Explanatory Note
On November 2, 2012, Fusion Telecommunications International, Inc. filed a Current Report on Form 8-K to disclose the acquisition of all of the
issued and outstanding membership interests of Network Billing Systems, LLC (“NBS”) and substantially all of the assets of NBS’ affiliate,
Interconnect Services Group II LLC (“ISG”), and thereby acquired the business operated by NBS and ISG (the “Acquired Business”). This report
is being amended to provide the information required by Item 9.01(a) and Item 9.01(b).
Acquisition of Network Billing Systems, LLC and Related Transactions
On October 29, 2012, Fusion Telecommunications International, Inc. (“Fusion”) and its wholly owned subsidiary, Fusion NBS Acquisition
Corp. (“FNAC”, and collectively, the "Company"), completed the acquisition of all of the issued and outstanding membership interests of Network
Billing Systems, LLC (“NBS”) and substantially all of the assets of NBS’ affiliate, Interconnect Services Group II LLC (“ISG”), and thereby
acquired the business operated by NBS and ISG (the “Acquired Business”). Definitive agreements to purchase the Acquired Business were entered
into on January 30, 2012, and amended on June 6, 2012, August 20, 2012, September 21, 2012 and October 24, 2012 (the “Purchase Agreements”),
and execution of the Purchase Agreements was initially reported by Fusion in a Current Report on Form 8-K/A filed on February 6, 2012.
The Acquired Business is a Unified Communications and cloud services provider offering a wide range of hosted voice and data services,
Internet and data network solutions to small, medium and large businesses in the United States. For the year ended December 31, 2011, the
Acquired Business had revenues of approximately $26.5 million and net income of approximately $3.1 million.
In accordance with the terms of the Purchase Agreements, the Company purchased the Acquired Business, including $500,000 of cash and
the assumption of certain related liabilities. The aggregate purchase price for the outstanding membership interests of NBS and the assets of ISG,
net of the assumed liabilities, was $19.6 million (the “Purchase Price”), consisting of $17.75 million in cash, $0.6 million to be evidenced by
promissory notes payable to the sellers of the NBS membership interests (the “Seller Notes”) and 11,363,636 shares of restricted common stock of
Fusion valued at $1.25 million. The Seller Notes bear interest at the rate of 3% per annum and are payable in 14 equal monthly installments
commencing January 31, 2013. The Purchase Price will be adjusted on or before November 15, 2012, based on certain working capital
measurements described in the Purchase Agreements, and 10% of the cash portion of the Purchase Price is being held in escrow for a period of up
to one year as collateral to secure the accuracy of the sellers’ representations, warranties and covenants contained in the Purchase Agreements.
In connection with its acquisition of the Acquired Business, Fusion entered into an Employment and Restrictive Covenant Agreement (the
“Kaufman Employment Agreement”) with Jonathan Kaufman, the principal operating officer of the Acquired Business and Manager of NBS, who
has become the President of the Company’s combined Corporate Services business segment.
Additionally, effective with the consummation of the Acquired Business, FNAC entered into a 5-year lease agreement (the “Lease”) with
Manchester Realty, LLC, a company controlled by Jonathan Kaufman, to continue the occupancy of NBS’ principal offices in Wayne, NJ. The
lease is for approximately 11,000 square feet of office space, under which FNAC is required to pay annual rent to the landlord of approximately
$120,000, with annual increases of approximately 7-8% per year. The Company believes that the terms of the Lease are no less favorable to FNAC
than what could have been obtained from an unaffiliated third party.
The cash portion of the Purchase Price was largely financed through the issuance by FNAC of $16.5 million of senior notes (see “Sale of
Senior Notes and Related Transactions” below).
The foregoing summary of the terms and conditions the of the Purchase Agreements, the Seller Notes, the Kaufman Employment
Agreement and the Lease are qualified in their entirety by reference to the full text of such documents, which are filed as Exhibits 10.47-10.56 to
this Current Report on Form 8-K.
ITEM
2.01
COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
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