Fusion Reports First Quarter 2010 Results

NEW YORK, May 18 /PRNewswire-FirstCall/ -- Fusion (OTC Bulletin Board: FSNN) has announced financial results for the quarter ended March 31, 2010.

The Company reported consolidated revenues of $9.6 million for the first quarter of 2010, an increase of 6.5% when compared to revenues of $9.0 million for the first quarter of 2009. First quarter revenues for the Carrier Services segment increased 4.2% when compared to the first quarter 2009, while first quarter revenues for the Corporate Services segment increased 147% when compared to first quarter 2009. The first quarter of 2010 was the ninth consecutive quarter of consistent revenue growth for the Corporate Services segment.

Consolidated gross margin increased to 9.6% for the first quarter of 2010, compared to 5.9% for the first quarter of 2009.  This margin increase resulted from stronger margins in the Carrier Services segment, where the gross margin increased from 5.2% to 8.3%, as well as the increased business volume in the Corporate Services segment, which achieved a gross margin of 40%.

Selling, general and administrative costs decreased approximately $0.3 million, or 11%, for the first quarter of 2010 compared to the first quarter of 2009.  This improvement was primarily attributable to the Company's continuing focus on cost-containment.

As a result of the increased revenues, improvement in gross margin, and reduced SG&A expenses, the Company's adjusted EBITDA loss (earnings before interest, taxes, depreciation, amortization, and specific non-recurring and non-cash adjustments) of ($1.2) million for the first quarter of 2010 was a 38% improvement from its first quarter 2009 adjusted EBITDA loss of ($1.9) million.

Fusion also reported a decrease in net loss applicable to common stockholders of ($1.7) million or ($0.02) per share for the quarter ended March 31, 2010, compared to a net loss applicable to common stockholders of ($3.2) million or ($0.07) per share for the quarter ended March 31, 2009.  This change resulted primarily from the overall improvement in financial results for the Company's continuing operations.  The decrease in net loss per share compared to the prior year also reflected an increase in the number of shares outstanding.  The net loss from continuing operations in the first quarter of 2010 was ($1.7) million, a 37% improvement from the net loss from continuing operations of ($2.7) million in the first quarter of 2009.

As of March 31, 2010, the Company had current assets of $3.2 million compared to $2.9 million as of December 31, 2009, and total assets of $5.5 million at March 31, 2010 compared to $5.4 million as of December 31, 2009.  These increases were primarily due to increased accounts receivable associated with increased revenues when compared to the fourth quarter of 2009.

Stockholders' equity/(deficit) at March 31, 2010 was ($7.8) million deficit, compared to ($7.3) million deficit as of December 31, 2009. This change resulted from an increase in the accumulated deficit, partially offset by additional equity investment. During the first quarter of 2010, Fusion raised approximately $1.35 million in total new capital, including $450,000 in new equity, and successfully converted approximately $240,000 of existing debt to equity. The Company continues to seek additional equity and debt financing required to fund the operations of its business.

Commenting on the results, Matthew Rosen, Chief Executive Officer of Fusion, said, "I am pleased that the first quarter of 2010 showed continued progress in achieving the milestones we have set for achieving profitability. Our gross margin, SG&A expenses, and adjusted EBITDA performance all showed marked improvement. We are delighted with these results, and we believe that strong sales growth, combined with continuing expense management, will position us well for continued improvements in our financial results."  

Expanding on Mr. Rosen's comments, Don Hutchins, President, Chief Operating Officer and Acting Chief Financial Officer, said, "We are particularly pleased with the nearly 150% revenue growth in our Corporate Services segment and the 68% gross margin improvement in our Carrier Services segment, when compared to the same period in 2009. In addition, our corporate revenue growth included twice as many add-on orders from existing customers as the prior quarter, demonstrating the loyalty of our customers and the attractiveness of our services."

Use of Non-GAAP Financial Measures:

The Company believes that EBITDA (earnings before interest, taxes, depreciation and amortization) is useful to investors because it is commonly used in the communications industry to analyze companies on the basis of operating performance and leverage. The Company also believes that EBITDA provides investors with a measure of the Company's operational and financial progress that corresponds with the measurements used by management as a basis for allocating resources and making other operating decisions.  Adjusted EBITDA provides an adjusted view of EBITDA that takes into account certain significant non-recurring transactions, such as impairment losses associated with divested businesses and forgiveness of debt, which vary significantly between periods and are not recurring in nature. Although the Company uses Adjusted EBITDA as one of several financial measures to assess its operating performance, its use is limited as it excludes certain significant operating expenses. EBITDA and Adjusted EBITDA are not intended to represent cash flows for the period presented, nor have they been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Generally Accepted Accounting Principles (GAAP).  Consistent with the SEC Regulation G, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, which can be viewed under the heading "Reconciliation of Net Income (Loss) to Adjusted EBITDA", immediately following the Consolidated Statements of Operations included in this press release.

Statements in this Press Release that are not purely historical facts, including statements regarding Fusion's beliefs, expectations, intentions or strategies for the future, may be "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among others, introduction of products in a timely fashion, market acceptance of new products, cost increases, fluctuations in and obsolescence of inventory, price and product competition, availability of labor and materials, development of new third-party products and techniques that render Fusion's products obsolete, delays in obtaining regulatory approvals, potential product recalls, securing necessary funding and litigation. Risk factors, cautionary statements and other conditions which could cause Fusion's actual results to differ from management's current expectations are contained in Fusion's filings with the Securities and Exchange Commission and available through http://www.sec.gov

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FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS





                                              Three Months Ended

                                              March 31,

                                              2010          2009



Revenues                                      $ 9,588,632   $ 9,002,301

Operating expenses:

 Cost of revenues                             8,663,769     8,467,891

 Depreciation and amortization                231,875       489,471

 Selling, general and administrative expenses 2,196,312     2,470,280

 Advertising and Marketing                    3,771         7,496

 Total operating expenses                     11,095,727    11,435,138

Operating loss                                (1,507,095)   (2,432,837)



Other income (expense)

 Interest income (expense), net               (49,467)      (95,781)

 Gain (loss) on debt forgiveness              9,500         -

 Gain (loss) on sale of investment in Estel   -             -

 Loss from investment in Estel                -             -

 Other                                        4,867         2,214

 Total other income (expense)                 (35,100)      (93,567)

Loss from continuing operations               (1,542,195)   (2,526,404)



Income (loss) from discontinued operations    (1,373)       (479,811)



Net loss                                      $ (1,543,568) $ (3,006,215)



Losses applicable to common stockholders

 Loss from continuing operations              $ (1,542,195) $ (2,526,404)

 Preferred stock dividends in arrears         (157,710)     (157,710)

Net loss applicable to common stockholders

 from continuing operations                   (1,699,905)   (2,684,114)

 Income from discontinued operations          (1,373)       (479,811)

Net loss applicable to common stockholders    $ (1,701,278) $ (3,163,925)



Basic and diluted net loss per common share:

 Loss from continuing operations              $ (0.02)      $ (0.06)

 Income (loss) from discontinued operations   (0.00)        (0.01)

Net loss applicable to common stockholders    $ (0.02)      $ (0.07)



Weighted average shares outstanding

 Basic and diluted                            97,046,963    47,005,246






FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET





                                            March 31, 2010  December 31, 2009

ASSETS

Current assets

 Cash and cash equivalents                  $ -             $ 99,019

 Accounts receivable, net of allowance      2,833,020       2,500,319

 Prepaid expenses and other current assets  341,150         298,822

 Assets held for sale                       5,784           6,513

 Assets of Discontinued Operations          25,723          32,283

  Total current assets                      3,205,678       2,936,956



Property and equipment, net                 1,461,975       1,664,583



Other assets

 Security deposits                          23,106          23,008

 Restricted cash                            248,391         248,391

 Intangible assets, net                     472,306         489,294

 Other assets                               61,362          62,120

  Total other assets                        805,164         822,812

TOTAL ASSETS                                $ 5,472,816     $ 5,424,351



LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)

Current Liabilities

 Long-term debt, current portion            $ 3,085,425     $ 2,407,187

 Capital and equipment financing lease
 obligations, current portion               17,418          14,831

 Accounts payable and accrued expenses      9,503,170       9,588,289

 Liabilities of discontinued operations     360,294         360,294

  Total current liabilities                 12,966,307      12,370,601.34



Long-term liabilities

 Other long-term liabilities                327,668         339,402

  Total long-term liabilities               327,668         339,402



Stockholders' equity

 Preferred stock, Class A-1, A-2, A-3 & A-4 80              80

 Common stock                               997,386         925,440

 Capital in excess of par value             131,917,882     130,984,766

 Accumulated deficit                        (140,736,507)   (139,192,939)

  Total stockholders' equity                (7,821,159)     (7,282,653)



TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 5,472,816     $ 5,427,351






FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES



RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA





                                        Three Months Ended

                                        March 31,

                                        2010          2009



Net loss                                $ (1,543,568) $ (3,006,215)



Income from discontinued operations     1,373         479,811

Loss from continuing operations         (1,542,195)   (2,526,404)

Adjustments:

Interest (income) expense, net          49,467        95,781

Depreciation and amortization           231,875       489,471

EBITDA                                  (1,260,853)   (1,941,152)

Adjustments:

(Gain)/loss on disposal of fixed assets -             -

Communication charges                   -             -

Other taxes                             37,508        33,846

Non cash compensation                   68,227        34,945

Adjusted EBITDA                         $ (1,155,117) $ (1,872,361)






FUSION   Philip Turits, Treasurer

CONTACT: 212-201-2407

         pturits@fusiontel.com





SOURCE Fusion Telecommunications International