FSN Fusion Telecommunications International,

NEW YORK, March 31 /PRNewswire-FirstCall/ -- Fusion (AMEX:FSN) today announced financial results for the quarter and full year ended December 31, 2008. Recent Highlights: -- Full Year 2008 Consolidated Revenues were $50.6 million, compared to $55.0 million for full year 2007; -- Adjusted EBITDA loss for 2008 full year and fourth quarter increased 2.2% over 2007 full year and 19.1% over 2007 fourth quarter, but improved for second consecutive quarter; -- Raised $6.8 million in debt and equity financing in full year 2008; -- Revenues from corporate customers increased 39% over prior quarter; -- Selling, General and Administrative costs improved for the third consecutive quarter, and improved 3.4% compared to full year 2007; -- Company appealed notice of intent to de-list Fusion stock by NYSE Amex to Appeals Panel at Hearing on March 25, 2009; Company received notice from the Appeals Panel on March 30, 2009 that it had been granted a sixty day extension. Fusion reported Consolidated Revenues of $50.6 million and $13.1 million for the year and quarter ended December 31, 2008, respectively. This represented a decrease of 8.1% and 10.9% compared to revenues of $55.0 million and $14.7 million for the year and quarter ended December 31, 2007. The decrease over the prior year was primarily attributable to a decrease in the carrier segment, which was due in large part to lower traffic volumes resulting from the challenging economic environment, as well as normally expected variations in traffic. Consolidated Gross Margin decreased slightly to 6.5% for the year and 6.3% for the fourth quarter of 2008, compared to 7.7% for the year and 7.6% for the fourth quarter of 2007. Although overall results were lower than anticipated due to the reasons indicated above, fourth quarter revenue for the corporate division increased by 39% compared to the prior quarter and nearly 400% when compared to the fourth quarter of 2007. The fourth quarter was our fourth successive quarter of growth in both revenue and margin in the corporate division. The average monthly charge per customer increased by 16% and the total contract value of our existing customer base increased by more than 60%. Selling, General and Administrative costs improved for the third consecutive quarter, and represented a 3.4% decrease for 2008 compared to 2007. It was also a 2.4% improvement for the fourth quarter of 2008 over 2007. The improvement was primarily attributable to the Company's continuing focus on cost-containment and maximizing infrastructure efficiencies. 2008 results also included $0.1 million in one-time costs associated with the consumer business. Excluding this additional expense, the year over year improvement would have been 4.2%. For the year ended December 31, 2008, Adjusted EBITDA loss (earnings before interest, taxes, depreciation, amortization, and specific non-recurring and non-cash adjustments) increased $0.2 million, or 2.2%, to ($7.6) million, compared to Adjusted EBITDA of ($7.4) million for the year ended 2007. Fusion also reported an increase in Net Loss in the year ended December 31, 2008 compared to the year ended December 31, 2007. For 2008, Fusion reported a Net Loss of ($15.6) million, and a Net Loss applicable to Common Stockholders of ($16.2 million) or ($0.44) per share compared to a Net Loss of ($12.7) million, and a Net Loss applicable to Common Stockholders of ($13.2) million or ($0.48) per share during the year ended December 31, 2007. As of December 31, 2008, the Company had current assets of $4.1 million compared to $6.3 million as of December 31, 2007. The decrease was primarily a result of a decrease in Accounts Receivable due to early receipt in the first quarter of 2008 of certain receivables. Total Liabilities and Stockholders' equity (deficit) at December 31, 2008 was a ($4.8) million deficit, compared to $6.7 million in equity as of December 31, 2007. The primary reasons for the change were the $5.1 million impairment primarily associated with the exit in the Consumer segment, as well as the Net Loss from Operations in 2008 of $10.5 million, offset by additional equity investments of $3.5 million. As required by Amex Company Guide Section 610(b), the Company also disclosed that financial statements for the fiscal year ended December 31, 2008, again contained a going concern qualification from its independent accounting firm, Rothstein, Kass and Company, P.C. Commenting on the results, Matthew Rosen, Chief Executive Officer of Fusion, said, "The fourth quarter of 2008, and the year in general, were challenging for Fusion, and for virtually all companies having to deal with the realities of an uncertain and struggling economy. While our business was impacted by lower traffic volumes and a slowing of both the sales cycles and the availability of investment capital, we ultimately believe that the economic situation will benefit us in the long term, as we are able to provide communications services that assist companies in reducing their costs without compromising on quality. To reach our goal of positive Adjusted EBITDA prior to the end of 2009, in addition to our continuing efforts to work on adequate financing, we have maximized our operational efficiencies, reduced cash requirements and increased our focus on growing our higher margin corporate business." Expanding on Mr. Rosen's comments, Don Hutchins, President and Chief Operating Officer of Fusion, said, "We believe that the major progress we have seen in direct and partner corporate sales will continue, and we anticipate a significant increase in future revenues from this division. Additionally, we expect to increase our focus on the carrier segment that now serves over 200 international customers and vendors, allowing for significant growth. Improved operating efficiencies, increased automation of key processes and systems, as well as other aggressive, cost-cutting measures will help to improve results, and play a significant role in Fusion's future success." 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. Earnings Conference call The Company will host a conference call to discuss its financial results at 10:00 A.M. ET today. The conference call can be accessed by dialing (877) 879-6201. A replay of the call will be available through Friday, April 3, 2009. To listen to the replay, please call (888) 203-1112 (Domestic) or (719) 457-0820 (International). To access the replay, users will need to enter the following passcode: 5643166. The call will be available live on the Internet at http://www.fusiontel.com/. The online archive of the web cast will be available for one year following the call. (Logo: http://www.newscom.com/cgi-bin/prnh/20050705/NYTU073LOGO ) 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 TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 2008 December 31, 2007 ----------------- ----------------- ASSETS Current assets Cash and cash equivalents $458,246 $114,817 Accounts receivable, net of allowance 3,330,908 5,545,408 Prepaid expenses and other current assets 329,968 481,556 Assets held for sale - 129,231 --- ------- Total current assets 4,119,122 6,271,012 --------- --------- Property and equipment, net 3,941,528 5,425,846 --------- --------- Other assets Security deposits 51,760 66,638 Restricted cash 416,566 416,566 Goodwill - 964,557 Intangible assets, net 810,908 4,892,215 Other assets 123,440 91,455 ------- ------ Total other assets 1,402,674 6,431,431 --------- --------- TOTAL ASSETS $9,463,324 $18,128,289 ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Long-term debt, current portion $2,362,992 $566,567 Capital and equipment financing lease obligations, current portion 122,960 233,759 Accounts payable and accrued expenses 10,283,207 9,663,325 Liabilities of discontinued operations 13,313 15,829 ------ ------ Total current liabilities 12,782,472 10,479,480 ---------- ---------- Long-term liabilities Other long-term liabilities 1,445,431 953,626 --------- ------- Total long-term liabilities 1,445,431 953,626 --------- ------- Stockholders' equity Preferred stock, Class A- 1, A-2, A-3 & A-4 80 80 Common stock 457,500 299,078 Capital in excess of par value 124,384,568 120,402,691 Accumulated deficit (129,606,727) (114,006,666) ------------ ------------ Total stockholders' equity (4,764,579) 6,695,183 ---------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,463,324 $18,128,289 ========== =========== FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended Fiscal Year Ended December 31, December 31, ------------ ------------ 2008 2007 2008 2007 ---- ---- ---- ---- Revenues $13,113,284 $14,717,018 $50,559,371 $55,023,860 Operating expenses: Cost of revenues 12,283,694 13,604,176 47,253,807 50,797,354 Depreciation and amortization 488,179 460,303 1,882,959 1,709,040 Loss on Impairment 5,143,231 4,006,664 5,143,231 4,006,664 Selling, general and administrative expenses 2,822,694 2,891,905 12,056,007 12,484,485 Advertising and Marketing 24,113 5,322 108,086 146,471 ------ ----- ------- ------- Total operating expenses 20,761,911 20,968,370 66,444,090 69,144,014 ---------- ---------- ---------- ---------- Operating loss (7,648,627) (6,251,352) (15,884,719) (14,120,154) Other income (expense) Interest income (expense), net (121,649) (6,743) (316,284) (17,043) Gain (loss) on debt forgiveness - 618,885 659,991 618,885 Gain (loss) on sale of investment in Estel - - - 937,578 Loss from investment in Estel - - - (60,000) Other (1,101) (48,612) (59,049) (27,536) ------ ------- ------- ------- Total other income (expense) (122,750) 563,530 284,658 1,451,884 -------- ------- ------- --------- Loss from continuing operations (7,771,377) (5,687,822) (15,600,061) (12,668,270) Income (loss) from discontinued operations - - - - --- --- --- --- Net loss $(7,771,377) $(5,687,822) $(15,600,061) $(12,668,270) =========== =========== ============ ============ Losses applicable to common stockholders Loss from continuing operations $(7,771,377) $(5,687,822) $(15,600,061) $(12,668,270) Preferred stock dividends in arrears (161,214) (572,087) (641,352) (572,087) -------- -------- -------- -------- Net loss applicable to common stockholders from continuing operations (7,932,591) (6,259,909) (16,241,413) (13,240,357) Income from discontinued operations - - - - --- --- --- --- Net loss applicable to common stockholders $(7,932,591) $(6,259,909) $(16,241,413) $(13,240,357) =========== =========== ============ ============ Basic and diluted net loss per common share: Loss from continuing operations $(0.18) $(0.22) $(0.44) $(0.48) Income (loss) from discontinued operations - - - - --- --- --- --- Net loss applicable to common stockholders $(0.18) $(0.22) $(0.44) $(0.48) ====== ====== ====== ====== Weighted average shares outstanding Basic and diluted 42,924,966 28,360,155 37,274,411 27,314,196 ========== ========== ========== ========== FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA Three Months Ended Fiscal Year Ended December 31, December 31, ------------ ------------ 2008 2007 2008 2007 ---- ---- ---- ---- Net loss $(7,771,377) $(5,687,822) $(15,600,061) $(12,668,270) Income from discontinued operations - - - - --- --- --- --- Loss from continuing operations (7,771,377) (5,687,822) (15,600,061) (12,668,270) Adjustments: Interest (income) expense, net 121,649 6,743 316,284 17,043 Depreciation and amortization 488,179 460,303 1,882,959 1,709,040 ------- ------- --------- --------- EBITDA (7,161,549) (5,220,776) (13,400,818) (10,942,187) Adjustments: (Gain) loss on settlements of debt - (618,885) (659,991) (618,885) (Gain)/loss on disposal of fixed assets - 115,566 59,158 105,807 (Gain) loss on sales of investment in Estel - - - (937,578) Loss on impairment 5,143,231 4,006,664 5,143,231 4,006,664 Communication charges 353,491 Other taxes 37,401 112,303 289,923 410,475 Other 537 Non cash compensation 174,873 88,650 617,499 544,417 ------- ------ ------- ------- Adjusted EBITDA $(1,806,044) $(1,516,478) $(7,596,970) $(7,431,287) =========== =========== =========== =========== FUSION Philip Turits CONTACT: 212-201-2407 Damon Testaverde, Managing Director Network 1 Financial Securities 732-758-9001 http://www.newscom.com/cgi-bin/prnh/20050705/NYTU073LOGODATASOURCE: Fusion CONTACT: Philip Turits of Fusion, +1-212-201-2407, ; or Damon Testaverde, Managing Director of Network 1 Financial Securities, +1-732-758-9001, Web Site: http://www.fusiontel.com/

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