8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 29, 2010(March 29, 2010)

XFONE, INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

Commission File No. 001-32521

11-3618510

(I.R.S. Employer Identification Number)

5307 W. Loop 289

Lubbock, Texas 79414

 (Address of principal executive offices) (Zip Code)

806-771-5212

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Information About Forward-Looking Statements

This current report contains forward-looking statements. The words or phrases "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements." XFONE's financial and operational results reflected herein should not be construed by any means as representative of the current or future value of its common stock. All information set forth in this Form 8-K, except historical and factual information, represents forward-looking statements. This includes all statements about the Registrant's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include issues related to: rapidly changing technology and evolving standards in the industries in which the Registrant and its subsidiaries operate; the ability to obtain sufficient funding to continue operations, maintain adequate cash flow, profitably exploit new business, license and sign new agreements; the unpredictable nature of consumer preferences; and other factors set forth in the Registrant's most recently filed annual report and registration statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Registrant undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risks and uncertainties described in other documents that the Company files from time to time with the U.S. Securities and Exchange Commission.

Item 2.02                     Results of Operations and Financial Condition

On March 29, 2010, Xfone, Inc. (the “Registrant”) issued a press release announcing certain recent developments and its financial highlights for the year ended December 31, 2009.  A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

In accordance with General Instructions B.2 of Form 8-K, the information in this report shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section nor shall it be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01                       Financial Statements and Exhibits

(a)            Not applicable.

(b)            Not applicable.

(c)            Not applicable.

(d)           Exhibits.

Exhibit No.	Description
99.1	Press Release of the Registrant dated March 29, 2010.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Xfone, Inc.
Date: March 29, 2010	By:	/s/  Guy Nissenson
		Guy Nissenson
		President, Chief Executive Officer and Director

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INDEX TO EXHIBITS

Exhibit No.	Description
99.1	Press Release of the Registrant dated March 29, 2010.

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EX-99.1

FOR IMMEDIATE RELEASE

XFONE Reports Fourth Quarter and Year End 2009 Results

Lubbock, TX – March 29, 2010 – XFONE, Inc. (NYSE Amex and TASE: XFN) (“XFONE” or “the Company”) announces results for the year ended December 31, 2009.

Mr. Guy Nissenson, the Company’s President and CEO, commented, “During 2009 we laid the groundwork that has in recent weeks resulted in transformational opportunities that we believe position Xfone well for long-term growth as the Company moves to become a purely U.S. business with state-of-the-art Fiber-To-The-Premise (FTTP) infrastructure. Despite the difficult market conditions prevalent for much of 2009 which resulted in a slight decline in revenues, we are encouraged by our ability to modestly grow our gross margins in the U.S. and increase operating cash flow.”

Subsequent to the close of fiscal 2009, Xfone announced the following developments:

Stimulus Grant and Loan:  In March 2010, the Company received approval for$63.6 million in federal grants and long-term, low interest loans from the Broadband Initiative Program of the American Recovery and Reinvestment Act.  This funding will enable Xfone to rollout its state-of-the-art FTTP infrastructure to bring broadband services to the Texas south plains and to the communities of Burkburnett and Iowa Park, Texas.  Additionally, this funding will help stimulate the economic growth of these communities by creating a significant amount of new jobs associated with the network build out.

Divestiture of International Businesses: In January 2010, Xfone announced the intended divestiture of the U.K. division for the value of approximately $4.5 million in total proceeds and savings.  The Company also subsequently announced that it had signed a memorandum of understanding for the divestiture of the Israeli division. In addition to providing cash to the balance sheet, these divestitures will eliminate most of the Company’s international overhead expense and reinforce its concentration in the U.S. market.

During the fourth quarter, Xfone wrote-off virtually all of the $21.1 million U.S.-based goodwill on its balance sheet that mostly related to its legacy copper network operation.  This non-cash write-off of goodwill has no effect on the operation of the Company’s business or its ability to serve its customers, and reflects Xfone’s business shift toward the higher margin FTTP business.

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Financial highlights for the year ended December 31, 2009:

§   Total revenues decreased 5.9% to $85 million compared to $90.3 million for the year ended December 31, 2008.

§   Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization and non-recurring loss) was $8.5 million compared to $9 million for the year ended December 31, 2008.

§   Operating income (excluding non-recurring items) was $4.2 million, compared to $4.8 million for the year ended December 31, 2008.

§   Net financing expenses were $4.1 million compared to $2.9 million for the year ended December 31, 2008.

§   The Company reported a net loss of $22.2 million, or $1.21 per share, assuming 18,376,075 fully diluted shares outstanding at December 31, 2009, compared to net income of $2 million, or $0.12 per share, assuming 17,624,249 fully diluted shares outstanding at December 31, 2008.  The net loss was primarily related to non-cash charges attributable to the write-off of goodwill . This goodwill impairment charge is an accounting adjustment that does not affect the cash flow or liquidity of future operations.

Financial highlights for the three months ended December 31, 2009:

§   Total revenues were $20.8 million, a decrease of 8.5% compared to $22.7 million for the three months ended December 31 2008.

§   Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization and non-recurring loss) was $2.2 million compared to $1 million for the three months ended December 31, 2008.

§   Operating income was (excluding non-recurring items) $1 million, compared to $3,000 for the three months ended December 31, 2008.

§   Net financing expense increased to $0.4 million, compared to an income of $2.2 million for the three months ended December 31, 2008, primarily attributed to the effect of fluctuations in the exchange rate of the New Israeli Shekel (NIS) on the Company’s Bonds which are stated in NIS and linked to the Israeli Consumer Price Index (CPI).

§   The Company reported a net loss of $20.9 million, or $1.14 per share, assuming 18,376,075 fully diluted shares outstanding at December 31, 2009, compared to net income of $2.3 million, or $0.125 per share, assuming 18,376,075 fully diluted shares outstanding at December 31, 2008. The net loss was primarily related to non-cash charges attributable to the write-off of goodwill. This goodwill impairment charge is an accounting adjustment that does not affect the cash flow or liquidity of future operations.

Mr. Nissenson continued, “The decrease in the U.S. compared to last year’s revenues was due to the attrition of residential customers from our legacy non-FTTP business and sales to other carriers.  Going forward, we expect that sales from our high margin FTTP business will grow as a percentage of revenues.  In November of 2009 we began in earnest to sign up customers to our FTTP services in Levelland and our subscription rate to date is approximately 30% of lit passings.  We believe that we are well on our way to achieving our projected 69% take rate in the market.”

Mr. Nissenson concluded, “The $63.6 million in federal funding that we have recently been approved to receive is truly transformative for our company and will be used for the expansion of our FTTP network in the Texas south plains and Burkburnett and Iowa Park, Texas.  These PRIDE Network projects are expected to add another 30,000 passings, approximately five times the size of our Levelland project.  Additionally, there is a second round of RUS broadband funding being made available, and we submitted our applications yesterday. It is important to note that the application process is very competitive and there is no assurance that we will be selected to receive the additional requested funding.”

Conference Call:

The Company will host a conference call today, March 29 at 10:00 a.m. Eastern Time to discuss its financial results. The conference call may be accessed in the U.S. and Canada by dialing toll-free 1-877-407-8035.  International callers may access the call by dialing 1-201-689-8035.

A replay of the teleconference will be available for 30 days after the call and may be accessed domestically by dialing 1-877-660-6853 and international callers may dial 1-201-612-7415.  Callers must enter account number 286 and conference number 347894.

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To access the live webcast, log onto the XFONE website at http://www.xfone.com. The webcast can also be accessed at http://www.InvestorCalendar.com. An online replay will be available shortly after the call.

About XFONE, Inc.

A U.S.-domiciled corporation, XFONE is a holding and managing company with operations in the United States, the United Kingdom and Israel, that offers a wide range of communications services which include: 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.  The Company serves customers worldwide.

In addition to disclosing financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP EBITDA (non-GAAP earnings before interest, taxes, depreciation and amortization, other expenses and non-recurring loss). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

There are a number of limitations related to the use of non-GAAP EBITDA. First, these non-GAAP financial measures exclude depreciation and amortization expenses that are recurring and significant non-recurring expenses. First, Depreciation and amortization have been, and will continue to be for the foreseeable future, a significant recurring expense with an impact upon our company notwithstanding the lack of immediate impact upon cash. Second, there is no assurance the components of the costs that we exclude in our calculation of non-GAAP operating loss do not differ from the components that our peer companies exclude when they report their results of operations. Third, there is no assurance we will avoid further non-recurring costs associated with other balance sheet items. Our management compensates for these limitations by providing specific reconciliation of GAAP amounts to these non-GAAP financial EBITDA and evaluating these non-GAAP financial measures together with their most directly comparable financial measures calculated in accordance with GAAP. Readers should note the chart at the end of this release which sets forth how we calculate the non-GAAP EBITDA.

This press release contains forward-looking statements. The words or phrases "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements." XFONE's financial and operational results reflected above should not be construed by any means as representative of the current or future value of its common stock. All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the Company's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include issues related to: rapidly changing technology and evolving standards in the industries in which the Company and its subsidiaries operate; the ability to obtain sufficient funding to continue operations, maintain adequate cash flow, profitably exploit new business, license and sign new agreements; the unpredictable nature of consumer preferences; and other factors set forth in the Company's most recently filed annual report and registration statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risks and uncertainties described in other documents that the Company files from time to time with the U.S. Securities and Exchange Commission.

Contact Details:

US IR Contact John G. Nesbett/Jennifer Belodeau Institutional Marketing Services (IMS) Tel: 1.203.972.9200. E-mail: jnesbett@institutionalms.com Company Contact Niv Krikov, CFO Tel: 1.806.771.1181 E-mail: niv@xfone.com

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	Years Ended
	December 31,
	2009			2008
Revenues	$	85,029,883		$	90,338,980
Cost of revenues		45,067,148			47,132,313
Non – recurring loss from distribution of calling cards in Israel		506,176			-
Gross profit		39,456,559			43,206,667
Operating expenses:
Research and development		53,754			60,094
Marketing and selling		10,465,908			12,422,391
General and administrative		25,238,174			25,720,376
Non- recurring loss		21,441,485			189,610
Total operating expenses		57,199,321			38,392,471
Operating profit (loss)		(17,742,762	)		4,814,196
Financing expenses, net		(4,110,043	)		(2,862,132	)
Other expenses		(475,531	)		(296,719	)
Income (loss) before taxes		(22,328,336	)		1,655,345
Tax benefit		169,774			613,879
Net income (loss)		(22,158,562	)		2,269,222
Less: Net income (loss) attributed to non-controlling interest		(20,870	)		(221,985	)
Net income (loss) attributed to shareholders	$	(22,179,432	)	$	2,047,237
Basic and diluted net income (loss) per share	$	(1.207	)	$	0.116
Weighted average number of shares used for computing
Basic and diluted income (loss) per share		18,376,075			17,624,249

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Reconciliation of Non-GAAP Financial Measures*:

	Years Ended
	December 31,
	2009			2008
Net income (loss) attributed to shareholders	$	(22,179,432	)	$	2,047,237
Non- recurring loss		21,947,661			189,610
Depreciation and amortization		4,335,820			3,979,915
Financing expenses, net		4,110,043			2,862,132
Other expenses		475,531			296,719
Net (income) attributed to non-controlling interest		20,870			221,985
Tax benefit		(169,774	)		(613,879	)
EBITDA	$	8,540,719		$	8,983,719

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