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Lattice Announces Financial Results for the Third Quarter

Companies mentioned in this article: Lattice Incorporated

PENNSAUKEN, NJ -- (Marketwire) -- 11/19/12 -- 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        Nine Months Ended
                         September 30,             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



Contact:

Contact:
Investor Relations
Jon Cunningham
RedChip Companies, Inc.
Tel: +1-800-733-2447, ext. 107
info@redchip.com
http://www.redchip.com