Condor Announces 2017 Second Quarter Results

CALGARY, AB—(Marketwired – August 14, 2017) – Condor Petroleum Inc. (“Condor” or the “Company”) (TSX: CPI), a Canadian based oil and gas company focused on exploration and production activities in Turkey and Kazakhstan, is pleased to announce the release of its unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2017, together with the related management's discussion and analysis. These documents will be made available under Condor's profile on SEDAR at www.sedar.com and on the Condor website at www.condorpetroleum.com. All financial amounts in this news release are presented in Canadian dollars, unless otherwise stated.

Q2 2017 Highlights

  • Construction of the Poyraz Ridge gas processing facility is 98% complete. Construction of the 6″ gas sales pipeline is continuing with production expected to commence in the fourth quarter of 2017.
  • The Poyraz West 4 development well was drilled to 2,164 meters. The well is currently being completed and will be tied into the processing facilities. No paraffin issues have been encountered on prior tests of this upper Gazhanedere interval.
  • The Yakamoz 1 exploration well in Turkey was drilled to a total depth of 2,250 meters and encountered numerous gas shows while drilling, including a gas influx. However, insufficient reservoir–quality pay was encountered at this location and the well was abandoned.
  • Production from Shoba and Taskuduk in Kazakhstan averaged 353 bopd for the three months ended June 30, 2017 (2016: nil) despite temporary weather related road bans which constrained production in April 2017. Once the bans were lifted, production averaged 525 bopd during the three months from May to July 2017.
  • The Company has referred the Zharkamys exploration contract extension case to the Supreme Court of Kazakhstan. The ongoing court proceedings related to Zharkamys do not affect the Company's Shoba and Taskuduk oilfields which are each governed by separate production contracts.
  • During the first quarter of 2017, the Company established and received funds from a USD 10.0 million secured non–revolving credit facility which bears interest at 14% and matures on January 31, 2020 and issued to the lender a warrant certificate exercisable into one million common shares of Condor at $2.35 per share on or before January 31, 2020.
  • The net loss for the three months ended June 30, 2017 of $4.1 million (2016: $3.0 million) includes $1.3 million of exploration and evaluation expense related to the Yakamoz 1 well drilled in the second quarter of 2017 and for the six months ended June 30, 2017 of $64.0 million (2016: $7.1 million) which includes $56.6 million of exploration and evaluation expense pertaining to the derecognition of the Zharkamys contract in the first quarter of 2017.

Operations

The Shoba and Taskuduk oilfields in Kazakhstan produced 32,099 barrels of oil or an average of 353 bopd for the three months and 69,747 barrels of oil or an average of 385 bopd for the six months ended June 30, 2017. Production was constrained in April 2017 due to temporary spring break up road bans that limited trucking and once the road bans were lifted, production averaged 525 bopd during the three months from May to July 2017. There was no production in the three or six months ended June 30, 2016.

In Turkey, construction of the Poyraz Ridge gas processing facility is 98% complete. Construction of the 6″ gas sales pipeline is 35% complete and progress has been impacted by delays in approvals for portions of the surface right–of–way access rights. Approval of all pipeline surface access rights has now been obtained and construction is continuing. Production is expected to commence in the fourth quarter of 2017 at an initial rate of 10 MMscf/day.

The Poyraz West 4 development well was drilled to 2,164 meters. The well is currently being completed and will be tied into the processing facilities. No paraffin issues have been encountered on prior tests of this upper Gazhanedere interval.

Paraffin mitigating equipment was installed at the Poyraz 3 well and successfully prevented blockage in the tubing string although sustained commercial gas flow rates were not realized from the zone completed. A workover is planned to complete another gas bearing zone.

The Yakamoz 1 exploration well was drilled to a total depth of 2,250 meters and encountered numerous gas shows while drilling, including a gas influx. However, insufficient reservoir–quality pay was encountered at this location and the well was abandoned. The well confirmed that an active petroleum system extends to the north and west of Poyraz Ridge and, as predicted, an extensive fracture system prevails along the Miocene–Eocene sub–thrust trend. In addition, the well has provided critical structural and stratigraphic information that can be tied back to the regional 2D seismic as it relates to trap, reservoir and seal within this fairway. Condor is currently integrating this data into the geological model in order to high grade prospective areas for future 3D seismic and additional exploration drilling along and sub–parallel to this trend and the Yakamoz structure remains prospective.

The net loss for the three months ended June 30, 2017 of $4.1 million (2016: $3.0 million) includes $1.3 million of exploration and evaluation expense related to the Yakamoz 1 well drilled in the second quarter of 2017 and for the six months ended June 30, 2017 of $64.0 million (2016: $7.1 million) which includes $56.6 million of exploration and evaluation expense pertaining to the derecognition of the Zharkamys contract in the first quarter of 2017. Cash used in operations amounted to $2.4 million for three months ended June 30, 2017 compared to $2.9 million in the second quarter of 2016. Capital expenditures for the three months ended June 30, 2017 amounted to $6.3 million (2016: $2.1 million) and for both periods relates mainly to Poyraz Ridge field development in Turkey.

The Company's Zharkamys exploration contract (“Zharkamys Contract”) with the Ministry of Energy of the Government of Kazakhstan (“Ministry”) was due to expire on December 14, 2016. Prior to this date, the Kazakhstan Chamber of International Commerce and subsequently the Kazakhstan Civil Court (“Civil Court”) confirmed that a force majeure event had occurred which, under Kazakhstan subsurface use law, can be the basis for the Zharkamys Contract validity period to be extended for a period of 630 days. In May 2017, the Kazakhstan Court of Appeal (“Court of Appeal”), pursuant to the appeal filed by the Ministry, released its ruling dated April 14, 2017 that the force majeure event is not recognized and reversed the decision of the Civil Court. As a result of the Court of Appeal ruling, there is uncertainty regarding the Company's future legal rights to have the Zharkamys Contract extended and the related exploration and evaluation assets were derecognized.

The Company has referred the case to the Supreme Court of Kazakhstan (“Supreme Court”), the country's highest legal body. A positive ruling by the Supreme Court to uphold the Civil Court force majeure ruling would likely allow the Company to apply to the Ministry for the 630 day Zharkamys Contract extension. A negative ruling would likely result in the Zharkamys Contract reverting back to the Ministry. The on–going court proceedings do not affect the Company's production rights for the Shoba and Taskuduk oilfields which are each governed by separate production contracts.

During the first quarter of 2017 the Company established and received funds from a USD 10.0 million secured non–revolving credit facility which bears interest at 14% and matures on January 31, 2020 (“Credit Facility”). Interest for the first year of the Credit Facility is due on January 31, 2018 followed by eight payments of USD 1.25 million of principal plus interest due quarterly in arrears. Condor also issued to the lender a warrant certificate exercisable into one million common shares of Condor at $2.35 per share on or before January 31, 2020. The loan proceeds are available to fund capital expenditures related to drilling, infrastructure and workovers at Poyraz Ridge and for general corporate purposes.

FORWARD–LOOKING STATEMENTS

Certain statements in this news release constitute forward–looking statements under applicable securities legislation. Such statements are generally identifiable by the terminology used, such as “anticipate'', “appear”, “believe'', “intend”, “expect”, “plan”, “estimate”, “budget'', “outlook'', “scheduled”, “may”, “will”, “should”, “could”, “would”, “in the process of” or other similar wording. Forward–looking information in this news release includes, but is not limited to, information concerning: the timing and ability to develop the gas reserves, construct the required infrastructure and to commence producing and selling gas; the timing and ability to conduct exploration and development operations and activities; the expectations, timing and costs of exploration and development activities; the ability of the drilled wells to become future gas producing wells; uncertainty regarding the Company's future legal rights to have the Zharkamys Contract extended; the timing of and ability to maintain the Zharkamys Contract; the timing, results and impact of any Supreme Court ruling and the impact, if any, on the Shoba and Taskuduk production contracts; historical production and testing rates may not be indicative of future production rates, capabilities or ultimate recovery; projections and timing with respect to crude oil and gas production; historical oil and gas prices may not be indicative of future oil and gas prices; the timing and ability to obtain various approvals for the Company's exploration and development activities; the ability to confirm an active petroleum system extends beyond Poyraz Ridge and that a fracture system prevails along the Miocene–Eocene sub–thrust trend; the ability to tie structural and stratigraphic information back to regional seismic; the timing and ability to integrate data into the geological model and high grade prospective areas for future seismic and drilling; the prospectivity of the Yakamoz structure; the timing and ability to apply wax production treatment measures; the timing and ability to obtain future funding on favourable terms; and the timing and ability to access oil and gas pipelines and oil and gas domestic and export sales markets.

Forward–looking statements involve the use of certain assumptions that may not materialize or that may not be accurate and are subject to known and unknown risks and uncertainties and other factors, which may cause actual results or events to differ materially from those expressed or implied by such information. Condor's operations are also subject to certain other risks and uncertainties inherent with oil and gas operations and additional information on these and other factors that could affect Condor's operations and financial results. These factors are discussed in greater detail under Risk Factors – Risks Relating to the Company in Condor's Annual Information Form, which may be accessed through the SEDAR website (www.sedar.com). The Company believes that the expectations reflected in these forward–looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward–looking statements should not be unduly relied upon. The Company does not undertake any obligation to update or to revise any of the forward–looking information, except as required by applicable law.

ABBREVIATIONS

The following is a summary of abbreviations used in this news release:

bopd   Barrels of oil per day
     
Q   Quarter
     
scf   Standard cubic feet
     
USD   United States dollars
     
%   Percent
     

The TSX does not accept responsibility for the adequacy or accuracy of this news release.

Gran Colombia Gold Reports Second Quarter 2017 Results; Announces Mine Life Extension at Its Segovia Operations

TORONTO, ON—(Marketwired – August 14, 2017) – Gran Colombia Gold Corp. (TSX: GCM) announced today the release of its unaudited interim consolidated financial statements and accompanying management's discussion and analysis (MD&A) for the three and six months ended June 30, 2017. All financial figures contained herein are expressed in U.S. dollars (“USD”) unless otherwise noted.

Lombardo Paredes Arenas, Chief Executive Officer of Gran Colombia, commenting on the Company's results for the first half of 2017, said, “As we reach the midpoint of 2017, we are pleased to report that our operating and financial results have been tracking to our guidance for the year. Our exploration effort in 2016 has paid off with a four–year extension of the expected mine life at our Segovia Operations to 2026 and we are now 40% of the way through our 2017 drilling program. We believe that our investment and social programs in Segovia over the last seven years have positively impacted the local community, respecting the role that responsible mining plays in the local culture and economy. The recent civil disruption is not an issue caused by Gran Colombia. It is the response by illegal miners to the Colombian government's recent regulations aimed at illegal mining in the country, including restrictions on the use of mercury. While we hope that the Colombian government will soon be able to restore order in the community so that our people and their families can safely go about their daily lives and we can return to normal operations, we are continuing our negotiations to formalize illegal mining within our title.”

Second Quarter and First Half 2017 Highlights

  • Gran Colombia has updated the life–of–mine (“LOM”) plan for its Segovia Operations to incorporate the Mineral Resource estimate announced on April 19, 2017, extending the expected mine life at Segovia by four years to 2026. Measured and Indicated Resources at the Segovia Operations increased to 2.9 million tonnes at a grade of 12.0 g/t totalling 1.1 million ounces of gold, up 174% compared to the Mineral Resource estimate as of December 31, 2016. Gran Colombia also added 0.4 million ounces of gold to the Inferred category at Segovia bringing total Inferred Mineral Resources to 3.1 million tonnes at an average grade of 9.9 g/t representing 1.0 million ounces of gold. Gran Colombia is continuing its exploration campaign at Segovia in 2017 with approximately 40% of the planned 20,000 meters drilling program completed in the first half of the year. The mine life extension, coupled with an increase in the expected long–term gold price to $1,250 per ounce, resulted in a $35.5 million after–tax reversal of impairment related to the Segovia Operations in the second quarter of 2017.
  • On May 31, 2017, Gran Colombia extended the maturity date for $47.0 million of its Senior Secured Convertible Debentures due 2020 (the “2020 Debentures”) to 2024.
  • Gran Colombia's adjusted EBITDA of $21.3 million in the second quarter of 2017 represented a 16% increase over the second quarter last year. This brings the trailing 12–months' adjusted EBITDA to $71.0 million, up 8% from the end of 2016. See the Company's MD&A for the computation of this non–IFRS measure.
  • Gran Colombia generated $3.2 million of Excess Cash Flow (see the Company's MD&A for the computation) in the second quarter of 2017, bringing the total for the first half of 2017 to $5.5 million, as expected.
  • Gran Colombia has continued to execute its strategy to aggressively reduce its Senior Debentures with its Excess Cash Flow, repurchasing and cancelling $1.7 million of 2020 Debentures under its Normal Course Issuer Bid (“NCIB”) in the second quarter of 2017. Subsequent to June 30, 2017, the Company repurchased and cancelled an additional $0.7 million of 2020 Debentures and completed a $3.0 million partial redemption at par of the 2020 Debentures on July 31, 2017. Collectively, these actions reduced the potential dilution from conversion of the 2020 Debentures by approximately 2.8 million shares, equivalent to approximately 3% of total shares on a fully diluted basis (excluding stock options and warrants), and saves future interest costs of about $0.8 million. Gran Colombia intends to continue using the sinking fund balance to repurchase 2020 Debentures in the open market under the NCIB, when available, or to make further partial redemptions.
  • Gold production in the second quarter of 2017 totalled 46,075 ounces, up 21% from the second quarter last year led by continuing strong performance at its Segovia Operations. For the first half of 2017, gold production increased by 22% over the first half last year to a total of 85,083 ounces. The trailing 12–months' total gold production as of the end of June 2017 stands at 165,073 ounces, up 10% over 2016's annual gold production and above the Company's production guidance for the 2017 calendar year of a total of 150,000 to 160,000 ounces. Gold production in July 2017 totalled 14,980 ounces. However, production in the first half of August 2017 has been adversely impacted by a civil disruption in Segovia and Remedios convened by illegal miners commencing in late July, preventing many of the Company's personnel from safely reporting to work. The Company has implemented its contingency plans during this civil disruption, including ensuring sufficient cash is set aside to meet the interest payments on the Senior Debentures at the end of August. Certain capital projects have been suspended until the civil disruption subsides and Gran Colombia is currently able to conduct some mining, processing and maintenance activities until order is restored by the Colombian government. Negotiations between Gran Colombia and representatives of the Cogote and San Nicolas mines operating in the Company's mining title at Segovia are continuing at this time.
  • Revenue has been positively impacted in 2017 by the increased level of gold production compared with last year, up 17% in the second quarter of 2017 to $56.0 million and up 23% in the first half of 2017 to $101.7 million.
  • Gran Colombia's total cash costs and all–in sustaining costs (“AISC”) were also positively impacted in the second quarter of 2017 by the increased level of production, averaging $676 per ounce and $884 per ounce, respectively, bringing the averages for the first half of 2017 to $709 per ounce and $910 per ounce, respectively. The Company continues to expect that its total cash cost and AISC averages for the full year should remain below $720 and $900 per ounce sold according to its guidance for 2017, provided there is no prolonged adverse impact on production from the civil disruption. See the Company's MD&A for the computation of these non–IFRS measures.
  • Net income for the second quarter of 2017 was $36.2 million, or $1.77 per share, compared with $0.1 million, or $0.01 per share, in the second quarter last year. For the first half of 2017, net income was $35.4 million, or $1.77 per share, compared with $10.9 million, or $1.40 per share, in the first half last year. Net income for the second quarter and first half of 2017 includes a $35.5 million after–tax reversal ($1.73 per share) of impairment related to the Segovia Operations. Net income in the first half of 2016 included a $14.5 million after–tax gain on financial instruments.
  • Adjusted net income for the second quarter of 2017 was $4.1 million, or $0.20 per share, compared with $3.9 million, or $0.42 per share, in the second quarter last year. For the first half of 2017, adjusted net income increased to $7.2 million, or $0.36 per share, compared with $4.1 million, or $0.53 per share, in the first half last year. See the reconciliation in the Company's MD&A for the computation of this non–IFRS measure. The increase in adjusted EBITDA combined with reductions in finance costs and wealth tax, net of an increase in adjusted income taxes, in 2017 were the primary drivers behind the improvement in adjusted net income in the first half of 2017.

Financial and Operating Summary

A summary of the financial and operating results for the second quarter and first half of 2017 and 2016 follows:

         
    Second Quarter   First Half
    2017   2016   2017   2016
                         
Operating data:                        
  Gold produced (ounces)     46,075     38,229     85,083     69,718
  Gold sold (ounces)     45,179     38,902     83,613     68,588
  Average realized gold price ($/oz sold)   $ 1,225   $ 1,216   $ 1,201   $ 1,185
  Total cash costs ($/oz sold) (1)     676     680     709     682
  All–in sustaining costs ($/oz sold) (1)     884     811     910     802
                         
Financial data ($000's, except per share amounts):            
  Revenue   $ 55,973   $ 48,014   $ 101,690   $ 82,484
  Adjusted EBITDA (1)     21,263     18,299     34,854     29,885
  Reversal of impairment charges, net of tax     35,460         35,460    
  Net income     36,172     65     35,388     10,891
  Basic and diluted (loss) income per share (2)     1.77     0.01     1.77     1.40
  Adjusted net income (1)     4,123     3,857     7,207     4,108
  Basic and diluted adjusted income per share (1)(2)     0.20     0.42     0.36     0.53
  Excess Cash Flow (1)     3,228     2,276     5,504     2,299
(1)   Refer to “Additional Financial Measures” on pages 21–24 of the Company's MD&A.
(2)   Per share information has been adjusted to reflect the 1:15 consolidation completed on April 25, 2017.
     
         
    June 30,   December 31,
    2017   2016
             
Balance sheet ($000's):            
  Cash and cash equivalents   $ 3,008   $ 2,783
  Cash in trust for Senior Debentures (3)     4,627     537
  Senior debt (4)     90,609     84,602
  Other debt, including current portion     879     1,652
(3)   Represents amounts deposited into sinking funds for the Senior Debentures, net of cash used for the NCIBs.
(4)   Represents carrying amounts, which are at a discount to principal amounts, for the Senior Debentures. At June 30, 2017, the aggregate principal amounts of the 2018 Debentures, 2020 Debentures and 2024 Debentures issued and outstanding were $46.0 million, $52.5 million and $47.0 million, respectively (December 31, 2016 – $49.7 million, $101.2 million and Nil, respectively).
     

Segovia Operations

In light of the updated Mineral Resource estimate for the Segovia Operations announced in April 2017, the Company collaborated with SRK Consulting (USA) Inc. (“SRK”) to update its internal LOM plan for Segovia. The updated LOM plan foresees a total of 4.1 million tonnes of material with an average head grade of 8.8 g/t being processed over an extended mine life through the end of 2026, four years longer than the previous LOM plans. Over this mine life, the updated LOM plan expects a total of 1.0 million ounces of gold to be produced at an average LOM total cash cost of $697 per ounce and an AISC (excluding corporate G&A) of $896 per ounce. At an expected long–term gold price of $1,250 per ounce, total LOM undiscounted after–tax free cash flow from mining operations amounts to $210 million. SRK is completing a NI 43–101 independent report that includes an updated Preliminary Economic Assessment for the Segovia Operations based on this updated LOM plan that is expected to be filed on the Company's website and SEDAR profile within the next 45 days.

In the second quarter of 2017, tonnes processed at the Segovia Operations averaged 842 tpd, a 9% increase over the second quarter last year. In addition, head grades in the Company–operated mining areas improved to an average of 11.3 g/t in the second quarter of 2017, up from an average of 4.4 g/t in the second quarter last year, as a result of mining higher grade stopes in the Providencia mine this year. This brought the overall head grade for the Segovia Operations to an average of 15.9 g/t in the second quarter of 2017 compared with 13.8 g/t in the second quarter last year. Segovia's gold production of 40,228 ounces in the second quarter of 2017 brought the total for the first half of 2017 to 72,996 ounces, up 26% over the same period last year. The trailing 12 months' total gold production as of the end of June 2017 at Segovia was 141,374 ounces, up 12% over 2016's annual gold production and above the Company's production guidance range for the 2017 calendar year at Segovia of 126,000 to 134,000 ounces. Gold production in July 2017 was 12,651 ounces. However, production in the first half of August 2017 has been adversely impacted by the civil disruption and the impact of the civil disruption on 2017's full year production guidance cannot be assessed at this time.

Segovia's total cash costs were $620 per ounce in the second quarter of 2017, down from $690 in the first quarter of 2017 reflecting the favorable impact on fixed costs on a per ounce basis of the 23% increase in quarterly gold production at the Segovia Operations. Segovia's second quarter 2017 total cash cost of $620 per ounce was slightly better than the $627 per ounce total cash cost reported for the second quarter of last year as the benefit of this year's production increase was partially offset by the year–over–year appreciation of the Colombian peso (“COP”) against the U.S. dollar.

The Company's AISC for the first half of 2017 included $12.6 million of sustaining capital expenditures, equivalent to $150 per ounce sold and $76 per ounce higher than the first half of 2016 due to the increased level of exploration, development and capital investment in the Segovia Operations this year. Sustaining capital expenditures in the first half of 2017 of $11.9 million at the Segovia Operations, equivalent to $142 per ounce sold, included (i) $4.8 million for exploration and mine development, (ii) $3.6 million for the mines including completion of a ventilation shaft at the Providencia mine, commencement of ventilation improvements at the El Silencio mine, installation of mine refuge stations, mine equipment and other infrastructure upgrades, (iii) $1.8 million for further upgrades of equipment in the Maria Dama plant and initiation of the project to expand the tailings storage facility, and (iv) $1.1 million to commence installation of a water treatment plant at the Maria Dama plant site to reduce the environmental discharge fees being incurred by the Company.

Marmato Operations

At the Marmato Operations, gold production continued to be steady with 5,847 ounces produced in the second quarter of 2017, bringing the total for the first half of 2017 to 12,087 ounces, up 2% over the same period last year. This brings Marmato's trailing 12 months' gold production at the end of June 2017 to 23,699 ounces, up 1% over its 2016 annual production. July's production amounted to 2,329 ounces and the Company continues to expect Marmato's annual gold production for 2017 will range between 24,000 and 26,000 ounces.

Total cash costs at the Marmato Operations were also steady in the second quarter of 2017 at $1,062 per ounce, but were $129 per ounce over its total cash cost in the second quarter last year as a result of the year–over–year COP appreciation and the impact on total cash costs on a per ounce basis of the impact on gold production of the lower head grades in the second quarter of 2017 compared with the second quarter last year.

Outlook

The Company produced a total of 100,063 ounces of gold production through the end of July 2017, keeping it on track to produce a total of 150,000 to 160,000 ounces of gold for the full year compared with the 149,708 ounces produced in 2016. However, the recent civil disruption in Segovia and Remedios has adversely impacted mining and plant operations at Segovia in the first half of August. Although the Company is able to conduct some operations at Segovia at this time, there can be no assurance regarding the duration of the current disruption or the extent of the impact that it will continue to have on production and cash flow during the balance of 2017.

The Company's total cash cost and AISC averaged $709 and $910 per ounce sold, respectively, in the first half of 2017. These results were in line with the Company's expectations and the Company continues to expect, provided there is no prolonged adverse impact on production through the balance of the year, that its total cash cost and AISC averages for the full year 2017 will remain below $720 and $900 per ounce sold, respectively.

The Company has deposited a total of $5.5 million representing its Excess Cash Flow for the first half of 2017 into the sinking funds for the Senior Debentures. In 2017, provided gold prices remain at least at the current levels and there is no prolonged adverse impact on operations from the civil disruption in Segovia, the Company expects to generate Excess Cash Flow for the full year in the order of $16 million and, to the extent possible, will use the cash in the sinking fund to make open market repurchases of the 2020 Debentures for cancellation. The Company also completed a $3.0 million partial redemption at par of the 2020 Debentures on July 31, 2017 and will continue to consider, as appropriate, additional partial redemptions going forward as a means to reduce its 2020 Debentures ahead of maturity.

Webcast

As a reminder, the Company will host a conference call and webcast on Tuesday, August 15, 2017 at 9:30 a.m. Eastern Time to discuss the results.

Webcast and call–in details are as follows:

Live Event link: http://edge.media–server.com/m/p/urfvuni7
International: 1 (514) 841–2157
North America Toll Free: 1 (866) 215–5508
Colombia Toll Free: 01 800 9 156 924
Conference ID: 45399427

A replay of the webcast will be available at www.grancolombiagold.com from Tuesday, August 15, 2017 until Thursday, September 14, 2017.

About Gran Colombia Gold Corp.

Gran Colombia is a Canadian–based gold and silver exploration, development and production company with its primary focus in Colombia. Gran Colombia is currently the largest underground gold and silver producer in Colombia with several underground mines in operation at its Segovia and Marmato Operations. Gran Colombia is continuing its expansion and modernization activities at its high–grade Segovia Operations.

Additional information on Gran Colombia can be found on its website at www.grancolombiagold.com and by reviewing its profile on SEDAR at www.sedar.com.

Cautionary Statement on Forward–Looking Information

This news release contains “forward–looking information”, which may include, but is not limited to, statements with respect to anticipated business plans or strategies. Often, but not always, forward–looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward–looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Gran Colombia to be materially different from any future results, performance or achievements expressed or implied by the forward–looking statements. Factors that could cause actual results to differ materially from those anticipated in these forward–looking statements are described under the caption “Risk Factors” in the Company's Annual Information Form dated as of March 30, 2017, which is available for view on SEDAR at www.sedar.com. Forward–looking statements contained herein are made as of the date of this press release and Gran Colombia disclaims, other than as required by law, any obligation to update any forward–looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward–looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward–looking statements.

Primero to Delist From the NYSE; Shares Continue to Trade on the Toronto Stock Exchange

TORONTO, ON—(Marketwired – August 14, 2017) – Primero Mining Corp. (“Primero” or the “Company”) (TSX: P) (NYSE: PPP) today announces that it has received formal notification from the New York Stock Exchange (“NYSE”) of its intention to initiate delisting procedures of the Company's common shares.

The NYSE has determined that the Company is no longer suitable for listing based on “abnormally low” price levels, pursuant to Section 802.01D of the Listed Company Manual. Primero will not seek an appeal to the NYSE's decision. The NYSE will file Form 25 (Notification of Removal from Listing and/or Registration Under Section 12(b) of the Securities Exchange Act of 1934) with the U.S. Securities and Exchange Commission (“SEC”).

The Company's common shares trade on the Toronto Stock Exchange (“TSX”) under symbol “P”.

About Primero

Primero Mining Corp. is a Canadian–based precious metals producer that owns 100% of the San Dimas gold–silver mine and the Cerro del Gallo gold–silver–copper development project in Mexico and 100% of the Black Fox mine and adjoining properties in the Township of Black River‐Matheson near Timmins, Ontario, Canada.

Primero's website is www.primeromining.com.

Attachment Available: http://www.marketwire.com/library/MwGo/2017/8/14/11G144163/PR18–17_NYSE_Delisting_Final–4b407c7a55e3a9508d5084ca3f36de68.pdf

Difference Capital Announces Resignation of Director

TORONTO, ON—(Marketwired – August 14, 2017) – Difference Capital Financial Inc. (“DCF” or the “Company”) (TSX: DCF) (TSX: DCF.DB), announces today the resignation of John Albright as director of the Company. Mr. Albright has resigned from the board of directors of the Company (the “Board”) in order to focus his efforts on his other commitments. Mr. Albright had served as a director of the Company since June 2012.

“On behalf of the Board and the entire DCF team, I would like to thank John for serving on our Board over the past five years,” commented Michael Wekerle, Executive Chairman of the Company. “John's contributions on the Board, Corporate Governance, Compensation and Nominating Committee and on our Audit Committee were highly valued. We wish him all the best in his future endeavors.”

With the resignation of Mr. Albright, the Board currently consists of the following four individuals:

Corey Delaney – Independent Director
Wayne Gudbranson – Independent Director
Henry Kneis – CEO
Michael Wekerle – Executive Chairman

About Difference Capital Financial Inc.

Difference Capital Financial Inc. invests in and advises growth companies. We leverage our capital market expertise to help unlock the value in technology, media and healthcare companies as they approach important milestones in their business lifecycle.

Bluegreen Vacations Acclaimed Among Achievers 50 Most Engaged Workplaces(TM) in North America

FORT LAUDERDALE, FL—(Marketwired – August 14, 2017) – BBX Capital Corporation (NYSE: BBX) (OTCQX: BBXTB) (“BBX Capital”) and its wholly–owned subsidiary, Bluegreen Corporation (“Bluegreen Vacations”), announced today that Bluegreen Vacations has been acclaimed among Achievers 50 Most Engaged Workplaces™ in North America. The annual award, issued by Achievers, an industry leading provider of employee recognition and engagement solutions, recognizes top employers that display leadership and innovation in engaging their workforces.

The Achievers 50 Most Engaged Workplaces™ Awards are judged by an esteemed panel of academics and thought leaders in the field of employee engagement, including representatives of the Society for Human Resource Management (SHRM), HR Technology Conference and HRO Today. The judges evaluated each applicant company based on the Eight Elements of Employee Engagement™: Communication, Leadership, Culture, Rewards & Recognition, Professional & Personal Growth, Accountability & Performance, Vision & Values and Corporate Social Responsibility.

“This is the second time Bluegreen Vacations has been acknowledged as one of Achievers 50 Most Engaged Workplaces™ in North America and we are proud to receive this recognition again,” said Susan Saturday, Chief Human Resources Officer of Bluegreen Vacations. “Our associates are at the core of our success and work tirelessly to preserve the fantastic culture that our team has built.”

About Bluegreen Corporation: Founded in 1966 and headquartered in Boca Raton, Florida, Bluegreen Vacations is a sales, marketing and management company, focused on the vacation ownership industry. Bluegreen manages, markets and sells the Bluegreen Vacation Club, a flexible, points–based, deeded vacation ownership plan with more than 200,000 owners, 66 resorts, and access to more than 4,300 resorts worldwide. Bluegreen Vacations also offers a portfolio of comprehensive, fee–based resort management, financial services, and sales and marketing services, to or on behalf of third parties. For more information, please visit www.BluegreenVacations.com.

About BBX Capital Corporation:
BBX Capital Corporation (NYSE: BBX) (OTCQX: BBXTB), formerly BFC Financial Corporation, is a diversified holding company whose principal activities are its ownership of Bluegreen Corporation and, through its Real Estate and Middle Market Divisions, the acquisition, ownership and management of joint ventures and investments in real estate and real estate development projects and middle market operating businesses. As of June 30, 2017, BBX Capital had total consolidated assets of $1.5 billion, shareholders' equity of $486.5 million, and total equity of $533.5 million. At June 30, 2017, BBX Capital's book value per share was $5.01 compared to $4.61 at June 30, 2016. For more information, please visit www.BBXCapital.com.

Avaya Reports Third Quarter Fiscal 2017 Financial Results

SANTA CLARA, CA—(Marketwired – August 14, 2017) –

Third Quarter Fiscal 2017

  • Revenue of $803 million
  • Gross margin 61.0%, non–GAAP gross margin 61.6%
  • Operating loss of $44 million, non–GAAP operating income of $156 million or 19.4% of revenue
  • Adjusted EBITDA(1) of $204 million or 25.4% of revenue, a record percentage of revenue for a third fiscal quarter
  • Positive cash flow from operations for the third quarter and nine months ended June 30, 2017

Avaya reported financial results for the third fiscal quarter ended June 30, 2017.

Total revenue for the third quarter was $803 million, down $1 million compared to the prior quarter and down $79 million year–over–year primarily as a result of lower demand for products and services primarily due to extended procurement cycles resulting from the chapter 11 filing. Non–GAAP gross margin was 61.6%, which compares to 60.6% for the prior quarter and 62.4% for the third quarter of fiscal 2016. GAAP operating loss was $44 million, inclusive of $52 million of goodwill impairment and $53 million of costs in connection with certain legal matters, which compares to operating income of $64 million for the prior quarter and $58 million for the third quarter of fiscal 2016. Non–GAAP operating income was $156 million which compares to $148 million for the prior quarter and $180 million for the third quarter of fiscal 2016. For the third quarter, adjusted EBITDA(1) was $204 million or 25.4% of revenue, a record percentage of revenue for a third fiscal quarter, and compares to adjusted EBITDA of $199 million for the prior quarter and $223 million for the third quarter of fiscal 2016.

Cash provided by operating activities was $72 million for the third fiscal quarter 2017, compared to $97 million during the second fiscal quarter 2017 and $23 cash used from operations during the third fiscal quarter 2016. Cash and cash equivalents totaled $729 million as of June 30, 2017.

“The support of our amended Plan of Reorganization by a majority of holders of our first lien debt and the settlement reached with the U.S. Pension Benefit Guaranty Corporation gives us a clear and viable path to emerge from chapter 11 this fall,” said Kevin Kennedy, president and CEO.

“As we work through our debt restructuring, Avaya continues to transform into a leading provider of software and services focused on delivering cloud–based business communications and innovative next–generation workflow automation solutions with world–class customer satisfaction. In addition, we continue to build momentum with our newest generation of solutions including Avaya Oceana™, Avaya Equinox™, Avaya Breeze™, Zang™ Office and Zang Spaces,” continued Mr. Kennedy.

Third Fiscal Quarter Highlights

• Filed an amended plan of reorganization, with emergence from chapter 11 expected this fall
• Signed over 2,400 major customer contracts since filing for chapter 11 through June 30, 2017
• Over 3,000 attendees at Avaya Engage Mexico and an additional 3,700 watched via live streaming
• Closed on sale of the Networking business to Extreme Networks on July 14
• Total bookings for the third fiscal quarter increased 3% from the prior quarter and were 12% below the prior year in constant currency, reflecting extended procurement cycles resulting from the chapter 11 filing
• Software and services accounted for approximately 79% of total revenue in third quarter 2017
• Recurring revenue represented 58% of total revenue, a company record, up from 55% year–over–year, in constant currency
• Net Promoter Score of 49 for customer satisfaction driven by industry–leading service and support
• Product revenue of $345 million decreased 1% from the prior quarter and 13% year–over–year, service revenue of $458 million was slightly higher sequentially and decreased 5% year–over–year, each in constant currency
• For the third fiscal quarter, percentage of revenue by geography was:
  U.S. – 54% EMEA – 25%
  Asia–Pacific – 11% Americas International – 10%

Accompanying slides

Links to this financial results press release and accompanying slides are available on the investor page of Avaya's website (www.avaya.com/investors).

About Avaya
Avaya enables the mission critical, real–time communication applications of the world's most important operations. As the global leader in delivering superior communications experiences, Avaya provides the most complete portfolio of software and services for contact center and unified communications — offered on premises, in the cloud, or a hybrid. Today's digital world requires some form of communications enablement, and no other company is better positioned to do this than Avaya. For more information, please visit www.avaya.com.

Cautionary Note Regarding the Chapter 11 Cases

The Company's security holders are cautioned that trading in securities of the Company during the pendency of the Company's Chapter 11 proceeding will be highly speculative and will pose substantial risks. It is possible some or all of the Company's currently outstanding securities may be cancelled and extinguished upon confirmation of a restructuring plan by the United States Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”). In such an event, the Company's security holders would not be entitled to receive or retain any cash, securities or other property on account of their cancelled securities. Trading prices for the Company's securities may bear little or no relation to actual recovery, if any, by holders thereof in the Company's Chapter 11 proceeding. Accordingly, the Company urges extreme caution with respect to existing and future investments in its securities.

Cautionary Note Regarding Forward–Looking Statements

This document contains certain “forward–looking statements.” All statements other than statements of historical fact are “forward–looking” statements for purposes of the U.S. federal and state securities laws. These statements may be identified by the use of forward looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “our vision,” “plan,” “potential,” “preliminary,” “predict,” “should,” “will,” or “would” or the negative thereof or other variations thereof or comparable terminology and include, but are not limited to, statements regarding timing of exit from the Chapter 11 proceeding, technology innovation and operational projections. The Company has based these forward–looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward–looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. These factors, including, but not limited to adjustments in the calculation of financial results for the third quarter, or the application of accounting principles, discovery of new information that alters expectations about financial results or impacts valuation methodologies underlying financial results, accounting changes required by United States generally accepted accounting principles, and those risks discussed in the Company's Annual Report on Form 10–K for the fiscal year ended September 30, 2015, may cause its actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward–looking statements. For a further list and description of such risks and uncertainties, please refer to the Company's filings with the SEC that are available at www.sec.gov. The Company cautions you that the list of important factors included in the Company's SEC filings may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward–looking statements contained in this report may not in fact occur. The Company undertakes no obligation to publicly update or revise any forward–looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

[1] Refer to Supplemental Financial Information accompanying this press release for a reconciliation of GAAP to non–GAAP numbers and for reconciliation of adjusted EBITDA for the third quarter of fiscal 2017.

Avaya Inc.  
(Debtor–in–possession)  
Consolidated Statements of Operations  
(Unaudited; in millions)  
   
      Three months ended     Nine months ended  
      June 30,     June 30,  
      2017     2016     2017     2016  
REVENUE                              
  Products $ 345     $ 398     $ 1,094     $ 1,286  
  Services   458       484       1,388       1,458  
        803       882       2,482       2,744  
COSTS                              
  Products:                              
    Costs (exclusive of amortization of acquired technology intangible assets)   122       141       395       461  
    Amortization of acquired technology intangible assets   5       7       16       22  
  Services   186       192       567       599  
        313       340       978       1,082  
GROSS PROFIT   490       542       1,504       1,662  
                               
OPERATING EXPENSES                              
  Selling, general and administrative   357       317       994       1,027  
  Research and development   60       66       181       211  
  Amortization of acquired intangible assets   57       57       170       170  
  Goodwill impairment   52             52        
  Restructuring charges, net   8       44       22       88  
        534       484       1,419       1,496  
OPERATING (LOSS) INCOME   (44 )     58       85       166  
Interest expense   (17 )     (117 )     (229 )     (352 )
Other income, net   3       1       2       7  
Reorganization costs, net   (35 )           (77 )      
                               
LOSS BEFORE INCOME TAXES   (93 )     (58 )     (219 )     (179 )
(Provision for) benefit from income taxes   (12 )     (57 )     6       (66 )
NET LOSS $ (105 )   $ (115 )   $ (213 )   $ (245 )
                               
Avaya Inc.
(Debtor–in–possession)
Consolidated Balance Sheets
(Unaudited; in millions)
 
    June 30,     September 30,  
    2017     2016  
ASSETS              
Current assets:              
  Cash and cash equivalents $ 729     $ 336  
  Accounts receivable, net   469       584  
  Inventory   101       153  
  Other current assets   265       187  
  Assets held for sale   134        
TOTAL CURRENT ASSETS   1,698       1,260  
  Property, plant and equipment, net   205       253  
  Acquired intangible assets, net   414       617  
  Goodwill   3,541       3,629  
  Other assets   74       62  
TOTAL ASSETS $ 5,932     $ 5,821  
LIABILITIES              
Current liabilities:              
  Debt maturing within one year $ 25     $ 6,018  
  Accounts payable   253       338  
  Payroll and benefit obligations   113       183  
  Deferred revenue   538       705  
  Business restructuring reserve, current portion   39       69  
  Other current liabilities   89       267  
  Liabilities held for sale   54        
TOTAL CURRENT LIABILITIES   1,811       7,580  
  Liabilities subject to compromise   7,929        
  Pension obligations   563       1,743  
  Other postretirement obligations         245  
  Deferred income taxes, net   31       169  
  Business restructuring reserve, non–current portion   37       65  
  Other liabilities   155       439  
TOTAL NON–CURRENT LIABILITIES   8,715       2,661  
Commitments and contingencies              
STOCKHOLDER'S DEFICIENCY              
  Common stock          
  Additional paid–in capital   2,976       2,966  
  Accumulated deficit   (5,938 )     (5,725 )
  Accumulated other comprehensive loss   (1,632 )     (1,661 )
TOTAL STOCKHOLDER'S DEFICIENCY   (4,594 )     (4,420 )
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY $ 5,932     $ 5,821  
               
Avaya Inc.
(Debtor–in–possession)
Condensed Statements of Cash Flows
(Unaudited; in millions)
 
      Nine months ended  
      June 30,  
      2017     2016  
Net cash (used for) provided by:              
  Net loss $ (213 )   $ (245 )
    Adjustments to net loss for non–cash items   408       296  
    Changes in operating assets and liabilities   (70 )     (21 )
  Operating activities   125       30  
  Investing activities   (120 )     (80 )
  Financing activities   387       3  
  Effect of exchange rate changes on cash and cash equivalents   1       (7 )
Net increase (decrease) in cash and cash equivalents   393       (54 )
Cash and cash equivalents at beginning of period   336       323  
Cash and cash equivalents at end of period $ 729     $ 269  
                   
Avaya Inc.
(Debtor–in–possession)
Supplemental Schedules of Revenue
(Unaudited; in millions)
 
Three Months Ended     Three Months Ended June 30,  
                    Revenues   Mix     Change  
Sept. 30, 2016   Dec. 31, 2016   Mar. 31, 2017     2017   2016   2017     2016     Amount     Pct.     Pct., net of FX impact  
                                                             
                  Revenue by Segment                                          
$ 397   $ 346   $ 309   GCS $ 302   $ 356   38 %   40 %   $ (54 )   –15 %   –15 %
  72     55     39   Networking   43     42   5 %   5 %     1     2 %   2 %
  469     401     348   Total ECS product revenue   345     398   43 %   45 %     (53 )   –13 %   –13 %
  489     474     456   AGS   458     484   57 %   55 %     (26 )   –5 %   –5 %
$ 958   $ 875   $ 804   Total revenue $ 803   $ 882   100 %   100 %   $ (79 )   –9 %   –8 %
                                                             
                                                             
                  Revenue by Geography                                          
$ 552   $ 466   $ 450   U.S. $ 435   $ 487   54 %   55 %   $ (52 )   –11 %   –11 %
                  International:                                          
  217     234     202     EMEA   204     206   25 %   23 %     (2 )   –1 %   0 %
  104     90     77     APAC – Asia Pacific   88     102   11 %   12 %     (14 )   –14 %   –14 %
  85     85     75     Americas International – Canada and Latin America   76     87   10 %   10 %     (11 )   –13 %   –11 %
  406     409     354   Total International   368     395   46 %   45 %     (27 )   –7 %   –6 %
$ 958   $ 875   $ 804   Total revenue $ 803   $ 882   100 %   100 %   $ (79 )   –9 %   –8 %

Use of non–GAAP (Adjusted) Financial Measures

The information furnished in this release includes non–GAAP financial measures that differ from measures calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), including adjusted EBITDA and non–GAAP gross margin.

EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted to exclude certain charges and other adjustments described in our SEC filings.

We believe that including supplementary information concerning adjusted EBITDA is appropriate because it serves as a basis for determining management and employee compensation. In addition, we believe adjusted EBITDA provides more comparability between our historical results and results that reflect purchase accounting and our current capital structure. Accordingly, adjusted EBITDA measures our financial performance based on operational factors that management can impact in the short–term, such as our pricing strategies, volume, costs and expenses of the organization and it presents our financial performance in a way that can be more easily compares to prior quarters or fiscal years.

EBITDA and adjusted EBITDA have limitations as analytical tools. EBITDA measures do not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. While EBITDA measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations. In particular, our formulation of adjusted EBITDA allows adjustment for certain amounts that are included in calculating net income (loss) as set forth in the following table including, but not limited to, restructuring charges, certain fees payable to our private equity sponsors and other advisors, resolution of certain legal matters and a portion of our pension costs and post–employment benefits costs which represents the amortization of pension service costs and actuarial gain (loss) associated with these benefits. However, these are expenses that may recur, may vary and are difficult to predict.

The estimate of adjusted EBITDA provided in this press release has been determined consistent with the methodology for calculating adjusted EBITDA as set forth in the Company's Annual Report on Form 10–K for the fiscal year ended September 30, 2015.

Non–GAAP gross margin excludes the amortization of acquired technology intangible assets, share based compensation, costs to settle certain legal matters, impairment of long lived assets, and purchase accounting adjustments. We have included non–GAAP gross margin because we believe it provides additional useful information to investors regarding our operations by excluding those charges that management does not believe are reflective of the Company's ongoing operating results when assessing the performance of the business.

Non–GAAP operating income excludes the amortization of acquired technology intangible assets, restructuring and impairment charges, acquisition and integration related costs, third party sales transformation and advisory costs, share based compensation, costs to settle certain legal matters, impairment of long lived assets and purchase accounting adjustments. We have included non–GAAP operating income because we believe it provides additional useful information to investors regarding our operations by excluding those charges that management does not believe are reflective of the company's ongoing operating results when assessing the performance of the business.

These non–GAAP measures are not based on any comprehensive set of accounting rules or principles and have limitations as analytical tools in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. As such, these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.

The following tables reconcile GAAP measures to non–GAAP measures:

Avaya Inc.
(Debtor–in–possession)
Supplemental Schedule of Non–GAAP Adjusted EBITDA
(Unaudited; in millions)
 
    Three months ended     Nine months ended  
  June 30,     June 30,  
  2017     2016     2017     2016  
Net loss $ (105 )   $ (115 )   $ (213 )   $ (245 )
  Interest expense   17       117       229       352  
  Interest income   (1 )     (1 )     (2 )     (1 )
  Provision for (benefit from) income taxes   12       57       (6 )     66  
  Depreciation and amortization   85       93       263       277  
EBITDA   8       151       271       449  
  Restructuring charges, net   8       44       22       88  
  Sponsor and other advisory fees   18       9       82       15  
  Acquisition and integration–related costs   1       1       1       2  
  Third–party sales transformation costs                     5  
  Reorganization items, net   35             77        
  Non–cash share–based compensation   4       4       10       12  
  Goodwill impairment   52             52        
  Impairment of long–lived asset   3             3        
  Costs in connection with certain legal matters   53       2       53       53  
  Foreign currency gains, net   (2 )     (1 )     (1 )     (10 )
  Pension/OPEB/nonretirement postemployment benefits and long–term disability costs   24       13       70       42  
  Other               1        
Adjusted EBITDA $ 204     $ 223     $ 641     $ 656  
                               
Avaya Inc.
(Debtor–in–possession)
Supplemental Schedules of Non–GAAP Reconciliations
(Unaudited; in millions)
 
      Three Months Ended  
      June 30,     Sept. 30,     Dec. 31,     Mar. 31     June 30  
      2016     2016     2016     2017     2017  
                                           
Reconciliation of Non–GAAP Gross Profit and Non–GAAP Gross Margin                                      
  Gross Profit $ 542     $ 583     $ 533     $ 481     $ 490  
  Gross Margin   61.5 %     60.9 %     60.9 %     59.8 %     61.0 %
                                           
  Items excluded:                                      
    Amortization of acquired technology intangible assets   7       8       5       6       5  
    Share–based compensation         1                    
    Costs in connection with certain legal matters   1                          
  Non–GAAP Gross Profit $ 550     $ 592     $ 538     $ 487     $ 495  
                                           
  Non–GAAP Gross Margin   62.4 %     61.8 %     61.5 %     60.6 %     61.6 %
                                           
                                           
Reconciliation of Non–GAAP Operating Income                                      
  Operating Income (Loss) $ 58     $ (428 )   $ 65     $ 64     $ (44 )
    Percentage of Revenue   6.6 %     –44.7 %     7.4 %     8.0 %     –5.5 %
                                           
  Items excluded:                                      
    Amortization of acquired intangible assets   64       64       62       62       62  
    Restructuring charges, net   44       17       10       4       8  
    Acquisition and integration–related costs   1                          
    Impairment charges         542                   55  
    Advisory fees   7       27       48       14       18  
    Share–based compensation   4       7       2       4       4  
    Costs in connection with certain legal matters   2                         53  
                                           
  Non–GAAP Operating Income $ 180     $ 229     $ 187     $ 148     $ 156  
                                           
  Non–GAAP Operating Margin   20.4 %     23.9 %     21.4 %     18.4 %     19.4 %
                                           
Avaya Inc.
(Debtor–in–possession)
Supplemental Schedules of Non–GAAP Reconciliation of Gross Profit and Gross Margin by Portfolio
(Unaudited; in millions)
 
    Three Months Ended  
    June 30,     Sept. 30,     Dec. 31,     Mar. 31,     June 30,  
    2016     2016     2016     2017     2017  
                                         
Reconciliation of Non–GAAP Gross Profit and Non–GAAP Gross Margin – Products                                      
  Revenue $ 398     $ 469     $ 401     $ 348     $ 345  
  Costs (exclusive of amortization of acquired technology intangible assets)   141       169       146       127       122  
  Amortization of acquired technology intangible assets   7       8       5       6       5  
GAAP Gross Profit   250       292       250       215       218  
GAAP Gross Margin   62.8 %     62.3 %     62.3 %     61.8 %     63.2 %
                                         
Items excluded:                                      
  Amortization of acquired technology intangible assets   7       8       5       6       5  
  Costs in connection with certain legal matters   1                          
Non–GAAP Gross Profit $ 258     $ 300     $ 255     $ 221     $ 223  
                                         
Non–GAAP Gross Margin   64.8 %     64.0 %     63.6 %     63.5 %     64.6 %
                                         
                                         
Reconciliation of Non–GAAP Gross Profit and Non–GAAP Gross Margin – Services                                      
  Revenue $ 484     $ 489     $ 474     $ 456     $ 458  
  Costs   192       198       191       190       186  
GAAP Gross Profit   292       291       283       266       272  
GAAP Gross Margin   60.3 %     59.5 %     59.7 %     58.3 %     58.3 %
                                         
Items excluded:                                      
  Share–based and other compensation         1                    
Non–GAAP Gross Profit $ 292     $ 292     $ 283     $ 266     $ 272  
                                         
Non–GAAP Gross Margin   60.3 %     59.7 %     59.7 %     58.3 %     59.4 %
                                         

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Fusion Reports Second Quarter 2017 Financial Results

NEW YORK, NY—(Marketwired – August 14, 2017) – Fusion (NASDAQ: FSNN), a leading cloud services provider, today announced financial results for the three and six months ended June 30, 2017.

Second Quarter Financial and Operational Highlights

  • Business Services segment revenue grew 40% year over year to $30.0 million, of which over 86% was contracted and recurring. Consolidated revenue grew 23% to $38.1 million, compared to $31.0 million in Q2 2016
  • Consolidated gross margin increased approximately 270 basis points to 45.1%, compared to 42.4% in Q2 2016
  • Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) grew 66% to $3.7 million, compared to $2.2 million in Q2 2016 and grew 13% compared to $3.3 million in Q1 2017 (see definition and further discussion about the presentation of Adjusted EBITDA, a non–GAAP measurement, below)
  • Ended the quarter with approximately 13,100 Business Services customers and approximately $13.4 million in total contract value in backlog
  • Ended the quarter with an average monthly revenue per customer (“ARPU”) of $751, compared to $539 at June 30, 2016 and $732 at March 31, 2017
  • Ended the quarter with monthly churn of 0.9%, compared to 1.0% in Q2 2016 and 1.0% in Q1 2017
  • Reduced the Company's senior debt balance by $4.6 million year to date, as the Company made scheduled principal payments and paid down its revolving credit facility during the quarter
  • Announced the formation of Fusion Global Services, which will combine Fusion's Carrier Services division with XComIP, LLC, enhancing Fusion's focus on its Business Services segment and reducing operating expense, thereby improving the Company's consolidated margin profile
  • Completed the implementations of a new operations support system (OSS) and unified billing platform
  • Launched a new and enhanced customer portal for Fusion's leading–edge SD–WAN (Software Defined Wide Area Network) cloud network solution
  • Added to the Russell Microcap Index, one of the most widely followed equity investment benchmarks for emerging growth companies

“Fusion continued to improve its financial performance as demonstrated by our strong results in the second quarter,” said Matthew Rosen, Fusion's CEO. “By executing on our strategy, we delivered solid year–over–year growth in revenue and Adjusted EBITDA by leveraging our market position as the single source for the cloud, our unified service delivery platform, and our robust nationwide network. The investments we have made in our highly scalable platform and our sales and marketing organization have enabled us to expand our margins efficiently as we grow both organically and through acquisition. Furthermore, the implementation of our new OSS system, which we completed during the second quarter, will improve Fusion's operational efficiency, reduce the time between sales and revenue recognition, and allow us to integrate acquisitions faster and more easily.

“I am also pleased to note that Fusion produced nearly 11% year–over–year revenue growth in Business Services, excluding the contribution from our Apptix acquisition which closed last November. We achieved this through a combination of solid sales bookings, installations and customer novations. In addition, our M&A pipeline remains solid, and we continue to anticipate closing one to two acquisitions per year to drive significant growth in our customer base, revenue and cash flow.”

Michael Bauer, Fusion's CFO, said, “In the first half of this year, we reduced our outstanding debt by $4.6 million through principal payments and repayments against our revolver. At quarter end, our full $5.0 million revolver was undrawn and available. Also, we remained focused on taking meaningful steps to simplify our capital structure and improve our financial flexibility in the coming quarters.

“The Apptix acquisition has been fully integrated and we have achieved the full run–rate of our expected cost synergies. And, with our expanded Business Services platform and our robust sales and M&A pipelines, Fusion is well positioned to achieve its intermediate financial goals of $200 million in annual revenue and $30 million in annual Adjusted EBITDA.”

Second Quarter 2017 Financial Results

Fusion's consolidated revenue grew 23% in Q2 2017 to $38.1 million, compared to $31.0 million in Q2 2016, due to an increase in the Company's Business Services segment revenue. Business Services revenue grew 40% to $30.0 million, compared to $21.4 million in Q2 2016, primarily due to the acquisition of Apptix which closed in November 2016. Carrier Services segment revenue in Q2 2017 was $8.1 million, compared to $9.6 million in Q2 2016, primarily due to a decline in the total minutes of traffic carried on Fusion's network.

Consolidated gross margin in Q2 2017 was 45.1%, an increase of approximately 270 basis points compared to 42.4% in Q2 2016, primarily due to a greater proportion of Business Services revenue in consolidated revenue. Business Services segment gross margin of 56.7% decreased slightly from 59.3% in Q2 2016, primarily due to the addition of lower margin revenue from new customers the Company began servicing during the second quarter. Carrier Services segment gross margin was 2.4% compared to 4.8% in Q2 2016.

Net loss attributable to common shareholders in Q2 2017 was $3.1 million, or $(0.14) per share on a basic and diluted basis, compared to net loss in Q2 2016 of $3.0 million, or $(0.20) per share on a basic and diluted basis.

Adjusted EBITDA grew 66% in Q2 2017 to $3.7 million, compared to $2.2 million in Q2 2016, and grew 13% compared to $3.3 million in Q1 2017, due primarily to revenue growth and the achievement of additional synergies associated with the acquisition of Apptix.

Capital expenditures in Q2 2017 totaled $1.4 million, or 3.6% of revenue. Capital expenditures in the first half of 2017 totaled $2.3 million, or 3.2% of revenue.

Cash at June 30, 2017 totaled $2.4 million, compared to $7.2 million at December 31, 2016. During 2017, the Company made $4.6 million in debt pay downs, reducing its outstanding term loan balance by $1.6 million and completely repaying the $3.0 million outstanding on its revolving credit facility. As of June 30, 2017, the Company's full $5.0 million revolving credit facility was undrawn and available.

Further details about the Company's financial results are available in its quarterly report on Form 10–Q, which is available in the investor relations section of the Company's website at ir.fusionconnect.com.

Conference Call Information

Fusion CEO Matthew Rosen and CFO Michael Bauer will host a conference call today to discuss its Q2 2017 financial results, followed by a question and answer period. To access the call, please use the following information:

Date: Monday, August 14, 2017
Time: 4:30 p.m. ET / 1:30 p.m. PT
Dial–in: (888) 427–9411 (domestic) / (913) 981–5526 (international); Conference ID 4384178
Webcast: ir.fusionconnect.com under “Events”

Participants should dial in 10 minutes prior to the start time and ask to be placed into the Fusion call. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact MZ Group at (949) 491–8235.

Use of Non–GAAP Financial Measurements

The Company believes that EBITDA (earnings before interest, taxes, depreciation and amortization) is useful to investors because it is commonly used in the cloud communications industry to evaluate companies on the basis of operating performance and leverage. Adjusted EBITDA provides an adjusted view of EBITDA that takes into account certain significant non–recurring transactions, if any, such as impairment losses and expenses associated with pending acquisitions, which vary significantly between periods and are not recurring in nature, as well as certain recurring non–cash charges such as changes in fair value of the Company's derivative liabilities and stock–based compensation. The Company also believes that Adjusted 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. 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 periods 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 accounting principles generally accepted in the United States of America (“GAAP”). In accordance with SEC Regulation G, the non–GAAP measurements in this press release have been reconciled to the nearest GAAP measurement, which can be viewed under the heading “Reconciliation of Net Loss to Adjusted EBITDA”, immediately following the Consolidated Balance Sheets included in this press release.

– Tables Follow –

             
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES  
Consolidated Statements of Operations  
(Unaudited)  
             
    Three Months Ended June 30,     Six Months Ended June 30,  
      2017       2016       2017       2016  
                                 
Revenues   $ 38,089,006     $ 31,041,047     $ 73,900,882     $ 64,835,296  
Cost of revenues (exclusive of depreciation and amortization, shown separately below)     20,901,548       17,865,570       40,172,461       38,397,081  
Gross profit     17,187,458       13,175,477       33,728,421       26,438,215  
Depreciation and amortization     3,600,609       3,031,890       7,437,757       5,948,153  
Selling, general and administrative expenses     14,330,934       11,270,013       28,465,809       22,694,799  
Total operating expenses     17,931,543       14,301,903       35,903,566       28,642,952  
Operating loss     (744,085 )     (1,126,426 )     (2,175,145 )     (2,204,737 )
Other (expenses) income:                                
Interest expense     (2,172,084 )     (1,624,669 )     (4,264,396 )     (3,252,633 )
Gain on change in fair value of derivative liability     113,779       45,642       73,334       228,042  
Loss on disposal of property and equipment     (65,250 )     (11,996 )     (92,050 )     (72,818 )
Other income, net     13,365       37,111       129,845       88,263  
Total other expenses     (2,110,190 )     (1,553,912 )     (4,153,267 )     (3,009,146 )
Loss before income taxes     (2,854,275 )     (2,680,338 )     (6,328,412 )     (5,213,883 )
Provision for income taxes     (23,100 )           (30,911 )      
Net loss     (2,877,375 )     (2,680,338 )     (6,359,323 )     (5,213,883 )
Preferred stock dividends in arrears     (240,498 )     (284,839 )     (1,494,607 )     (1,816,821 )
Net loss attributable to common stockholders   $ (3,117,873 )   $ (2,965,177 )   $ (7,853,930 )   $ (7,030,704 )
                                 
Basic and diluted loss per common share   $ (0.14 )   $ (0.20 )   $ (0.36 )   $ (0.49 )
Weighted average common shares outstanding:                                
Basic and diluted     22,408,335       14,864,768       21,562,714       14,306,170  
                                 
                 
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES  
Consolidated Balance Sheets  
                 
      June 30,       December 31,  
      2017       2016  
      (Unaudited)          
ASSETS                
Current assets:                
Cash and cash equivalents   $ 2,407,317     $ 7,221,910  
Accounts receivable, net of allowance for doubtful accounts     9,486,904       9,359,876  
Prepaid expenses and other current assets     1,707,268       1,084,209  
Total current assets     13,601,489       17,665,995  
Property and equipment, net     13,850,574       14,248,915  
Security deposits     612,299       630,373  
Restricted cash     27,153       27,153  
Goodwill     35,286,629       35,689,215  
Intangible assets, net     60,975,789       63,617,471  
Other assets     60,527       77,117  
TOTAL ASSETS   $ 124,414,460     $ 131,956,239  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
Term loan – current portion   $ 4,875,000     $ 2,979,167  
Obligations under asset purchase agreements – current portion     911,370       546,488  
Equipment financing obligations     1,238,986       1,002,578  
Accounts payable and accrued expenses     20,692,741       19,722,838  
Total current liabilities     27,718,097       24,251,071  
Long–term liabilities:                
Notes payable – non–related parties, net of discount     31,692,383       31,431,602  
Notes payable – related parties     903,583       875,750  
Term loan     57,341,519       60,731,204  
Indebtedness under revolving credit facility           3,000,000  
Obligations under asset purchase agreements     1,290,811       890,811  
Equipment financing obligations     983,364       1,237,083  
Derivative liabilities     262,542       348,650  
Total liabilities     120,192,299       122,766,171  
Commitments and contingencies                
Stockholders' equity (deficit):                
Preferred stock, $0.01 par value, 10,000,000 shares authorized, 14,341 and 17,299 shares issued and outstanding     143       174  
Common stock, $0.01 par value, 90,000,000 shares authorized, 22,505,365 and 20,642,028 shares issued and outstanding     225,054       206,422  
Capital in excess of par value     193,605,847       192,233,032  
Accumulated deficit     (189,608,883 )     (183,249,560 )
Total stockholders' equity     4,222,161       9,190,068  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 124,414,460     $ 131,956,239  
                 
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES  
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA  
(Unaudited)  
                 
      Three Months Ended June 30,       Six Months Ended June 30,  
      2017       2016       2017       2016  
Net (loss)   $ (2,877,375 )   $ (2,680,338 )   $ (6,359,323 )   $ (5,213,883 )
Interest expense and other financing costs     2,167,124       1,624,923       4,275,759       3,252,915  
Income tax benefit     23,100             30,911        
Depreciation and amortization     3,600,609       3,031,890       7,437,757       5,948,153  
EBITDA     2,913,457       1,976,475       5,385,104       3,987,185  
Acquisition transaction expenses     602,603       71,439       925,242       163,809  
Change in fair value of derivative liability     (113,779 )     (45,642 )     (73,334 )     (228,042 )
(Gain) loss on disposal of property and equipment     65,250       11,996       92,050       72,818  
Non–recurring employee related expenses                       535,500  
Stock based compensation expense     225,500       207,712       622,892       458,496  
Adjusted EBITDA   $ 3,693,031     $ 2,221,980     $ 6,951,954     $ 4,989,766  

About Fusion

Fusion (NASDAQ: FSNN), a leading provider of integrated cloud solutions to small, medium and large businesses, is the industry's single source for the cloud. Fusion's advanced, proprietary cloud services platform enables the integration of leading edge solutions in the cloud, including cloud communications, contact center, cloud connectivity, and cloud computing. Fusion's innovative, yet proven cloud solutions lower our customers' cost of ownership, and deliver new levels of security, flexibility, scalability, and speed of deployment. For more information, please visit www.fusionconnect.com.

Forward Looking Statements

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 1996. Such statements consist of any statement other than a recitation of historical fact and may sometimes be identified by the use of forward–looking terminology such as “may”, “expect”, “anticipate”, “intend”, “estimate” or “continue” or the negative thereof or other variations thereof or comparable terminology. The reader is cautioned that all forward–looking statements are speculative, and there are certain risks and uncertainties that could cause actual events or results to differ from those referred to in such forward–looking statements. Important risks regarding the Company's business include the Company's ability to raise additional capital to execute its comprehensive business strategy; the integration of businesses and assets following an acquisition; the Company's ability to comply with covenants included in its senior debt agreements; competitors with broader product lines and greater resources; emergence into new markets; natural disasters, acts of war, terrorism or other events beyond the Company's control; and other factors identified by Fusion from time to time in its filings with the Securities and Exchange Commission, which are available through http://www.sec.gov. However, the reader is cautioned that Fusion's future performance could also be affected by risks and uncertainties not enumerated above.

In the event that there is any inconsistency between the information contained in this press release and the information set forth in Fusion's Form 10–K or 10–Q filed with the Securities and Exchange Commission, the information contained in the Form 10–K or 10–Q governs.