NTS, INC. - FORM 8-K - EX-99.1 - July 29, 2010

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Xfone, Inc.
Unaudited Pro Forma Consolidated Financial Statements of Xfone, Inc.


The unaudited pro forma condensed combined financial information reflecting the divestiture of Swiftnet Limited, Auracall Limited, Equitalk.co.uk Limited, Story Telecom, Inc. and Story Telecom Limited (collectively,  the "Xfone UK"). is provided for informational purposes only. The pro forma information is not necessarily indicative of what the companies’ results of operations actually would have been had the divestiture been completed at the dates indicated, and it is not necessarily indicative of Xfone’s future results of operations.

The amounts of proceeds in the unaudited pro forma financial statements are based on management’s preliminary valuation estimates. Accordingly, the capital loss in the pro forma adjustments included in the unaudited financial statements are preliminary and have been made for the purpose of providing unaudited pro forma condensed combined financial information and are subject to revision based on a final determination of fair value. In the opinion of the management of the Company, all adjustments have been made that are necessary to present fairly the pro forma data.

The unaudited pro forma consolidated balance sheet reflects the disposition of Xfone UK from the consolidated balance sheet of Xfone and its subsidiaries.

This information should be read in conjunction with Xfone’s audited consolidated financial statements and the related notes filed as part of its Annual Reports on Form 10-K for the fiscal years ended December 31, 2009and its unaudited consolidated financial statements and related notes filed as part of its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010, each of which are attached hereto as Appendix D.

 
 
 
 

Xfone, Inc. and Subsidiaries
UNAUDITTED PRO FORMA BALANCE SHEETS
March 31, 2010
             
                     
   
Xfone, Inc.
    
Pro forma adjustments
        
Pro form Consolidated
CURRENT ASSETS:
                    
Cash
$
7,000,436
  
$
-
      
$
7,000,436
Account receivables, net
  
2,414,936
    
-
        
2,414,936
Prepaid expenses and other receivables
  
2,254,330
    
1,858,325
  
(1a)
 
  
4,112,655
Deferred taxes
  
413,691
    
-
        
413,691
Inventory
  
197,498
    
-
        
197,498
Total current assets
  
12,280,891
    
1,858,325
        
14,139,216
                     
BONDS ISSUANCE COSTS, NET
  
1,650,108
    
-
        
1,650,108
                     
OTHER LONG-TERM ASSETS
  
1,222,680
    
-
        
1,222,680
                     
FIXED ASSETS, NET
  
53,557,590
    
-
        
53,557,590
                     
OTHER ASSETS, NET
  
1,723,942
    
-
        
1,723,942
                     
ASSETS OF DISCONTINUED OPERATIONS IN THE UNITED KINGDOM
  
8,475,755
    
(8,475,755
)
(2)
 
  
-
                     
ASSETS OF DISCONTINUED OPERATIONS IN ISRAEL
  
4,266,937
    
-
        
4,266,937
                     
Total Assets
$
83,177,903
  
$
(6,617,430
)
    
$
76,560,473
                     
CURRENT LIABILITIES
                    
Short- term bank credit and current portion of notes payables
$
6,626,959
  
$
(226,604
)
(1b)
 
$
6,400,355
Trade Payables
  
7,920,835
    
-
        
7,920,835
Other liabilities and accrued income
  
3,459,025
    
-
        
3,459,025
Current maturities of obligations under capital leases
  
225,737
    
-
        
225,737
Current maturities of bonds
  
4,072,855
    
-
        
4,072,855
                     
Total current liabilities
  
22,305,411
    
(226,604
)
      
22,078,807
                     
DEFFERED TAXES
  
3,202,055
    
-
        
3,202,055
                     
NOTES PAYABLE FROM THE UNITED STATES DEPARTMENT OF AGRICULTURE, NET OF CURRENT MATURITIES
  
5,208,981
    
-
        
5,208,981
                     
NOTES PAYABLE, NET OF CURRENT MATURITIES
  
2,639,240
    
-
        
2,639,240
                     
BONDS PAYABLES, NET OF CURRENT MATURITIES
  
17,690,919
    
-
        
17,690,919
                     
OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT MATURITIES
  
198,421
    
-
        
198,421
                     
OTHER LONG-TERM LIABILITIES
  
277,405
    
-
        
277,405
                     
SEVERANCE PAY
  
54,253
    
-
        
54,253
                     
LIABILITIES OF DISCONTINUED OPERATIONS IN THE UNITED KINGDOM
  
3,923,779
    
(3,923,779
)
(3), (1c)
 
  
-
                     
LIABILITIES OF DISCONTINUED OPERATIONS IN ISRAEL
  
3,207,571
    
-
        
3,207,571
                     
Total liabilities
  
58,708,035
    
(4,150,383
)
      
54,557,652
                     
TOTAL SHAREHOLDERS' EQUITY
  
24,137,064
    
(2,467,047
)
(4)
 
  
21,670,017
                     
NON-CONTROLLING INTEREST
  
332,804
    
-
        
332,804
                     
TOTAL EQUITY
  
24,469,868
    
(2,467,047
)
      
22,002,821
                     
Total liabilities and shareholders' equity
$
83,177,903
  
$
(6,617,430
)
    
$
76,560,473
 
 
 
 
 
(1).
Represents proceeds from the divestiture of the Xfone UK. Pursuant to the agreement to divest Xfone UK, the consideration to be paid by Buyer and/or Keinan to Xfone shall be comprised of the following three components:
 
a.  
An annual earn-out payment over the following years beginning on the consummation of the Transaction. The aggregate Earn-Out Payments shall be equal to but shall not exceed $1,858,325 in the aggregate;
 
b.  
A release of the Company from its obligation to Bank Leumi (UK) Plc. for of £150,000 ($226,604), thereby releasing the Company from its obligation to Bank Leumi (UK) Plc.; and
 
c.  
A release of the Company from the repayment of the loan from Iddo Keinan, the son of Mr. Keinan and an employee of Swiftnet dated December 10, 2009, pursuant to which Iddo Keinan extended to Swiftnet a loan of £860,044 ($1,229,263).
 
(2).
Amount represents:
 
a.  
Consolidate assets of Xfone UK in total amount of $4,279,766 which were classified as "Assets of discontinued operations in the United Kingdom" in Xfone, Inc.'s Condensed Consolidated Balance Sheet.
 
b.  
Intangible assets of $4,195,989 resulted from certain acquisition of entities in Xfone UK.
 
(3).
Amount represents consolidate liabilities of Xfone UK in total amount of $2,694,516 which were classified as "Liabilities of discontinued operations in the United Kingdom" in Xfone, Inc.'s Condensed Consolidated Balance Sheet. This amount does not include a note from related party for amount of $1,229,263 which is accounted for under the proceeds from the divestiture of Xfone UM (see 1c above).
 
(4).
Net proforma loss as of March 31, 2010 from the divestiture of Xfone UK does not take into consideration overhead savings such as retirement of Xfone, Inc. from any severance liability and monthly fees for Mr. Keinan.
 
 
 
 

Xfone, Inc. and Subsidiaries
UNAUDITTED PRO FORMA STATEMENTS OF OPERATIONS
 
YEAR ENDED DECEMBER 31, 2009

   
Xfone Inc
  
Xfone UK diverstiture
      
Pro forma
Consolidated
  
                       
Revenues
  
$
85,029,883
  
(3,307,509
)
    
$
81,722,374
  
Cost of Revenues
    
45,067,148
  
(1,354,586
)
      
43,712,562
  
Non-recurring loss
    
506,176
  
-
        
506,176
  
                       
Gross profit
    
39,456,559
  
(1,952,923
)
      
37,503,636
  
                       
Operating expenses:
                      
Research and development
    
53,754
  
(53,754
)
      
-
  
Marketing and selling
    
10,465,908
  
(1,137,067
)
      
9,328,841
  
General and administrative
    
25,238,174
  
(846,231
)
(1)
    
24,391,943
  
Non recurring loss
    
21,441,485
  
-
        
21,441,485
  
                       
                       
Total operating expenses
    
57,199,321
  
(2,037,052
)
      
55,162,269
  
                       
Operating profit (loss)
    
(17,742,762
)
84,129
        
(17,658,633
)
                       
Financing income (expenses), net
    
(4,110,043
)
50,185
        
(4,059,858
)
                       
Other expenses
    
(475,531
)
-
        
(475,531
)
                       
Income (loss) before taxes
    
(22,328,336
)
134,314
        
(22,194,022
)
                       
Tax benefits
    
169,774
  
-
        
169,774
  
                       
Net Income (loss)
    
(22,158,562
)
134,314
        
(22,024,248
)
                       
Less: Net (income) attributed to non-controlling interest
    
(20,870
) 
-
        
(20,870
) 
                       
Net income (loss) attributed to shareholders
  
$
(22,179,432
) 
134,314
      
$
(22,045,118
) 
                       
                       
Basic and diluted earning per share
  
$
(1.207
) 
        
$
(1.200
) 
                       
Weighted average number of shares used for computing basic and diluted earning per share
    
18,376,075
            
18,376,075
  
                       
 
(1)           Amount includes the saving of fees paid to Mr Keinan during the year ended December 31, 2009 for a total amount of $301,204.
 

 
 
 
 
   
Xfone, Inc. and Subsidiaries
UNAUDITTED PRO FORMA STATEMENTS OF OPERATIONS
 
THREE MONTHS ENDED MARCH 31, 2010

   
Xfone Inc
  
Xfone UK diverstiture
      
Pro forma
Consolidated
  
                       
                       
Revenues
  
$
14,557,438
  
-
      
$
14,557,438
  
Cost of Revenues
    
7,704,165
  
-
        
7,704,165
  
                       
Gross profit
    
6,853,273
  
-
        
6,853,273
  
                       
Operating expenses:
                      
Marketing and selling
    
1,107,892
  
-
        
1,107,892
  
General and administrative
    
5,432,000
  
(74,982
)
(1)
    
5,357,018
  
                       
                       
Total operating expenses
    
6,539,892
  
(74,982
)
      
6,464,910
  
                       
Operating profit
    
313,381
  
74,982
        
388,363
  
                       
Financing expenses, net
    
(1,094,726
)
-
        
(1,094,726
)
                       
Other expenses
    
(145,245
)
-
        
(145,245
)
                       
Loss before taxes
    
(926,590
)
74,982
        
(851,608
)
                       
Tax benefits
    
322,229
  
-
        
322,229
  
                       
Net loss from continued operations
    
(604,361
)
74,982
        
(529,379
)
                       
Income (loss) from discontinued operations in the United Kingdom and Israel, before taxes
    
(259,663
)
428,936
  
(2)
    
169,273
  
                       
Income tax expense on discontinued operations in the United Kingdom and Israel
    
(93,094
) 
-
        
(93,094
) 
                       
Net loss
    
(957,118
)
503,918
        
(453,200
)
                       
Less: Net income attributed to non-controlling interest
    
(97,139
) 
-
        
(97,139
) 
                       
Net income (loss) attributed to shareholders
  
$
(1,054,257
) 
503,918
      
$
(550,339
) 
                       
Basic and diluted loss per share:
                      
Income (loss) from continued operations
    
(0.032
) 
          
(0.028
) 
Income from discontinued operations
    
(0.024
) 
          
(0.002
) 
Basic and diluted
  
$
(0.056
) 
        
$
(0.030
) 
                       
Weighted average number of shares used for computing basic and diluted earning per share
    
18,613,772
            
18,613,772
  
                       
 
(1)  
Amount includes the saving of fees paid to Mr Keinan during the three months ended March 31, 2010 for a total amount of $74,982.
 
(2)  
Amount represents the net results of Xfone UK for the three months ended March 31, 2010 which were classified as discontinued operations.
 
 
 
 

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