PENNSAUKEN, NJ--(Marketwire - Nov 19, 2012) - Lattice Incorporated (OTCBB: LTTC) ("Lattice" or the "Company"), a provider of advanced information and communications technology solutions to the corrections industry and key government agencies, announced its financial results for the third quarter ended September 30, 2012.
Third Quarter Financial Highlights:
- Revenue increased 7.3% to $2.73 million, compared to $2.55 million for the same period of 2011
- Net loss decreased 88.5% to $0.11 million, compared with a loss of $0.93 million for the same period of 2011
Nine Months Financial Highlights:
- Revenue decreased 4.4% to $8.62 million, compared to $9.01 million for the same period of 2011
- Net income was $0.02 million, compared with a loss of $3.44 million for the same period of 2011
Additional information may be found in the Company's 10-Q filing with the U.S. Securities and Exchange Commission.
Third quarter revenue from the Company's rapidly growing Communications Services segment increased 80.1% year-over-year and 15.4% quarter-on-quarter to $2.12 million, compared to $1.18 million in the third quarter of 2011 and $1.84 million in the second quarter of 2012, respectively. Segment revenue accounted for 77.7% of total company revenues in the third quarter, compared with 46.3% in the third quarter of 2011. Third quarter revenue from recurring services within the segment was up 27.3% to $1.44 million, compared to the same period of 2011, reflecting higher call volumes from correctional facilities and the increased number of facilities on the network.
Government Services revenue in the third quarter decreased to $0.61 million, compared with $1.37 million in the same period of 2011. The decrease in revenue in this segment was primarily attributable to the termination of contracts in 2011 and 2012, mainly the SPAWAR contracts which ended in May 2011. New contract awards and the expansion of funding on existing contracts have been impacted by the stagnation of contract funding in the Federal DoD market.
"We anticipate growing interest in our proprietary technology will drive revenue acceleration in our communications business in the quarters ahead," stated Paul Burgess, CEO of Lattice. "Overall demand for our technology and direct services remains robust, both domestically and internationally."
Mr. Burgess continued, "Cost-cutting efforts aided our ability to improve from a sizable net loss in 2011 to positive net income for the 2012 nine months period. Combined with the growth in our Communications Services segment, we anticipate a continued rebound in the current quarter."
Conference Call
Lattice will host a conference call today, Monday, November 19, with CEO Paul Burgess and CFO Joseph Noto at 2:00 p.m. Eastern time (11 a.m. Pacific time). To participate in the call, please dial (877) 941-1427, or (480) 629-9664 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company's website at http://www.latticeincorporated.com, or alternately at http://ViaVid.net.
A replay of the call will be available for two weeks from 5:00 p.m. ET on November 19, 2012, until 11:59 p.m. ET on December 3, 2012. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 4576659. In addition, a recording of the call will be available via the Company's website at http://www.latticeincorporated.com for one year.
About Lattice Incorporated
Lattice Incorporated is a provider of advanced information and communications technology solutions to the government and commercial markets. The company's Lattice Government Services division designs, deploys and manages advanced technological solutions at key government agencies and for mid- to large-sized enterprises. The company's Lattice Secure Communications division provides core proprietary platforms that develop customized software applications with military grade security for markets including correctional facilities that require highly secure solutions. For more information, visit http://www.latticeinc.com.
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.
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LATTICE INCORPORATED AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATION |
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(Unaudited) |
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2012 |
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2011 |
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2012 | |
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2011 |
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Revenue |
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$ |
2,731,599 |
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$ |
2,545,429 |
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$ |
8,615,139 |
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$ |
9,006,867 |
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Cost of Revenue |
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1,652,778 |
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1,677,232 |
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5,191,893 |
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5,773,103 |
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Gross Profit |
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1,078,821 |
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868,197 |
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3,423,246 |
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3,233,764 |
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Operating expenses: |
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| |
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Selling, general and administrative |
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860,923 |
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1,565,445 |
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2,683,680 |
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4,255,532 |
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Research and development |
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160,876 |
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192,930 |
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514,067 |
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513,160 |
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Impairment loss |
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- |
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- |
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- |
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1,575,000 |
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Amortization expense |
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80,448 |
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104,727 |
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241,344 |
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314,181 |
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Total operating expenses |
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1,102,247 |
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1,863,102 |
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3,439,091 |
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6,657,873 |
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Income (loss) from operations |
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(23,426 |
) |
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(994,905 |
) | |
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(15,845 |
) |
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(3,424,109 |
) |
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Other income (expense): |
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Derivative income (loss) |
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8,483 |
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82,359 |
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38,733 |
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64,150 |
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Other income (expense) |
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- |
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255,613 |
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- |
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Interest expense |
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(124,773 |
) |
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(105,274 |
) |
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(354,710 |
) |
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(342,397 |
) |
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Total other income |
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(116,290 |
) |
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(22,915 |
) |
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(60,364 |
) |
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(278,247 |
) |
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Noncontrolling interest | |
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- |
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3,147 |
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- |
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9,441 |
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Income (Loss) before taxes |
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(139,716 |
) |
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(1,014,673 |
) |
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(76,209 |
) |
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(3,692,915 |
) |
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Income taxes (benefit) |
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(32,399 |
) |
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(85,504 |
) |
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(97,191 |
) |
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(256,512 |
) |
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Net income (loss) |
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(107,317 |
) |
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(929,169 |
) |
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20,982 |
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(3,436,403 |
) |
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| |
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Reconciliation of net income (loss) to income applicable to common shareholders: |
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Net income (loss) |
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(107,317 |
) |
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(929,169 |
) |
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20,982 |
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(3,436,403 |
) |
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Preferred stock dividends |
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(6,277 |
) |
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(6,277 |
) |
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(18,831 |
) |
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(18,831 |
) |
Income (loss) applicable to common stockholders |
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(113,594 |
) |
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(935,446 |
) |
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2,151 |
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(3,455,234 |
) |
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Income (loss) per common share |
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Basic |
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$ |
(0.00 |
) |
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$ |
(0.03 |
) |
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$ |
0.00 |
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$ |
(0.13 |
) |
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Diluted |
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$ |
(0.00 |
) |
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$ |
(0.03 |
) |
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$ |
0.00 |
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$ |
(0.13 |
) |
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Weighted average shares: |
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Basic |
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30,917,270 |
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29,364,488 |
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30,209,356 |
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25,976,950 |
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Diluted |
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30,917,270 |
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29,364,488 |
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73,208,384 |
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25,976,950 |
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LATTICE INCORPORATED AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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September |
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December 31, |
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2012 |
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2011 |
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(unaudited) |
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ASSETS: |
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Current assets: |
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Cash and cash equivalents |
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$ |
81,105 |
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$ |
192,286 |
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Accounts receivable |
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2,666,825 |
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2,700,859 |
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Inventories |
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7,350 |
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7,350 |
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Other current assets |
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110,249 |
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142,500 |
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Total current assets |
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2,865,529 |
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3,042,995 |
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Property and equipment, net |
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554,412 |
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612,710 |
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Goodwill |
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690,871 |
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690,871 |
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Other intangibles, net |
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1,255,465 |
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1,594,306 |
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Other assets |
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2,812 |
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2,813 |
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Total assets |
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$ |
5,369,089 |
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$ |
5,943,695 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
1,817,378 |
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$ |
1,769,896 |
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Accrued expenses |
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1,326,914 |
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1,698,617 |
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Deferred revenues |
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12,500 |
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|
50,000 |
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Customer advances |
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360,239 |
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|
124,266 | |
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Notes payable - current |
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|
2,152,823 |
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|
1,869,043 |
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Contingent Consideration |
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|
77,700 |
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|
77,700 |
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Derivative liability |
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|
57,634 |
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|
96,366 |
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Total current liabilities |
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5,805,188 |
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|
5,685,888 |
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Long term liabilities: |
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|
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Notes Payable - long term |
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|
603,155 |
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|
1,206,283 |
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Deferred tax liabilities |
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|
126,581 |
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|
223,771 |
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Total long term liabilities |
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729,736 |
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|
1,430,054 |
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Total liabilities |
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|
6,534,924 |
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|
7,115,942 |
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| |
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Shareholders' equity |
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Preferred Stock - .01 par value |
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|
Series A 9,000,000 shares authorized 7,530,681 issued and 7,159,678 outstanding |
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|
71,597 |
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|
75,307 |
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|
Series B 1,000,000 shares authorized 1,000,000 issued and 502,160 outstanding |
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10,000 |
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|
|
10,000 |
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|
Series C 520,000 shares authorized 520,000 issued and outstanding |
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|
5,200 |
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|
|
5,200 |
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|
Series D 636,400 shares authorized 520,000 issued and outstanding |
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|
5,909 |
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|
5,909 |
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|
Common stock - .01 par value, 200,000,000 authorized, 31,176,509 and 22,942,437 issued and outstanding respectively |
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|
311, 766 |
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|
298, 516 |
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|
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Additional paid-in capital |
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|
43,308,690 |
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|
43,313,969 |
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|
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Accumulated deficit |
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|
(44,441,034 |
) |
|
|
(44,443,185 |
) |
|
|
|
(727,872 |
) |
|
|
(734,284 | ) |
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Stock held in treasury, at cost |
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|
(558,096 |
) |
|
|
(558,096 |
) |
Equity Attributable to shareowners of Lattice Incorporated |
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|
(1,285,968 |
) |
|
|
(1,292,380 |
) |
Equity Attributable to noncontrolling interest |
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|
120,133 |
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|
|
120,133 |
|
Total liabilities and shareholders' equity |
|
$ |
5,369,089 |
|
|
$ |
5,943,695 |
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LATTICE INCORPORATED AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(Unaudited) |
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|
Nine Months Ended September 30, |
|
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|
2012 |
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|
2011 |
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|
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Cash flow from operating activities: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
20,982 |
|
|
$ |
(3,436,403 |
) |
|
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| |
|
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|
|
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
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|
|
|
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|
|
|
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|
|
Derivative income (expense) |
|
|
(38,733 |
) |
|
|
(64,150 |
) |
|
|
|
|
|
|
|
|
|
|
|
Impairment Loss |
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|
- |
|
|
|
1,575,000 |
|
|
|
|
|
|
|
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|
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|
|
Amortization of intangible assets |
|
|
338,844 |
|
|
|
411,681 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
(97,191 |
) |
|
|
(256,512 |
) |
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
- |
|
|
|
(9,441 |
) |
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
4,263 |
|
|
|
194,750 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
172,685 |
|
|
|
119,091 |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
- |
|
(Increase) decrease in: |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
34,034 |
|
|
|
282,492 |
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets |
|
|
55,251 |
|
|
|
1,037 |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in: |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
(343,052 |
) |
|
|
(244,097 |
) |
|
|
|
|
|
|
|
|
|
|
|
Deferred revenues |
|
|
(37,500 |
) |
|
|
(17,879 |
) |
|
|
|
|
|
|
|
|
|
|
|
Customer advances |
|
|
235,973 |
|
|
|
(78,786 |
) |
Total adjustments |
|
|
324,574 |
|
|
| 1,913,186 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities |
|
|
345,556 |
|
|
|
(1,523,217 |
) |
Cash Used in investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of equipment |
|
|
(114,387 |
) |
|
|
(430,811 |
) |
|
|
|
|
|
|
|
|
|
|
|
Acquired cash - CLR |
|
|
- |
|
|
|
59,518 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities |
|
|
(114,387 |
) |
|
|
(371,293 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit facility (payments) borrowings, net |
|
|
(206,139 |
) |
|
|
427,411 |
|
|
|
|
|
|
|
|
|
|
|
|
Payments on captial lease |
|
|
(16,718 |
) |
|
|
(44,404 |
) |
|
|
|
|
|
|
|
|
|
|
|
Payments on notes payable | |
|
(264,055 |
) |
|
|
(643,704 |
) |
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of notes payable |
|
|
175,000 |
|
|
|
2,164,733 |
|
|
|
|
|
|
|
|
|
|
|
|
Payments on Director Loans |
|
|
(30,438 |
) |
|
|
(24,436 |
) |
|
Net cash provided by (used in) financing activities |
|
|
(342,350 |
) |
|
|
1,879,600 |
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(111,181 |
) |
|
|
(14,910 |
) |
Cash and cash equivalents - beginning of period |
|
|
192,286 |
|
|
|
324,149 |
|
Cash and cash equivalents - end of period |
|
$ |
81,105 |
|
|
$ |
309,239 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid in cash |
|
$ |
396,051 |
|
|
$ |
342,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
- |
|
|
|
1,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
|
- |
|
|
|
(31,999 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in Capital |
|
|
- |
|
|
|
30,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|