Fusion Reports First Quarter 2008 Results

NEW YORK, May. 15 /PRNewswire/ --

NEW YORK, May 15 /PRNewswire-FirstCall/ -- Fusion today announced financial results for the quarter ended March 31, 2008.

Recent Highlights: -- Consolidated Revenues were $11.5 million, compared to $13.2 million for Q1 2007; -- Adjusted EBITDA improved 10.4% over Q1 2007; -- Raised $1.8 million in equity financing; -- Launched new Efonica consumer services website and portal; -- Expanded distribution of corporate products and services into Latin America; -- Don Hutchins promoted to President and Chief Operating Officer.

Fusion reported Consolidated Revenues of $11.5 million for the quarter ended March 31, 2008. This represented a decrease of 12.7% compared to revenues of $13.2 million for the quarter ended March 31, 2007. The decrease over the prior year was largely attributable to inherent quarter-to-quarter fluctuations in the Company's Voice to Carrier segment, which experienced a revenue decrease of 13.3% in the first quarter of 2008 compared to the first quarter of 2007.

Consolidated gross margin was 7.1% in first quarter of 2008 compared to 8.5% in the first quarter of 2007.

Selling, general and administrative costs decreased 3.4% compared to the first quarter of 2007. The decrease was primarily attributable to the Company's increasing focus on cost containment and maximizing infrastructure efficiencies.

For the first quarter ended March 31, 2008, Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and specific nonrecurring and non-cash adjustments) improved $0.2 million, or 10.4%, to ($1.94) million, compared to Adjusted EBITDA of ($2.16) million for the first quarter of 2007.

Fusion also reported an improvement in Net Loss of 16.5% compared to the first quarter of the prior year. For the first quarter of 2008, Fusion reported a net loss of ($2.36) million or ($0.08) per share compared to a net loss of ($2.83) million or ($0.10) per share during the quarter ended March 31, 2007. This includes certain one-time items, which positively impacted net loss by $0.27 million in the first quarter of 2008. Excluding these certain one-time items, the net loss would have been $(2.64) million in 2008 compared with $(2.83) million in 2007, an improvement of $.2 million or 6.8% year-over-year.

As of March 31, 2008, the Company had current assets of $4.9 million compared to $6.3 million as of December 31, 2007. The decrease was primarily a result of cash used in operations and a decrease in Accounts Receivable due to early receipt in first quarter, 2008 of certain receivables. Total Liabilities and Stockholders' equity at March 31, 2008 was $16.4 million compared to $18.1 million as of December 31, 2007.

In the first quarter of 2008, the Company raised an additional $1.8 million in equity financing.

Commenting on the results, Matthew Rosen, Chief Executive Officer of Fusion, said, "Despite our decline in overall revenue in the first quarter, which was largely due to the inherent volatility in the carrier segment, we made continued progress in operating efficiencies, as reflected in a 10.4% improvement in Adjusted EBITDA over the first quarter, 2007. Moving forward through the remaining quarters of the year, we will continue to focus our corporate efforts on driving improved operating results."

Expanding on Mr. Rosen's comments, Don Hutchins, President and Chief Operating Officer of Fusion, said, "We have been closely focused on the corporate and consumer segments of our business, as they are a key element of our plan to enhance value through an expanded retail customer base and by increasing margins. We are pleased to have seen meaningful progress in these areas, as we moved from building our technical infrastructure to building revenue. The launch of our new consumer website and portal, the expansion of our distribution channels, and the increase in corporate and consumer revenues compared to the first quarter of 2007, position us well for continued growth during the remainder of the year."

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 1:00 p.m. EDT today. The conference call can be accessed by dialing 877-397-0286. A replay of the call will be available through May 18, 2008. 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: 5953734. 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.

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About Fusion:

Fusion provides its Efonica branded VoIP (Voice over Internet Protocol), Internet access, and other Internet services to, from, in and between Asia, the Middle East, Africa, Latin America and the Caribbean. The company provides services to consumers, corporations, and communications carriers worldwide. For more information please go to http://www.fusiontel.com.

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 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 STATEMENT OF OPERATIONS Three Months Ended March 31, 2008 2007 (Un-Audited) (Un-Audited) Revenues $11,529,817 $13,205,954 Operating expenses: Cost of revenues 10,707,974 12,085,771 Depreciation and amortization 461,677 392,182 Selling, general and administrative expenses 3,310,811 3,427,369 Advertising and Marketing 29,392 82,215 Total operating expenses 14,509,854 15,987,537 Operating loss (2,980,037) (2,781,583) Other income (expense) Interest income (expense), net (15,659) (2,438) Gain (loss) on extinguishment of debt 634,991 - Gain (loss) on sale of other assets - - Loss from investment in Estel - (45,000) Other (2,284) - Total other income (expense) 617,048 (47,438) Loss from continuing operations (2,362,989) (2,829,021) Net loss $(2,362,989) $(2,829,021) Losses applicable to common stockholders Loss from continuing operations $(2,362,989) $(2,829,021) Preferred stock dividends (159,462) - Net loss applicable to common stockholders from continuing operations (2,522,451) (2,829,021) Income from discontinued operations - - Net loss applicable to common stockholders $(2,522,451) $(2,829,021) Basic and diluted net loss per common share: Loss from continuing operations $(0.08) $(0.10) Income (loss) from discontinued operations - - Net loss applicable to common stockholders $(0.08) $(0.10) Weighted average shares outstanding Basic and diluted 32,818,945 26,958,965 FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET March 31, December 31, 2008 2007 (Un-Audited) (Audited) ASSETS Current assets Cash and cash equivalents $731,489 $114,817 Accounts receivable, net of allowance 3,554,845 5,545,408 Prepaid expenses and other current assets 473,721 481,556 Assets held for sale 129,231 129,231 Total current assets 4,889,286 6,271,012 Property and equipment, net 5,142,574 5,425,846 Other assets Security deposits 68,157 66,638 Restricted cash 416,566 416,566 Goodwill 964,557 964,557 Intangible assets, net 4,884,249 4,892,215 Other assets 79,189 91,455 Total other assets 6,412,718 6,431,431 TOTAL ASSETS $16,444,578 $18,128,289 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Long-term debt, current portion $413,035 $566,567 Capital and equipment financing lease obligations, current portion 178,350 233,759 Accounts payable and accrued expenses 8,768,799 9,663,325 Liabilities of discontinued operations 13,314 15,829 Total current liabilities 9,373,498 10,479,480 Long-term liabilities Long-term debt, net of current portion 215,199 283,433 Capital lease/equipment obligations, net of current portion 5,102 10,922 Other long-term liabilities 617,176 659,271 Total long-term liabilities 837,477 953,626 Stockholders' equity (deficit) Preferred stock, Class A-1, A-2, A-3 & A-4 80 80 Common stock 357,630 299,078 Common stock, Class A - - Capital in excess of par value 122,245,548 120,402,691 Accumulated deficit (116,369,655) (114,006,666) Total stockholders' equity (deficit) 6,233,603 6,695,183 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $16,444,578 $18,128,289 FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA Three Months Ended March 31, 2008 2007 (Un-Audited) (Un-Audited) Net loss $(2,362,989) $(2,829,021) Loss from continuing operations (2,362,989) (2,829,021) Adjustments: Interest (income) expense, net 15,659 2,438 Depreciation and amortization 461,677 392,182 EBITDA (1,885,653) (2,434,401) Adjustments: (Gain) loss on debt forgiveness (634,991) - (Gain) loss on sale of other assets 537 - Communications expense 361,119 - Other taxes 108,131 101,623 Non cash compensation 114,347 171,326 Adjusted EBITDA $(1,936,510) $(2,161,452) CONTACT: Philip Turits 212-201-2407 pturits@fusiontel.com