Fusion Reports Second Quarter 2010 Results

NEW YORK, Aug. 16 /PRNewswire-FirstCall/ -- Fusion (OTC Bulletin Board: FSNN) today announced financial results for the quarter ended June 30, 2010.

The Company reported consolidated revenues of $9.7 million for the quarter ended June 30, 2010, an increase of 12.8% when compared to revenues of $8.6 million for the second quarter of 2009.  Second quarter 2010 revenues for the Carrier Services segment increased 10.7% when compared to the second quarter of 2009, and second quarter 2010 revenues for the Corporate Services segment increased 78.5% when compared to the second quarter of 2009. This quarter was the tenth consecutive quarter of consistent revenue growth for the Corporate Services segment.

Consolidated gross margin increased to 10.0% for the second quarter of 2010, compared to 8.0% for the second quarter of 2009. This margin increase resulted from stronger margins in the Carrier Services segment, where the gross margin increased from 7.1% to 8.5%, and from increased business volume in the Corporate Services segment, which achieved a gross margin of 42%.  

Selling, general, and administrative costs for the second quarter of 2010 were reduced by $46,000 or 2.1%, when compared to the second quarter of 2009.  This improvement was primarily attributable to the Company's continuing focus on cost-containment.

As a result of the Company's increased revenues, improved gross margin, and reduced SG&A expenses, its adjusted EBITDA loss (earnings before interest, taxes, depreciation, amortization, and specific non-recurring and non-cash adjustments) of ($1.1) million for the second quarter of 2010 was a 21.4% improvement from its second quarter 2009 adjusted EBITDA loss of ($1.4) million. These figures, which are adjusted for discontinued operations, do not reflect the full benefit of the Company's exiting the consumer business.

For the quarter ended June 30, 2010, Fusion reported a net loss applicable to common stockholders of ($1.7) million or ($0.02) per share, a $1.5 million decrease when compared to a net loss applicable to common stockholders of ($3.2) million or ($0.06) per share for the quarter ended June 30, 2009. This 67% decrease in net loss per share compared to the prior year period resulted from continued improvement in the financial results of the Company's continuing operations, the impact of its exit from the consumer business, and an increase in the total number of shares outstanding.

As of June 30, 2010, the Company had current assets of $4.2 million, compared to current assets of $2.9 million as of December 31, 2009, and total assets of $6.3 million, compared to total assets of $5.4 million as of December 31, 2009. These increases were primarily due to increased cash and cash equivalents, as well as increased accounts receivable.

Total stockholders' equity/(deficit) at June 30, 2010 was ($6.7) million, compared to ($7.3) million as of December 31, 2009.  The change resulted from an increase in the accumulated deficit of $(3.1) million, offset by additional equity investments of $3.7 million. During the second quarter of 2010, Fusion raised approximately $2.6 million in total new capital, including $2.1 million in new equity, and successfully converted approximately $0.5 million of existing debt to equity. The Company continues to seek additional equity and debt financing to fund its operations.

Commenting on the results, Matthew Rosen, Chief Executive Officer of Fusion, said, "I am very pleased that the second quarter of 2010 showed further progress in achieving the financial objectives we have set for reaching profitability. Our gross margin, SG&A expenses, and adjusted EBITDA performance all continued to improve. We believe that future revenue and margin growth in both business segments, coupled with ongoing expense management, will position us well for continued improvement in 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 80% revenue growth in our Corporate Services segment compared to the prior year period – our tenth consecutive quarter of revenue growth in this segment – and with our continuing improvement in gross margin in both business segments. I am also pleased to see another quarterly increase in the percentage of Corporate Services orders coming from our existing customers, which further proves the continued loyalty of our business 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 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.

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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.


FUSION   Philip Turits, Treasurer

CONTACT: 212-201-2407

         pturits@fusiontel.com






FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS



                       Three Months Ended           Six Months Ended

                       June 30,                     June 30,

                       2010          2009           2010          2009

Revenues               $ 9,727,200   $ 8,649,762    $ 19,315,832  $ 17,652,063

Operating expenses:

 Cost of revenues      8,753,785     7,958,140      17,417,554    16,426,031

 Depreciation and
 amortization          207,909       226,944        439,785       716,415

 Loss on Impairment    -             243,000        -             243,000

 Selling, general and
 administrative
 expenses              2,195,581     2,242,168      4,391,892     4,712,448

 Advertising and
 Marketing             17,425        3,016          21,196        10,512

 Total operating
 expenses              11,174,700    10,673,268     22,270,427    22,108,406

Operating loss         (1,447,500)   (2,023,506)    (2,954,595)   (4,456,343)



Other income (expense)

 Interest income
 (expense), net        (54,596)      (119,390)      (104,064)     (215,171)

 Gain on settlements
 of debt               -             -              9,500         -

 Other                 3,862         1,279          8,729         3,493

 Total other income
 (expense)             (50,734)      (118,111)      (85,835)      (211,678)

Loss from continuing
operations             (1,498,234)   (2,141,617)    (3,040,430)   (4,668,021)



Loss from discontinued
operations             (86,982)      (885,132)      (88,355)      (1,364,943)



Net loss               $ (1,585,216) $ (3,026,749)  $ (3,128,785) $ (6,032,964)



Loss applicable to
Common Stockholders:

 Loss from continuing
 operations            $ (1,498,234) $ (2,141,617)  $ (3,040,430) $ (4,668,021)

 Preferred stock
 dividends in arrears  (159,462)     (159,462)      (317,171)     (317,171)

 Net loss from
 continuing operations
 applicable to Common
 Stockholders:         (1,657,696)   (2,301,079)    (3,357,601)   (4,985,192)

 Loss from
 discontinued
 operations            (86,982)      (885,132)      (88,355)      (1,364,943)

Net loss applicable to
common stockholders    $ (1,744,678) $ (3,186,211)  $ (3,445,956) $ (6,350,135)

Basic and diluted net
loss per common share:

 Loss from continuing
 operations            $ (0.02)      $ (0.04)       $ (0.03)      $ (0.10)

 Loss from
 discontinued
 operations            (0.00)        (0.02)         (0.00)        (0.03)

Net loss applicable to
Common Stockholders    $ (0.02)      $ (0.06)       $ (0.03)      $ (0.12)

Weighted average
common shares
outstanding:

 Basic and diluted     108,396,957   56,822,335     102,960,496   52,438,147








FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET



                                            June 30, 2010  December 31, 2009

ASSETS

Current assets

 Cash and cash equivalents                  $ 907,578      $ 99,019

 Accounts receivable, net of allowance      3,053,104      2,500,319

 Restricted cash, current portion           -              168,176

 Prepaid expenses and other current assets  175,078        130,647

 Assets held for sale                       5,169          6,513

 Assets of Discontinued Operations          20,105         32,283

  Total current assets                      4,161,034      2,936,957

Property and equipment, net                 1,314,809      1,664,583

Other assets

 Security deposits                          33,106         23,008

 Restricted cash, net of current portion    238,390        248,390

 Intangible assets, net                     455,318        489,294

 Other assets                               77,334         62,119

  Total other assets                        804,148        822,811

TOTAL ASSETS                                $ 6,279,991    $ 5,424,351



LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

 Long-term debt, current portion            $ 2,824,425    $ 2,407,187

 Capital and equipment financing lease
 obligations, current portion               12,408         14,831

 Escrow Payable                             350,000        321,418

 Accounts payable and accrued expenses      9,199,529      9,263,872

 Liabilities of discontinued operations     285,294        360,294

  Total current liabilities                 12,671,656     12,367,602.00

Long-term liabilities

 Capital and equipment financing lease
 obligations, net of current portion        -              2587

 Other long-term liabilities                322,067        336,815

  Total long-term liabilities               322,067        339,402



Stockholders' equity

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

 Common stock                               1,211,671      925,440

 Capital in excess of par value             134,396,240    130,984,766

 Accumulated deficit                        (142,321,723)  (139,192,939)

  Total stockholders' equity                (6,713,732)    (7,282,653)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 6,279,991    $ 5,424,351








FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES



RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA



                       Three Months Ended           Six Months Ended

                       June 30,                     June 30,

                       2010          2009           2010          2009



Net Loss               $ (1,585,216) $ (3,026,749)  $ (3,128,785) $ (6,032,964)



Loss from discontinued
operations             86,982        885,132        88,355        1,364,943

Loss from continuing
operations             (1,498,234)   (2,141,617)    (3,040,430)   (4,668,021)

Adjustments:

Interest (income)
expense, net           54,596        119,390        104,064       215,171

Depreciation and
amortization           207,909       226,944        439,785       716,415

Loss on impairment     -             243,000        -             243,000

EBITDA                 (1,235,729)   (1,552,283)    (2,496,581)   (3,493,435)

Adjustments:

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

Communication charges  -             -              -             -

Other taxes            38,084        18,580         75,592        52,426

Non cash compensation  68,818        84,822         137,045       119,767

Adjusted EBITDA        $ (1,128,827) $ (1,448,881)  $ (2,283,944) $ (3,321,242)







SOURCE Fusion