SOURCE: Lattice Incorporated

Lattice Incorporated

November 19, 2012 08:31 ET

Lattice Announces Financial Results for the Third Quarter

Y-T-D Net Income Positive With Communications Sales Up 78.5%; Conference Call Today, November 19 at 2 p.m. ET

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.

               
LATTICE INCORPORATED AND SUBSIDIARIES              
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION              
(Unaudited)              
                         
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2012     2011     2012     2011  
                                 
Revenue   $ 2,731,599     $ 2,545,429     $ 8,615,139     $ 9,006,867  
                                 
Cost of Revenue     1,652,778       1,677,232       5,191,893       5,773,103  
                                 
Gross Profit     1,078,821       868,197       3,423,246       3,233,764  
                                 
Operating expenses:                                
  Selling, general and administrative     860,923       1,565,445       2,683,680       4,255,532  
  Research and development     160,876       192,930       514,067       513,160  
  Impairment loss     -       -       -       1,575,000  
  Amortization expense     80,448       104,727       241,344       314,181  
  Total operating expenses     1,102,247       1,863,102       3,439,091       6,657,873  
                                 
Income (loss) from operations     (23,426 )     (994,905 )     (15,845 )     (3,424,109 )
                                 
Other income (expense):                                
  Derivative income (loss)     8,483       82,359       38,733       64,150  
  Other income (expense)             -       255,613       -  
  Interest expense     (124,773 )     (105,274 )     (354,710 )     (342,397 )
  Total other income     (116,290 )     (22,915 )     (60,364 )     (278,247 )
                                 
Noncontrolling interest     -       3,147       -       9,441  
                                 
Income (Loss) before taxes     (139,716 )     (1,014,673 )     (76,209 )     (3,692,915 )
                                 
Income taxes (benefit)     (32,399 )     (85,504 )     (97,191 )     (256,512 )
                                 
Net income (loss)     (107,317 )     (929,169 )     20,982       (3,436,403 )
                                 
Reconciliation of net income (loss) to income applicable to common shareholders:                                
  Net income (loss)     (107,317 )     (929,169 )     20,982       (3,436,403 )
  Preferred stock dividends     (6,277 )     (6,277 )     (18,831 )     (18,831 )
Income (loss) applicable to common stockholders     (113,594 )     (935,446 )     2,151       (3,455,234 )
                                 
Income (loss) per common share                                
  Basic   $ (0.00 )   $ (0.03 )   $ 0.00     $ (0.13 )
  Diluted   $ (0.00 )   $ (0.03 )   $ 0.00     $ (0.13 )
                                 
Weighted average shares:                                
  Basic     30,917,270       29,364,488       30,209,356       25,976,950  
  Diluted     30,917,270       29,364,488       73,208,384       25,976,950  
                                   
                                   
LATTICE INCORPORATED AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
             
    September     December 31,  
    2012     2011  
    (unaudited)        
ASSETS:                
Current assets:                
                 
Cash and cash equivalents   $ 81,105     $ 192,286  
                 
Accounts receivable     2,666,825       2,700,859  
                 
Inventories     7,350       7,350  
                 
Other current assets     110,249       142,500  
  Total current assets     2,865,529       3,042,995  
                 
Property and equipment, net     554,412       612,710  
                 
Goodwill     690,871       690,871  
                 
Other intangibles, net     1,255,465       1,594,306  
                 
Other assets     2,812       2,813  
  Total assets   $ 5,369,089     $ 5,943,695  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current liabilities:                
                 
Accounts payable   $ 1,817,378     $ 1,769,896  
                 
Accrued expenses     1,326,914       1,698,617  
                 
Deferred revenues     12,500       50,000  
                 
Customer advances     360,239       124,266  
                 
Notes payable - current     2,152,823       1,869,043  
                 
Contingent Consideration     77,700       77,700  
                 
Derivative liability     57,634       96,366  
  Total current liabilities     5,805,188       5,685,888  
                 
Long term liabilities:                
Notes Payable - long term     603,155       1,206,283  
                 
Deferred tax liabilities     126,581       223,771  
  Total long term liabilities     729,736       1,430,054  
  Total liabilities     6,534,924       7,115,942  
                 
                 
Shareholders' equity                
Preferred Stock - .01 par value                
  Series A 9,000,000 shares authorized 7,530,681 issued and 7,159,678 outstanding     71,597       75,307  
  Series B 1,000,000 shares authorized 1,000,000 issued and 502,160 outstanding     10,000       10,000  
  Series C 520,000 shares authorized 520,000 issued and outstanding     5,200       5,200  
  Series D 636,400 shares authorized 520,000 issued and outstanding     5,909       5,909  
               
Common stock - .01 par value, 200,000,000 authorized, 31,176,509 and 22,942,437 issued and outstanding respectively     311, 766         298, 516   
                 
Additional paid-in capital     43,308,690       43,313,969  
                 
Accumulated deficit     (44,441,034 )     (44,443,185 )
      (727,872 )     (734,284 )
                 
Stock held in treasury, at cost     (558,096 )     (558,096 )
Equity Attributable to shareowners of Lattice Incorporated     (1,285,968 )     (1,292,380 )
Equity Attributable to noncontrolling interest     120,133       120,133  
Total liabilities and shareholders' equity   $ 5,369,089     $ 5,943,695  
                 
                 
LATTICE INCORPORATED AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
             
    Nine Months Ended September 30,  
    2012     2011  
                 
Cash flow from operating activities:                
                 
Net income (loss)   $ 20,982     $ (3,436,403 )
                 
  Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:                
                   
  Derivative income (expense)     (38,733 )     (64,150 )
                   
  Impairment Loss     -       1,575,000  
                   
  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  
                 
                 

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