Lattice Incorporated 7150 N. Park Dr. Suite 500 Pennsauken, NJ 08109 Phone: (856) 910-1166 Fax: (856) 910-1811 |  | Investor Relations Contact: Hawk Associates, Inc. Julie Marshall and Cale Smith Phone: (305) 451-1888 E-mail: info@hawkassociates.com http://www.hawkassociates.com |
| | News Release: FINAL |
| | FOR IMMEDIATE RELEASE |
Lattice Incorporated First Quarter Revenues Up 137% to $3.2M
Conference Call Scheduled for May 25 at 11 a.m.
PENNSAUKEN, N.J. - May 24, 2007 -- Lattice Incorporated (OTC Bulletin Board: LTTC), a provider of advanced technological solutions to key government agencies and enterprise customers, announced today the company’s financial results for the quarter ended March 31, 2007.
Revenues for the quarter were $3,176,000, an increase of 137% compared to $1,342,000 in the first quarter of 2006. The total increase in revenue for the quarter included the results of Ricciardi Technologies Inc. (RTI) acquired in the third quarter of 2006. Exclusive of RTI’s results, total revenues increased by $491,000 or 37% compared to the year ago period.
Revenues in the services segment increased 215% for the quarter to $2,887,000 from $918,000 in the prior year due to the contribution from RTI and new contracts with government agencies. Excluding RTI results, service revenues increased by 68% on a year over year basis. Revenues from technology products decreased for the quarter to $289,000 from $424,000 in 2006, reflecting variability in unit shipments during the quarter. Gross margin for the quarter improved slightly to 53.6% from 52.9% in the comparable period.
For the first quarter of 2007, the company reported a net loss of $93,497 or $0.00 per diluted share, compared to a net loss of $49,676 or $0.00 per diluted share a year earlier. Results for the first quarter of 2007 included non-cash amortization expense of $520,000 associated with intangibles valued as part of the SMEI and more recently RTI acquisitions. Excluding non-cash expenses (depreciation, amortization and share-based compensation), adjusted operating income in the first quarter of 2007 increased 207% to $532,000 compared to $173,000 a year ago. Although a non-GAAP performance measure, the company believes adjusted operating income is a meaningful measure of its operations.
Lattice CEO Paul Burgess said, “Our operating performance continued to improve in the first quarter. We are pleased with trends in our adjusted operating income and believe we can gain further efficiencies across our subsidiaries in the months ahead. We intend to keep a close eye on costs as we complete the integration of RTI and continue to emphasize cross-selling higher margin products and fixed-price service contracts across our subsidiaries.
“Our first quarter results highlight RTI’s top-line contribution to the company. Gross margins and revenues in the services segment increased significantly over the course of the year, due largely to existing RTI contracts. We are also pleased to be realizing healthy growth in our services segment independent of that business. Our legacy operations continue to benefit from a renewed focus and additional cross-selling opportunities. In spite of variability in unit sales in the product segment during the quarter, we saw favorable trends in product mix, as gross margins in the product segment increased to 69.2% from 63.6% a year ago.
“I would also like to comment on a brief delay in our integration schedule that arose during the quarter. In RTI we acquired a solid business with attractive long-term prospects, a strong proprietary platform and significant existing contracts. We have since found weaknesses in the internal controls of the formerly private company that we are now in the process of addressing. We view these as non-material to our financial outlook and consider them emblematic of the challenges inherent in ensuring the successful integration of any acquired company. Though our integration schedule has been pushed back several weeks, we remain optimistic and energized about the prospects of our combined businesses.”
Lattice CFO Joe Noto stated, “Our strong organic growth is testament that we are moving forward towards our goal of producing significant long-term, sustainable operating cash flows. In addition, we expect to gain further efficiencies in our cost structure over the next few quarters as we continue the integration of RTI.”
A copy of the financial statements follows.
The company will host a conference call with CEO Paul Burgess and CFO Joseph Noto on Friday, May 25 at 11 a.m. Eastern Daylight Saving Time. The call will cover Lattice’s first quarter 2007 financial results. Paul Burgess will open the conference call, followed by a question-and-answer session.
To participate in this call, dial (888) 200-8152 any time after 10:50 a.m. EDT on May 25. International callers should dial (973) 935-8764.
A live webcast of the call will be available at http://viavid.net/dce.aspx?sid=00004039. A podcast will also be available approximately 15 minutes after the live event ends at http://viavid.net/mp3/00004039.mp3. Each will be archived for approximately 90 days.
About Lattice Incorporated
Lattice Incorporated is a provider of advanced information and communications technology to the government and commercial markets. The company’s technology services division designs, deploys and manages advanced technological solutions at key government agencies and 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 multiple vertical 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.
For investor relations information regarding Lattice Incorporated, contact Julie Marshall or Cale Smith, Hawk Associates, at (305) 451-1888, e-mail: info@hawkassociates.com. 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 and http://www.americanmicrocaps.com. To receive free e-mail notification of future releases for this company, sign up at http://www.hawkassociates.com/email.aspx.
Forward-Looking Statements: Statements in this press release may be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about Lattice Incorporated’s business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and probably will, differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including those risks discussed from time to time in the company’s filings with the Securities and Exchange Commission, including the Risk Factors in the Form 10-KSB for the year ended December 31, 2006 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Form 10-KSB for the year ended December 31, 2006 and the Form 10-QSB for the quarter ended March 31, 2007. In addition, general industry and market conditions and growth rates, and general economic conditions and competitive conditions, particularly those relating to the our working capital and the market for our products and services and our dependence on government and government-related business, regulatory matters and other factors could affect such statements. Any forward-looking statement speaks only as of the date on which they are made, and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.
LATTICE INCORPORATED (formerly Science Dynamics Corp.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
| | | March 31, | | December 31, | |
| | | 2007 | | 2006 | |
| ASSETS | | | | | |
| | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | | $ | 240,739 | | $ | 392,275 | |
| Accounts receivable - trade | | | 3,087,553 | | | 2,412,164 | |
| Inventories | | | 65,674 | | | 64,442 | |
| Other current assets | | | 129,741 | | | 698,514 | |
| Total current assets | | | 3,523,707 | | | 3,567,395 | |
| | | | | | | | |
| Property and equipment, net | | | 33,061 | | | 37,187 | |
| Goodwill | | | 2,547,866 | | | 2,547,866 | |
| Other intangibles, net | | | 6,823,807 | | | 7,344,235 | |
| Other assets | | | 96,701 | | | 122,935 | |
| | | | | | | | |
| Total assets | | $ | 13,025,142 | | $ | 13,619,618 | |
| | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | | | | | | | |
| Current liabilities: | | | | | | | |
| Customer deposits | | $ | 15,000 | | $ | 15,000 | |
| Deferred revenue | | | 33,874 | | | 62,495 | |
| Accounts payable | | | 983,671 | | | 892,773 | |
| Accrued expenses | | | 940,013 | | | 1,736,754 | |
| Current maturities notes payable | | | 1,607,178 | | | 1,998,189 | |
| Derivative liability | | | 13,047,396 | | | 19,873,782 | |
| Total current liabilities | | | 16,627,132 | | | 24,578,993 | |
| | | | | | | | |
| Non-Current Deferred Tax Liabilities | | | 406,162 | | | 406,162 | |
| Minority Interest | | | 182,604 | | | 135,561 | |
| | | | | | | | |
| Shareholders' equity - (Deficit) | | | | | | | |
| Preferred stock - .01 par value | | | | | | | |
| 10,000,000 shares authorized | | | | | | | |
| 8,826,087 and 1,000,000 issued | | | 88,261 | | | 10,000 | |
| Common stock - .01 par value, | | | | | | | |
| 200,000,000 shares authorized, | | | | | | | |
| 16,642,428 and 16,642,428 issued | | | | | | | |
| 16,629,848 and 16,629,848 outstanding | | | | | | | |
| in 2007 and 2006 respectively. | | | 166,425 | | | 166,425 | |
| | | | | | | | |
| Additional paid-in capital | | | 3,205,731 | | | 25,571,152 | |
| | | | | | | | |
| (Deficit) | | | (36,953,340 | ) | | (36,850,842 | ) |
| | | | (3,792,923 | ) | | (11,103,265 | ) |
| Common stock held in treasury, at cost | | | (397,833 | ) | | (397,833 | ) |
| | | | | | | | |
| Total Shareholders' Equity (Deficit) | | | (4,190,756 | ) | | (11,501,098 | ) |
| | | | | | | | |
| | | | | | | | |
| Total Liabilities and Shareholders' Equity | | $ | 13,025,142 | | $ | 13,619,618 | |
LATTICE INCORPORATED (formerly Science Dynamics Corp.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| | | Three Months Ended March 31, | |
| | | 2007 | | 2006 | |
| | | | | | |
| Sales - Technology Products | | $ | 289,402 | | $ | 423,890 | |
| Sales - Technology Services | | | 2,887,079 | | | 917,917 | |
| Total Sales | | | 3,176,481 | | | 1,341,807 | |
| | | | | | | | |
| Cost of Sales - Technology Products | | | 89,192 | | | 154,120 | |
| Cost of Sales - Technology Services | | | 1,383,262 | | | 478,248 | |
| Total Cost of Sales | | | 1,472,454 | | | 632,368 | |
| | | | | | | | |
| Total Gross Profit | | | 1,704,027 | | | 709,439 | |
| | | | | | | | |
| Operating costs and expenses: | | | | | | | |
| | | | | | | | |
| Research and development | | | 109,041 | | | 109,134 | |
| Selling, general and administrative | | | 1,649,152 | | | 504,606 | |
| | | | 1,758,193 | | | 613,740 | |
| | | | | | | | |
| Operating income (loss) before other income (expenses) | | | (54,166 | ) | | 95,699 | |
| | | | | | | | |
| Other income (expense): | | | | | | | |
| Derivative | | | (1,684,074 | ) | | -- | |
| Extinguishment gain | | | 2,073,589 | | | -- | |
| Interest expense | | | (385,803 | ) | | (129,890 | ) |
| Finance expense | | | (5,000 | ) | | (8,043 | ) |
| | | | | | | | |
| Total other income (expenses) | | | 7,712 | | | (137,933 | ) |
| | | | | | | | |
| Net Income (Loss) before Minority Interest | | | (46,454 | ) | | (42,234 | ) |
| Minority Interest | | | 47,043 | | | (7,442 | ) |
| | | | | | | | |
| Net Loss | | $ | (93,497 | ) | $ | (49,676 | ) |
| | | | | | | | |
| Basic and diluted earnings per common share | | $ | (0.00 | ) | $ | (0.00 | ) |
| | | | | | | | |
| Weighted average shares outstanding basic and diluted | | | 16,629,848 | | | 8,984,150 | |
LATTICE INCORPORATED (formerly Science Dynamics Corp.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | | Three Months Ended March 31 | |
| | | 2007 | | 2006 | |
| Cash flows from operating activities: | | | | | |
| Net (loss) | | $ | (102,497 | ) | $ | (49,676 | ) |
| | | | | | | | |
| Adjustments to reconcile net (loss) to net cash | | | | | | | |
| provided by (used for) operating activities: | | | | | | | |
| Depreciation | | | 4,125 | | | 20,940 | |
| Amortization intangible assets | | | 520,428 | | | 56,690 | |
| Financing expense non-cash | | | 5,000 | | | 8,043 | |
| Derivative expense | | | 1,684,074 | | | - | |
| Non cash interest derivative | | | 113,207 | | | 36,180 | |
| Amortization of debt discount | | | 205,809 | | | - | |
| Extinguishment gain | | | 57,245 | | | - | |
| Minority interest | | | 47,043 | | | 7,442 | |
| Stock-based compensation | | | 61,440 | | | - | |
| Changes in operating assets and liabilities: | | | | | | | |
| (Increase) decrease in: | | | | | | | |
| Accounts receivable | | | (675,389 | ) | | (320,390 | ) |
| Inventories | | | (1,232 | ) | | 4,106 | |
| Other current assets | | | 8,090 | | | (37,049 | ) |
| Other assets | | | 26,235 | | | (2,100 | ) |
| Increase (decrease) in: | | | | | | | |
| Accounts Payable and | | | | | | | |
| accrued expenses | | | 180,911 | | | 154,883 | |
| Customer Deposits | | | - | | | 16,111 | |
| Deferred Revenue | | | (28,621 | ) | | - | |
| | | | | | | | |
| Total adjustments | | | 77,531 | | | (55,144 | ) |
| | | | | | | | |
| Net cash provided by (used for) | | | | | | | |
| operating activities | | | (24,966 | ) | | (104,820 | ) |
| | | | | | | | |
| Cash flows from financing activities: | | | | | | | |
| Payments of short term note payable | | | (45,000 | ) | | - | |
| Net borrowing (payment) on Revolving AR credit facility | | | (81,570 | ) | | 166,591 | |
| | | | | | | | |
| Net cash (used in) provided by financing activities | | | (126,570 | ) | | 166,591 | |
| | | | | | | | |
| Net increase (decrease) in | | | | | | | |
| cash and cash equivalents | | | (151,536 | ) | | 61,771 | |
| Cash and cash equivalents - | | | | | | | |
| beginning of period | | | 392,275 | | | 53,997 | |
| | | | | | | | |
| Cash and cash equivalents - | | | | | | | |
| end of period | | $ | 240,739 | | $ | 115,768 | |
| | | | | | | | |
| Supplemental information: | | | | | | | |
| Interest paid | | $ | 40,315 | | $ | 54,527 | |
| Taxes paid | | $ | - | | $ | - | |
LATTICE INCORPORATED (formerly Science Dynamics Corp.) AND SUBSIDIARIES
CONDENSED SEGMENT DATA
(unaudited)
| | | Three Months Ended | | Three Months Ended | |
| | | March 31, 2007 | | March 31, 2006 | |
| Revenue | | | | | |
| Technology Products | | $ | 289,402 | | | 423,890 | |
| Technology Services | | | 2,887,079 | | | 917,917 | |
| Total Consolidated Revenue | | $ | 3,176,481 | | $ | 1,341,807 | |
| | | | | | | | |
| Gross Profit | | | | | | | |
| Technology Products | | | 200,210 | | | 269,770 | |
| Technology Services | | | 1,503,817 | | | 439,669 | |
| Total Gross Profit | | $ | 1,704,027 | | $ | 709,439 | |
LATTICE INCORPORATED (formerly Science Dynamics Corp.) AND SUBSIDIARIES
ADJUSTED OPERATING INCOME
RECONCILIATION TO REPORTED OPERATING INCOME
(unaudited)
| | | For the three months ended March 31, | |
| | | 2007 | | 2006 | |
| Reported Operating Income (Loss) | | $ | (54,166 | ) | $ | 95,699 | |
| | | | | | | | |
| Add-back: | | | | | | | |
| Non-cash Depreciation & Amortization Expenses | | $ | 524,553 | | $ | 77,630 | |
| Share-based Compensation | | $ | 61,440 | | $ | - | |
| | | | | | | | |
| Adjusted Operating Income | | $ | 531,827 | | $ | 173,329 | |
