||
61,924,104
|
63,530,779
|
|||||||
Treasury stock at cost, 702,878
shares in 2007
|
||||||||
and 2006
|
(22,744,795 | ) | (22,744,795 | ) | ||||
Total stockholders’
equity
|
39,179,309
|
40,785,984
|
||||||
Total
liabilities and stockholders’ equity
|
$ |
47,073,251
|
$ |
49,481,682
|
2007
|
2006
|
|||||||
Revenues
earned
|
$ |
67,421,984
|
$ |
67,340,912
|
||||
Cost
of communication services
|
42,348,164
|
43,579,013
|
||||||
Gross profit
|
25,073,820
|
23,761,899
|
||||||
Selling,
general and administrative expenses
|
23,676,789
|
24,410,455
|
||||||
Income (loss) from
operations
|
1,397,031
|
(648,556 | ) | |||||
Other
income (expenses)
|
||||||||
Interest income
|
382,364
|
401,805
|
||||||
Building lease
|
779,777
|
695,140
|
||||||
Other income
|
63,749
|
88,182
|
||||||
Gain on sale of
assets
|
23,696
|
11,031
|
||||||
Gain on sale of
investments
|
410,702
|
- | ||||||
Interest expense
|
(141,750 | ) | (183,779 | ) | ||||
Total other income
(expenses)
|
1,518,538
|
1,012,379
|
||||||
Income
from continuing operations
|
||||||||
before income
taxes
|
2,915,569
|
363,823
|
||||||
Income
tax provision
|
1,022,245
|
140,681
|
||||||
Net
income
|
$ |
1,893,324
|
$ |
223,142
|
||||
Common
Stock
|
Additional
Paid-In Capital
|
Retained
Earnings
|
Treasury
Stock
|
Total
Stock-holders' Equity
|
||||||||||||||||
Balance,
July 31, 2005
|
$ |
4,959,938
|
$ |
1,814,620
|
$ |
56,533,079
|
$ | (22,744,795 | ) | $ |
40,562,842
|
|||||||||
Net
income
|
- | - |
223,142
|
- |
223,142
|
|||||||||||||||
Balance,
July 31, 2006
|
4,959,938
|
1,814,620
|
56,756,221
|
(22,744,795 | ) |
40,785,984
|
||||||||||||||
Dividend
|
- | - | (3,499,999 | ) | - | (3,499,999 | ) | |||||||||||||
Net
income
|
- | - |
1,893,324
|
- |
1,893,324
|
|||||||||||||||
Balance,
July 31, 2007
|
$ |
4,959,938
|
$ |
1,814,620
|
$ |
55,149,546
|
$ | (22,744,795 | ) | $ |
39,179,309
|
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net income
|
$ |
1,893,324
|
$ |
223,142
|
||||
Adjustments
to reconcile net income to net
|
||||||||
cash provided by operating
activities:
|
||||||||
Depreciation and amortization of
fixed assets
|
6,084,457
|
6,855,241
|
||||||
Capitalized
depreciation
|
90,210
|
82,412
|
||||||
Increase (decrease) in deferred
taxes
|
1,022,245
|
140,681
|
||||||
(Gain) loss on sale or disposal
of assets
|
(23,696 | ) | (11,031 | ) | ||||
(Gain) loss on sale of
investments
|
(410,702 | ) | - | |||||
(Increase)
decrease:
|
||||||||
Accounts receivable –
trade
|
(14,922 | ) | (1,492,338 | ) | ||||
Other receivables
|
(2,686 | ) | (160,984 | ) | ||||
Unbilled revenue
|
376,560
|
2,149,444
|
||||||
Accrued interest
|
142,689
|
(42,049 | ) | |||||
Prepaid expenses
|
59,166
|
(296,548 | ) | |||||
Inventory
|
97,769
|
(244,568 | ) | |||||
Other assets
|
5,689
|
6,406
|
||||||
Increase
(decrease):
|
||||||||
Accounts payable –
trade
|
(554,282 | ) | (361,670 | ) | ||||
Customer deposits
|
95
|
419
|
||||||
Deferred revenue
|
53,878
|
(352,408 | ) | |||||
Accrued other
liabilities
|
(56,128 | ) | (244,494 | ) | ||||
Accrued
settlement
|
- | (218,487 | ) | |||||
Net
cash provided (used) by operating activities
|
8,763,666
|
6,033,168
|
||||||
Cash
flows from investing activities:
|
||||||||
Purchase of property, equipment
and improvements
|
(5,238,717 | ) | (10,062,401 | ) | ||||
Proceeds from sale of
assets
|
48,730
|
23,697
|
||||||
Change in partnership
investment
|
1,777
|
(2,527 | ) | |||||
Proceeds from sale of
investments
|
1,043,885
|
- | ||||||
Collection of note
receivable
|
1,983,192
|
- | ||||||
Net
cash provided (used) by investing activities
|
(2,161,133 | ) | (10,041,231 | ) |
2007
|
2006
|
|||||||
Cash
flows from financing activities:
|
||||||||
Principal payments on long-term
debt
|
(699,747 | ) | (1,556,745 | ) | ||||
Dividends paid
|
(3,499,999 | ) | - | |||||
Change in line of credit note
payable
|
(1,155,365 | ) |
1,155,365
|
|||||
Net
cash provided (used) by financing activities
|
(5,355,111 | ) | (401,380 | ) | ||||
Net
increase (decrease) in cash
|
1,247,422
|
(4,409,443 | ) | |||||
Cash/Cash
equivalents, beginning of year
|
5,387,759
|
9,797,202
|
||||||
Cash/Cash
equivalents, end of year
|
$ |
6,635,181
|
$ |
5,387,759
|
||||
Supplementary
disclosures of cash flow information:
|
||||||||
Cash
paid during the year for:
|
||||||||
Interest
|
$ |
141,750
|
$ |
183,779
|
||||
Income taxes
|
$ |
-
|
$ |
-
|
||||
Non
cash investing and financing activities:
|
||||||||
Equipment acquired by issuance of
long-term debt
|
$ |
108,319
|
$ |
416,820
|
||||
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES,
Continued
|
2.
|
OTHER
RECEIVABLES
|
2007
|
2006
|
|||||||
Current
portion of employee advances
|
$ | - | $ |
1,360
|
||||
Health
insurance refund
|
- |
99,601
|
||||||
Vender
credit receivable
|
9,079
|
97,554
|
||||||
Miscellaneous
receivables
|
1,670
|
3,474
|
||||||
Receivable
from Shareholder Value Ltd.
|
26,239
|
19,875
|
||||||
Sales
tax refund receivable
|
187,562
|
- | ||||||
$ |
224,550
|
$ |
221,864
|
3.
|
INVESTMENTS
|
2007
|
2006
|
|||||||
Shareholder
Value Ltd.
|
$ |
4,998
|
$ |
6,775
|
||||
Land
|
- |
633,183
|
||||||
$ |
4,998
|
$ |
639,958
|
4.
|
PROPERTY,
EQUIPMENT AND IMPROVEMENTS
|
Estimated
|
|||||||||
Useful
|
|||||||||
2007
|
2006
|
Lives
|
|||||||
Land
|
$ |
440,608
|
$ |
440,608
|
|||||
Communications
system in service
|
53,059,478
|
52,043,496
|
3-15
years
|
||||||
Building
|
2,100,779
|
2,044,684
|
20
years
|
||||||
Leasehold
improvements
|
1,928,760
|
1,923,817
|
5-15
years
|
||||||
Office
equipment
|
1,684,976
|
1,892,489
|
5-10
years
|
||||||
Computer
hardware/software
|
9,459,519
|
11,283,564
|
5- 7
years
|
||||||
Construction
equipment
|
393,915
|
383,064
|
5
years
|
||||||
Vehicles
|
883,759
|
911,869
|
5
years
|
||||||
Data,
telephone and video equipment -
|
|||||||||
fiber
network
|
2,854,657
|
2,935,684
|
3-15
years
|
||||||
Capitalized
installation charges
|
3,422,369
|
3,376,539
|
5
years
|
||||||
Fiber
optic system
|
24,471,256
|
20,158,802
|
18-20
years
|
||||||
Total
property, equipment and improvements
|
$ |
100,700,076
|
$ |
97,394,616
|
Total
depreciation and amortization expense on property, equipment and
improvements for the years ended July 31, 2007 and 2006 was $6,084,457 and
$6,855,241, respectively. Total depreciation expense
capitalized for the years ended July 31, 2007 and 2006 was $90,210 and
$82,412, respectively.
|
5.
|
NOTE
PAYABLE
|
6.
|
LONG-TERM
DEBT
|
2007
|
2006
|
|||||||
GE
Capital Corporation
|
||||||||
Note for the purchase of the CLEC
equipment with a face
|
||||||||
value of $727,276, with monthly
payments of $14,590,
|
||||||||
including interest at 7.42%
through August, 2006, secured
|
||||||||
by the purchased
equipment.
|
$ | - | $ |
14,942
|
||||
Note for the purchase of equipment
with a face
|
||||||||
amount of $108,319, with monthly
payments of $3,468,
|
||||||||
including interest at 9.31%
through July, 2010, secured by
|
||||||||
the purchased
equipment.
|
105,728
|
- | ||||||
Note for the purchase of a DRM
faststart telephone switch
|
||||||||
with a face amount of $1,353,202,
payable in monthly
|
||||||||
installments of $25,518 including
interest at 4.970% through
|
||||||||
September, 2007, secured by the
purchased equipment.
|
50,727
|
346,475
|
||||||
Note for the purchase of equipment
with a face value of $62,835,
|
||||||||
with monthly payments of $1,232,
including interest at 9.30%
|
||||||||
through April, 2011, secured by
the purchased equipment.
|
50,390
|
59,822
|
||||||
|
||||||||
GE
Commercial Finance
|
||||||||
|
||||||||
Note for the purchase of equipment
with a face value of $256,219,
|
||||||||
with monthly payments of $7,568,
including interest at 9.30%
|
||||||||
through March, 2009, secured by
the purchased equipment.
|
161,615
|
233,655
|
||||||
City
Bank
|
||||||||
Note for the purchase of a
tractor, backhoe, trailer, and boring
|
||||||||
machine with a face amount of
$126,575, payable in monthly
|
||||||||
installments of $2,637, including
interest at 4.25% through
|
||||||||
May, 2007, secured by the
purchased equipment.
|
- |
26,412
|
||||||
Note for the purchase of vehicles
with a face value of $73,471,
|
||||||||
payable in monthly installments of
$1,677, including interest at
|
||||||||
4.49% through May, 2009, secured
by the purchased equipment.
|
35,333
|
53,403
|
||||||
|
||||||||
Note for the purchase of equipment
with a face amount of
|
||||||||
$1,064,230, payable in monthly
installments of $17,750,
|
||||||||
plus interest at prime through
April, 2009, secured by the
|
||||||||
purchased
equipment.
|
376,050
|
584,980
|
|
6. LONG-TERM
DEBT, Continued
|
2007
|
2006
|
|||||||
Note for the purchase of a pickup
with a face amount of $16,628
|
||||||||
payable in monthly installments of
$509, including interest at
|
||||||||
6.29% through April, 2009, secured
by the purchased pickup.
|
10,082
|
15,360
|
||||||
Note for the purchase of a pickup
with a face amount of $13,000
|
||||||||
payable in monthly installments of
$306, including interest at
|
||||||||
6.39% through February, 2010,
secured by the purchased pickup.
|
||||||||
This note was retired prior to
maturity.
|
- |
11,797
|
||||||
Note for the purchase of a dump
truck with a face amount of
|
||||||||
$18,000 payable in monthly
installments of $438, including
|
||||||||
interest at 7.75% through
February, 2010, secured by the
|
||||||||
purchased dump
truck.
|
12,258
|
16,376
|
||||||
Note for the purchase of a pickup
with a face amount of $17,244
|
||||||||
payable in monthly installments of
$402, including interest at
|
||||||||
5.49% through October, 2009,
secured by the purchased pickup.
|
10,167
|
14,295
|
||||||
Note for the purchase of two
pickups with a face amount of
|
||||||||
$32,894 payable in monthly
installments of $763, including
|
||||||||
interest at 5.49% through August,
2009, secured by the
|
||||||||
purchased pickups.
|
17,960
|
25,230
|
||||||
CitiCapital
|
||||||||
Note for the purchase of a
trencher and trailer with a face amount
|
||||||||
of $93,800, payable in monthly
installments of $1,849, including
|
||||||||
interest at 6.75% through April,
2009, secured by the purchased
|
||||||||
equipment and guaranty by NTS
Communications, Inc.
|
36,519
|
55,510
|
||||||
$ |
866,829
|
$ |
1,458,257
|
2008
|
$ |
445,397
|
||
2009
|
349,291
|
|||
2010
|
56,638
|
|||
2011
|
15,503
|
|||
2012
|
- | |||
$ |
866,829
|
July
31,
|
Amount
|
||||||
2008
|
$
|
1,386,871
|
|||||
2009
|
1,285,334
|
||||||
2010
|
933,293
|
||||||
2011
|
786,886
|
||||||
2012
|
771,714
|
||||||
Thereafter
|
771,714
|
||||||
|
|||||||
Total
minimum lease payments
|
$
|
5,935,812
|
|
July
31,
|
Amount
|
|||
2008
|
$ |
281,101
|
||
2009
|
135,200
|
|||
2010
|
51,983
|
|||
2011
|
17,854
|
|||
2012
|
4,000
|
|||
Total
minimum future rentals
|
$ |
490,138
|
2007
|
2006
|
|||||||
Income
(loss) from continuing operations
|
||||||||
before taxes
|
$ |
2,915,569
|
$ |
363,823
|
||||
50% meals and
entertainment
|
21,923
|
21,661
|
||||||
Penalties
|
- |
7,142
|
||||||
Taxable
income (loss) – financial
|
2,937,492
|
392,626
|
||||||
Increase
(decrease) in provision for bad debts
|
(8,072 | ) | (615,392 | ) | ||||
Increase
(decrease) in provision for accrued vacation
|
(84,631 | ) |
3,261
|
|||||
Book
depreciation greater (lesser) than tax
|
414,314
|
958,276
|
||||||
Excess
tax gain (loss) on asset disposals
|
- |
4,196
|
||||||
Book
amortization of section 197 intangibles
|
||||||||
greater(lesser) than tax
amortization
|
(512,468 | ) | (512,468 | ) | ||||
Excess
book income over partnership K-1
|
(230 | ) | ||||||
Utilization
of contribution carryover
|
- | (4,101 | ) | |||||
Utilization
of net operating loss carryover
|
(2,746,405 | ) | (226,398 | ) | ||||
Taxable
income (loss)
|
$ |
0
|
$ |
0
|
|
|
2007
|
2006
|
|||||||
Federal
income tax liability at 34%
|
$ |
0
|
$ |
0
|
||||
Increase
(decrease) in deferred income taxes
|
1,022,245
|
140,681
|
||||||
Income
tax provision
|
$ |
1,022,245
|
$ |
140,681
|
|
The
following is an analysis of the components of deferred
taxes:
|
2007
|
2006
|
|||||||||||||||
Current
|
Long-term
|
Current
|
Long-term
|
|||||||||||||
Difference
in financial and
|
||||||||||||||||
tax depreciation
|
$ | - | $ |
7,277,209
|
$ | - | $ |
7,622,182
|
||||||||
Provision
for bad debts
|
(202,735 | ) | - | (210,807 | ) | - | ||||||||||
Provision
for accrued
|
||||||||||||||||
vacation
|
(402,400 | ) | - | (487,030 | ) | - | ||||||||||
Difference
in financial and
|
||||||||||||||||
tax goodwill
amortization
|
- | (2,861,109 | ) | - | (3,373,576 | ) | ||||||||||
Net
operating loss carryforward
|
(2,791,620 | ) | - | - | (5,538,024 | ) | ||||||||||
(3,396,755 | ) |
4,416,100
|
(697,837 | ) | (1,289,418 | ) | ||||||||||
x34 | % | x34 | % | x34 | % | x34 | % | |||||||||
Deferred
tax (benefit)
|
||||||||||||||||
payable
|
$ | (1,154,897 | ) | $ |
1,501,474
|
$ | (237,265 | ) | $ | (438,403 | ) |
11.
|
CONCENTRATION
OF RISK
|
12.
|
SUBSEQUENT
EVENTS
|
2007
|
2006
|
|||||||
Long
distance, toll, and operator assistance
|
$ |
17,166,703
|
$ |
17,811,076
|
||||
Private
lines
|
17,080,956
|
17,492,527
|
||||||
Local
service
|
20,370,117
|
20,028,633
|
||||||
Data
services
|
6,987,319
|
6,606,434
|
||||||
Universal
service fee
|
1,224,633
|
1,095,492
|
||||||
PICC
cost recovery
|
263,570
|
294,879
|
||||||
Regulatory
cost recovery
|
376,387
|
25,328
|
||||||
Carrier
access billing
|
1,292,968
|
1,849,088
|
||||||
Paging
|
691
|
2,403
|
||||||
Telephone
systems sales & services
|
1,836,388
|
1,729,985
|
||||||
Conference
calls
|
48,536
|
43,099
|
||||||
Video
|
982,758
|
480,669
|
||||||
Other
credits
|
(209,042 | ) | (118,701 | ) | ||||
$ |
67,421,984
|
$ |
67,340,912
|
2007
|
2006
|
|||||||
Access
and termination
|
$ |
1,029,596
|
$ |
1,518,241
|
||||
Usage
|
9,473,694
|
8,838,517
|
||||||
Transport
|
3,493,832
|
3,742,851
|
||||||
Private
line
|
8,317,820
|
8,366,757
|
||||||
Local
service access
|
2,335,553
|
2,591,832
|
||||||
CLEC
local service
|
9,494,346
|
10,309,165
|
||||||
Conference
calls
|
20,486
|
19,722
|
||||||
Universal
service fund
|
1,365,518
|
1,145,060
|
||||||
PICC
fund
|
89,731
|
44,234
|
||||||
Amortization
of capitalized Installation charges
|
95,988
|
188,616
|
||||||
Circuit
establishment and maintenance
|
14,131
|
22,451
|
||||||
Video
services
|
490,147
|
236,731
|
||||||
Depreciation
and amortization of
|
||||||||
telecommunications
equipment
|
4,786,055
|
5,354,699
|
||||||
Data
services
|
332,208
|
253,233
|
||||||
Payphone
service charge
|
45,385
|
67,467
|
||||||
800
access & administration fees
|
37,528
|
53,109
|
||||||
Telephone
equipment and warranty
|
886,943
|
808,522
|
||||||
Operator
assistance
|
38,723
|
16,883
|
||||||
Paging
services
|
480
|
923
|
||||||
$ |
42,348,164
|
$ |
43,579,013
|
2007
|
2006
|
|||||||
Advertising
|
$ |
313,409
|
$ |
868,313
|
||||
Automobile
and truck expense
|
183,470
|
199,627
|
||||||
Bad
debt expense
|
249,433
|
257,156
|
||||||
Bank
charges
|
141,723
|
104,110
|
||||||
Business
meals
|
43,619
|
42,825
|
||||||
Collection
agency fees
|
16,128
|
15,803
|
||||||
Commissions
|
890,198
|
885,051
|
||||||
Computer
expense
|
540,307
|
393,124
|
||||||
Contract
labor
|
63,327
|
80,061
|
||||||
Depreciation
|
1,202,414
|
1,311,926
|
||||||
Directors
fees
|
39,000
|
54,000
|
||||||
Dues
and subscriptions
|
50,311
|
58,693
|
||||||
Employee
benefits
|
425,380
|
404,042
|
||||||
Engineering
fees
|
7,120
|
6,213
|
||||||
Entertainment
and promotional
|
111,327
|
143,480
|
||||||
Freight
|
30,029
|
32,798
|
||||||
Insurance
|
2,204,707
|
1,765,040
|
||||||
State
infrastructure assessment
|
293,531
|
189,272
|
||||||
Internet
expenses
|
11,700
|
11,700
|
||||||
Legal
and accounting
|
250,741
|
202,280
|
||||||
Licenses
and fees
|
37,008
|
35,372
|
||||||
Management
fees
|
26,019
|
23,921
|
||||||
Miscellaneous
|
30,488
|
17,102
|
||||||
Office
supplies and expense
|
192,216
|
265,199
|
||||||
Postage
|
271,670
|
323,393
|
||||||
Rent
|
1,649,039
|
1,643,743
|
||||||
Repairs
and maintenance
|
337,756
|
322,797
|
||||||
Salaries
|
11,436,642
|
12,011,601
|
||||||
Taxes
– other
|
472,988
|
468,461
|
||||||
Taxes
– payroll
|
922,607
|
973,558
|
||||||
Telephone
|
188,317
|
251,100
|
||||||
Travel
|
185,097
|
218,712
|
||||||
Training
|
12,725
|
26,730
|
||||||
Trust
and loan fees
|
- |
185
|
||||||
Utilities
|
846,343
|
803,067
|
||||||
$ |
23,676,789
|
$ |
24,410,455
|
Financial
statements
|
Page |
F-84
|
|
F-86
|
|
F-87
|
|
F-89
|
December
31,
|
||||||||
2007
|
2006
|
|||||||
Current
assets
|
||||||||
Cash and cash
equivalents
|
$ | 7,976,454 | $ | 5,400,569 | ||||
Accounts receivable -
trade
|
2,745,499 | 3,340,273 | ||||||
Allowance for bad
debts
|
(206,438 | ) | (222,223 | ) | ||||
Other receivables
|
25,762 | 158,258 | ||||||
Unbilled revenue
|
1,271,708 | 1,629,157 | ||||||
Prepaid expenses
|
779,460 | 723,444 | ||||||
Accrued interest
|
- | 21,382 | ||||||
Inventory
|
562,995 | 360,239 | ||||||
Other
Current Assets
|
- | 288,586 | ||||||
Deferred tax benefit –
Current
|
756,973 | 230,099 | ||||||
Total current
assets
|
13,912,413 | 11,929,784 | ||||||
Investments
|
5,791 | 638,815 | ||||||
Property,
equipment and improvements
|
||||||||
Less accumulated depreciation
& amortization
|
27,544,758 | 28,600,460 | ||||||
Property, equipment and
improvements in
|
||||||||
development
|
1,720,766 | 1,037,666 | ||||||
Total property, equipment and
improvements
|
29,265,524 | 29,638,126 | ||||||
Other
assets
|
||||||||
Note receivable – Shareholder
Value, Ltd.
|
- | 2,005,802 | ||||||
Goodwill
|
5,686,996 | 5,686,996 | ||||||
Less amortization of
goodwill
|
(1,278,809 | ) | (1,278,809 | ) | ||||
Deferred tax benefit –
Long-term
|
- | 341,455 | ||||||
Other assets
|
23,717 | 378,610 | ||||||
Total other
assets
|
4,431,905 | 7,134,054 | ||||||
Total
assets
|
$ | 47,615,633 | $ | 49,340,779 |
December
31,
|
||||||||
2007
|
2006
|
|||||||
Current
liabilities
|
||||||||
Accounts payable – trade and
carrier charges
|
$ | 2,670,852 | $ | 2,959,921 | ||||
Current maturities of long-term
debt
|
502,309 | 1,502,264 | ||||||
Accrued other
liabilities
|
2,591,194 | 2,342,626 | ||||||
Deferred revenues
|
888,857 | 920,104 | ||||||
Other current
liabilities
|
50,142 | 68,810 | ||||||
Total current
liabilities
|
6,703,354 | 7,793,725 | ||||||
Long-term
liabilities
|
||||||||
Long-term debt, less current
portion
|
2,745,867 | 673,994 | ||||||
Deferred income
taxes
|
1,416,612 | 4,583 | ||||||
Total long-term
liabilities
|
4,162,479 | 678,577 | ||||||
Total
liabilities
|
10,865,833 | 8,472,302 | ||||||
Stockholders’
equity
|
||||||||
Common stock, no par value,
authorized
|
||||||||
11,000,000 shares, 1,962,029
shares issued
|
||||||||
in December 31, 2007 and
2006
|
4,959,938 | 4,959,938 | ||||||
Additional paid-in
capital
|
1,814,620 | 1,814,620 | ||||||
Retained earnings –
unrestricted
|
52,720,037 | 56,838,714 | ||||||
59,494,595 | 63,613,272 | |||||||
Treasury stock at cost, 702,878
shares in
|
||||||||
December 31, 2007 and
2006
|
(22,744,795 | ) | (22,744,795 | ) | ||||
Total stockholders’
equity
|
36,749,800 | 40,868,477 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 47,615,633 | $ | 49,340,779 |
Five
months ended December 31,
|
||||||||
2007
|
2006
|
|||||||
Revenues
earned
|
$ | 26,352,595 | $ | 27,921,772 | ||||
Cost
of communication services
|
16,490,365 | 17,850,420 | ||||||
Gross profit
|
9,862,230 | 10,071,352 | ||||||
Selling,
general and administrative expenses
|
8,988,100 | 10,314,870 | ||||||
Income (loss) from
operations
|
874,130 | (243,518 | ) | |||||
Other
income (expenses)
|
||||||||
Interest income
|
89,496 | 151,666 | ||||||
Building lease
|
325,132 | 194,100 | ||||||
Other income
|
34,068 | 147,676 | ||||||
Gain on sale of
assets
|
4,351 | - | ||||||
Interest expense
|
(87,461 | ) | (78,564 | ) | ||||
Total other income
(expenses)
|
365,586 | 414,878 | ||||||
Income
from continuing operations
|
||||||||
before income
taxes
|
1,239,716 | 171,360 | ||||||
Income
tax provision
|
647,263 | 88,864 | ||||||
Net
income
|
$ | 592,453 | $ | 82,496 | ||||
Five
months ended December 31,
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net income
|
$ | 592,453 | $ | 82,496 | ||||
Adjustments
to reconcile net income to net
|
||||||||
cash provided by operating
activities:
|
||||||||
Depreciation and amortization of
fixed assets
|
2,426,861 | 2,547,403 | ||||||
Capitalized
depreciation
|
38,346 | - | ||||||
Increase (decrease) in deferred
taxes
|
313,062 | 353,656 | ||||||
(Gain) loss on sale or disposal
of assets
|
(4,351 | ) | (16,102 | ) | ||||
(Increase)
decrease:
|
||||||||
Accounts receivable –
trade
|
299,425 | (294,486 | ) | |||||
Other receivables
|
198,788 | 63,607 | ||||||
Unbilled revenue
|
127,942 | 147,053 | ||||||
Accrued interest
|
251 | 121,558 | ||||||
Prepaid expenses
|
(115,378 | ) | (196 | ) | ||||
Inventory
|
(54,953 | ) | 245,572 | |||||
Other Current
Assets
|
(308,202 | ) | ||||||
Increase
(decrease):
|
||||||||
Accounts payable –
trade
|
224,937 | (40,276 | ) | |||||
Deferred revenue
|
(9,612 | ) | 75,513 | |||||
Customer deposits
|
8,194 | |||||||
Accrued other
liabilities
|
460,081 | 174,148 | ||||||
Net
cash provided (used) by operating activities
|
4,497,852 | 3,159,938 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchase of property, equipment
and improvements
|
(2,519,522 | ) | (2,988,037 | ) | ||||
Proceeds from sale of
assets
|
4,351 | 30,517 | ||||||
Change in partnership
investment
|
(793 | ) | (1,423 | ) | ||||
Net
cash provided (used) by investing activities
|
(2,515,964 | ) | (2,958,943 | ) |
Five
months ended December 31,
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from financing activities:
|
||||||||
Proceeds on long term
debt
|
$ | 2,595,935 | $ | 567,591 | ||||
Principal payments on long-term
debt
|
(214,588 | ) | (150,410 | ) | ||||
Changes in line of credit note
payable
|
(605,365 | ) | ||||||
Dividend Paid
|
(3,021,962 | ) | ||||||
Net
cash provided (used) by financing activities
|
(640,615 | ) | (188,184 | ) | ||||
Net
increase (decrease) in cash
|
1,341,273 | 12,811 | ||||||
Cash/Cash
equivalents, beginning of year
|
6,635,181 | 5,387,758 | ||||||
Cash/Cash
equivalents, end of year
|
$ | 7,976,454 | $ | 5,400,569 | ||||
Supplementary
disclosures of cash flow information:
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | 80,236 | $ | 77,834 | ||||
Income taxes
|
$ | - | $ | - | ||||
Non
cash investing and financing activities:
|
||||||||
Equipment acquired by issuance of
long-term debt
|
$ | - | $ | 125,000 | ||||
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES,
Continued
|
2.
|
SUBSEQUENT
EVENTS
|
Xfone, Inc. and
Subsidiaries
|
||||||||
PRO FORMA BALANCE
SHEETS
|
||||||||
DECEMBER 31,
2007
|
||||||||
(Unaudited)
|
||||||||
Xfone,
Inc.
|
NTS
Communications
|
Pro
forma adjustments
|
Pro
form
Consolidated
|
||||||||||||||
CURRENT
ASSETS:
|
|||||||||||||||||
Cash
|
$
|
5,835,608
|
$
|
7,976,454
|
(3,249,373
|
)
|
(a)
|
$
|
10,562,689
|
||||||||
Restricted
cash
|
25,562,032
|
-
|
(25,562,032
|
)
|
(b)
|
-
|
|||||||||||
Account
Receivables, net
|
5,886,499
|
3,836,531
|
9,723,030
|
||||||||||||||
Prepaid
expenses and other receivables
|
3,985,307
|
1,536,433
|
273,510
|
|
(c)
|
5,795,250
|
|||||||||||
Inventory
|
-
|
562,995
|
|
|
562,995
|
||||||||||||
Total current
assets
|
41,269,446
|
13,912,413
|
26,643,964
|
||||||||||||||
INVESTMENTS
|
-
|
5,791
|
|
5,791
|
|||||||||||||
MINORITY
INTEREST
|
7,190
|
-
|
|
7,190
|
|||||||||||||
LONG
TERM LIABILITIES
|
2,076,061
|
-
|
|
2,076,061
|
|||||||||||||
FIXED
ASSETS, NET
|
5,747,758
|
29,265,524
|
3,020,281
|
(d)
|
38,033,563
|
||||||||||||
OTHER
ASSETS, NET
|
17,948,872
|
4,431,905
|
12,107,122
|
(e)
|
34,487,899
|
||||||||||||
Total
Assets
|
$
|
67,049,327
|
$
|
47,615,633
|
$
|
101,254,468
|
|||||||||||
CURRENT
LIABILITIES
|
|||||||||||||||||
Notes
payables – current portion
|
$
|
1,094,339
|
$
|
502,309
|
$
|
1,596,648
|
|||||||||||
Trade
Payables
|
8,287,420
|
2,670,852
|
10,958,272
|
||||||||||||||
Other
liabilities and accrued expenses
|
5,322,045
|
3,530,193
|
1,200,000
|
(f)
|
10,052,238
|
||||||||||||
Current
maturities of obligations under leases
|
89,654
|
-
|
89,654
|
||||||||||||||
Bonds
– current portion
|
3,268,476
|
-
|
1,953,910
|
(g)
|
5,222,386
|
||||||||||||
Total current
liabilities
|
18,061,934
|
6,703,354
|
27,919,198
|
||||||||||||||
DEFFERED
TAXES
|
1,103
|
1,416,612
|
(1,417,715
|
)
|
(c)
|
-
|
|||||||||||
NOTES
PAYABLE
|
1,013,808
|
2,745,867
|
3,759,675
|
||||||||||||||
OBLIGATIONS
UNDER CAPITAL LEASES
|
31,893
|
-
|
31,893
|
||||||||||||||
BONDS
|
22,083,892
|
-
|
22,083,892
|
||||||||||||||
SEVERANCE
PAY
|
148,600
|
-
|
148,600
|
||||||||||||||
Total
liabilities
|
41,341,230
|
10,865,833
|
53,943,258
|
||||||||||||||
TOTAL
SHAREHOLDERS' EQUITY
|
25,708,097
|
36,749,800
|
(15,146,687
|
)
|
(h)
|
47,311,210
|
|||||||||||
Total
liabilities and shareholders' equity
|
$
|
67,049,327
|
$
|
47,615,633
|
$
|
101,254,468
|
|||||||||||
Xfone,
Inc. and Subsidiaries
|
PRO
FORMA STATEMENTS OF OPERATIONS
|
(Unaudited)
|
YEAR
ENDED DECEMBER 31, 2007
|
Xfone
Inc
|
NTS
Communications
|
Pro
forma adjustments
|
Pro
forma
Consolidated
|
||||||||||||||||
Revenues
|
$ | 44,723,934 | $ | 66,522,841 | $ | 111,246,775 | |||||||||||||
Cost
of Revenues
|
19,626,322 | 40,860,503 | 60,486,825 | ||||||||||||||||
Gross
profit
|
25,097,612 | 25,662,338 | 50,759,950 | ||||||||||||||||
Operating
expenses:
|
|||||||||||||||||||
Research
and development
|
47,609 | - | 47,609 | ||||||||||||||||
Marketing
and selling
|
10,886,883 | 4,473,363 | 15,360,246 | ||||||||||||||||
General
and administrative
|
12,335,759 | 18,232,129 | (3,020,281 | ) |
(a)
|
27,547,607 | |||||||||||||
Non
recurring loss
|
2,856,803 | - | 2,856,803 | ||||||||||||||||
Total operating
expenses
|
26,127,054 | 22,705,492 | 45,812,265 | ||||||||||||||||
Operating
profit (loss)
|
(1,029,442 | ) |
|
2,956,846 | 4,947,685 | ||||||||||||||
Financing
income (expenses), net
|
(515,562 | ) |
|
134,449 | (1,953,909 | ) |
(b)
|
(2,335,022 | ) |
|
|||||||||
Equity
in income of affiliated company
|
132,867 | - | 132,867 | ||||||||||||||||
Other
income
|
- | 480,869 | 480,869 | ||||||||||||||||
Income
(loss) before minority interest and taxes
|
(1,412,137 | ) |
|
3,572,164 | 3,226,399 | ||||||||||||||
Minority
interest
|
(297,860 | ) |
|
- | (297,860 | ) |
|
||||||||||||
Income
before taxes
|
(1,709,997 | ) |
|
3,572,164 | 2,928,539 | ||||||||||||||
Taxes
on income
|
426,105 | (1,486,897 | ) | 1,691,225 |
(c)
|
630,433 | |||||||||||||
Net
Income (loss)
|
$ | (1,283,892 | ) |
|
$ | 2,085,267 | $ | 3,558,972 | |||||||||||
Adjustment
of non recurring loss
|
1,999,762 |
(d)
|
1,999,762 |
(d)
|
|||||||||||||||
Net
income from recurring operations
|
$ | 715,870 | $ | 5,558,734 | |||||||||||||||
Earning
per share:
|
|||||||||||||||||||
Basic
and Diluted
|
$ | (0.109 | ) |
|
$ | 0.193 | |||||||||||||
Adjustment
of non recurring loss
|
0.170 |
(d)
|
0.109 |
(d)
|
|||||||||||||||
Basic
and Diluted
|
$ | 0.061 | $ | 0.302 | |||||||||||||||
1.
|
To make an effort and to take all
actions that are reasonably required, subject to the law and the rules of
the Tel Aviv Stock Exchange Ltd. (the “TASE”), to list the Bonds for
trading on the TASE, such that restrictions on resale will not apply in
accordance with Section 15c of the Israeli Securities Law 5728-1968 (the
“Israeli Securities Law”) on the holders of the Bonds, no later than 12
months from the Date of Issuance.
|
2.
|
Immediately after the issuance the
Company will apply to the TASE to list the Bonds as a “non-tradable
security” with the TASE Clearing House, at the discretion of the Company,
subject to the law and the rules of the TASE.
|
3.
|
Starting from the date of the
Bonds’ listing for trade on the TASE, to the extent such listing occurs,
the interest rate payable for the unpaid balance of the Bonds will be
reduced by 1% (to an annual interest rate of
8%).
|
4.
|
Until the Bonds are listed for
trade on the TASE, in the event that the rating of the Bonds is reduced
from the rating given them at their issuance - A3 by Midroog - to Baa1 (or
an equivalent rating by another rating company), the annual rate of
interest on the Bonds will increase by 0.25%.
|
5.
|
If the Bonds are not listed for
trading within 12 months from the Date of Issuance, any holder of the
Bonds will be allowed (but not required), to redeem his Bonds, in whole or
in part, in an early redemption.
|
6.
|
In the event that by March 31,
2008 the conditions for the release of the proceeds of the offering by the
Trustee, as set forth in the Indenture of the Bonds, are not met, the
issuance will be canceled and the Trustee will return the proceeds of the
offering to the holders of the Bonds, along with interest at an annual
rate of 9%, linked to the CPI, for the period from the Date of Issuance
until the date of the return of the proceeds as stated. The
interest from the proceeds of the offering that have accumulated in the
trust account will be transferred to the Company. The applicable
conditions are: (i) that the Company raises an aggregate of at least $20.0
million in equity financings (this condition has been satisfied subject to
the receipt of certain regulatory approvals); and (ii) that the conditions
(which are not related to the financing of the acquisition) for the
consummation of the NTS Acquisition have been
met.
|
7.
|
The occurrence of certain events
in connection with the Company may lead to the requirement to immediately
redeem the Bonds. Among those events are: (1) customary events such as
non-payment, the appointment of a liquidator or temporary or permanent
conservator, whose appointment is not canceled within a certain period of
time, the placement of a lien on substantive assets of the Company, the
realization of pledges on substantive assets of the Company, the
termination of the Company and when a bank requires immediate repayment of
a substantive amount of credit; (2) specific events that relate to the
period before the Bonds are listed for trade on the TASE such as the
reduction of the rating of the Bonds to Baa2 of Midroog (or an equivalent
rating of another rating company) or to a lower rating, if the Company
issues additional bonds in a manner that causes the current rating of the
Bonds to be reduced, if the Bonds cease to be rated for a period greater
than 30 days, if the proportion of the debt to EBITDA increases above 4:1,
if the Company ceases to control (directly and/or indirectly) NTS
Communications (for this purpose “control” has the meaning as defined in
the Israeli Securities Law) and in the event that Mr. Guy Nissenson ceases
to serve as President and CEO of the Company; (3) additional specific
events such as the payment of a dividend that will cause the proportion of
the shareholders equity to the Company’s balance sheet to be lower than
25%.
|
o
|
$35,414,715 was paid in cash;
and
|
o
|
2,366,892 shares of our Common
Stock were issued to certain NTS Sellers who elected to reinvest all or a
portion of their allocable sale price in our Common Stock, pursuant to the
terms of the NTS Purchase Agreement. Our Board of Directors determined, in
accordance with the NTS Purchase Agreement, the number of shares of our
Common Stock to be delivered to each participating NTS Seller by dividing
the portion of such NTS Seller’s allocable sale price that the NTS Seller
elected to receive in shares of our Common Stock by 93% of the average
closing price of our Common Stock on the American Stock Exchange for the
ten consecutive trading days preceding the trading day immediately prior
to the Closing Date (i.e., $2.74). The aggregate sales price reinvested by
all such NTS Sellers was
$6,485,284.
|
·
|
On the closing date, NIS
15,500,000 (approximately $4,374,824) (the “First
Installment”);
|
·
|
By November 20, 2008, NIS
15,500,000 (approximately $4,374,824), subject to adjustment resulting
from linkage to the Consumer Price Index (the “Second
Installment”); and
|
·
|
By November 1, 2009, NIS
13,000,000 (approximately $3,669,207), subject to adjustment resulting
from linkage to the Consumer Price Index (the “Third
Installment”).
|
Year Ended
December
31,
|
||||||||
2007
|
2006
|
|||||||
Revenues
|
100
|
%
|
100
|
%
|
||||
Cost of
Revenues
|
-44
|
%
|
-58
|
%
|
||||
Gross
Profit
|
56
|
%
|
42
|
%
|
||||
Operating
Expenses:
|
||||||||
Research and
Development
|
0
|
%
|
0
|
%
|
||||
Marketing and
Selling
|
-24
|
%
|
-13
|
%
|
||||
General and
Administrative
|
-28
|
%
|
-26
|
%
|
||||
Non- recurring
loss
|
-6
|
%
|
0
|
%
|
||||
Total Operating
Expenses
|
-58
|
%
|
-39
|
%
|
||||
Income (loss) before
Taxes
|
-4
|
%
|
2
|
%
|
||||
Net Income
|
-3
|
%
|
2
|
%
|
Six months
ended
June 30,
|
Three months
ended
June 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||||
Cost of
Revenues
|
-50.5
|
%
|
-44.6
|
%
|
-51.7
|
%
|
-44.1
|
%
|
||||||||
Gross
Profit
|
49.5
|
%
|
55.4
|
%
|
48.3
|
%
|
55.9
|
%
|
||||||||
Operating
Expenses:
|
||||||||||||||||
Research and
Development
|
-0.1
|
%
|
-0.1
|
%
|
-0.1
|
%
|
-0.1
|
%
|
||||||||
Marketing and
Selling
|
-14.7
|
%
|
-23.6
|
%
|
-13.4
|
%
|
-23.6
|
%
|
||||||||
General and
Administrative
|
-27.4
|
%
|
-25.3
|
%
|
-27.5
|
%
|
-25.5
|
%
|
||||||||
Total Operating
Expenses
|
-42.2
|
%
|
-49.0
|
%
|
-41
|
%
|
-49.2
|
%
|
||||||||
Income (loss) before
Taxes
|
-2.7
|
%
|
4.8
|
%
|
-5
|
%
|
4.9
|
%
|
||||||||
Net Income
(loss)
|
-2.1
|
%
|
3.7
|
%
|
-7.2
|
%
|
3.5
|
%
|
Date
|
||||
2008
|
$
|
86,201
|
||
2009
|
46,573
|
|||
$
|
132,774
|
Director
|
Class
|
Abraham
Keinan
|
Class
A
|
Guy
Nissenson
|
Class
A
|
Shemer
Shimon Schwarz
|
Class
A
|
Eyal
Josef Harish
|
Class
B
|
Aviu
Ben-Horrin
|
Class
B
|
Itzhak
Almog
|
Class
B
|
Morris
Mansour
|
Class
C
|
Israel
Singer
|
Class
C
|
Name
|
Age
|
Director
/ Officer
|
||
Abraham
Keinan
|
58
|
Chairman
of the Board of Directors, since our inception.
|
||
Guy
Nissenson
|
33
|
Director,
President and Chief Executive Officer since our
inception.
|
||
Eyal
J. Harish
|
55
|
Director,
since December 19, 2002.
|
||
Shemer
S. Schwartz
|
33
|
Director,
since December 19, 2002, and is an independent director and a member of
our Audit Committee and our Compensation Committee.
|
||
Itzhak
Almog
|
69
|
Director,
since May 18, 2006, and is an independent director and Chairman of our
Audit Committee and our Nominating Committee.
|
||
Aviu
Ben-Horrin
|
59
|
Director,
since November 23, 2004, and is an independent
director.
|
||
Israel
Singer
|
59
|
Director,
since December 28, 2006, and is an independent director and a member of
our Audit Committee.
|
||
Morris
Mansour
|
60
|
Director,
since December 28, 2006, and is an independent director and Chairman
of our Compensation Committee and a member of our Nominating
Committee.
|
||
Niv
Krikov
|
37
|
Principal
Accounting Officer since May 9, 2007 and Treasurer and Chief Financial
Officer since August 13, 2007.
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
Non-qualified
Deferred Compensation Earnings
($)
|
All
Other Compensation (10)
($)
|
Total
($)
|
|||||||||||||||
Abraham Keinan
,
Chairman
of the Board
|
2007
|
96,043
|
(1)
|
254,350
|
(2)
|
18,796
|
(3)
|
369,189
|
||||||||||||||||
2006
|
94,032
|
(1)
|
–
|
–
|
–
|
100,710
|
(4)
|
–
|
35,920
|
(3)
|
230,662
|
|||||||||||||
Guy
Nissenson,
President,
CEO, and Director
|
2007
|
96,043
|
(5)
|
242,490
|
(6)
|
31,294
|
(7)
|
338,533
|
||||||||||||||||
2006
|
94,032
|
(5)
|
–
|
–
|
–
|
163,381
|
(8)
|
–
|
26,341
|
(7)
|
283,754
|
|||||||||||||
Niv Krikov,
Treasurer,
CFO and Principal
Accounting Officer (9)
|
2007
|
76,030
|
3,650
|
–
|
–
|
–
|
–
|
–
|
79,680
|
|||||||||||||||
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
(1)
|
Salary
paid to Mr. Keinan by our U.K. based wholly owned subsidiary, Swiftnet
Limited, in connection with his employment as Chairman of the Board. Mr.
Keinan has been the Chairman of the Board of Directors of Swiftnet since
its inception in 1990. The amount shown in the table above for 2006 was
paid in British Pound Sterling (£48,000) and has been translated into U.S.
dollars for convenience purposes using the rate of exchange of the U.S.
dollar at December 31, 2006. The representative rate of exchange of the £
at December 31, 2006 was £1 = $1.959. The amount shown in the table above
for 2007 was paid in British Pound Sterling (£48,000) and has been
translated into U.S. dollars using the average rate of exchange of the
U.S. dollar during 2007. The average rate of exchange of the £ during 2007
was £1 = $2.001.
|
(2)
|
Pursuant
to a Company’s Board of Directors’ resolution dated December 25, 2006, on
March 28, 2007, the Company and Mr. Keinan entered into a consulting
agreement, effective as of January 1, 2007 (the “Keinan Consulting
Agreement”). The Keinan Consulting Agreement provides that Mr. Keinan
shall render the Company advisory, consulting and other services in
relation to the business and operations of the Company (excluding its
business and operations in the United Kingdom). In consideration of the
performance of the Services pursuant to the Keinan Consulting Agreement,
the Company agreed to pay Mr. Keinan a monthly fee of £10,000 ($19,679)
(the “Fee”). Mr. Keinan invoices the Company at the end of each calendar
month, and the Company makes the monthly payments immediately upon receipt
of such invoices. The amount shown reflects payments to Mr.
Keinan pursuant to the Keinan Consulting
Agreement.
|
(3)
|
The
amount shown for 2006 reflects airfare expenses incurred by the Company
for the travels of Mr. Keinan’s wife and payments for a leased car for Mr.
Keinan’s use during 2006. The amount shown for 2007 reflects payments for
a leased car for Mr. Keinan’s use in
2007.
|
(4)
|
On
April 2, 2002, our Board of Directors approved a bonus and success fee
whereby if the Company receives monthly revenues in excess of $485,000
then Mr. Keinan and our former consultant, Campbeltown Business Ltd. shall
receive 1% of such monthly revenues, up to a maximum of one million
dollars (the “Bonus and Success Fee”). On April 10, 2003, Mr. Keinan and
Campbeltown Business waived their right to receive 1% of the revenues
generated by Story Telecom. On February 8, 2007, an Agreement was entered
by and between the Company, Swiftnet, Campbeltown Business, and Mr. Keinan
(the “February 8, 2007 Agreement”). The February 8, 2007 Agreement
provides that effective as of January 1, 2007, the Bonus and Success Fee
is cancelled, and that Mr. Keinan and Campbeltown Business shall have no
further right to any percentage of our revenues. Mr. Keinan agreed to
receive a total amount of only $100,710 (£51,409) as Bonus and Success Fee
for 2006, which is reflected in the table above, and waived the
remainder.
|
(5)
|
Salary
paid to Mr. Nissenson by our U.K. based wholly owned subsidiary, Swiftnet,
in connection with his employment as Director of Business Development. Mr.
Nissenson joined Swiftnet in October 1999 and became a member of its Board
of Directors in May 2000. Mr. Nissenson had been the Managing Director of
Swiftnet from October 2003 until July 2006. The amount shown in the table
above for 2006 was paid in British Pound Sterling (£48,000) and has been
translated into U.S. dollars for convenience purposes using the rate of
exchange of the U.S. dollar at December 31, 2006. The representative rate
of exchange of the £ at December 31, 2006 was £1 = $1.959. The amount
shown in the table above for 2007 was paid in British Pound Sterling
(£48,000) and has been translated into U.S. dollars using the average rate
of exchange of the U.S. dollar during 2007. The average rate of exchange
of the £ during 2007 was £1 =
$2.001.
|
(6)
|
Pursuant
to a Company’s Board of Directors’ resolution dated December 25, 2006, on
March 28, 2007, the Company and Mr. Nissenson entered into a consulting
agreement, effective as of January 1, 2007 (the “Nissenson Consulting
Agreement”). The Nissenson Consulting Agreement provides that Mr.
Nissenson shall render the Company advisory, consulting and other services
in relation to the business and operations of the Company (excluding its
business and operations in the United Kingdom). In consideration of the
performance of the Services pursuant to the Nissenson Consulting
Agreement, the Company agreed to pay Mr. Nissenson a monthly fee of
£10,000 ($19,679) (the “Fee”). Mr. Nissenson invoices the Company at the
end of each calendar month, and the Company makes the monthly payments
immediately upon receipt of such invoices. The amount shown
reflects payments to Mr. Nissenson pursuant to the Nissenson Consulting
Agreement.
|
(7)
|
The
amount shown in the table above reflects airfare expenses incurred by the
Company for the travels of Mr. Nissenson’s wife during 2006 and
2007.
|
(8)
|
On
May 11, 2000, Swiftnet and Mr. Keinan entered into a consulting agreement
with Campbeltown Business that provided that Swiftnet will hire
Campbeltown Business as its financial and business development consultant
and will pay Campbeltown Business £2,000 per month together with an
additional monthly performance bonus based upon Swiftnet attaining certain
revenue levels (the “Consulting Agreement”). On April 2, 2002, our Board
of Directors approved a bonus and success fee whereby if the Company
receives monthly revenues in excess of $485,000 then Mr. Keinan and
Campbeltown Business shall receive 1% of such monthly revenues, up to a
maximum of one million dollars (the “Bonus and Success Fee”). On April 10,
2003, Mr. Keinan and Campbeltown Business waived their right to receive 1%
of the revenues generated by Story Telecom. On February 8, 2007, an
Agreement was entered by and between the Company, Swiftnet, Campbeltown
Business, and Mr. Keinan (the “February 8, 2007 Agreement”). The February
8, 2007 Agreement provides that effective as of January 1, 2007, the Bonus
and Success Fee is cancelled, and that Mr. Keinan and Campbeltown Business
shall have no further right to any percentage of our revenues. The
February 8, 2007 Agreement further provides that effective as of January
1, 2007, the Consulting Agreement is terminated. Campbeltown Business
agreed to receive a total amount of only $163,381 (£83,400) as
compensation under the Consulting Agreement and the Bonus and Success Fee
for 2006, and waived the remainder. Campbeltown Business Ltd., a private
company incorporated in the British Virgin Islands, is owned and
controlled by Guy Nissenson and other members of the Nissenson family. Guy
Nissenson owns 20% of Campbeltown Business. The compensation is shown in
the table above as paid to Guy Nissenson due to his 20% ownership of
Campbeltown Business.
|
(9)
|
Mr.
Niv Krikov has been our Vice President Finance since March 13, 2007, and
our Principal Accounting Officer since May 9, 2007. On August 13, 2007, in
accordance with a resolution of the Board of Directors of the Company, the
Company elected Mr. Krikov as its Treasurer and Chief Financial Officer.
Following his election, Mr. Krikov no longer serves as Vice President
Finance of the Company, but continues to serve as its Principal Accounting
Officer.
|
(10)
|
The
Company acknowledges that on several occasions, consultants may be
required to travel frequently for a long duration around the world.
Therefore, in order to enable the consultants’ spouses to accompany them
on certain lengthy trips for a normal family life, the Company bears
travel expenses for the consultants’
spouses.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||||||||||||||||||
Name
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock that Have Not Vested
(#)
|
Market
Value of Shares or Units of Stock that Have Not Vested
($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
that Have Not Vested
(#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
Other Rights that Have Not Vested
($)
|
|||||||||||||||||||||||||||
Abraham
Keinan
|
1,500,000
|
(1)
|
–
|
–
|
3.50
|
Nov.
24, 2010
|
–
|
–
|
–
|
–
|
||||||||||||||||||||||||||
Guy
Nissenson
|
1,500,000
|
(1)
|
–
|
–
|
3.50
|
Nov.
24, 2010
|
–
|
–
|
–
|
–
|
||||||||||||||||||||||||||
Niv
Krikov
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
(1)
|
These
options were granted on November 24, 2004, vested in full on November 24,
2005, and will expire on November 24,
2010.
|
1.
|
If
the NTS Officer terminates the Employment Agreement for good reason, NTS
will pay the NTS Officer his or her salary for the remainder of the
employment term, except that if the NTS Officer obtains other employment
during that time, such salary payments will be reduced by the amount
received with respect to such other
employment.
|
2.
|
If
the NTS Officer terminates his employment for any reason other than for
good reason, the NTS Officer will be entitled to receive his or her salary
only through the date such termination is effective, and any unexercised
vested options to purchase the Company’s Common Stock and rights to
receive any additional options to purchase the Company’s Common Stock
shall be cancelled.
|
3.
|
If
NTS terminates the Employment Agreement for cause, the NTS Officer will be
entitled to receive his or her salary through the date such termination is
effective, and any options for the Company’s Common Stock issued in any
year subsequent to Employment Year 1 shall be
cancelled.
|
4.
|
If
the Employment Agreement is terminated because of the NTS Officer’s death,
the NTS Officer will be entitled to receive his or her salary through the
end of the calendar month in which his or her death occurs, and any right
to receive any additional options to purchase the Company’s Common Stock
shall be cancelled.
|
5.
|
If
the Employment Agreement expires after the performance of the full term
and NTS and the NTS Officer cannot agree on the terms for an extension of
the Employment Agreement or a new employment agreement to replace the
Employment Agreement, and the NTS Officer terminates employment, then the
NTS Officer will be entitled to receive as severance pay his or her salary
for a period of three (3) months following the date of such
termination.
|
6.
|
If
the Employment Agreement is terminated by either party as a result of the
NTS Officer’s disability, NTS will pay the NTS Officer his or her s alary
through the remainder of the calendar month during which such termination
is effective and any right to receive any additional options for the
Company’s Common Stock shall be
cancelled.
|
Employment
Year during which such termination occurs:
|
Ms.
Baldwin
|
Mr.
Hoover
|
Mr.
Worthington
|
|||||||||
Year
1
|
$
|
773,000
|
$
|
487,680
|
$
|
487,680
|
||||||
Year
2
|
$
|
618,400
|
$
|
390,144
|
$
|
390,144
|
||||||
Year
3
|
$
|
463,800
|
$
|
292,608
|
$
|
292,608
|
||||||
Year
4
|
$
|
309,200
|
$
|
195,072
|
$
|
195,072
|
||||||
Year
5
|
$
|
154,600
|
$
|
97,536
|
$
|
97,536
|
1.
|
Within
fourteen (14) days from the date of this agreement, the Company will grant
the Executive, under its 2004 Stock Option Plan, 300,000 options for
restricted shares of its Common Stock, at a strike price of $3.50 per
share. Such options shall vest as follows: 75,000 options on the first
anniversary of this agreement and 18,750 each quarter thereafter during
which he is employed by Swiftnet. Such options may be exercised at any
time before the tenth anniversary of the date of the
agreement.
|
2.
|
On
or before 31 August 2006, the Executive will be paid a bonus of £4,000 if
he has produced a business plan that the Board approves for execution in
writing.
|
3.
|
On
or before 31 October 2006, the Executive will be paid a bonus equal to
twelve per cent (12%) of the revenues referable for the month of September
2006 from former customers of Equitalk, which have transferred to Swiftnet
and whose CLIs and other details have been entered into Swiftnet’s system
and set up so as to ensure that their calls are routed by means of
Swiftnet’s switch by 30 September 2006. If such former customers have not
paid in relation to such revenues by 31 December 2006, then the Executive
shall repay to Swiftnet within thirty (30) days, the portion of the bonus
that relates to the non-collected
revenues.
|
4.
|
If
the share capital of Swiftnet, the Company or any Associated Company of
either is admitted to a recognized investment exchange in the United
Kingdom (a “Listing”) at any time during the course of the Executive’s
employment, the Executive will be paid a bonus of one point thirty three
per cent (1.33%) of the amount raised on such a Listing. Such bonus will
be subject to any applicable law and appropriate approvals from the
American Stock Exchange, SEC and/or UK Recognized Stock Exchange and shall
be paid as soon as reasonably practicable following the date of the
Listing by way of the grant of options or warrants (exercisable at any
time within 5 years of the date of grant subject to any lock-in periods
agreed as part of the Listing process) exercisable into restricted shares
of Common Stock of the Company. Such options or warrants will be priced at
the issue price of the Listing, according to the Black Scholes option -
pricing model, with a volatility of ninety per cent
(90%).
|
5.
|
If
Swiftnet, the Company or any Associated Company acquires the shares,
assets of undertaking of any company or business in the United Kingdom (an
“Acquisition”) at any time during the course of the Executive’s
employment, the Executive will be paid a bonus of one point thirty three
per cent (1.33%) of the value of the Acquisition. Such bonus will be
subject to any applicable law and appropriate approvals from the American
Stock Exchange and/or SEC and shall be paid as soon as reasonably
practicable following the date of the Acquisition and may be satisfied by
Swiftnet by procuring that the Company allots restricted shares of Common
Stock to the Executive to the value of such
bonus.
|
6.
|
On
or before 31 August 2006, the Executive and Swiftnet will agree a bonus
scheme linked to his individual performance. An on-target bonus of £4,000
per month will be payable for each month, such targets to be set so as to
reward the Executive for improving the profitability and revenue of
Swiftnet, whilst giving him a realistic chance of reaching them. The bonus
will be paid monthly in arrears and there shall be no entitlement to
receive any bonus once the Executive’s employment has terminated. The
Executive and the Company will agree a formula to pay the Executive a
reduced bonus if targets are not met and an increased bonus if targets are
exceeded.
|
7.
|
The
Executive is entitled to the same piggyback registration rights with
respect to the securities of the Company allotted to the Executive under
the service agreement, as those enumerated in Clause 3.5 and Schedule 13
of the May 25, 2006 Agreement to purchase
Equitalk.co.uk.
|
1)
|
Within
30 days of adoption of the 2007 Stock Incentive Plan, Mr. Haliva will be
granted options to purchase 300,000 shares of Common Stock, at an exercise
price of $3.50 per share, of which (i) options to purchase 75,000
shares will be exercisable after 12 months have elapsed from the
commencement of his employment, but not before the qualifying date (the
“First Exercise Date”); and (ii) options to purchase 18,750 shares
will be exercisable at the end of every 3 month period, beginning after 3
months have elapsed from the First Exercise
Date.
|
2)
|
At
the end of each calendar year between 2008 and 2011, and upon the
achievement by Xfone 018 100% of its Targets for each such year, Mr.
Haliva will be granted options to purchase 25,000 shares of the
Registrant’s Common Stock under the 2007 Stock Incentive Plan, for an
exercise price of $3.50 per share, which will be exercisable 30 days after
the Registrant publishes its annual financial statements for such
year.
|
Name
|
Fees
Earned or Paid in Cash (1)
($)
|
Stock
Awards
($)
|
Options
Awards
($)(9)
|
Non-Equity
Incentive Plan Compensation
($)
|
Nonqualified
Deferred Compensation Earnings
($)
|
All
Other Compensation
($)
|
Total
($)
|
|||||||||||||||||||||
Abraham
Keinan(2)
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||||||
Guy
Nissenson(2)
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||||||||||||||
Eyal
J. Harish(3)
|
1,250
|
–
|
–
|
–
|
–
|
–
|
450
|
|||||||||||||||||||||
Shemer
S. Schwartz (4)
|
3,600
|
–
|
–
|
–
|
–
|
–
|
1,100
|
|||||||||||||||||||||
Itzhak
Almog(5)
|
5,200
|
–
|
18,633
|
–
|
–
|
–
|
23,833
|
|||||||||||||||||||||
Aviu
Ben-Horrin(6)
|
2,450
|
–
|
–
|
–
|
–
|
–
|
1,150
|
|||||||||||||||||||||
Israel
Singer(7)
|
1,250
|
–
|
15,081
|
–
|
–
|
–
|
16,331
|
|||||||||||||||||||||
Morris
Mansour(8)
|
1,250
|
–
|
15,081
|
–
|
–
|
–
|
16,331
|
(1)
|
These
amounts were paid on February 11,
2008.
|
(2)
|
The
Company does not compensate Directors who also serve as executive officers
for their services on the Board. Accordingly, Mr. Keinan and Mr. Nissenson
did not receive any compensation for their service on the Company’s Board
during fiscal 2007.
|
(3)
|
As
of December 31, 2007, Mr. Harish held 75,000 options, fully exercisable at
an exercise price of $3.50 and with expiration date of November 24,
2010.
|
(4)
|
As
of December 31, 2007, Mr. Schwartz held 75,000 options, fully exercisable
at an exercise price of $3.50 and with expiration date of November 24,
2010.
|
(5)
|
As
of December 31, 2007, Mr. Almog held 25,000 options, fully exercisable at
an exercise price of $3.50 and with expiration date of October 30,
2012.
|
(6)
|
As
of December 31, 2006, Mr. Ben-Horrin held 25,000 options, fully
exercisable at an exercise price of $3.50 and with expiration date of
November 24, 2010.
|
(7)
|
As
of December 31, 2007, Mr. Singer held 20,000 options, which will vest in
full on June 5, 2008, one year from grant date, are exercisable at an
exercise price of $3.50, and will expire on June 5,
2013.
|
(8)
|
As
of December 31, 2007, Mr. Mansour held 20,000 options, which will vest in
full on June 5, 2008, one year from grant date, are exercisable at an
exercise price of $3.50, and will expire on June 5,
2013.
|
(9)
|
The
amount shown in the table reflects the dollar amount recognized for fiscal
2007 financial statement reporting purposes of the outstanding stock
options granted to the directors in accordance with FAS
123R.
|
Title
of
Class
|
Name,
Title & Address of Beneficial Owner
|
Amount
of
Beneficial
Ownership
|
Nature
of
Ownership
|
Percent
of
Class
|
||||||
Common
|
Abraham
Keinan(1)(3)
Chairman
of the Board
4
Wycombe Gardens
London
NW11 8AL
United
Kingdom
|
4,708,000
|
Direct
|
23.69
|
%
|
|||||
Common
|
Guy
Nissenson(2)(3)
President,
Chief Executive Officer, and Director,
3A
Finchley Park
London
N12 9JS
United
Kingdom
|
5,571,500
|
Direct/Indirect
|
28.03
|
%
|
|||||
Common
|
Eyal J.
Harish(4)
Director
18
Bloch St.
Tel
Aviv, Israel
|
90,000
|
Direct
|
0.49
|
%
|
|||||
Common
|
Shemer S.
Schwartz(5)
Director
5
Israel Galili St.
Kefar
Saba, Israel
|
75,000
|
Direct
|
0.41
|
%
|
|||||
Common
|
Aviu
Ben-Horrin(6)
Director
40
Jabotinski St.
Kefar
Sava, Israel
|
25,000
|
Direct
|
0.14
|
%
|
|||||
Common
|
Itzhak
Almog(7)
Director
7/A
Moledet St.
Hod
Hasharon, Israel
|
25,000
|
Direct
|
0.14
|
%
|
|||||
Common
|
Morris
Mansour(8)
Director
31
Tenterden Gardens
London
NW4 1TG, United Kingdom
|
20,000
|
Direct
|
0.11
|
%
|
|||||
Common
|
Israel
Singer(9)
Director
63
Ben Eliezer St.
Ramat
Gan, Israel
|
20,000
|
Direct
|
0.11
|
%
|
|||||
Common
|
Directors
and Executive Officers as a group (8 persons)(10)
|
7,666,500
|
Direct
|
35.47
|
%
|
|||||
Common
|
Scott
Richard L(11)
700
11th street South, Suite 101
Naples,
FL 34102
|
3,161,783
|
Indirect
|
16.48
|
%
|
|||||
Common
|
Gagnon
Securities LLC(12)
1370
Ave. of the Americas, Suite 2400
New
York, NY 10019
|
3,206,450
|
Direct
|
16.99
|
%
|
(1)
|
Until
June 23, 2004, Abraham Keinan indirectly held 1,302,331 shares of our
Common Stock through Vision Consultants Limited, a Nassau, Bahamas
incorporated company that is 100% owned by Mr. Keinan. On June 23, 2004,
the shares held by Vision Consultants Limited were transferred to Mr.
Keinan as an individual. In addition, certain stockholders provided Mr.
Keinan and Mr. Nissenson with irrevocable proxies representing a total of
2.47% of our Common Stock. On November 24, 2004, our board of directors
issued 1,500,000 options to Mr. Keinan on the following terms: Option
exercise price - $3.5, vesting date - 12 month from the date of grant,
expiration date - 5 years from the vesting date. Mr. Keinan’s 4,708,000
shares of Common Stock include 1,500,000 shares issuable upon the exercise
of options, exercisable within 60 days from the date of this
Prospectus.
|
(2)
|
Guy
Nissenson, our President, Chief Executive Officer, and Director, has
indirect beneficial ownership of 1,203,500 shares of our Common Stock and
direct beneficial ownership of 1,500,000 shares issuable upon the exercise
of options, exercisable within 60 days from the date of this Prospectus.
In addition, certain stockholders provided Mr. Nissenson and Mr. Keinan
with irrevocable proxies representing a total of 2.47% of our Common
Stock. To the extent that we issue any shares to Abraham Keinan,
Campbeltown Business Ltd. has the right to purchase or acquire such number
of our shares on the same terms and conditions so that the relative
percentage ownership of Abraham Keinan and Campbeltown Business Ltd.
remains the same. On November 24, 2004, our board of directors issued
1,500,000 options to Mr. Nissenson on the following terms: Option exercise
price - $3.5, vesting date - 12 month from the date of grant, expiration
date - 5 years from the vesting date.
On
July 1, 2008, Mr. Nissenson and Mr. Keinan entered into a certain
Irrevocable Option Agreement (the “Option Agreement”). Pursuant to the
Option Agreement, Mr. Keinan granted Mr. Nissenson (individually and/or
together with the Nissenson Investors, as such term is defined in the
Option Agreement) an irrevocable and exclusive option to purchase a
minimum of 2,868,000 of the shares of Xfone common stock, $0.001 par value
per share, that he beneficially owns (the “Option Shares”), at any time
from the date of the Option Agreement through 5:00 p.m. (British Time) on
January 1, 2009, at a price per share of $3.4289277 (the
"Option"). In the event that Mr. Nissenson decides to exercise the
Option, Mr. Keinan has the right to sell to the purchaser(s) of the Option
Shares up to an additional 340,000 shares of Xfone common stock that he
owns, at the same price as the Option Shares.
|
(3)
|
Our
Chairman of the Board, Abraham Keinan, and our President, Chief Executive
Officer, and Director, Guy Nissenson, exercise significant control over
stockholder matters through a September 28, 2004 Voting Agreement between
Mr. Keinan, Mr. Nissenson and Campbeltown Business Ltd., an entity owned
and controlled by Mr. Nissenson and his family. This agreement is for a
term of 10 years and provides that: (a) Messrs Keinan and Nissenson
and Campbeltown Business, Ltd. agree to vote any shares of our Common
Stock controlled by them only in such manner as previously agreed by all
these parties; and (b) in the event of any disagreement regarding the
manner of voting, a party to the agreement will not vote any shares,
unless all the parties have settled the disagreement.
|
(4)
|
Dr.
Eyal J. Harish is the brother-in-law of Abraham Keinan, our Chairman of
the Board. Dr. Harish holds 15,000 shares of our Common Stock and 75,000
shares issuable upon the exercise of options, exercisable within 60 days
from the date of this Prospectus.
|
(5)
|
Mr.
Shemer S. Schwartz holds 75,000 shares issuable upon the exercise of
options, exercisable within 60 days from the date of this
Prospectus.
|
(6)
|
Mr.
Aviu Ben-Horrin holds 25,000 shares issuable upon the exercise of options,
exercisable within 60 days from the date of this Prospectus.
|
(7)
|
Mr.
Itzhak Almog holds 25,000 shares issuable upon the exercise of options,
exercisable within 60 days from the date of this Prospectus.
|
(8)
|
Mr.
Morris Mansour holds 20,000 shares issuable upon the exercise of
options, exercisable within 60 days from the date of this
Prospectus.
|
(9)
|
Mr.
Israel Singer holds 20,000 shares issuable upon the exercise of
options, exercisable within 60 days from the date of this
Prospectus.
|
(10)
|
The
2,868,000 shares that are deemed beneficially owned by both
Mr. Keinan and Mr. Nissenson are counted only once in the total
shares reported. See Note 2 above.
|
(11)
|
According
to a Schedule 13D/A filed with the SEC on July 28, 2008, Richard L Scott,
the controlling member of XFN RLSI Investments, LLC, located at 700 11th
Street South, Suite 101, Naples, FL 34102, may be deemed to beneficially
own 2,200,000 shares and a warrant to purchase an additional 800,000
shares of Common Stock, for aggregate beneficial ownership of 3,000,000
shares. On August 25, 2008, a Form 4 was filed reflecting beneficial
ownership of a total of 2,361,783 shares of Common Stock. The table
reflects beneficial ownership of all such shares and the warrant to
purchase 800,000 additional shares.
|
(12)
|
According
to a Schedule 13G filed with the SEC on March 27, 2008, Gagnon Securities
LLC, a registered investment adviser located at 1370 Ave. of the Americas,
Suite 2400, New York, NY, in its capacity as investment advisor, may be
deemed to beneficially own 3,206,450 shares held of record by customer
accounts, foundations, partnerships, trusts, and private investment funds
to which it furnishes investment advice.
|
TARGET
AMOUNT OF REVENUES PER MONTH
|
ADDITIONAL
MONTHLY BONUS
|
Less
than £125,000
|
£0
|
Between
£125,000 - £150,000
(approximately
$245,992 - $295,191)
|
£1,250
(approximately $2,460)
|
Between
£150,000 - £175,000
(approximately
$295,191 - $344,389)
|
£2,500
(approximately $4,920)
|
Over
£175,000
(approximately
$344,389)
|
£2,750
(approximately $5,412)
|
·
|
Abraham
Keinan confirmed that all his businesses activities and initiatives in the
field of telecommunications are conducted through Swiftnet, and would
continue for at least 18 months after the conclusion of this
transaction.
|
·
|
Campbeltown
Business declared that it is not involved in any business that competes
with Swiftnet and would not be involved in such business at least for 18
months after this transaction is
concluded.
|
·
|
Campbeltown
Business would invest $100,000 in Swiftnet, in exchange for 20% of the
total issued shares of Swiftnet;
|
·
|
Campbeltown
Business would also receive 5% of our issued and outstanding shares
following our acquisition with Swiftnet. In June 2000, Campbeltown
Business invested the $100,000 in Swiftnet. We acquired Swiftnet and
Campbeltown received 720,336 shares of our Common Stock for its 20%
interest in Swiftnet.
|
·
|
Swiftnet
and Abraham Keinan would guarantee that Campbeltown Business’ 20% interest
in the outstanding shares of Swiftnet would be exchanged for at least 10%
of our outstanding shares and that Campbeltown Business would have in
total at least 15% of our total issued shares after our acquisition
occurred.
|
·
|
Campbeltown
Business would have the right to nominate 33% of the members of our board
of directors and Swiftnet’s board of directors. When Campbeltown Business
ownership in our Common Stock was less than 7%, Campbeltown Business would
have the right to nominate only 20% of our board members but always at
least one member. In the case that Campbeltown Business ownership in our
Common Stock was less than 2%, this right would
expire.
|
·
|
Campbeltown
Business would have the right to nominate a vice president in Swiftnet.
Mr. Guy Nissenson was nominated as of the time of the June 19, 2000
agreement. If for any reason Guy Nissenson will leave his position,
Campbeltown Business and Abraham Keinan will agree on another nominee. The
Vice President will be employed with suitable
conditions.
|
·
|
Campbeltown
Business will have the right to participate under the same terms and
conditions in any investment or transaction that involve equity rights in
Swiftnet or us conducted by Abraham Keinan at the relative ownership
portion.
|
·
|
Keinan
and Campbeltown Business have signed a right of first refusal agreement
for the sale of their shares.
|
·
|
Until
we conduct a public offering or are traded on a stock market, we are not
permitted to issue any additional shares or equity rights without a
written agreement from Campbeltown Business. This right expires when
Campbeltown no longer owns any equity interest or shares in our company or
our subsidiary, Swiftnet.
|
(i)
|
The
parties agree that Dionysos Investments will be compensated by the Company
for the Services provided to the Company in the amount of £8,000 ($15,743)
per month, beginning on January 1,
2007;
|
(ii)
|
In
addition, the Company will pay Dionysos Investments a one time success fee
in the amount of £10,000 ($19,679), for initiating, establishing and
developing the relationship between the Company and certain Israeli
financial institutions during fiscal years 2005-2006, relationships which
resulted in significant investments made by certain Israeli financial
institutions;
|
(iii)
|
In
addition, the Company will pay Dionysos Investments a success fee for any
future investments in the Company made by Israeli investors during fiscal
year 2007, provided such investments were a direct or indirect result of
the Services provided to the Company. The success fee will be equal to
0.5% (half percent) of the gross proceeds of such investments;
and
|
(iv)
|
In
addition, the Company will reimburse Dionysos Investments, based on prior
approval by the Audit Committee of the Company, for expenses incurred,
which expenses will include travel, hotel, meals, courier, report
reproduction and other administrative costs when and where needed.
Compensation for any additional services provided by Dionysos Investments
for the Company shall be as agreed by the
parties.
|
Expenses:
|
$ Dollar
amount
|
|||
Securities
and Exchange Commission Registration Fee
|
$
|
9,449
|
||
EDGARization,
Printing and Engraving
|
$
|
*
4,500
|
||
Accounting
Fees and Expenses
|
$
|
*
5,000
|
||
Legal
Fees and Expenses
|
$
|
40,000
|
||
Miscellaneous
|
$
|
-
|
||
TOTAL
|
$
|
52,949
|
Exhibit
Number
|
Description
|
2.
|
Agreement
and plan of reorganization dated September 20, 2000, between the Company
and Swiftnet Limited. (1)
|
3.1
|
Articles
of Incorporation of the Company.(1)
|
3.2a
|
Bylaws
of the Company.(1)
|
3.2b
|
Amended
Bylaws of the Company.(4)
|
3.3
|
Memorandum
of Association of Swiftnet Limited.(1)
|
3.4
|
Articles
of Association of Swiftnet Limited.(1)
|
3.6
|
Bylaws
of Xfone USA, Inc.(7)
|
3.8.
|
Amended
and Restated Bylaws of the Company dated March 12,
2006.(22)
|
3.9
|
Reamended
and Restated Bylaws of the Company dated February 5,
2007.(32)
|
4.
|
Specimen
Stock Certificate.(1)
|
5.
|
Opinion of Gersten Savage
LLP. (50)
|
10.1
|
Agreement
dated May 11, 2000, between Swiftnet Limited and Guy
Nissenson.(1)
|
10.2
|
Employment
Agreement dated January 1, 2000 with Bosmat Houston.
(1)
|
10.3
|
Loan
Agreement dated August 5, 2000, with Swiftnet Limited, Guy Nissenson, and
Nissim Levy.(1)
|
10.4
|
Promissory
Note dated September 29, 2000, between the Company and Abraham
Keinan.(1)
|
10.5
|
Stock
Purchase Agreement dated June 19, 2000, between Swiftnet Limited, Abraham
Keinan, and Campbeltown Business Ltd. (1)
|
10.6
|
Consulting
Agreement dated May 11, 2000 between Swiftnet Limited and Campbeltown
Business Ltd.(1)
|
10.7
|
Agreement
dated July 30, 2001, with Campbeltown Business Ltd.(1)
|
10.8
|
Contract
dated June 20, 1998, with WorldCom International
Ltd.(1)
|
10.9
|
Contract
dated April 11, 2000, with VoiceNet Inc.(1)
|
10.10
|
Contract
dated April 25, 2000, with InTouchUK.com Ltd.(1)
|
10.11
|
Letter
of Understanding dated July 30, 2001, from Campbeltown Business Ltd. to
the Company.(2)
|
10.12
|
Agreement
dated April 6, 2000, between Adar International, Inc./Mr. Sidney J. Golub
and Swiftnet Limited. (2)
|
10.13
|
Lease
Agreement dated December 4, 1991, between Elmtree Investments Ltd. and
Swiftnet Limited.(2)
|
10.14
|
Lease
Agreement dated October 8, 2001, between Postwick Property Holdings
Limited and Swiftnet Limited. (2)
|
10.15
|
Agreement
dated September 30, 2002, between the Company, Swiftnet Limited., and Nir
Davison.(5)
|
10.16
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Platinum Partners Value Arbitrage Fund LP, Countrywide Partners LLC and
WEC Partners LLC. (6)
|
10.17
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Simon Langbart, Robert Langbart, Arik Ecker, Zwi Ecker, Michael Derman,
Errol Derman, Yuval Haim Sobel, Zvi Sobel, Tenram Investment Ltd.,
Michael Zinn, Michael Weiss. (6)
|
10.18
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Southridge Partners LP and Southshore Capital Fund Ltd.
(6)
|
10.19
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Crestview Capital Master LLC. (6)
|
10.20
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Adam Breslawsky, Oded Levy, Michael Epstein, Steven Frank, Joshua Lobel,
Joshua Kazan and The Oberon Group LLC. (6)
|
10.21
|
Newco
(Auracall Limited) Formation Agreement.(6)
|
10.22
|
Agreement
with ITXC Corporation.(6)
|
10.23
|
Agreement
with Teleglobe International.(6)
|
10.23.1
|
Amendment
to Agreement with Teleglobe International.(6)
|
10.24
|
Agreement
with British Telecommunications.(6)
|
10.25
|
Agreement
with Easyair Limited (OpenAir).(6)
|
10.26
|
Agreement
with Worldnet.(6)
|
10.27
|
Agreement
with Portfolio PR.(6)
|
10.28
|
Agreement
with Stern and Company.(6)
|
10.29
|
Letter
to the Company dated December 31, 2003, from Abraham
Keinan.(6)
|
10.30
|
Agreement
between Swiftnet Limited and Dan Kirschner.(8)
|
10.31
|
Agreement
and Plan of Merger.(7)
|
10.32
|
Escrow
Agreement.(7)
|
10.33
|
Release
Agreement.(7)
|
10.34
|
Employment
Agreement date March 10, 2005, between Xfone USA, Inc. and Wade
Spooner.(7)
|
10.35
|
Employment
Agreement date March 10, 2005, between Xfone USA, Inc. and Ted
Parsons.(7)
|
10.36
|
First
Amendment to Agreement and Plan of Merger (to acquire WS Telecom,
Inc.).(11)
|
10.37
|
Finders
Agreement with The Oberon Group, LLC.(11)
|
10.38
|
Agreement
with The Oberon Group, LLC.(11)
|
10.39
|
Management
Agreement between WS Telecom, Inc. and Xfone USA,
Inc.(8)
|
10.40
|
Engagement
Letter to Tommy R. Ferguson, Confidentiality Agreement, and Executive
Inventions Agreement dated August 19, 2004. (11)
|
10.41
|
Voting
Agreement dated September 28, 2004.(11)
|
10.42
|
Novation
Agreement executed September 27, 2004.(11)
|
10.43
|
Novation
Agreement executed September 28, 2004.(11)
|
10.44
|
Investment
Agreement dated August 26, 2004, with Ilan
Shoshani.(12)
|
10.44.1
|
Addendum
and Clarification to the Investment Agreement with Ilan Shoshani dated
September 13, 2004. (12)
|
10.45
|
Agreement
dated November 16, 2004, with Elite Financial Communications
Group.(13)
|
10.46
|
Financial
Services and Business Development Consulting Agreement dated November 18,
2004, with Dionysos Investments (1999) Ltd. (13)
|
10.47
|
Agreement
and Plan of Merger to acquire I-55 Internet Services, Inc. dated August
18, 2005.(14)
|
10.48
|
Agreement
and Plan of Merger to acquire I-55 Telecommunications, LLC dated August
26, 2005.(15)
|
10.49
|
Securities
Purchase Agreement, dated September 27, 2005, by and between the Company
and Laurus Master Fund, Ltd. (16)
|
10.50
|
Secured
Convertible Term Note, dated September 27, 2005, by the Company in favor
of Laurus Master Fund, Ltd.; Adjustment Provision Waiver Agreement, dated
September 27, 2005, by and between the Company and Laurus Fund, Ltd.
(16)
|
10.51
|
Common
Stock Purchase Warrant, dated September 27, 2005, by the Company in favor
of Laurus Master Fund, Ltd. (16)
|
10.52
|
Registration
Rights Agreement, dated September 27, 2005, by and between the Company and
Laurus Master Fund, Ltd. (16)
|
10.53
|
Master
Security Agreement, dated September 27, 2005, by and between the Company,
Xfone USA, Inc., eXpeTel Communications, Inc., Gulf Coast Utilities, Inc.,
and Laurus Master Fund, Ltd. (16)
|
10.54
|
Stock
Pledge Agreement, dated September 27, 2005, by and between the Company,
Xfone USA, Inc., and Laurus Master Fund, Ltd. (16)
|
10.55
|
Subsidiary
Guarantee dated September 27, 2005, by Xfone USA, Inc., eXpeTel
Communications, Inc. and Gulf Coast Utilities, Inc. in favor of Laurus
Master Fund, Ltd. (16)
|
10.56
|
Funds
Escrow Agreement, dated September 27, 2005, by and between the Company,
Laurus Master Fund, Ltd. and Loeb & Loeb LLP; Disbursement Letter,
dated September 27, 2005. (16)
|
10.57
|
Incremental
Funding Side Letter, dated September 27, 2005, by and between the Company
and Laurus Master Fund, Ltd. (16)
|
10.58
|
Securities
Purchase Agreement dated September 28, 2005, by and between the Company
and Crestview Capital Mater, LLC, Burlingame Equity Investors, LP,
Burlingame Equity Investors II, LP, Burlingame Equity Investors
(Offshore), Ltd., and Mercantile Discount - Provident Funds.
(16)
|
10.59
|
Registration
Rights Agreement, dated September 28, 2005, by and between the Company and
Crestview Capital Mater, LLC, Burlingame Equity Investors, LP, Burlingame
Equity Investors II, LP, Burlingame Equity Investors (Offshore), Ltd., and
Mercantile Discount - Provident Funds. (16)
|
10.60
|
Common
Stock Purchase Warrant, dated September 28, 2005, by the Company in favor
of the Crestview Capital Mater, LLC, Burlingame Equity Investors, LP,
Burlingame Equity Investors II, LP, Burlingame Equity Investors
(Offshore), Ltd., and Mercantile Discount - Provident Funds.
(16)
|
10.61
|
Escrow
Agreement, dated September 28, 2005, by and between the Company, the
Purchasers and Feldman Weinstein LLP. (16)
|
10.62
|
Management
Agreement dated October 11, 2005.(17)
|
10.63
|
First
Amendment to Agreement and Plan of Merger (to acquire I-55 Internet
Services, Inc.), dated October 10, 2005. (17)
|
10.64
|
Letter
Agreement with MCG Capital Corporation dated October 10,
2005.(17)
|
10.65
|
Securities
Purchase Agreement, dated November 23, 2005, between the Company and
Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The
Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd.
(18)
|
10.66
|
Registration
Rights Agreement, dated November 23, 2005, between the Company and
Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The
Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd.
(18)
|
10.67
|
Common
Stock Purchase Warrant, dated November 23, 2005, by the Company in favor
of Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd.,
The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd.
(18)
|
10.68
|
Escrow
Agreement, dated November 23, 2005, between the Company, the Escrow Agent,
and Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd.,
The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd.
(18)
|
10.69
|
Management
Agreement with I-55 Telecommunications, LLC dated October 12,
2005.(19)
|
10.70
|
Agreement
- General Terms and Conditions with EBI Comm, Inc., dated January 1,
2006.(21)
|
10.71
|
Asset
Purchase Agreement with Canufly.net, Inc., dated January 10,
2006.(21)
|
10.72
|
Stock
Purchase Agreement dated May 10, 2006, by and among the Company, Story
Telecom, Inc., Story Telecom Limited, Story Telecom (Ireland) Limited, Nir
Davison, and Trecastle Holdings Limited. (23)
|
10.73
|
Agreement
dated May 25, 2006, by and among the Company and the shareholders of
Equitalk.co.uk Limited. (24)
|
10.74
|
Securities
Purchase Agreement, dated June 19, 2006, by and between the Company and
the Purchasers. (25)
|
10.75
|
Registration
Rights Agreement, dated June 19, 2006, by and between the Company and the
Purchasers. (25)
|
10.76
|
Common
Stock Purchase Warrant, dated June 19, 2006, by the Company in favor of
the Purchasers.(25)
|
10.77
|
Escrow
Agreement, dated June 19, 2006, by and between the Company, the Escrow
Agent, and the Purchasers. (25)
|
10.78
|
Form
of Indemnification Agreement between the Company and its Directors and
Officers.(27)
|
10.79
|
Agreement
to Purchase Promissory Note dated October 31, 2005, with Randall Wade
James Tricou.(27)
|
10.80
|
Agreement
to Purchase Promissory Note dated October 31, 2005, with Rene Tricou -
Tricou Construction. (27)
|
10.81
|
Agreement
to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Bon
Aire Estates. (27)
|
10.82
|
Agreement
to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Bon
Aire Utility. (27)
|
10.83
|
Agreement
to Purchase Promissory Note dated February 3, 2006, with Danny
Acosta.(27)
|
10.84
|
Letter
Agreement dated November 15, 2005, with Oberon Securities,
LLC.(27)
|
10.85
|
Letter
Agreement dated June 15, 2006, with Oberon Securities,
LLC.(27)
|
10.86
|
Second
Amendment to Agreement and Plan of Merger (to acquire WS Telecom, Inc.),
dated June 28, 2006. (27)
|
10.87
|
General
Contract for Services dated January 1, 2005, by and between the Company
and Swiftnet Limited. (27)
|
10.88
|
Service
Agreement dated December 6, 2005, by and between the Company and Elite
Financial Communications Group, LLC. (27)
|
10.89
|
Agreement
for Market Making in Securities dated July 31, 2006, by and between the
Company and Excellence Nessuah Stock Exchange Services Ltd.
(27)
|
10.90
|
Shareholders
Loan Agreement, dated September 27, 2006, by and between Auracall Limited,
Swiftnet Limited, and Dan Kirschner. (28)
|
10.91
|
Service
Agreement, dated November 7, 2006, by and between the Company and
Institutional Marketing Services, Inc. (28)
|
10.92
|
Consultancy
Agreement, dated November 20, 2006, by and between the Company and
Crestview Capital Partners, LLP. (29)
|
10.93
|
Agreement
dated December 24, 2006, by and between the Company, Halman-Aldubi
Provident Funds Ltd., and Halman-Aldubi Pension Funds Ltd. [translation
from Hebrew]. (31)
|
10.94
|
First
Amendment to Financial Services and Business Development Consulting
Agreement dated February 8, 2007, by and between the Company and Dionysos
Investments (1999) Ltd. (33)
|
10.95
|
Agreement
dated February 8, 2007, by and between the Company, Swiftnet Limited,
Campbeltown Business, Ltd., and Mr. Abraham Keinan.
(33)
|
10.96
|
First
Amendment to General Contract for Services, dated March 14, 2007, by and
between the Company and Swiftnet Limited. (34)
|
10.97
|
Employment
Agreement, dated March 28, 2007, between Swiftnet Limited and Abraham
Keinan.(34)
|
10.98
|
Consulting
Agreement, dated March 28, 2007, between the Company and Abraham
Keinan. (34)
|
10.99
|
Employment
Agreement, dated March 28, 2007, between Swiftnet Limited and Guy
Nissenson.(34)
|
10.100
|
Consulting
Agreement, dated March 28, 2007, between the Company and Guy
Nissenson.(34)
|
10.101
|
Settlement
Agreement and Release dated May 31, 2007, by and among Embarq Logistics,
Inc, Xfone USA, Inc. and the Company. (35)
|
10.102
|
Promissory
Note dated May 31, 2007, by Xfone USA, Inc.(35)
|
10.103
|
Parent
Guarantee dated as of May 31, 2007 by the Company in favor of Embarq
Logistics, Inc.(35)
|
10.104
|
Share
Purchase Agreement dated August 15, 2007, by and between Dan Kirschner, as
Seller, Swiftnet Limited, as Buyer, and Xfone, Inc.
(36)
|
10.105
|
Inter-Company
Loan Agreement dated August 15, 2007, by and between Auracall Limited, as
Lender, and Swiftnet Limited, as Borrower. (36)
|
10.106
|
Stock
Purchase Agreement dated August 22, 2007, by and among the Company, NTS
Communications, Inc., and the Shareholders of NTS Communications, Inc.
(37)
|
10.107
|
Letter
of Joint Venture dated June 15, 2007, by and among the Company and NTS
Holdings, Inc.(37)
|
10.107.1
|
Form
of Free Cash Flow Participation Agreement to be Entered into between the
Company and NTS Holdings, Inc. Upon Consummation of the Acquisition.
(37)
|
10.107.2
|
Form
of Employment Agreement to be entered into between NTS Communications,
Inc. and Barbara Baldwin upon Consummation of the Acquisition.
(37)
|
10.107.3
|
Form
of Employment Agreement to be entered into between NTS Communications,
Inc. and Jerry Hoover upon Consummation of the Acquisition.
(37)
|
10.107.4
|
Form
of Employment Agreement to be entered into between NTS Communications,
Inc. and Brad Worthington upon Consummation of the Acquisition.
(37)
|
10.108
|
Employment
Contract signed on August 26, 2007, by and between the Company’s Israeli
based Subsidiary Xfone 018 ltd. and Roni Haliva. (38)
|
10.109
|
Subscription
Agreement for the Purchase of Shares of Common Stock of the Company Dated
October 23, 2007. (39)
|
10.110
|
Subscription
Agreement for the Purchase of Shares of Common Stock of the Company Dated
November 1, 2007. (41)
|
10.111
|
Form
of Subscription Agreement for the Purchase of Units Consisting of Two
Shares of Common Stock and One Common Stock Purchase Warrant.
(42)
|
10.112
|
Form
of Common Stock Purchase Warrant.(42)
|
10.113
|
First
Amendment to Stock Purchase Agreement.(43)
|
10.114.1
|
Employment
agreement dated as of February 26, 2008, by and among NTS
Communications, Inc. and Barbara Baldwin. (44)
|
10.114.2
|
Employment
agreement dated as of February 26, 2008, by and among NTS
Communications, Inc. and Jerry Hoover. (44)
|
10.114.3
|
Employment
agreement dated as of February 26, 2008, by and among NTS
Communications, Inc. and Brad Worthington .(44)
|
10.115
|
Free
cash flow participation agreement dated as of February 26, 2008, by and
among Xfone, Inc. and NTS Holdings, Inc. (44)
|
10.116
|
Escrow
agreement dated as of February 26, 2008, by and among Xfone, Inc., Chris
Chelette, Robert Healea and Kevin Buxkemper the NTS shareholders
representatives, and Trustmark National Bank, as Escrow Agent.
(44)
|
10.117
|
Release,
effective as of February 26, 2008, entered into by each of Barbara
Baldwin, Jerry Hoover and Brad Worthington (44)
|
10.118
|
Noncompetition,
nondisclosure and nonsolicitation agreement dated as of February 26, 2008,
by and among Xfone, Inc., Telephone Electronics Corporation, Joseph D.
Fail, Chris Chelette, Robert Healea, Joey Garner, and Walter Frank.
(44)
|
10.119
|
Second
amendment to stock purchase agreement entered into by each of
February 26, 2008 by and among Xfone, Inc., NTS Communications, Inc. and
Chris Chelette, Robert Healea and Kevin Buxkemper, as the NTS
shareholders representatives. (44)
|
10.120
|
Modification
of Financial Consulting Agreement between Xfone, Inc. and Oberon
Securities, LLC in connection with NTS Communications Transaction.
(45)
|
10.121
|
Fees
Due to Oberon Securities, LLC from Xfone, Inc. in connection with services
provided in conjunction with the acquisition of NTS Communications, Inc.
(45)
|
10.122
|
Agreement
of Principles dated March 17, 2008 by and between Xfone 018 Ltd. and Tiv
Taam Holdings 1 Ltd. [Free Translation from Hebrew].
(46)
|
10.123
|
Compromise
Agreement dated March 25, 2008, between Xfone, Inc., Story Telecom, Inc.,
Story Telecom Limited, Trecastle Holdings Limited and Nir Davison.
(47)
|
10.124
|
Securities
Purchase Agreement dated March 25, 2008, between Xfone, Inc., Trecastle
Holdings Limited and Nir Davison. (47)
|
10.125
|
Third
Amendment to Stock Purchase Agreement entered into as of April 25, 2008 by
and among Chris Chelette, Robert Healea and Kevin Buxkemper, as Sellers’
Representative, NTS Communications, Inc. and Xfone, Inc.
(48)
|
10.126
|
Irrevocable
Option Agreement dated as of July 1, 2008 by and between Abraham
Keinan and Guy Nissenson (49)
|
16.1
|
Letter
dated January 31, 2006 from Chaifetz & Schreiber, P.C. to the
Securities and Exchange Commission. (20)
|
21.1
|
List
of Subsidiaries (Amended as of March 31, 2008) (26)
|
23
|
|
23.1
|
Consent
of Chaifetz & Schreiber, P.C.(30) (22.1)
|
23.2
|
Consent of Gersten Savage LLP - incorporated in
the legal opinion filed as Exhibit 5.
|
23.3
|
Consent
of Postlethwaite & Netterville, APAC dated February 7,
2006.(21.1)
|
23.4
|
Consent
of Postlethwaite & Netterville, APAC dated February 7,
2006.(21.1)
|
23.5
|
|
23.6
|
|
(1)
|
Denotes
previously filed exhibits: filed on August 10, 2001 with Xfone, Inc.’s
SB-2 Registration Statement.
|
|
(2)
|
Denotes
previously filed exhibits: filed on October 16, 2001 with Xfone, Inc.’s
SB-2/Amendment 1 Registration Statement.
|
|
(4)
|
Denotes
previously filed exhibit: filed on December 5, 2002 with Xfone, Inc.’s
Form 8-K.
|
|
(5)
|
Denotes
previously filed exhibit: filed on March 3, 2003 with Xfone, Inc.’s
SB-2/Post Effective Amendment 2 Registration Statement.
|
|
(6)
|
Denotes
previously filed exhibit: filed on April 15, 2004 with Xfone’s, Inc. SB-2
Amendment 1 Registration Statement.
|
|
(7)
|
Denotes
previously filed exhibit: filed on June 1, 2004 with Xfone, Inc.’s Form
8-K.
|
|
(8)
|
Denotes
previously filed exhibit: filed on June 7, 2004 with Xfone, Inc.’s
SB-2/Amendment 2 Registration Statement.
|
|
(9)
|
Denotes
previously filed exhibit: filed on August 11, 2004 with Xfone’s, Inc. SB-2
Amendment 3 Registration Statement.
|
|
(10)
|
Denotes
previously filed exhibit: filed on September 13, 2004 with Xfone’s, Inc.
SB-2 Amendment 4 Registration Statement.
|
|
(11)
|
Denotes
previously filed exhibits: filed on October 4, 2004 with Xfone, Inc.’s
Form 8-K
|
|
(12)
|
Denotes
previously filed exhibits: filed on November 29, 2004 with Xfone, Inc.’s
Form 8-K.
|
|
(13)
|
Denotes
previously filed exhibits; filed on March 31, 2005 with Xfone, Inc.’s Form
10-KSB.
|
|
(14)
|
Denotes
previously filed exhibit: filed on August 22, 2005 with Xfone, Inc.’s Form
8-K.
|
|
(15)
|
Denotes
previously filed exhibit: filed on August 31, 2005 with Xfone, Inc.’s Form
8-K.
|
|
(16)
|
Denotes
previously filed exhibits: filed on October 3, 2005 with Xfone, Inc.’s
Form 8-K.
|
|
(17)
|
Denotes
previously filed exhibits: filed on October 11, 2005 with Xfone, Inc.’s
Form 8-K/A #1.
|
|
(18)
|
Denotes
previously filed exhibits: filed on November 29, 2005 with Xfone, Inc.’s
Form 8-K.
|
|
(19)
|
Denotes
previously filed exhibit: filed on January 23, 2006 with Xfone, Inc.’s
Form 8-K/A #3.
|
|
(20)
|
Denotes
previously filed exhibit: filed on January 31, 2006 with Xfone, Inc.’s
Form 8-K/A #1.
|
|
(21)
|
Denotes
previously filed exhibit: filed on January 31, 2006 with Xfone, Inc.’s
Form 8-K.
|
|
(21.1)
|
Denotes
previously filed exhibits: filed on February 7, 2006 with Xfone, Inc.’s
Form SB-2 Amendment 3.
|
|
(22)
|
Denotes
previously filed exhibit: filed on March 15, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(22.1)
|
Denotes
previously filed exhibit: filed on March 31, 2006 with Xfone, Inc.’s Form
10-KSB.
|
(23)
|
Denotes
previously filed exhibit: filed on May 16, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(24)
|
Denotes
previously filed exhibit: filed on May 30, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(25)
|
Denotes
previously filed exhibits: filed on June 20, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(26)
|
Denotes
previously filed exhibit; filed on April 15, 2008 with Xfone, Inc.’s Form
10-KSB/A.
|
|
(27)
|
Denotes
previously filed exhibits: filed on July 31, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(28)
|
Denotes
previously filed exhibits: filed on November 14, 2006 with Xfone, Inc.’s
Form 10-QSB.
|
|
(29)
|
Denotes
previously filed exhibit: filed on November 22, 2006 with Xfone, Inc.’s
Form 8-K.
|
|
(30)
|
Denotes
previously filed exhibits: filed on November 30, 2006 with Xfone, Inc.’s
Form SB-2.
|
|
(31)
|
Denotes
previously filed exhibit: filed on December 28, 2006 with Xfone, Inc.’s
Form 8-K.
|
|
(32)
|
Denotes
previously filed exhibit: filed on February 5, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(33)
|
Denotes
previously filed exhibits: filed on February 8, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(34)
|
Denotes
previously filed exhibits; filed on March 30, 2007 with Xfone, Inc.’s Form
10-KSB.
|
|
(35)
|
Denotes
previously filed exhibits: filed on May 31, 2007 with Xfone, Inc.’s Form
8-K.
|
|
(36)
|
Denotes
previously filed exhibits: filed on August 15, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(37)
|
Denotes
previously filed exhibits: filed on August 22, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(38)
|
Denotes
previously filed exhibit: filed on August 27, 2007 with Xfone, Inc.’s Form
8-K.
|
|
(39)
|
Denotes
previously filed exhibit: filed on October 23, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(40)
|
Denotes
previously filed exhibit: filed on October 25, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(41)
|
Denotes
previously filed exhibit: filed on November 5, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(42)
|
Denotes
previously filed exhibits: filed on December 14, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(43)
|
Denotes
previously filed exhibit: filed on February 14, 2008 with Xfone, Inc.’s
Form 8-K.
|
|
(44)
|
Denotes
previously filed exhibits: filed on February 26, 2008 with Xfone, Inc.’s
Form 8-K.
|
|
(45)
|
Denotes
previously filed exhibits: filed on March 6, 2008 with Xfone, Inc.’s Form
8-K.
|
|
(46)
|
Denotes
previously filed exhibit: filed on March 17, 2008 with Xfone, Inc.’s Form
8-K.
|
|
(47)
|
Denotes
previously filed exhibits: filed on March 25 with Xfone, Inc.’s Form
8-K.
|
|
(48)
|
Denotes
previously filed exhibit: filed on May 1, 2008 with Xfone,
Inc.‘s Form 8-K.
|
|
(49)
|
Denotes
previously filed exhibit: filed on July 1, 2008 with Xfone,
Inc.‘s Form 8-K.
|
|
(50)
|
Denotes
previously filed exhibit: filed on August 6, 2008 with Xfone,
Inc.‘s Form S-1 Amendment No.1.
|
XFONE,
INC.
|
|||
By:
|
/s/ Guy
Nissenson
|
||
Guy
Nissenson
|
|||
President,
Chief Executive Officer and Director
|
|||
Signature
|
Title
|
Date
|
/s/
Abraham Keinan
|
Chairman
of the Board
|
August 28,
2008
|
Abraham
Keinan
|
||
/s/Guy
Nissenson
|
President,
Chief Executive Officer and Director
|
August 28,
2008
|
Guy
Nissenson
|
||
/s/
Itzhak Almog
|
Director
and Chairman of the Audit Committee and the Nominating
Committee
|
August 28,
2008
|
Itzhak
Almog
|
||
/s/Eyal
J. Harish
|
Director
|
August 28,
2008
|
Eyal
J. Harish
|
||
/s/
Israel Singer
|
Director
and member of the Audit Committee
|
August 28,
2008
|
Israel
Singer
|
||
/s/
Niv Krikov
|
Treasurer,
Chief Financial Officer and Principal Accounting Officer
|
August 28,
2008
|
Niv
Krikov
|
Exhibit
Number
|
Description
|
2.
|
Agreement
and plan of reorganization dated September 20, 2000, between the Company
and Swiftnet Limited. (1)
|
3.1
|
Articles
of Incorporation of the Company.(1)
|
3.2a
|
Bylaws
of the Company.(1)
|
3.2b
|
Amended
Bylaws of the Company.(4)
|
3.3
|
Memorandum
of Association of Swiftnet Limited.(1)
|
3.4
|
Articles
of Association of Swiftnet Limited.(1)
|
3.6
|
Bylaws
of Xfone USA, Inc.(7)
|
3.8.
|
Amended
and Restated Bylaws of the Company dated March 12,
2006.(22)
|
3.9
|
Reamended
and Restated Bylaws of the Company dated February 5,
2007.(32)
|
4.
|
Specimen
Stock Certificate.(1)
|
5.
|
Opinion of Gersten Savage
LLP. (50)
|
10.1
|
Agreement
dated May 11, 2000, between Swiftnet Limited and Guy
Nissenson.(1)
|
10.2
|
Employment
Agreement dated January 1, 2000 with Bosmat Houston.
(1)
|
10.3
|
Loan
Agreement dated August 5, 2000, with Swiftnet Limited, Guy Nissenson, and
Nissim Levy.(1)
|
10.4
|
Promissory
Note dated September 29, 2000, between the Company and Abraham
Keinan.(1)
|
10.5
|
Stock
Purchase Agreement dated June 19, 2000, between Swiftnet Limited, Abraham
Keinan, and Campbeltown Business Ltd. (1)
|
10.6
|
Consulting
Agreement dated May 11, 2000 between Swiftnet Limited and Campbeltown
Business Ltd.(1)
|
10.7
|
Agreement
dated July 30, 2001, with Campbeltown Business Ltd.(1)
|
10.8
|
Contract
dated June 20, 1998, with WorldCom International
Ltd.(1)
|
10.9
|
Contract
dated April 11, 2000, with VoiceNet Inc.(1)
|
10.10
|
Contract
dated April 25, 2000, with InTouchUK.com Ltd.(1)
|
10.11
|
Letter
of Understanding dated July 30, 2001, from Campbeltown Business Ltd. to
the Company.(2)
|
10.12
|
Agreement
dated April 6, 2000, between Adar International, Inc./Mr. Sidney J. Golub
and Swiftnet Limited. (2)
|
10.13
|
Lease
Agreement dated December 4, 1991, between Elmtree Investments Ltd. and
Swiftnet Limited.(2)
|
10.14
|
Lease
Agreement dated October 8, 2001, between Postwick Property Holdings
Limited and Swiftnet Limited. (2)
|
10.15
|
Agreement
dated September 30, 2002, between the Company, Swiftnet Limited., and Nir
Davison.(5)
|
10.16
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Platinum Partners Value Arbitrage Fund LP, Countrywide Partners LLC and
WEC Partners LLC. (6)
|
10.17
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Simon Langbart, Robert Langbart, Arik Ecker, Zwi Ecker, Michael Derman,
Errol Derman, Yuval Haim Sobel, Zvi Sobel, Tenram Investment Ltd.,
Michael Zinn, Michael Weiss. (6)
|
10.18
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Southridge Partners LP and Southshore Capital Fund Ltd.
(6)
|
10.19
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Crestview Capital Master LLC. (6)
|
10.20
|
As
to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant
A, Warrant B and Registration Rights Agreement of Selling Shareholders
Adam Breslawsky, Oded Levy, Michael Epstein, Steven Frank, Joshua Lobel,
Joshua Kazan and The Oberon Group LLC. (6)
|
10.21
|
Newco
(Auracall Limited) Formation Agreement.(6)
|
10.22
|
Agreement
with ITXC Corporation.(6)
|
10.23
|
Agreement
with Teleglobe International.(6)
|
10.23.1
|
Amendment
to Agreement with Teleglobe International.(6)
|
10.24
|
Agreement
with British Telecommunications.(6)
|
10.25
|
Agreement
with Easyair Limited (OpenAir).(6)
|
10.26
|
Agreement
with Worldnet.(6)
|
10.27
|
Agreement
with Portfolio PR.(6)
|
10.28
|
Agreement
with Stern and Company.(6)
|
10.29
|
Letter
to the Company dated December 31, 2003, from Abraham
Keinan.(6)
|
10.30
|
Agreement
between Swiftnet Limited and Dan Kirschner.(8)
|
10.31
|
Agreement
and Plan of Merger.(7)
|
10.32
|
Escrow
Agreement.(7)
|
10.33
|
Release
Agreement.(7)
|
10.34
|
Employment
Agreement date March 10, 2005, between Xfone USA, Inc. and Wade
Spooner.(7)
|
10.35
|
Employment
Agreement date March 10, 2005, between Xfone USA, Inc. and Ted
Parsons.(7)
|
10.36
|
First
Amendment to Agreement and Plan of Merger (to acquire WS Telecom,
Inc.).(11)
|
10.37
|
Finders
Agreement with The Oberon Group, LLC.(11)
|
10.38
|
Agreement
with The Oberon Group, LLC.(11)
|
10.39
|
Management
Agreement between WS Telecom, Inc. and Xfone USA,
Inc.(8)
|
10.40
|
Engagement
Letter to Tommy R. Ferguson, Confidentiality Agreement, and Executive
Inventions Agreement dated August 19, 2004. (11)
|
10.41
|
Voting
Agreement dated September 28, 2004.(11)
|
10.42
|
Novation
Agreement executed September 27, 2004.(11)
|
10.43
|
Novation
Agreement executed September 28, 2004.(11)
|
10.44
|
Investment
Agreement dated August 26, 2004, with Ilan
Shoshani.(12)
|
10.44.1
|
Addendum
and Clarification to the Investment Agreement with Ilan Shoshani dated
September 13, 2004. (12)
|
10.45
|
Agreement
dated November 16, 2004, with Elite Financial Communications
Group.(13)
|
10.46
|
Financial
Services and Business Development Consulting Agreement dated November 18,
2004, with Dionysos Investments (1999) Ltd. (13)
|
10.47
|
Agreement
and Plan of Merger to acquire I-55 Internet Services, Inc. dated August
18, 2005.(14)
|
10.48
|
Agreement
and Plan of Merger to acquire I-55 Telecommunications, LLC dated August
26, 2005.(15)
|
10.49
|
Securities
Purchase Agreement, dated September 27, 2005, by and between the Company
and Laurus Master Fund, Ltd. (16)
|
10.50
|
Secured
Convertible Term Note, dated September 27, 2005, by the Company in favor
of Laurus Master Fund, Ltd.; Adjustment Provision Waiver Agreement, dated
September 27, 2005, by and between the Company and Laurus Fund, Ltd.
(16)
|
10.51
|
Common
Stock Purchase Warrant, dated September 27, 2005, by the Company in favor
of Laurus Master Fund, Ltd. (16)
|
10.52
|
Registration
Rights Agreement, dated September 27, 2005, by and between the Company and
Laurus Master Fund, Ltd. (16)
|
10.53
|
Master
Security Agreement, dated September 27, 2005, by and between the Company,
Xfone USA, Inc., eXpeTel Communications, Inc., Gulf Coast Utilities, Inc.,
and Laurus Master Fund, Ltd. (16)
|
10.54
|
Stock
Pledge Agreement, dated September 27, 2005, by and between the Company,
Xfone USA, Inc., and Laurus Master Fund, Ltd. (16)
|
10.55
|
Subsidiary
Guarantee dated September 27, 2005, by Xfone USA, Inc., eXpeTel
Communications, Inc. and Gulf Coast Utilities, Inc. in favor of Laurus
Master Fund, Ltd. (16)
|
10.56
|
Funds
Escrow Agreement, dated September 27, 2005, by and between the Company,
Laurus Master Fund, Ltd. and Loeb & Loeb LLP; Disbursement Letter,
dated September 27, 2005. (16)
|
10.57
|
Incremental
Funding Side Letter, dated September 27, 2005, by and between the Company
and Laurus Master Fund, Ltd. (16)
|
10.58
|
Securities
Purchase Agreement dated September 28, 2005, by and between the Company
and Crestview Capital Mater, LLC, Burlingame Equity Investors, LP,
Burlingame Equity Investors II, LP, Burlingame Equity Investors
(Offshore), Ltd., and Mercantile Discount - Provident Funds.
(16)
|
10.59
|
Registration
Rights Agreement, dated September 28, 2005, by and between the Company and
Crestview Capital Mater, LLC, Burlingame Equity Investors, LP, Burlingame
Equity Investors II, LP, Burlingame Equity Investors (Offshore), Ltd., and
Mercantile Discount - Provident Funds. (16)
|
10.60
|
Common
Stock Purchase Warrant, dated September 28, 2005, by the Company in favor
of the Crestview Capital Mater, LLC, Burlingame Equity Investors, LP,
Burlingame Equity Investors II, LP, Burlingame Equity Investors
(Offshore), Ltd., and Mercantile Discount - Provident Funds.
(16)
|
10.61
|
Escrow
Agreement, dated September 28, 2005, by and between the Company, the
Purchasers and Feldman Weinstein LLP. (16)
|
10.62
|
Management
Agreement dated October 11, 2005.(17)
|
10.63
|
First
Amendment to Agreement and Plan of Merger (to acquire I-55 Internet
Services, Inc.), dated October 10, 2005. (17)
|
10.64
|
Letter
Agreement with MCG Capital Corporation dated October 10,
2005.(17)
|
10.65
|
Securities
Purchase Agreement, dated November 23, 2005, between the Company and
Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The
Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd.
(18)
|
10.66
|
Registration
Rights Agreement, dated November 23, 2005, between the Company and
Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The
Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd.
(18)
|
10.67
|
Common
Stock Purchase Warrant, dated November 23, 2005, by the Company in favor
of Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd.,
The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd.
(18)
|
10.68
|
Escrow
Agreement, dated November 23, 2005, between the Company, the Escrow Agent,
and Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd.,
The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd.
(18)
|
10.69
|
Management
Agreement with I-55 Telecommunications, LLC dated October 12,
2005.(19)
|
10.70
|
Agreement
- General Terms and Conditions with EBI Comm, Inc., dated January 1,
2006.(21)
|
10.71
|
Asset
Purchase Agreement with Canufly.net, Inc., dated January 10,
2006.(21)
|
10.72
|
Stock
Purchase Agreement dated May 10, 2006, by and among the Company, Story
Telecom, Inc., Story Telecom Limited, Story Telecom (Ireland) Limited, Nir
Davison, and Trecastle Holdings Limited. (23)
|
10.73
|
Agreement
dated May 25, 2006, by and among the Company and the shareholders of
Equitalk.co.uk Limited. (24)
|
10.74
|
Securities
Purchase Agreement, dated June 19, 2006, by and between the Company and
the Purchasers. (25)
|
10.75
|
Registration
Rights Agreement, dated June 19, 2006, by and between the Company and the
Purchasers. (25)
|
10.76
|
Common
Stock Purchase Warrant, dated June 19, 2006, by the Company in favor of
the Purchasers.(25)
|
10.77
|
Escrow
Agreement, dated June 19, 2006, by and between the Company, the Escrow
Agent, and the Purchasers. (25)
|
10.78
|
Form
of Indemnification Agreement between the Company and its Directors and
Officers.(27)
|
10.79
|
Agreement
to Purchase Promissory Note dated October 31, 2005, with Randall Wade
James Tricou.(27)
|
10.80
|
Agreement
to Purchase Promissory Note dated October 31, 2005, with Rene Tricou -
Tricou Construction. (27)
|
10.81
|
Agreement
to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Bon
Aire Estates. (27)
|
10.82
|
Agreement
to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Bon
Aire Utility. (27)
|
10.83
|
Agreement
to Purchase Promissory Note dated February 3, 2006, with Danny
Acosta.(27)
|
10.84
|
Letter
Agreement dated November 15, 2005, with Oberon Securities,
LLC.(27)
|
10.85
|
Letter
Agreement dated June 15, 2006, with Oberon Securities,
LLC.(27)
|
10.86
|
Second
Amendment to Agreement and Plan of Merger (to acquire WS Telecom, Inc.),
dated June 28, 2006. (27)
|
10.87
|
General
Contract for Services dated January 1, 2005, by and between the Company
and Swiftnet Limited. (27)
|
10.88
|
Service
Agreement dated December 6, 2005, by and between the Company and Elite
Financial Communications Group, LLC. (27)
|
10.89
|
Agreement
for Market Making in Securities dated July 31, 2006, by and between the
Company and Excellence Nessuah Stock Exchange Services Ltd.
(27)
|
10.90
|
Shareholders
Loan Agreement, dated September 27, 2006, by and between Auracall Limited,
Swiftnet Limited, and Dan Kirschner. (28)
|
10.91
|
Service
Agreement, dated November 7, 2006, by and between the Company and
Institutional Marketing Services, Inc. (28)
|
10.92
|
Consultancy
Agreement, dated November 20, 2006, by and between the Company and
Crestview Capital Partners, LLP. (29)
|
10.93
|
Agreement
dated December 24, 2006, by and between the Company, Halman-Aldubi
Provident Funds Ltd., and Halman-Aldubi Pension Funds Ltd. [translation
from Hebrew]. (31)
|
10.94
|
First
Amendment to Financial Services and Business Development Consulting
Agreement dated February 8, 2007, by and between the Company and Dionysos
Investments (1999) Ltd. (33)
|
10.95
|
Agreement
dated February 8, 2007, by and between the Company, Swiftnet Limited,
Campbeltown Business, Ltd., and Mr. Abraham Keinan.
(33)
|
10.96
|
First
Amendment to General Contract for Services, dated March 14, 2007, by and
between the Company and Swiftnet Limited. (34)
|
10.97
|
Employment
Agreement, dated March 28, 2007, between Swiftnet Limited and Abraham
Keinan.(34)
|
10.98
|
Consulting
Agreement, dated March 28, 2007, between the Company and Abraham
Keinan. (34)
|
10.99
|
Employment
Agreement, dated March 28, 2007, between Swiftnet Limited and Guy
Nissenson.(34)
|
10.100
|
Consulting
Agreement, dated March 28, 2007, between the Company and Guy
Nissenson.(34)
|
10.101
|
Settlement
Agreement and Release dated May 31, 2007, by and among Embarq Logistics,
Inc, Xfone USA, Inc. and the Company. (35)
|
10.102
|
Promissory
Note dated May 31, 2007, by Xfone USA, Inc.(35)
|
10.103
|
Parent
Guarantee dated as of May 31, 2007 by the Company in favor of Embarq
Logistics, Inc.(35)
|
10.104
|
Share
Purchase Agreement dated August 15, 2007, by and between Dan Kirschner, as
Seller, Swiftnet Limited, as Buyer, and Xfone, Inc.
(36)
|
10.105
|
Inter-Company
Loan Agreement dated August 15, 2007, by and between Auracall Limited, as
Lender, and Swiftnet Limited, as Borrower. (36)
|
10.106
|
Stock
Purchase Agreement dated August 22, 2007, by and among the Company, NTS
Communications, Inc., and the Shareholders of NTS Communications, Inc.
(37)
|
10.107
|
Letter
of Joint Venture dated June 15, 2007, by and among the Company and NTS
Holdings, Inc.(37)
|
10.107.1
|
Form
of Free Cash Flow Participation Agreement to be Entered into between the
Company and NTS Holdings, Inc. Upon Consummation of the Acquisition.
(37)
|
10.107.2
|
Form
of Employment Agreement to be entered into between NTS Communications,
Inc. and Barbara Baldwin upon Consummation of the Acquisition.
(37)
|
10.107.3
|
Form
of Employment Agreement to be entered into between NTS Communications,
Inc. and Jerry Hoover upon Consummation of the Acquisition.
(37)
|
10.107.4
|
Form
of Employment Agreement to be entered into between NTS Communications,
Inc. and Brad Worthington upon Consummation of the Acquisition.
(37)
|
10.108
|
Employment
Contract signed on August 26, 2007, by and between the Company’s Israeli
based Subsidiary Xfone 018 ltd. and Roni Haliva. (38)
|
10.109
|
Subscription
Agreement for the Purchase of Shares of Common Stock of the Company Dated
October 23, 2007. (39)
|
10.110
|
Subscription
Agreement for the Purchase of Shares of Common Stock of the Company Dated
November 1, 2007. (41)
|
10.111
|
Form
of Subscription Agreement for the Purchase of Units Consisting of Two
Shares of Common Stock and One Common Stock Purchase Warrant.
(42)
|
10.112
|
Form
of Common Stock Purchase Warrant.(42)
|
10.113
|
First
Amendment to Stock Purchase Agreement.(43)
|
10.114.1
|
Employment
agreement dated as of February 26, 2008, by and among NTS
Communications, Inc. and Barbara Baldwin. (44)
|
10.114.2
|
Employment
agreement dated as of February 26, 2008, by and among NTS
Communications, Inc. and Jerry Hoover. (44)
|
10.114.3
|
Employment
agreement dated as of February 26, 2008, by and among NTS
Communications, Inc. and Brad Worthington .(44)
|
10.115
|
Free
cash flow participation agreement dated as of February 26, 2008, by and
among Xfone, Inc. and NTS Holdings, Inc. (44)
|
10.116
|
Escrow
agreement dated as of February 26, 2008, by and among Xfone, Inc., Chris
Chelette, Robert Healea and Kevin Buxkemper the NTS shareholders
representatives, and Trustmark National Bank, as Escrow Agent.
(44)
|
10.117
|
Release,
effective as of February 26, 2008, entered into by each of Barbara
Baldwin, Jerry Hoover and Brad Worthington (44)
|
10.118
|
Noncompetition,
nondisclosure and nonsolicitation agreement dated as of February 26, 2008,
by and among Xfone, Inc., Telephone Electronics Corporation, Joseph D.
Fail, Chris Chelette, Robert Healea, Joey Garner, and Walter Frank.
(44)
|
10.119
|
Second
amendment to stock purchase agreement entered into by each of
February 26, 2008 by and among Xfone, Inc., NTS Communications, Inc. and
Chris Chelette, Robert Healea and Kevin Buxkemper, as the NTS
shareholders representatives. (44)
|
10.120
|
Modification
of Financial Consulting Agreement between Xfone, Inc. and Oberon
Securities, LLC in connection with NTS Communications Transaction.
(45)
|
10.121
|
Fees
Due to Oberon Securities, LLC from Xfone, Inc. in connection with services
provided in conjunction with the acquisition of NTS Communications, Inc.
(45)
|
10.122
|
Agreement
of Principles dated March 17, 2008 by and between Xfone 018 Ltd. and Tiv
Taam Holdings 1 Ltd. [Free Translation from Hebrew].
(46)
|
10.123
|
Compromise
Agreement dated March 25, 2008, between Xfone, Inc., Story Telecom, Inc.,
Story Telecom Limited, Trecastle Holdings Limited and Nir Davison.
(47)
|
10.124
|
Securities
Purchase Agreement dated March 25, 2008, between Xfone, Inc., Trecastle
Holdings Limited and Nir Davison. (47)
|
10.125
|
Third
Amendment to Stock Purchase Agreement entered into as of April 25, 2008 by
and among Chris Chelette, Robert Healea and Kevin Buxkemper, as Sellers’
Representative, NTS Communications, Inc. and Xfone, Inc.
(48)
|
10.126
|
Irrevocable
Option Agreement dated as of July 1, 2008 by and between Abraham
Keinan and Guy Nissenson (49)
|
16.1
|
Letter
dated January 31, 2006 from Chaifetz & Schreiber, P.C. to the
Securities and Exchange Commission. (20)
|
21.1
|
List
of Subsidiaries (Amended as of March 31, 2008) (26)
|
23
|
|
23.1
|
Consent
of Chaifetz & Schreiber, P.C.(30) (22.1)
|
23.2
|
Consent of Gersten Savage LLP - incorporated in
the legal opinion filed as Exhibit 5.
|
23.3
|
Consent
of Postlethwaite & Netterville, APAC dated February 7,
2006.(21.1)
|
23.4
|
Consent
of Postlethwaite & Netterville, APAC dated February 7,
2006.(21.1)
|
23.5
|
|
23.6
|
(1)
|
Denotes
previously filed exhibits: filed on August 10, 2001 with Xfone, Inc.’s
SB-2 Registration Statement.
|
|
(2)
|
Denotes
previously filed exhibits: filed on October 16, 2001 with Xfone, Inc.’s
SB-2/Amendment 1 Registration Statement.
|
|
(4)
|
Denotes
previously filed exhibit: filed on December 5, 2002 with Xfone, Inc.’s
Form 8-K.
|
|
(5)
|
Denotes
previously filed exhibit: filed on March 3, 2003 with Xfone, Inc.’s
SB-2/Post Effective Amendment 2 Registration Statement.
|
|
(6)
|
Denotes
previously filed exhibit: filed on April 15, 2004 with Xfone’s, Inc. SB-2
Amendment 1 Registration Statement.
|
|
(7)
|
Denotes
previously filed exhibit: filed on June 1, 2004 with Xfone, Inc.’s Form
8-K.
|
|
(8)
|
Denotes
previously filed exhibit: filed on June 7, 2004 with Xfone, Inc.’s
SB-2/Amendment 2 Registration Statement.
|
|
(9)
|
Denotes
previously filed exhibit: filed on August 11, 2004 with Xfone’s, Inc. SB-2
Amendment 3 Registration Statement.
|
|
(10)
|
Denotes
previously filed exhibit: filed on September 13, 2004 with Xfone’s, Inc.
SB-2 Amendment 4 Registration Statement.
|
|
(11)
|
Denotes
previously filed exhibits: filed on October 4, 2004 with Xfone, Inc.’s
Form 8-K
|
|
(12)
|
Denotes
previously filed exhibits: filed on November 29, 2004 with Xfone, Inc.’s
Form 8-K.
|
|
(13)
|
Denotes
previously filed exhibits; filed on March 31, 2005 with Xfone, Inc.’s Form
10-KSB.
|
|
(14)
|
Denotes
previously filed exhibit: filed on August 22, 2005 with Xfone, Inc.’s Form
8-K.
|
|
(15)
|
Denotes
previously filed exhibit: filed on August 31, 2005 with Xfone, Inc.’s Form
8-K.
|
|
(16)
|
Denotes
previously filed exhibits: filed on October 3, 2005 with Xfone, Inc.’s
Form 8-K.
|
|
(17)
|
Denotes
previously filed exhibits: filed on October 11, 2005 with Xfone, Inc.’s
Form 8-K/A #1.
|
|
(18)
|
Denotes
previously filed exhibits: filed on November 29, 2005 with Xfone, Inc.’s
Form 8-K.
|
|
(19)
|
Denotes
previously filed exhibit: filed on January 23, 2006 with Xfone, Inc.’s
Form 8-K/A #3.
|
|
(20)
|
Denotes
previously filed exhibit: filed on January 31, 2006 with Xfone, Inc.’s
Form 8-K/A #1.
|
|
(21)
|
Denotes
previously filed exhibit: filed on January 31, 2006 with Xfone, Inc.’s
Form 8-K.
|
|
(21.1)
|
Denotes
previously filed exhibits: filed on February 7, 2006 with Xfone, Inc.’s
Form SB-2 Amendment 3.
|
|
(22)
|
Denotes
previously filed exhibit: filed on March 15, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(22.1)
|
Denotes
previously filed exhibit: filed on March 31, 2006 with Xfone, Inc.’s Form
10-KSB.
|
(23)
|
Denotes
previously filed exhibit: filed on May 16, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(24)
|
Denotes
previously filed exhibit: filed on May 30, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(25)
|
Denotes
previously filed exhibits: filed on June 20, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(26)
|
Denotes
previously filed exhibit; filed on April 15, 2008 with Xfone, Inc.’s Form
10-KSB/A.
|
|
(27)
|
Denotes
previously filed exhibits: filed on July 31, 2006 with Xfone, Inc.’s Form
8-K.
|
|
(28)
|
Denotes
previously filed exhibits: filed on November 14, 2006 with Xfone, Inc.’s
Form 10-QSB.
|
|
(29)
|
Denotes
previously filed exhibit: filed on November 22, 2006 with Xfone, Inc.’s
Form 8-K.
|
|
(30)
|
Denotes
previously filed exhibits: filed on November 30, 2006 with Xfone, Inc.’s
Form SB-2.
|
|
(31)
|
Denotes
previously filed exhibit: filed on December 28, 2006 with Xfone, Inc.’s
Form 8-K.
|
|
(32)
|
Denotes
previously filed exhibit: filed on February 5, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(33)
|
Denotes
previously filed exhibits: filed on February 8, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(34)
|
Denotes
previously filed exhibits; filed on March 30, 2007 with Xfone, Inc.’s Form
10-KSB.
|
|
(35)
|
Denotes
previously filed exhibits: filed on May 31, 2007 with Xfone, Inc.’s Form
8-K.
|
|
(36)
|
Denotes
previously filed exhibits: filed on August 15, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(37)
|
Denotes
previously filed exhibits: filed on August 22, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(38)
|
Denotes
previously filed exhibit: filed on August 27, 2007 with Xfone, Inc.’s Form
8-K.
|
|
(39)
|
Denotes
previously filed exhibit: filed on October 23, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(40)
|
Denotes
previously filed exhibit: filed on October 25, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(41)
|
Denotes
previously filed exhibit: filed on November 5, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(42)
|
Denotes
previously filed exhibits: filed on December 14, 2007 with Xfone, Inc.’s
Form 8-K.
|
|
(43)
|
Denotes
previously filed exhibit: filed on February 14, 2008 with Xfone, Inc.’s
Form 8-K.
|
|
(44)
|
Denotes
previously filed exhibits: filed on February 26, 2008 with Xfone, Inc.’s
Form 8-K.
|
|
(45)
|
Denotes
previously filed exhibits: filed on March 6, 2008 with Xfone, Inc.’s Form
8-K.
|
|
(46)
|
Denotes
previously filed exhibit: filed on March 17, 2008 with Xfone, Inc.’s Form
8-K.
|
|
(47)
|
Denotes
previously filed exhibits: filed on March 25 with Xfone, Inc.’s Form
8-K.
|
|
(48)
|
Denotes
previously filed exhibit: filed on May 1, 2008 with Xfone,
Inc.‘s Form 8-K.
|
|
(49)
|
Denotes
previously filed exhibit: filed on July 1, 2008 with Xfone,
Inc.‘s Form 8-K.
|
|
(50)
|
Denotes
previously filed exhibit: filed on August 6, 2008 with Xfone,
Inc.‘s Form S-1 Amendment No.1.
|