Lattice Incorporated Reports First-Quarter 2009 Results

PENNSAUKEN, N.J.--(Business Wire)--
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 "Adjusted" 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 of
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.

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 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

See accompanying notes to condensed consolidated financial statements.

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 assets 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 78,107 78,387
issued
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 169,425 168,425
respectively
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.

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 ) $ -

See accompanying notes to condensed consolidated financial statements.

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

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