VALUATION

Anticipating the growth in the market, valuations for focused IP communications companies have been established at above market and forward looking levels as evidenced in both the public and private market. The Enterprise Value of 8x8 (NASDAQ: EGHT) was recently 2.99x revenue and 26.99x EBITDA. In recent M&A transactions, one of the leading providers of cloud-based telephony, M5 Networks was acquired by Shoretel, a traditional facilities-based telephony provider, for 3.3x revenue and 45.7x EBITDA.

Another provider of cloud-based telephony, Smoothstone IP Communications, was acquired by West Communications for 3.1x revenue and 38x EBITDA. The Company believes that should such forward looking valuation levels be accorded to Fusion, the Company may gain the ability to leverage its high valuation in acquiring smaller companies at significantly lower valuations and to arbitrage the difference between its own valuation and that of the acquired company.