SOURCE: Lattice Incorporated

Lattice Incorporated

May 24, 2010 16:38 ET

Lattice Announces First Quarter 2010 Earnings

Communication Services Revenue Up 175%

PENNSAUKEN, NJ--(Marketwire - May 24, 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 first quarter ended March 31, 2010.

Total revenue for the quarter ended March 31, 2010 was $3.7 million compared to $3.8 million for the quarter ended March 31, 2009. Net loss was ($532,000) or EPS of ($0.02) compared with net loss of ($403,000) or EPS of ($0.02) in 2009.

Gross profit for the quarter was $1.19 million compared to $1.25 million a year ago. Gross margin was 31.8% compared to 32.9%.

Total operating expense for the quarter was $1.48 million, a decrease of 5.9% from $1.57 million in the comparable period a year ago. As a percentage of sales, operating expenses decreased to 39.5% from 41.2% for 2009.

CEO Paul Burgess said, "Our first quarter results are continued confirmation of our successful business transition. Communication Services segment revenue increased to $829,000, or 22.2% of our total revenues in Q1 '10 compared to $301,000 or just 7.9% of total revenues in the first quarter a year ago. We are gratified by this significant 175% increase in our communications revenues, a clear demonstration of the success we are experiencing due to our entry into the services model late last year.

"As we explained last month in our year-end conference call, our communications services segment opens a new market for us that exceeds $1 billion. We anticipate continued growth in this area and expect that our services model will provide us with monthly recurring revenues. The dip in government revenue should be short lived as we have a strong pipeline."

Financial tables are below.

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

                                                  March 31,   December 31,
                                                    2010          2009
                                                  unaudited     audited
                                                ------------  ------------
ASSETS:
Current assets:
Cash and cash equivalents                       $    580,631  $    212,616
Accounts receivable                                3,882,375     3,560,293
Inventories                                           29,402        29,402
Other current assets                                 105,880       133,405
                                                ------------  ------------
    Total current assets                           4,598,288     3,935,716

Property and equipment, net                          276,714       264,753
Goodwill                                           3,599,386     3,599,386
Other intangibles, net                             2,105,319       977,455
Other assets                                          78,262        54,259
                                                ------------  ------------
    Total assets                                $ 10,657,969  $  8,831,569
                                                ------------  ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                                $  2,140,530  $  1,780,143
Accrued expenses                                   1,615,539     1,719,831
Licensing agreement payable                        1,100,000             -
Customer deposits                                    240,888        94,954
Notes payable                                      1,396,579     1,503,742
Derivative liability                                 169,732       161,570
                                                ------------  ------------
    Total current liabilities                      6,663,268     5,260,240
Long term liabilities:
Long term debt                                       616,011       188,466
Deferred tax liabilities                             379,392       440,832
                                                ------------  ------------
    Total long term liabilities                      995,403       629,298
                                                ------------  ------------
    Total liabilities                              7,658,671     5,889,538
                                                ------------  ------------


Shareholders' equity
Preferred Stock - .01 par value
    Series A 9,000,000 shares authorized
     7,530,681 and 7,567,685 issued
     respectively                                     75,307        75,677
    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                                            5,200         5,200
Common stock - .01 par value, 200,000,000
 authorized, 22,942,437 and 17,810,281 issued,
 22,639,450 and 17,507,294 outstanding
 respectively                                        229,425       178,104
Additional paid-in capital                        39,473,907    38,925,743
Accumulated deficit                              (36,390,593)  (35,851,892)
                                                ------------  ------------
                                                   3,403,246     3,342,832
Stock held in treasury, at cost                     (558,096)     (558,096)
                                                ------------  ------------
Equity Attributable to shareowners of Lattice
 Incorporated                                      2,845,150     2,784,736
                                                ------------  ------------
Equity Attributable to non-controlling interest      154,148       157,295
                                                ------------  ------------
Total liabilities and shareholders' equity      $ 10,657,969  $  8,831,569
                                                ============  ============




                  LATTICE INCORPORATED AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATION
                                MARCH 31,

                                                      2010         2009
                                                  -----------  -----------

Revenue                                           $ 3,741,058  $ 3,807,883


Cost of Revenue                                     2,552,846    2,555,164
                                                  -----------  -----------


Gross Profit                                        1,188,212    1,252,719
                                                         31.8%        32.9%
Operating  expenses:
  Selling, general and administrative               1,181,322    1,117,470
                                                         31.6%        29.3%
  Research and development                            155,531      152,494
  Amortization expense and depreciation expense       140,596      300,086
                                                  -----------  -----------
  Total operating expenses                          1,477,449    1,570,050

                                                  -----------  -----------
Loss from operations                                 (289,237)    (317,331)
  EBITDA                                               28,919      108,385
Other income (expense):
  Derivative expense                                  (95,947)    (172,443)
  Extinguishment (loss)                              (130,055)           -
  Other income                                              -       (4,840)
  Interest expense                                    (81,771)     (77,217)
                                                  -----------  -----------
  Total other income                                 (307,773)    (254,500)
                                                  -----------  -----------

Minority Interest                                       3,147        5,395

                                                  -----------  -----------
Income before taxes                                  (593,863)    (566,436)

Income taxes (benefit)                                (61,440)    (163,355)

                                                  -----------  -----------
Net loss                                             (532,423)    (403,081)

Reconciliation of net loss to
Loss applicable to common shareholders:
  Net loss                                           (532,423)    (403,081)
  Preferred stock dividends                            (6,777)      (6,777)
                                                  -----------  ----------- 
Loss applicable to common stockholders               (539,200)    (409,858)

Loss per common share
  Basic                                           $     (0.02) $     (0.02)
  Diluted                                         $     (0.02) $     (0.02)

Weighted average shares:
  Basic                                            22,639,450   16,700,554
  Diluted                                          22,639,450   16,700,554





                  LATTICE INCORPORATED AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          March 31,
                                                    ----------------------
                                                       2010        2009
                                                    ----------  ----------
Cash flow from operating activities:

Net loss                                            $ (532,423) $ (403,081)

   Adjustments to reconcile net income  to net cash
    provided by (used in) operating activities:
   Derivative income                                    95,947     172,443
   Amortization of intangible assets                   172,136     299,248
   Deferred income taxes                               (61,440)   (163,355)
   Extinguishment loss                                 130,055           -
   Minority interest                                    (3,147)     (5,395)
   Share-based compensation                            131,275     125,631
   Depreciation                                         14,745         837
Changes in operating assets and liabilities:
(Increase) decrease in:
   Accounts receivable                                (322,082)   (359,568)
   Other current assets                                 27,525     (61,862)
   Other assets                                          6,997          32
Increase (decrease) in:
   Accounts payable and accrued liabilities          1,410,829     205,554
   Customer advances                                    84,923           -
                                                    ----------  ----------
Total adjustments                                    1,687,763     213,565
                                                    ----------  ----------
   Net cash provided by (used for) operating
    activities                                       1,155,340    (189,516)
Cash Used in investing activities:

   Purchase of intangibles                          (1,300,000)
   Purchase of equipment                               (26,706)          -
                                                    ----------  ----------

   Net cash used for investing activities           (1,326,706)          -
                                                    ----------  ----------
Cash flows from financing activities:
   Revolving credit facility (payments) borrowings,
    net                                                373,579    (775,950)
   Payments on capital equipment lease                  (9,189)          -
   Proceeds from issuance of Series A preferred
    stock                                              250,000           -
   Loans paid director                                 (12,509)    (21,000)
   Payments on short term notes payable                (62,500)          -
                                                    ----------  ----------
   Net cash provided by (used in) financing
    activities                                         539,381    (796,950)
                                                    ----------  ----------
   Net increase (decrease) in cash and cash
    equivalents                                        368,015    (986,466)
                                                    ----------  ----------
Cash and cash equivalents - beginning of period        212,616   1,363,130
                                                    ----------  ----------
Cash and cash equivalents - end  of period          $  580,631  $  376,664
                                                    ==========  ==========

Supplemental cash flow information
   Interest paid in cash                            $   81,771  $   57,289
   Taxes paid                                                   $    4,805
Supplemental disclosures of Non-Cash Investing &
 Financing Activities
   Proceeds from Factoring agreement paid directly
    to Private Bank Facility                                       682,232
   Preferred stock dividends                                         6,277
   Conversion of preferred shares into common          (14,370)       (280)
   Conversion of preferred shares into common           51,322       1,000
   Additional paid in capital                          (36,951)       (720)
   Exchange of warrants for preferred series A
     Derivative liabilities                             87,785
     Additional paid in Capital                        453,840




                  LATTICE INCORPORATED AND SUBSIDIARIES
                          CONDENSED SEGMENT DATA
                                (unaudited)

                                                      Three Months Ended
                                                           March 31,
                                                    -----------------------
                                                       2010        2009
                                                    ----------- -----------

Revenues:
Government Services                                 $ 2,911,835 $ 3,506,525
Communication Services                                  829,222     301,358
                                                    ----------- -----------
Total Consolidated Revenues                         $ 3,741,057 $ 3,807,883
                                                    =========== ===========

Gross Profit:
Government Services                                 $   967,177 $ 1,066,768
Communication Services                                  221,035     185,951
                                                    ----------- -----------
Total Consolidated                                  $ 1,188,212 $ 1,252,719
                                                    =========== ===========

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