SOURCE: Lattice Incorporated

Lattice Incorporated

August 14, 2012 09:26 ET

Lattice Announces Positive Q2 Net Income, Growing Communications Sales and Improved Outlook for Government Services

Y-T-D Communications Revenue up 77% Over Year-Ago Period

Conference Call Today, August 14 at 2:00 p.m. EDT

PENNSAUKEN, NJ--(Marketwire - Aug 14, 2012) -  Lattice Incorporated (OTCBB: LTTC), a provider of advanced information and communications technology solutions to the corrections industry and key government agencies, announced its financial results for the second quarter ended June 30,2012 and the first six months of 2012.

Q2 Financial Highlights:

  • Revenue was $2,488,203 compared to $3,194,686 for the same period of 2011.
  • Net income was $99,541 compared with a loss of ($1,965,852) for the same period of 2011

Six Months Financial Highlights:

  • Revenue was $5,883,684 compared to $6,461,437 for the same period of 2011.
  • Net income was $128,301 compared with a loss of ($2,507,234) 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 (SEC).

Revenues from the company's rapidly growing Communications Services in the second quarter rose 54% to $1,839,000, accounting for 74% of total company revenues compared with 37% in the second quarter of 2011. Revenues from recurring services within the Communications segment were up 90% to $1,554,000 reflecting higher call volumes from correctional facilities and the increased number of facilities on the network.

Government Services revenue in the second quarter decreased to $649,000 compared with $1,997,000 in the second quarter a year earlier. The decrease in revenue in this segment was primarily attributable to SPAWAR contracts ending in 2011 and 2012 and the stagnation of contract funding in the Federal DoD market. The ending of the SPAWAR contracts accounted for approximately $747,000 of the decrease from the prior year.

Lattice CEO Paul Burgess said, "We continue to see strong growth in our communications business as demand for our technology and direct services remain robust. With an increase in sales both domestically and internationally, it is a clear indication our proprietary technology is being more widely accepted within the corrections industry and bodes well for our market share growth. With recent contract awards for our Government Services division we anticipate earnings growth within the division to rebound in the second half of the year."

Lattice will host a conference call today, Tuesday, August 14, with CEO Paul Burgess and CFO Joseph Noto at 2:00 p.m. EDT. To participate in this call, dial 1-877-941-1429 after 1:50 p.m. EDT. International callers should dial 1-480-629-9809. An audio replay of the call will be available at http://www.hawkassociates.com/lttcprofile.aspx for approximately 90 days after the call.

Financial Tables are attached.

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

Investment profile about Lattice: http://www.hawkassociates.com/lttcprofile.aspx.

An online investor relations kit including copies of press releases, current price quotes, stock charts and information for investors is available at http://www.hawkassociates.com. To receive free e-mail notification of future releases for Lattice, 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  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION  
(Unaudited)  
   
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2012     2011     2012     2011  
                                 
Revenue   $ 2,488,203     $ 3,194,686     $ 5,883,684     $ 6,461,437  
                                 
Cost of Revenue     1,503,618       1,994,506       3,541,806       4,095,874  
                                 
Gross Profit     984,585       1,200,180       2,341,878       2,365,563  
      39.6 %     37.6 %     39.8 %     36.6 %
Operating expenses:                                
  Selling, general and administrative     810,516       1,563,005       1,820,182       2,690,087  
  Research and development     178,608       167,969       353,190       320,230  
  Impairment loss     -       1,575,000       -       1,575,000  
Amortization expense     80,448       104,728       160,896       209,455  
Total operating expenses     1,069,572       3,410,702       2,334,268       4,794,772  
                                 
Income (loss) from operations     (84,987 )     (2,210,522 )     7,610       (2,429,209 )
                                 
Other income (expense):                                
  Derivative income (loss)     18,467       254,708       30,250       (18,209 )
  Other income (expense)     255,613       -       255,613       -  
Interest expense     (121,949 )     (98,689 )     (229,958 )     (237,118 )
  Total other income     152,131       156,019       55,905       (255,327 )
                                 
Noncontrolling interest     -       3,147       -       6,294  
                                 
Income (Loss) before taxes     67,144       (2,051,356 )     63,516       (2,678,242 )
                                 
Income taxes (benefit)     (32,397 )     (85,504 )     (64,786 )     (171,008 )
                                 
Net income (loss)     99,541       (1,965,852 )     128,301       (2,507,234 )
                                 
Reconciliation of net income (loss) to income applicable to common shareholders:                                
  Net income (loss)     99,541       (1,965,852 )     128,301       (2,507,234 )
Preferred stock dividends     (6,277 )     (6,277 )     (12,554 )     (12,554 )
Income (loss) applicable to common stockholders     93,264       (1,972,129 )     115,747       (2,519,788 )
                                 
Income (loss) per common share                                
  Basic   $ 0.00     $ (0.08 )   $ 0.00     $ (0.10 )
  Diluted   $ 0.00     $ (0.08 )   $ 0.00     $ (0.10 )
Weighted average shares:                                
  Basic     29,548,522       25,459,225       29,548,522       24,211,686  
  Diluted     74,708,287       25,459,225       74,292,934       24,211,686  
                                 
                                 
LATTICE INCORPORATED AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
   
    June 30, 2012
(unaudited)
    December 31,
2011
 
ASSETS:                
Current assets:                
Cash and cash equivalents   $ 165,117     $ 192,286  
Accounts receivable     2,509,196       2,700,859  
Inventories     7,350       7,350  
Other current assets     165,850       142,500  
  Total current assets     2,847,513       3,042,995  
                 
Property and equipment, net     605,756       612,710  
Goodwill     690,871       690,871  
Other intangibles, net     1,368,412       1,594,306  
Other assets     2,812       2,813  
Total assets   $ 5,515,364     $ 5,943,695  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current liabilities:                
Accounts payable   $ 1,854,605     $ 1,769,896  
Accrued expenses     1,194,550       1,698,617  
Deferred revenues     25,000       50,000  
Customer advances     209,785       124,266  
Notes payable - current     2,043,162       1,869,043  
Contingent Consideration     77,700       77,700  
Derivative liability     66,117       96,366  
Total current liabilities     5,470,919       5,685,888  
  Long term liabilities:                
Notes Payable - long term     939,125       1,206,283  
Deferred tax liabilities     158,978       223,771  
Total long term liabilities     1,098,103       1,430,054  
Total liabilities     6,569,022       7,115,942  
                 
Shareholders' equity                
Preferred Stock - .01 par value                
  Series A 9,000,000 shares authorized 7,530,681 issued and outstanding     75,307       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, 29,851,509 and 22,942,437 issued and outstanding respectively     298,516       298,516  
Additional paid-in capital     43,316,811       43,313,969  
Accumulated deficit     (44,327,438 )     (44,443,185 )
      (615,695 )     (734,284 )
Stock held in treasury, at cost     (558,096 )     (558,096 )
Equity Attributable to shareowners of Lattice Incorporated     (1,173,791 )     (1,292,380 )
Equity Attributable to noncontrolling interest     120,133       120,133  
Total liabilities and shareholders' equity   $ 5,515,364     $ 5,943,695  
                 
                 
LATTICE INCORPORATED AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
   
    Six Months Ended
June 30,
 
    2012     2011  
Cash flow from operating activities:                
Net income (loss)   $ 128,301     $ (2,507,234 )
  Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:                
  Derivative income     (30,250 )     18,209  
  Impairment Loss     -       1,575,000  
  Amortization of intangible assets     225,896       274,456  
  Deferred income taxes     (64,786 )     (171,008 )
  Minority interest     -       (6,294 )
  Share-based compensation     2,842       194,750  
  Depreciation     116,004       72,554  
Changes in operating assets and liabilities:     -          
(Increase) decrease in:     -          
  Accounts receivable     191,664       158,657  
  Other current assets     (23,350 )     7,172  
Increase (decrease) in:     -          
  Accounts payable and accrued liabilities     (408,919 )     (603,452 )
  Deferred revenues     (25,000 )     (67,879 )
Customer advances     85,519       125,267  
Total adjustments     69,619       1,577,432  
  Net cash provided by (used for) operating activities     197,920       (929,802 )
Cash Used in investing activities:                
  Purchase of equipment     (109,049 )     (263,582 )
Acquired cash - CLR     -       59,518  
Net cash used for investing activities     (109,049 )     (204,064 )
Cash flows from financing activities:                
  Revolving credit facility (payments) borrowings, net     (67,721 )     (103,612 )
  Payments on capital lease     (10,998 )     (25,658 )
  Payments on notes payable     (192,707 )     (589,275 )
  Proceeds from the issuance of notes payable     175,000       1,937,461  
Payments on Director Loans     (19,614 )     (13,746 )
Net cash provided by (used in) financing activities     (116,040 )     1,205,170  
Net increase (decrease) in cash and cash equivalents     (27,169 )     71,304  
Cash and cash equivalents - beginning of period     192,286       324,149  
Cash and cash equivalents - end of period   $ 165,117     $ 395,453  
Supplemental cash flow information                
  Interest paid in cash   $ 220,959     $ 218,618  
    Common Stock     -       1,231  
    Derivative liabilities     -       (31,999 )
    Additional paid-in Capital     -       30,768  

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