SOURCE: Lattice Inc.

Lattice Inc.

April 15, 2010 14:46 ET

Lattice Announces Year End 2009 Earnings; Conference Call Today at 4:30 ET

PENNSAUKEN, NJ--(Marketwire - April 15, 2010) - Lattice Incorporated (OTCBB: LTTC), a provider of advanced technological solutions to key government agencies and enterprise customers, announced today the company's financial results for the fiscal year ended December 31, 2009.

Total revenues for the year ended December 31, 2009 were $15,595,000 compared to $16,268,000 for the year ended December 31, 2008. Net loss was ($1,327,000) or basic EPS of ($0.08) compared with net income of $934,000 or basic EPS of $0.05 in 2008. A ($1,924,000) loss from operations included non-cash items such as amortization of intangibles, impairment charges, share-based compensation and depreciation expense totaling $1,986,000. Absent these non-cash items, operating income was $62,000.

Gross profit for the year rose to $5,240,000 from $5,023,000 a year ago reflecting margin improvement from 30.9% to 33.6% driven by a decline in lower margin subcontractor revenues relative to high margin direct labor revenues in the Government Services business.

The company reported a net reduction of outstanding debt of $747,000. The outstanding balance on its revolving credit facility was reduced from $1,458,000 to $838,000.

CEO Paul Burgess said, "Despite a small decline in our total revenue and our reported net income loss, our company actually emerged from 2009 in a stronger operational and competitive position that we believe will be reflected in improved results in 2010. We saw improvement in gross margin and a reduction in debt as well as a pay down in our revolving credit facility. The revenue decrease was mostly attributable to several contracts that ended in our Government Services business in 2008 partially offset by new contracts won and expanded in 2009. We expect revenue on existing GS contracts in 2010 to remain consistent with 2009 levels.

"As we look ahead to 2010, there have been a number of important positive developments. We launched a direct services model in the second half of 2009 resulting in a number of contract wins late in the year which have already improved our run rate for 2010 by over $1,700,000. We have successfully transitioned into a services model that will provide us with stronger monthly recurring revenues and opens a new addressable market to us valued at over $1 billion.

"We originally expected to have 11 sites operational by the end of the first quarter of 2010 and we already have double that number. We will provide more details of this in our first quarter report. But we are extremely pleased with the direction our business is taking and we expect 2010 is going to be an excellent year for us," Burgess said.

The company will host a conference call with CEO Paul Burgess and CFO Joseph Noto today, April 15 at 4:30 p.m. Eastern. To participate in this call, dial 1-877-941-2069 any time after 1:50 p.m. ET. International callers should dial 1-480-629-9713.

An audio replay of the call will be available at http://www.hawkassociates.com for approximately 90 days after the call.

About Lattice Incorporated

Lattice Incorporated is a provider of advanced information and communications technology solutions to the government and commercial markets. The company's technology services division designs, deploys and manages advanced technological solutions at key government agencies and for mid- to large-sized enterprises. Lattice's technology products division consists of several core proprietary platforms used to develop customized software applications with military grade security in a number of different markets. For more information, visit http://www.latticeincorporated.com.

An investment profile about Lattice Incorporated may be found at http://www.hawkassociates.com/lttcprofile.aspx.

An online investor relations kit including copies of press releases, current price quotes, stock charts and other valuable information for investors may be found at http://www.hawkassociates.com. To receive free e-mail notification of future releases for this company, sign up at http://www.hawkassociates.com/about/alert/.

Safe Harbor Statement

Safe-Harbor Statement under the Private Securities Litigation Reform Act of 1995: This press release may contain forward-looking information within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including all statements that are not statements of historical fact regarding the intent, belief or current expectations of the company, its directors or its officers with respect to, among other things: (i) the company's financing plans; (ii) trends affecting the company's financial condition or results of operations; (iii) the company's growth strategy and operating strategy; and (iv) the risk factors disclosed in the Company's periodic reports filed with the SEC. The words "may," "would," "will," "expect," "estimate," "anticipate," "believe," "intend" and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the company's ability to control, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors including the risk factors disclosed in the company's Forms 10-K previously filed with the SEC.


                  LATTICE INCORPORATED AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS


                                                December 31,  December 31,
                                                    2009          2008
                                                ------------  ------------
ASSETS:
Current assets:
Cash and cash equivalents                       $    212,616  $  1,363,130
Accounts receivable, net                           3,560,293     3,560,690
Inventories                                           29,402        30,704
Other current assets                                 133,405        51,008
                                                ------------  ------------
     Total current assets                          3,935,716     5,005,532

Property and equipment, net                          264,753        21,090
Goodwill                                           3,599,386     3,599,386
Other intangibles, net                               977,455     2,409,748
Other assets                                          54,259        54,459
                                                ------------  ------------
     Total assets                               $  8,831,569  $ 11,090,215
                                                ------------  ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                                $  1,780,143  $  1,698,551
Accrued expenses                                   1,719,831     1,726,891
Due to former Stockholder's per Sept 19, 2006
 purchase agreement
Customer deposits                                     94,954        15,000
Notes payable                                      1,503,742     1,766,098
Derivative liability                                 161,570       200,606
                                                ------------  ------------
     Total current liabilities                     5,260,240     5,407,146
Long term liabilities:
Long term debt                                       188,466       666,515
Deferred tax liabilities                             440,832     1,200,283
                                                ------------  ------------
     Total long term liabilities                     629,298     1,866,798
                                                ------------  ------------
     Total liabilities                             5,889,528     7,273,944
                                                ------------  ------------

Shareholders' equity
Preferred Stock - .01 par value
     Series A 9,000,000 shares authorized
      7,567,685 issued                                75,677        78,387
     Series B 1,000,000 shares authorized
      502,160 issued                                  10,000        10,000
     Series C 520,000 shares authorized  520,000
      issued                                           5,200         5,200
Common stock - .01 par value, 200,000,000
 authorized, 17,810,281 and 16,842,428 issued,
 17,507,294 and 16,539,441 outstanding
 respectively                                        178,104       168,425
Additional paid-in capital                        38,925,743    38,418,897
Accumulated deficit                              (35,851,892)  (34,499,822)
                                                ------------  ------------
                                                   3,342,832     4,181,087
Common stock held in treasury, at cost              (558,096)     (558,096)
                                                ------------  ------------
Equity Attributable to shareowners of Lattice
 Incorporated Shareholders' equity                 2,784,736     3,622,991
                                                ------------  ------------
Equity Attributable to noncontrolling interest       157,295       193,280
                                                ------------  ------------
Total liabilities and shareholders' equity      $  8,831,569  $ 11,090,215
                                                ============  ============




                  LATTICE INCORPORATED AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATION
                               DECEMBER 31,

                                                    2009          2008
                                                ------------  ------------

Revenue - Technology Services                   $ 14,483,165  $ 15,149,944
Revenue - Technology Products                      1,112,268     1,118,537
                                                ------------  ------------
  Total Revenue                                   15,595,433    16,268,481

Cost of Revenue - Technology Services              9,891,395    10,817,725
Cost of Revenue - Technology Products                464,465       427,759
                                                ------------  ------------
  Total cost of revenue                           10,355,860    11,245,484

                                                ------------  ------------
Gross Profit                                       5,239,573     5,022,997

Operating  expenses:
  Selling, general and administrative              5,189,848     4,667,374
  Research and development                           541,783       518,342
  Impairment loss (see Note 7)                       235,301     5,486,341
  Amortization expense                             1,196,992     1,488,228
                                                ------------  ------------
  Total operating expenses                         7,163,924    12,160,285

                                                ------------  ------------
Loss from operations                              (1,924,351)   (7,137,288)

Other income (expense):
  Derivative income                                   39,036     3,147,958
  Extinguishment income (loss)                             -     2,695,025
  Other income                                             -       977,844
  Interest expense                                  (237,088)     (230,839)
  Finance expense                                                        -
                                                ------------  ------------
  Total other income                                (198,052)    6,589,988

Noncontrolling interest                               35,985        21,319

                                                ------------  ------------
(Loss) before taxes                               (2,086,418)     (525,981)

Income taxes (benefit) (Note 13)                    (759,451)   (1,460,218)

                                                ------------  ------------
Net income (loss)                               $ (1,326,967) $    934,237
                                                ------------  ------------

Reconciliation of net income (loss) to
income applicable to common shareholders:
  Net income (loss)                               (1,326,967)      934,237
  Preferred stock dividends                          (25,108)      (25,108)
                                                ------------  ------------
Income (loss) applicable to common stockholders $ (1,352,075) $    909,129
                                                ------------  ------------

Income (loss) per common share
  Basic                                         $      (0.08) $       0.05
  Diluted                                       $      (0.08) $      (0.04)

Weighted average shares:
  Basic                                           16,634,610    16,779,762
  Diluted                                         16,634,610    55,453,783




                  LATTICE INCORPORATED AND SUBSIDIARIES
                    Reconciliation to non-GAAP Measure

Loss from operations as reported                    (1,924,351) (7,137,288)
    Non-cash items:
    Amortization of intangibles                      1,196,992   1,488,228
    Impairment charges                                 235,301   5,486,341
    Share-based compensation                           513,816     308,096
    Depreciation expense                                40,797      22,000
                                                    ----------  ----------

Adjusted operating income                               62,555     167,377

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