Lattice (LTTC) 8-K Lattice Incorporated Reports First-Quarter 2009 Results

For Immediate Release

Contact:
Lattice Incorporated	CCG Elite Investor Relations
Paul Burgess, CEO	Crocker Coulson, President
Phone: +(1) 856-910-1166 x.2111	Phone: +(1) 646-213-1915
Email: pburgess@latticeincorporated.com	Email: crocker.coulson@ccgir.com
	Ed Job, CFA
	Phone: +(1) 646-213-1914
	Email: ed.job@ccgir.com

Lattice Incorporated Reports First-Quarter 2009 Results

PENNSAUKEN, N.J., May 11, 2009 - Lattice Incorporated (OTC: LTTC) (“Lattice” or the “Company”), a provider of advanced information and communications technology solutions to key government agencies and enterprise customers, today announced results for the first quarter ended March 31, 2009.

First-Quarter 2009 Highlights

· Total revenues were $3.8 million, up 6.0% from approximately $3.6 million in the first quarter of 2008

· Gross margin was 32.9%, slightly up from 31.6% in the first quarter of 2008

· “Adjusted” Operating Income was $108,000 versus a $73,000 loss in the year ago period

“Despite uncertainties related to the economy and the ultimate spending roadmap of the new administration, we continue to succeed steadily in achieving organic growth, as we expand contract work with our existing government customers,” said Paul Burgess, Lattice’s Chief Executive Officer. “Simultaneously, we continue to emphasize cost-cutting as we focus on consolidating our businesses under the Lattice brand.”

First-Quarter 2009 Results

Lattice’s total revenue in the first quarter of 2009 was $3.8 million, up 6.0% from approximately $3.6 million in the same period last year.  The year-over-year increase in quarterly total revenues was attributable to an increase in rates on the Company’s cost-plus contracts in its Government services unit and higher sales in the Company’s technology product segment.

Cost of revenues increased to approximately $2.6 million from approximately $2.5 million in the same period of 2008. Gross profit in the 2009 first quarter was approximately $1.3 million compared to $1.1 million in the comparable period of 2008. As a percent of revenues, gross profit was 32.9% in the first quarter of 2009, up from 31.6% in the first quarter of 2008.  The year-over-year increase in gross profit was primarily due to a higher percentage of overall revenues attributable to higher-margin technology products, an increase in government services margins due to the rate increase on the Company’s cost plus contracts, partially offset by increased use of subcontractors in supporting the Government service revenues .

Operating expenses for the first quarter of 2009 totaled $1.6 million, approximately even with the comparable period of 2008. Selling, general and administrative expenses in the 2009 first quarter were $1.1 million, approximately even with SG&A recorded for the first quarter of 2008. Amortization expense was down 19.8% to $299,248 compared to $372,057 recorded in the corresponding period of 2008, as some of the Company’s intangibles have been fully amortized.

The Company posted an “Adjusted” operating income of $108,000 compared to a loss for the 2008 first quarter of $73,000. The Company uses “Adjusted” operating income, a non-GAAP measure, as an internal gauge on the Company’s operating performance. Below is a reconciliation of “Adjusted” operating income to reported operating loss.

Reconciliation of Operating Loss reported to "Ajusted" Operating Income

	31-Mar-09			31-Mar-08
Operating Loss - reported	$	(317,331	)	$	(458,390	)
Add-back non-cash items:
Depreciation & Amortization		300,085			375,733
Share-based compensation		125,631			9,833
"Adjusted" Operating Income		108,385			(72,824	)

Other expense in the first quarter of 2009 totaled $254,500, compared to other income of $128,394 recorded in the first quarter of 2008. Included in other expense for the first quarter of 2009 was $172,000 non-cash derivative expense which compared to derivative income of $179,000 in the comparable quarter in 2008.

Net loss applicable to common shareholders for the 2009 first quarter was $409,358, or $0.02 per fully diluted share, compared to a $140,836 and $0.01, respectively in the first quarter of 2008.

Conference Call

The Company will host a conference call at 5:00 p.m. ET on May 11, 2009, to discuss first-quarter 2009 results. Joining Paul Burgess, Lattice’s Chief Executive Officer, will be Joe Noto, Chief Financial Officer. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1(866) 800-8648. The conference ID for the call is 83148794.

If you are unable to participate in the call at this time, a replay will be available on May 11 at 7:00 p.m. ET for seven days. To access the replay, dial +1(888)286-8010 or +1(617)801-6888; the conference ID is 41548873.

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.

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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.

- FINANCIAL TABLES FOLLOW -

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LATTICE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended
	March 31,
	2009			2008
Revenue - Technology Services	$	3,506,525		$	3,354,013
Revenue - Technology Products		301,358			236,893
Total Revenue		3,807,883			3,590,906
Cost of Revenue - Technology Services		2,439,757			2,369,326
Cost of Revenue - Technology Products		115,407			88,538
Total cost of revenue		2,555,164			2,457,864
Gross Profit		1,252,719			1,133,042
Operating expenses:
Selling, general and administrative		1,118,308			1,069,640
Research and development		152,494			149,735
Amortization expense		299,248			372,057
Total operating expenses		1,570,050			1,591,432
Loss from operations		(317,331	)		(458,390	)
Other income (expense):
Derivative income (expense)		(172,443	)		179,667
Other expense		(4,840	)		-
Interest expense		(76,191	)		(50,821	)
Finance expense		(1,026	)		(452	)
Total other income (expense)		(254,500	)		128,394
Minority Interest		5,395			27,422
Loss before taxes		(566,436	)		(302,574	)
Income taxes (benefit)		(163,355	)		(174,208	)
Net loss	$	(403,081	)	$	(128,366	)
Reconciliation of net loss
Loss  applicable to common shareholders:
Net loss	$	(403,081	)	$	(128,336	)
Series B Preferred stock dividend		(6,277	)		(12,500	)
Loss applicable to common stockholders	$	(409,358	)	$	(140,836	)
Loss per common share
Basic	$	(0.02	)	$	(0.01	)
Diluted	$	(0.02	)	$	(0.01	)
Weighted average shares:
Basic		16,700,554			16,828,428
Diluted		16,700,554			16,828,428

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LATTICE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31			December 31,
	2009			2008
	(Unaudited)			(Audited)
ASSETS:
Current assets:
Cash and cash equivalents	$	376,664		$	1,363,130
Accounts receivable, net		3,238,027			3,560,690
Inventories		30,704			30,704
Other current assets		112,870			51,008
Total current assets		3,758,265			5,005,532
Property and equipment, net		20,253			21,090
Goodwill		3,599,386			3,599,386
Other intangibles, net		2,110,500			2,409,748
Other assetes		54,427			54,459
Total assets	$	9,542,831		$	11,090,215
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,450,409		$	1,698,551
Accrued expenses		2,170,036			1,726,891
Customer deposits		15,000			15,000
Notes payable		487,416			1,766,098
Derivative liability		373,049			200,606
Total current liabilities		4,495,910			5,407,146
Long term liabilities:
Long Term Debt		482,841			666,515
Deferred tax liabilities		1,036,928			1,200,283
Total long term liabilities		1,519,769			1,866,798
Total liabilities		6,015,679			7,273,944
Minority interest		187,885			193,280
Shareholders' equity
Preferred Stock - .01 par value
Preferred Stock series A 9,000,000 shares authorized, 7,810,686 and  7,838,686 issued		78,107			78,387
Preferred Stock series B 1,000,000 shares authorized  1,000 000 issued		10,000			10,000
Preferred Stock series C 575,000 shares authorized 520,000 issued		5,200			5,200
Common stock - .01 par value, 200,000,000 authorized,
16,942,428 and 16,842,428 issued, and 16,639,441 and 16,539,441 outstanding respectively		169,425			168,425
Additional paid-in capital		38,543,809			38,418,897
Accumulated deficit		(34,909,178	)		(34,499,822	)
		3,897,363			4,181,087
Common stock held in treasury, at cost		(558,096	)		(558,096	)
Shareholders' equity		3,339,267			3,622,991
Total liabilities and shareholders' equity	$	9,542,831		$	11,090,215

See accompanying notes to condensed consolidated financial statements

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LATTICE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months ended
	March 31,
	2009			2008
Cash flow from operating activities:
Net loss before preferred dividends	$	(403,081	)	$	(128,336	)
Adjustments to reconcile net loss to net used for operating activities:
Derivative (income) expense		172,443			(179,667	)
Amortization of intangible assets		299,248			372,057
Deferred income taxes		(163,355	)		(174,208	)
Minority interest		(5,395	)		(27,422	)
Share-based compensation		125,631			9,833
Depreciation		837			3,676
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable		(359,568	)		850,650
Other current assets		(61,862	)		41,721
Other assets		32			17,524
Increase (decrease) in:
Accounts payable and accrued liabilities		205,554			(1,057,349	)
Deferred revenue		-			15,000
Total adjustments		213,565			(128,185	)
Net cash provided by ( used in) operating activities		(189,516	)		(256,521	)
Cash flows from investing activities:
Purchase of equipment		-			(16,594	)
Net cash used in investing activities		-			(16,594	)
Cash flows from financing activities:
Payments on notes payable		(21,000	)		(66,000	)
Bank line-of-credit borrowings (payments), net		(775,950	)		637,407
Net cash provided by (used in) by financing activities		(796,950	)		571,407
Net increase (decrease) in cash and cash equivalents		(986,466	)		298,292
Cash and cash equivalents - beginning of period		1,363,130			769,915
Cash and cash equivalents - end of period	$	376,664		$	1,068,207
Supplemental cash flow information
Interest paid in cash	$	57,289		$	19,302
Taxes paid	$	4,805		$	2,080
Supplemental Disclosures of Non-Cash Financing Activities
Proceeds from Factoring agreement paid directly
to Private Bank Facility	$	682,232		$	-
Preferred stock dividends	$	6,277		$	12,500
Conversion of 28,000 preferred share into 100,000 of common	$	(280	)	$	-
Conversion of 28,000 preferred share into 100,000 of common	$	1,000		$	-
Additional paid in capital	$	(720	)	$	-

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