Fusion Reports Fourth Quarter and Full Year 2010 Results

NEW YORK, April 14, 2011 /PRNewswire/ -- Fusion (OTC BB: FSNN) today announced financial results for the quarter and full year ended December 31, 2010.

Fusion reported consolidated revenues of $41.8 million and $11.3 million for the year and quarter ended December 31, 2010, respectively. This represented an increase in consolidated revenues of 2% for the year and a decrease of 1.2% for the quarter, when compared to revenues of $40.9 million and $11.4 million for the year and quarter ended December 31, 2009. The increase over the prior year was primarily attributable to a 64% revenue increase in the Corporate Services segment due to growth in customer acquisition. The decrease in consolidated revenue for the fourth quarter of 2010 was primarily due to lower traffic volumes in the Carrier Services segment resulting from constraints on working capital availability, the challenging economic environment, resource limitations resulting from the Company's focus on cost-control, and normally expected quarter-to-quarter variations in traffic.

Consolidated gross margin increased 16.2% to 9.4% for the full year as compared to 8.3% for 2009.  Consolidated gross margin decreased $.02 million to 8.8% for the fourth quarter of 2010 compared to 10.2% for the fourth quarter of 2009. The increase in consolidated gross margin for the full year is a result of stronger gross margins in the Carrier Services segment, as well as an increased contribution from the higher margin Corporate Services segment, which achieved a gross margin for the fourth quarter and full year 2010 of 38.1% and 39.3% respectively.

In addition, despite slightly lower revenues for the Carrier Services segment, revenues for the Corporate Services segment increased by 64.1% when comparing 2010 to 2009 and by 36% when comparing the fourth quarter of 2010 to the fourth quarter of 2009. The fourth quarter was our twelfth successive quarter of growth in both revenue and margin for the Corporate Services segment, and reflects our strong and continuing commitment to building this segment.

Selling, general and administrative costs decreased by 4% when comparing 2010 to 2009. SG&A costs increased 1.3% when comparing the fourth quarter of 2010 with the fourth quarter of 2009, as a result of a one-time non-cash reversal of a gain on legal expenses during the fourth quarter of 2009. Excluding this one-time reversal, SG&A costs decreased 2.1% in the fourth quarter of 2010 compared to the fourth quarter of 2009.  

For the year ended December 31, 2010, adjusted EBITDA loss (earnings before interest, taxes, depreciation, amortization, and specific non-recurring and non-cash adjustments) decreased $.0.9 million or 17%, to ($4.5) million, compared to ($5.4) million for the year ended December 31, 2009. Excluding the impact of reclassification to discontinued operations, adjusted EBITDA loss for 2010 decreased by $2.6 million or 36% to ($4.5) million, compared to ($7.1) million in 2009.  

Fusion also reported a decrease in net loss for the year ended December 31, 2010, compared to the year ended December 31, 2009.  For 2010, Fusion reported a net loss of ($5.8) million, and a net loss applicable to common stockholders of ($6.4) million or ($0.06) per share, compared to a net loss of ($9.6) million, and a net loss applicable to common stockholders of ($10.2) million or ($0.16) per share, during the year ended December 31, 2009.  

As of December 31, 2010, and December 31, 2009, the Company had current assets of $2.9 million.  Total liabilities as of December 31, 2010, were $13.0 compared to $12.7 at December 31, 2009. Stockholders' equity (deficit) at December 31, 2010 was ($8.1) million, compared to ($7.3) million at December 31, 2009.

Commenting on the results, Matthew Rosen, Chief Executive Officer of Fusion, said, "Last year was the first full year of operations since our exit from the consumer business in 2009. During the year we continued our sharp focus on both the corporate and carrier segments of our business which, coupled with our cost-cutting measures and a company-wide commitment to drive operating efficiencies, led to a 39.5% improvement in net loss and a 17% improvement in adjusted EBITDA when comparing 2010 to 2009. While raising the capital required to fund our operations remains a key objective, we made significant financial and operational progress this past year in achieving our long term business goals, and we remain optimistic about our ability to have a strong 2011."

Expanding on Mr. Rosen's comments, Don Hutchins, President and Chief Operating Officer of Fusion, said, "We are particularly pleased with the steady quarter-over-quarter growth in revenue and gross margin in our corporate business segment, and the fact that corporate revenue and gross margin increased by 64.1% and 78.6%, respectively, when compared to the prior year. This strong performance, when combined with the 13.6% year-over-year improvement in carrier gross margin, led to an overall improvement of 16.4% in consolidated gross margin.  We believe our continued focus on growing the corporate and carrier business segments during 2011, will position us well for continued progress this year in achieving our business and financial objectives."  

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 nonrecurring 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 are available through http://www.sec.gov.  

Fusion Telecommunications International, Inc. and Subsidiaries

Consolidated Statement of Operations

                      Three Months Ended           Years Ended

                      December 31,                 December 31,

                      2010          2009           2010          2009

Revenues              $ 11,297,196  $ 11,433,533   $ 41,763,002  $ 40,938,615

Operating expenses:

Cost of revenues      10,303,790    10,261,872     37,830,121    37,553,727

Depreciation and
amortization          209,991       341,263        847,881       1,361,798

Loss on impairment    19,018        -              19,018        243,000

Selling, general and
expenses              2,253,182     2,224,141      8,847,474     9,216,292

Advertising and
marketing             2,419         28,186         38,973        42,705

Total operating
expenses              12,788,400    12,855,462     47,583,467    48,417,522

Operating loss        (1,491,204)   (1,421,929)    (5,820,465)   (7,478,907)

Other income

Interest income       107           176            491           4,233

Interest expense      (34,236)      (58,786)       (181,205)     (387,460)

Gain on settlements
of debt               -             12,758         159,500       12,758

Other                 35,566        (67,528)       54,456        (62,043)

Total other income
(expenses)            1,437         (113,380)      33,242        (432,512)

Loss from continuing
operations            (1,489,767)   (1,535,309)    (5,787,223)   (7,911,419)


Loss from
operations            69,875        (206,950)      (12,257)      (1,674,793)

Net loss              $ (1,419,892) $ (1,742,259)  $ (5,799,480) $ (9,586,212)

Loss applicable to
Common Stockholders:

Loss from continuing
operations            $ (1,489,767) $ (1,535,309)  $ (5,787,223) $ (7,911,419)

Preferred stock
dividends in arrears  (147,099)     (161,214)      (583,600)     (639,600)

Net loss from
continuing operations

to Common
Stockholders:         (1,636,866)   (1,696,523)    (6,370,823)   (8,551,019)

Income (loss) from
operations            69,875        (206,950)      (12,257)      (1,674,793)

Net loss applicable
to Common
Stockholders          $ (1,566,991) $ (1,903,473)  $ (6,383,080) $ (10,225,812)

Basic and diluted net
loss per common

Loss from continuing
operations            $ (1,636,866) $ (1,696,523)  $ (6,370,823) $ (8,551,019)

Income (loss) from
operations            69,875        (206,950)      (12,257)      (1,674,793)

Net loss applicable
to Common
Stockholders          $ (0.01)      $ (0.04)       $ (0.06)      $ (0.16)

Weighted average
common shares

Basic and diluted     132,010,498   42,924,966     115,848,332   65,475,687

Fusion Telecommunications International, Inc. and Subsidiaries

Consolidated Balance Sheet

                                                   December 31,

                                                   2010           2009


Current assets:

Cash and cash equivalents                          $ 20,370       $ 99,019

Accounts receivable, net of allowance              2,721,585      2,500,319

Restricted cash, current portion                   -              168,176

Prepaid expenses and other current assets          103,009        130,647

Assets held for sale                               1,089          6,513

Current assets reclassified to discontinued
operations                                         12,449         32,283

Total current assets                               2,858,502      2,936,957

Property and equipment, net                        1,124,398      1,664,583

Other assets:

Security deposits                                  13,330         23,008

Restricted cash, net of current portion            533,437        248,390

Intangible assets, net                             409,000        489,294

Other assets                                       39,486         62,119

Total other assets                                 995,253        822,811

TOTAL ASSETS                                       $ 4,978,153    $ 5,424,351


Current Liabilities:

Promissory notes payable - non related parties     $ 683,870      $ 725,000

Promissory notes payable - related parties         2,420,625      1,682,187

Capital lease/equipment financing obligations,
current portion                                    4,550          14,831

Escrow payable                                     155,000        321,418

Accounts payable and accrued expenses              9,178,674      9,263,872

Current liabilities reclassified to discontinued
operations                                         165,274        360,294

Total current liabilities                          12,607,993     12,367,602

Long-term liabilities:

Capital lease/equipment financing obligations, net
of current portion                                 0              2,587

Other long-term liabilities                        428,646        336,815

Total long-term liabilities                        428,646        339,402

Commitments and contingencies

Stockholders' deficit:

Preferred stock, Class A-1, A-2, A-3 & A-4         73             80

Common stock                                       1,320,105      925,440

Capital in excess of par value                     135,613,755    130,984,766

Accumulated deficit                                (144,992,419)  (139,192,939)

Total stockholders' deficit                        (8,058,486)    (7,282,653)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT        $ 4,978,153    $ 5,424,351

Fusion Telecommunications International, Inc. and Subsidiaries

Reconciliation of Net Loss to Adjusted EBITDA

                       Three Months Ended           Years Ended

                       December 31,                 December 31,

                       2010          2009           2010          2009

Net Loss               $ (1,419,892) $ (1,742,259)  $ (5,799,480) $ (9,586,212)

Loss from discontinued
operations             (69,875)      206,950        12,257        1,674,793

Loss from continuing
operations             (1,489,767)   (1,535,309)    (5,787,223)   (7,911,419)


Interest (income)
expense, net           34,129        58,610         180,714       383,227

Depreciation and
amortization           209,991       341,263        847,881       1,361,798

Loss on impairment     19,018        -              19,018        243,000

EBITDA                 $ (1,226,629) $ (1,135,436)  $ (4,739,610) $ (5,923,394)

Adjustments to EBITDA:

Forgiveness of debt    -             (12,758)       (159,500)     (12,758)

Gain/(loss) on
disposal of fixed
assets                 -             71,178         -             71,178

Non cash compensation  253,496       294,601        253,496       294,601

Other taxes            132,891       131,126        132,891       131,126

Adjusted EBITDA        $ (840,242)   $ (651,289)    $ (4,512,723) $ (5,439,247)

FUSION   Philip Turits

CONTACT: 212-201-2407