8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act Of 1934

May 21, 2009	( May 15, 2009 )
Date of Report	( Date of earliest event reported )

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	001-32421	58-23420 21
( State or other jurisdiction of incorporation )	( Commission File Number )	( IRS Employer Identification No. )

420 Lexington Avenue, Suite 1718, New York, NY 10170

( Address of principal executive offices, including zip code )

Registrant's telephone number, including area code: (212) 201-2400

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2. below):
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act [17 CFR 240.14d-2(b)]
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act [17 CFR 240.13e-4(c)]

Forward – Looking Statements

This report contains forward-looking statements that can be identified by such terminology such as “believes”, “expects,” “potential,” “plans”, “suggests,” “may,” “should,” “could,” “intends,” or similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements. In particular, management’s expectations regarding future research, development and/or commercial results could be affected by, among other things, uncertainties relating to product development; availability of future financing; unexpected regulatory delays or government regulation generally; the success of third-party marketing efforts; our ability to retain third-party distributors; our ability to obtain or maintain patent and other proprietary intellectual property protection; and competition in general. Forward-looking statements speak only as to the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
 

Item 2.02     Results of Operations and Financial Condition.

On May 15, 2009, Fusion Telecommunications International Inc., (the “Company”) issued a press release entitled “Fusion Reports First Quarter 2009 Results”, relating to its financial results for its fiscal quarter ended March 31, 2009. A conference call relating to these financial results was held on May 15, 2009.
 

Item 1.01     Entry into a Material Definitive Agreement.

Item 2.03     Creation of a Direct Financial Obligation or an Obligation under an Off—Balance Sheet Arrangement of a Registrant.

On May 15, 2009 and May 18, 2009, the Company borrowed an aggregate amount of $50,000 from two Directors: Marvin S. Rosen and Philip D. Turits. Each promissory note evidencing the loans provides the lender the right to demand payment at any time of all unpaid principal and interest upon 10 (ten) days written demand and bears interest at the rate of ten percent (10%) per annum. Each note also grants the lender a collateralized security interest, pari passu with other lenders, in the Company’s accounts receivable. The proceeds of these loans are being used primarily for general corporate purposes. The Form of Promissory Note issued in these transactions is incorporated by reference as Exhibit 99.2 to this report.
 

Item 5.02     Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Departure of Directors

On May 16, 2009, Mr. Fred P. Hochberg resigned as a member of the Company’s Board of Directors as a result of his appointment by President Barack Obama as President and Chairman of the Export—Import Bank of the United States. Mr. Hochberg’s resignation was effective on May 16, 2009. Mr. Hochberg has been a valuable member of the Company’s Board of Directors since 2004. During his tenure he has served on the Compensation and Nominating Committee.
 
On May 18, 2009, Mr. Raymond E. Mabus resigned as a member of the Company’s Board of Directors as a result of his appointment by President Barack Obama as Secretary of the Navy. Mr. Mabus’ resignation was effective on May 18, 2009. Mr. Mabus has been a valuable member of the Company’s Board of Directors since 1999. During his tenure he has served on the Company’s Audit Committee and the Compensation and Nominating Committee.

Item 7.01     Regulation FD Disclosure.

The press releases attached as Exhibit 99.1 to this report, is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by Fusion under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01     Financial Statements and Exhibits.

(d) Exhibits
 

99.1	Press Release issued by Fusion Telecommunications International, Inc., dated May 15, 2009 entitled ““Fusion Reports First Quarter 2009 Results.”
99.2	Form of Promissory Note and Security Agreement (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 8–K filed with the Securities Exchange Commission on October 6, 2008)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report on Form 8-K to be signed on its behalf by the undersigned thereunto duly authorized.

	Fusion Telecommunications International, Inc.
	By: /s/ BARBARA HUGHES
	Barbara Hughes
May 21, 2009	as Chief Financial Officer

INDEX TO EXHIBITS

Exhibit Number	Description
99.1	Press Release issued by Fusion Telecommunications International, Inc., dated May 15, 2009 entitled ““Fusion Reports First Quarter 2009 Results.”

EX-99

Fusion Reports First Quarter 2009 Results

NEW YORK, May 15, 2009 - Fusion (Amex: FSN) today announced financial results for the quarter ended March 31, 2009.
 
Fusion reported Consolidated Revenues of $9.0 million for the quarter ended March 31, 2009. This represented a decrease of 20% compared to revenues of $11.2 million for the quarter ended March 31, 2008, and excluded revenues of $0.3 million from the Consumer segment which has now been reclassified to discontinued operations. Prior to the reclassification, the year over year revenue decrease was 19%. The change over the prior period was primarily attributable to a decrease in the Carrier segment; however, the Company's Corporate segment increased 252% from the first quarter of 2008.
 
Consolidated Gross Margin after the reclassification decreased to 5.9% for the first quarter of 2009, compared to 6.5% for the first quarter of 2008. Prior to the reclassification, the Consolidated Gross Margin was 6.3% for the first quarter of 2009 compared to 7.1% for the first quarter of 2008.

Selling, General and Administrative costs improved $0.5 million, or 16% for the first quarter of 2009 compared to the first quarter of 2008. The improvement was primarily attributable to the Company's continuing focus on cost-containment and efforts to maximize the infrastructure efficiencies that have been ongoing for the past year. 

For the quarter ended March 31, 2009, Adjusted EBITDA loss (earnings before interest, taxes, depreciation, amortization, and specific non-recurring and non-cash adjustments) increased $0.2 million, or 13%, to ($1.9) million, compared to Adjusted EBITDA of ($1.7) million for first quarter ended 2008.

Fusion also reported an increase in Net Loss applicable to Common Stockholders of ($3.2 million) or ($0.07) per share quarter ended March 31, 2009, compared to a Net Loss applicable to Common Stockholders of ($2.5) million or ($0.08) per share for the quarter ended March 31, 2008. The primary reason for this increase was that in the first quarter of 2008 there was a gain on debt forgiveness of $0.6 million. Excluding that gain, the Net Loss applicable to Common Shareholders in the first quarter of 2008 would have also been ($3.2 million), representing no significant change in the year over year comparison.

As of March 31, 2009, the Company had current assets of $2.5 million compared to $4.2 million as of December 31, 2008. 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 March 31, 2009 was ($7.2) million deficit, compared to ($9.5) million deficit as of December 31, 2008. The primary reason for the change was the increase in the accumulated deficit of $(3.0) million, offset by additional equity investments of $0.7 million.

Commenting on the results, Matthew Rosen, Chief Executive Officer of Fusion, said, "Since the beginning of 2009, Fusion has successfully raised an additional $2.4 million, but continued to experience working capital and resource constraints, which, along with current global economic conditions, negatively impacted the Company's first quarter financial results. Additionally, the first quarter of 2009 has been one of change for Fusion, as we finalized our plans to exit the Consumer business and restructure the Company. With the restructuring largely behind us, our primary focus is continuing to drive the growth of the corporate and carrier business segments and secure the capital necessary to implement our business plan. With this focus, we look forward to improved financial results in the coming quarters."

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. ET today. The conference call can be accessed by dialing 877-604-9668. A replay of the call will be available through May 18, 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: 8389574. 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.
 
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 STATEMENT OF OPERATIONS
		Three Months Ended March 31,
		2009		2008
Revenues	$	9,002,300	$	11,207,002
Operating expenses:
Cost of revenues		8,467,891		10,481,360
Depreciation and amortization		489,471		447,680
Selling, general and administrative expenses		2,470,280		2,953,464
Advertising and Marketing		7,496		11,452
Total operating expenses		11,435,138		13,893,956
Operating loss		(2,432,838)		(2,686,954)
Other income (expense)
Interest income (expense), net		(95,781)		(15,659)
Gain (loss) on debt forgiveness		—		634,991
Gain (loss) on sale of investment in Estel		—		—
Loss from investment in Estel		—		—
Other		2,215		(1,237)
Total other income (expense)		(93,566)		618,095
Loss from continuing operations		(2,526,404)		(2,068,859)
Income (loss) from discontinued operations		(479,811)		(294,130)
Net loss	$	(3,006,215)	$	(2,362,989)
Losses applicable to common stockholders
Loss from continuing operations	$	(2,526,404)	$	(2,068,859)
Preferred stock dividends in arrears		(157,710)		(159,462)
Net loss applicable to common stockholders
from continuing operations		(2,684,114)		(2,228,321)
Income from discontinued operations		(479,811)		(294,130)
Net loss applicable to common stockholders	$	(3,163,925)	$	(2,522,451)
Basic and diluted net loss per common share:
Loss from continuing operations	$	(0.06)	$	(0.07)
Income (loss) from discontinued operations	$	(0.01)	$	(0.01)
Net loss applicable to common stockholders	$	(0.07)	$	(0.08)
Weighted average shares outstanding
Basic and diluted		47,880,802		32,818,945

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

		March 31, 2009		December 31, 2008
ASSETS
Current assets
Cash and cash equivalents	$	241,664	$	427,433
Accounts receivable, net of allowance		1,746,056		3,240,670
Prepaid expenses and other current assets		311,000		261,863
Assets held for sale		72,286		—
Assets of Discontinued Operations		135,785		302,533
Total current assets		2,506,791		4,232,499
Property and equipment, net		3,325,598		3,829,669
Other assets
Security deposits		51,042		50,241
Restricted cash		416,566		416,566
Intangible assets, net		807,773		810,908
Other assets		50,852		127,908
Total other assets		1,326,233		1,405,623
TOTAL ASSETS	$	7,158,622	$	9,467,791
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Long-term debt, current portion	$	3,522,992	$	2,362,992
Capital and equipment financing lease obligations, current portion		126,502		122,960
Accounts payable and accrued expenses		9,438,723		10,039,015
Liabilities of discontinued operations		226,116		261,972
Total current liabilities		13,314,333		12,786,939
Long-term liabilities
Other long-term liabilities		911,190		1,445,431
Total long-term liabilities		911,190		1,445,431
Stockholders' equity
Preferred stock, Class A-1, A-2, A-3 & A-4		80		80
Common stock		499,689		457,500
Capital in excess of par value		125,046,272		124,384,568
Accumulated deficit		(132,612,942)		(129,606,727)
Total stockholders' equity		(7,066,901)		(4,764,579)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	7,158,622	$	9,467,791

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
		Three Months Ended
		March 31,
		2009		2008
Net loss	$	(3,006,215)	$	(2,362,989)
Income from discontinued operations		479,811		294,130
Loss from continuing operations		(2,526,404)		(2,068,859)
Adjustments:
Interest (income) expense, net		95,781		15,659
Depreciation and amortization		489,471		447,680
EBITDA		(1,941,152)		(1,605,520)
Adjustments:
(Gain) loss on settlements of debt		—		(634,991)
(Gain)/loss on disposal of fixed assets		—		537
Communication charges		—		361,119
Other taxes		33,846		108,131
Non cash compensation		34,945		114,347
Adjusted EBITDA	$	(1,872,361)	$	(1,656,377)

FUSION CONTACT:
Philip Turits, Treasurer
212-201-2407
pturits@fusiontel.com

 

Damon Testaverde, Managing Director
Network Financial Securities
732-758-9001
ddtestaverde@netw1.com