8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934

Date of Report (Date of earliest reported): August 21, 2007

LATTICE INCORPORATED

(Exact name of registrant as specified in charter)

Delaware		22-2011859
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(IRS Employer Identification No.)

7150 N. Pennsauken, New Jersey 08109

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (856)910-1166

Copies to:

Gregory Sichenzia, Esq.

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32^nd Floor

New York, New York 10006

Phone: (212) 930-9700

Fax: (212) 930-9725

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On August 21, 2007 Lattice Corporation issued a press release announcing its results for the three months ended June 30, 2007, a copy of which is attached hereto as Exhibit 99.1. 

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits

(a) Financial statements of business acquired.

Not applicable.

(b) Pro forma financial information.

Not applicable.

(c) Exhibits.

99.1 Press Release of Lattice Corporation dated August 21, 2007

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	LATTICE CORPORATION
Date: August 23, 2007	By:	/s/ Joe Noto
		Name: Joe Noto
		Chief Financial Officer, Principal Accounting Officer

EX-99.1

		Investor Relations Contact: Hawk Associates, Inc. Julie Marshall and Cale Smith Phone: (305) 451-1888 E-mail: info@hawkassociates.com http://www.hawkassociates.com
Lattice Incorporated 7150 N. Park Dr. Suite 500 Pennsauken, NJ 08109 Phone: (856) 910-1166 Fax: (856) 910-1811	News Release: FOR IMMEDIATE RELEASE

Lattice Incorporated Announces Second Quarter Fiscal 2007 Financial Results

- Generated $3.7 Million of Revenue for Quarter -

PENNSAUKEN, N.J. - August 21, 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 second fiscal quarter ended June 30, 2007.

Revenues for the quarter were $3,720,000 compared to $1,343,000 in the second quarter of 2006, an increase of $2,377,000. Revenues for the quarter ended June 30, 2007 include $1,577,000 in revenues attributable to Ricciardi Technologies, Inc., an entity acquired by the company in September 2006. Disregarding the impact of the addition of Ricciardi Technologies, comparable sales increased $800,000 or 60% from $1,343,000 in the quarter ended June 30, 2006 to $2,143,000 in the quarter ended June 30, 2007.

Revenues in the services segment increased by $2,394,000 for the quarter to $3,379,000 from $965,000 in the second quarter of 2006. Such increase included Ricciardi Technologies service revenues of $1,577,000. Non-Riciardi Technologies service revenues increased by $817,000 or 85% from $965,000 in the second quarter of 2006 to $1,782,000 in the second quarter if 2007. Revenues from technology products decreased slightly for the quarter to $341,000 from $378,000 in the comparable quarter of 2006. The company reported an operating loss for the quarter of $20,000 versus an operating income of $116,000 in the comparable quarter of 2006. Included in the current quarter were non-cash amortization expenses related to intangible assets totaling $520,000 versus $57,000 in the year ago quarter.

For the second quarter of 2007, the company reported net income of $1,730,000 compared to a net loss of $7,000 a year earlier. Included in net income for the most recent quarter was $1,906,000 of derivative income representing a decrease in the fair value of the company’s derivative liabilities.

Lattice CEO Paul Burgess said, “We are pleased to report our continued growth in the second quarter. By continuing to augment our existing contracts and add new agreements, we anticipate further organic growth and cost efficiencies as we look ahead. We will strive to improve margins in our services segment as we focus our product development resources on accelerating the market launch of innovative, high margin solutions.

“We plan on continuing to expand our sales efforts both within the federal government secure software solutions space and commercial accounts. Our strong contract backlog has given us an opportunity to further expand our existing revenue base across both markets. During the quarter we also continued to investigate potential acquisitions of profitable companies with proprietary products and services which will mesh well with our existing customers and business.”

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A copy of the financial statements follows.

A podcast of the company’s second quarter conference call will be archived for approximately 90 days from today at http://viavid.net/mp3/000042F2.mp3.

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.

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 (the Exchange Act), 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; (iv) the declaration and payment of dividends; and (v) 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 and 10-Q filed with the SEC.

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LATTICE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30, 2007			December 31, 2006
	(Unaudited)			(Restated)
ASSETS
Current assets:
Cash and cash equivalents	$	272,174		$	392,275
Accounts receivable, net		3,974,858			2,412,164
Inventories		86,329			64,442
Other current assets		102,000			698,514
Total current assets		4,435,361			3,567,395
Property and equipment, net		28,937			37,187
Goodwill		2,547,866			2,547,866
Other intangibles, net		6,303,379			7,344,235
Other assets		96,556			122,935
Total assets	$	13,412,099		$	13,619,618
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable	$	1,558,601		$	892,773
Accrued expenses		800,122			1,736,754
Customer deposits		15,000		$	15,000
Deferred revenue		-			62,495
Notes payable		1,654,192			1,998,189
Derivative Liability		11,141,149			19,873,782
Total current liabilities		15,169,064			24,578,993
Deferred tax liabilities		406,162			406,162
Minority interest		236,740			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 16,629,848 issued and outstanding
in 2007 and 2006, respectively		166,425			166,425
Additional paid-in capital		33,638,894			24,850,967
Accumulated deficit		(35,895,614	)		(36,130,657	)
		(2,002,034	)		(11,103,265	)
Common stock held in treasury, at cost		(397,833	)		(397,833	)
Shareholders' deficit		(2,399,867	)		(11,501,098	)
Total liabilities and shareholders' deficit	$	13,412,099		$	13,619,618

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LATTICE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Six Months Ended June 30,						Three Months Ended June 30,
	2007			2006			2007			2006
Sales -- Technology services	$	6,265,887		$	1,882,675		$	3,378,808		$	964,758
Sales -- Technology products		630,487			801,886			341,085			377,996
Total sales		6,896,374			2,684,561			3,719,893			1,342,754
Cost of sales -- Technology services		2,945,113			923,924			1,561,851			445,676
Cost of sales -- Technology products		212,170			269,820			122,978			115,700
Total cost of sales		3,157,283			1,193,744			1,684,829			561,376
Gross profit		3,739,091			1,490,817			2,035,064			781,378
Operating costs and expenses:
Selling, general and administrative		3,608,003			1,061,197			1,958,852			556,590
Research and development		205,298			218,269			96,257			109,135
		3,813,301			1,279,466			2,055,109			665,725
Operating loss		(74,210	)		211,351			(20,045	)		115,653
Other income (expense):
Derivative income (expense)		1,060,882			13,445			1,906,247			13,445
Other income		-			13,505			-			13,505
Extinguishment loss		(157,130	)		-			-			-
Interest expense		(479,002	)		(264,753	)		(93,198	)		(134,864	)
Finance expense		(14,318	)		(16,309	)		(9,318	)		(8,266
Total other income (expenses)		410,432			(254,112	)		1,803,731			(116,180	)
Income (loss) before minority interest		336,222			(42,761	)		1,783,686			(527	)
Minority interest		(101,179	)		(14,021	)		(54,136	)		(6,579	)
Net income (loss)	$	235,043		$	(56,782	)	$	1,729,550		$	(7,106	)
Reconciliation of net income (loss) to income applicable to common shareholders:
Net income (loss)	$	235,043		$	(56,782	)	$	1,729,550		$	(7,106	)
Preferred stock dividends		(25,000	)		-			(12,500	)		-
	$	210,043		$	(56,782	)	$	1,717,050		$	(7,106	)
Income (loss) per common share:
Basic	$	0.01		$	(0.01	)	$	0.10		$	(0.00	)
Diluted	$	(0.02	)	$	(0.01	)	$	(0.00	)	$	(0.00	)
Weighted average shares:
Basic		16,642,428			9,371,901			16,642,428			9,759,652
Diluted		64,230,056			9,499,330			64,230,056			9,887,081

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LATTICE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	2007			2006
Cash flows from operating activities:
Net income (loss)	$	235,043		$	(56,782	)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Derivative (income) expense		(1,060,882	)		(13,445
Amortization of intangible assets		1,040,856			113,380
Amortization of debt discount (effective method)		205,809			79,332
Amortization of financing expense		127,525			16,309
Extinguishment loss		157,130			-
Minority interest		101,179			14,021
Share-based payments		122,880			-
Depreciation		8,250			35,279
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable		(1,559,695	)		(169,650	)
Inventories		(21,887	)		4,106
Other current assets		36,167			-
Other assets		26,380			(57,905	)
Increase (decrease) in:
Accounts payable and  accrued expenses		603,196			(252,328	)
Customer deposits		-			(135,199	)
Deferred revenue		(62,495	)		-
Total adjustments		(275,587	)		(366,100	)
Net cash provided by (used for) operating activities		(40,544	)		(422,882	)
Cash flows from financing activities:
Payments on notes payable		(68,000	)		(209,000	)
Sale of common stock, net		-			1,291,906
Revolving credit facility (payments) borrowings, net		(11,557	)		99,875
Net cash (used in) provided by financing activities		(79,557	)		1,182,781
Net increase (decrease) in cash and cash equivalents		(120,101	)		759,899
Cash and cash equivalents - beginning of period		392,275			53,996
Cash and cash equivalents - end of period	$	272,174			813,895
Supplemental cash flow information:
Interest paid in cash	$	215,685			-

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LATTICE INCORPORATED AND SUBSIDIARIES

CONDENSED SEGMENT DATA

	Six Months Ended		Six Months Ended		Three Months Ended		Three Months Ended
	30-June-07		30-June-06		30-June-07		30-June-06
Revenue
Technology Products	$	630,487	$	801,886	$	341,085	$	377,996
Technology Services		6,265,887		1,882,675		3,378,808		964,758
Total Consolidated Revenue	$	6,896,374	$	2,684,561	$	3,719,893	$	1,342,754
Gross Profit
Technology Products	$	418,317	$	532,066	$	218,107	$	262,296
Technology Services		3,320,774		958,751		1,816,957		519,082
Total Gross Profit	$	3,739,091	$	1,490,817	$	2,035,064	$	781,378

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