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): April 15, 2008

LATTICE INCORPORATED

(Exact name of registrant as specified in charter)

Delaware		22-2011859
(State or Other Jurisdiction of	(Commission File Number)	(IRS Employer
Incorporation or Organization		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 April 15, 2008 Lattice Incorporated (the “Company”) issued a press release announcing its results for the year ended December 31, 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 7.01 Regulation FD Disclosure

On April 15, 2008, the Company hosted a conference call to discuss its results for the year end December 31, 2007. The transcript of the conference call is attached hereto as Exhibit 99.2 During the conference call, the Company provided certain information regarding the Company’s EBITDA for 2007.

EBITDA is considered a non-GAAP financial measure as defined under SEC rules. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles. Management believes that EBITDA is one of the appropriate measures for evaluating our operating performance because it reflects the resources available for strategic opportunities including, among others, to invest in the business, strengthen the balance sheet and make strategic acquisitions. However, this measure should be considered in addition to, and not as a substitute for, or superior to, net earnings or other measures of financial performance prepared in accordance with generally accepted accounting principles as more fully discussed in our financial statements and filings with the SEC. The following is a reconciliation of the EBITDA measures discussed in our conference to the most directly comparable GAAP measures as is required under SEC rules regarding the use of non-GAAP financial measures:

Reconciliation of reported Operating Income (Loss) to Non-GAAP “EBITDA”:
	2007	2006
Operating Income (Loss)	($1,740,834)	$455,886
Add Non-cash items:
Depreciation & Amortization	2,024,737	780,285
Share-based compensation	245,760	90,612
Earnings before interest, taxes, depreciation and amortization (“EBITDA” )	$529,663	$1,326,783

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 April 15, 2008
99.2	Transcript of April 15, 2008 conference call

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: April 21, 2008	By:	/s/ Joe Noto
		Name: Joe Noto Chief Financial Officer, Principal Accounting Officer

EX-99.1

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@sysmanagement.com	Email: crocker.coulson@ccgir.com
	Ed Job, CFA
	Phone: +(1) 646-213-1914
	Email: ed.job@ccgir.com

Lattice Incorporated Reports Solid 2007 Results

PENNSAUKEN, N.J., April 15, 2008 - 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 record 2007 year end results.

Fiscal Year 2007 Highlights

· Total revenues increased 103% year-over-year to $15.2 million

· Gross profit increased 64% year-over-year to $6.8 million

· Net income applicable to common shares was $722 thousand

· Earnings per fully diluted share was $0.01

· Peace Corps selected Aquifer 6.5 to deploy its Vida 2.0 Database Application

· Backlog of contract wins reached a record $84.0 million

“We are extremely pleased with our results for the year. During 2007 we delivered strong top line performance and increased our Total Contract Backlog to $84.0 million, positioning the business for future growth,” said Paul Burgess, Lattice’s Chief Executive Officer.

Fiscal Year 2007 Results

Lattice’s total revenues in 2007 were $15.2 million, an increase of 103% over 2006. Revenue growth was driven by the acquisition of RTI in September of 2006 as well as organic growth of 32% attributable to new and expanded contract vehicles in the Company’s technology services business. Services and solutions to the Federal government accounted for 91% of the Company’s revenues in 2007, up from 77% in 2006.

Gross profit in 2007 was $6.8 million, an increase of 64% over 2006. Gross margin was 44.6% in 2007, down from 55.2% in the 2006. The year-over-year reduction in the gross profit percentage was primarily due to increased use of sub-contractors in support of the delivery of the Company’s government contract vehicles primarily its JPMIS Seaport-e contract which was awarded in the third quarter of 2007.

The Company posted an operating loss for 2007 of $1.8 million which compared to operating income of $456 thousand in 2006. The operating loss for 2007 included non-cash amortization expense of $2.0 million related to intangible assets associated with the acquisition of RTI in 2006 and SMEI in 2005, compared to a non-cash amortization expense of $739 thousand in 2006. Also included in operating results were non-cash share-based compensation of $245,000 and 90,000 for 2007 and 2006 respectively.

Net income applicable to common shares was $722 thousand, or $0.01 per fully diluted share, compared to a loss of $15.6 million, or $1.31 per diluted share in the year ago period.

Recent Events

On December 26, 2007 the Company disclosed that its backlog of contract wins had reached a record $84.0 million as of November 30, 2007

On January 28, 2008 the Company announced that Peace Corps selected Aquifer version 6.5 to develop and deploy its Volunteer Information Database Application (VIDA 2.0), with worldwide release scheduled for the first quarter of 2008.

On February 26, 2008 the Company announced that the Joint Program Manager Information Systems (JPM IS) has exercised and partially funded an optional $2.35M Contract Line Item in its ongoing SeaPort-e Task Order. If all options and award terms are exercised this contract could generate revenue over five years of up to approximately $55 million to Lattice.

On March 4, 2008 the Company announced that it had been recognized in the prestigious “Deloitte 2007 Technology Fast 500” program as one of the 500 fastest growing technology companies in North America.

On March 31, 2008 the Company announced that the Private Bank of the Peninsula reached a participation agreement with Montage Capital LLC under which it can expand Lattice’s line of credit from $2,400,000 up to $4,000,000.

Conference Call

The Company will host a conference call at 5:30 p.m. ET on April 15, 2008, to discuss 2007 year end 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) 864-4336. The conference ID for the call is 43157367.

If you are unable to participate in the call at this time, a replay will be available on April 15, at 7:30 p.m. ET, through May 22, 2008. To access the replay, dial +1(800)642-1687 international callers should dial +1(706)645-9291 and enter the conference ID 43157367.

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 INCOME STATEMENT
	2007			2006
Revenue - Technology Services	$	13,853,580		$	5,802,836
Revenue - Technology Products		1,364,247			1,692,052
Total Revenue		15,217,827			7,494,888
Cost of Revenue - Technology Services		7,892,257			2,801,085
Cost of Revenue - Technology Products		530,833			554,136
Total cost of revenue		8,423,090			3,355,221
Gross Profit		6,794,737			4,139,667
Operating expenses:
Selling, general and administrative		6,113,338			2,508,559
Research and development		432,069			435,768
Amortization expense		1,990,164			739,454
Total operating expenses		8,535,571			3,683,781
Income (Loss) from operations		(1,740,834	)		455,886
Other income (expense):
Derivative income (expense)		4,970,932			(13,753,295	)
Extinguishment loss		(157,130	)		(158,266	)
Finance expense		(99,279	)		(1,334,335	)
Total other income (expense)		4,714,523			(15,245,896	)
Net interest expense		(494,414	)		(704,178	)
Minority Interest		(79,038	)		(57,245	)
Income (loss) before taxes		2,400,237			(15,551,433	)
Income taxes (benefit)		(1,325,976	)		-
Net income (loss)		3,726,213			(15,551,433	)
Reconciliation of net income (loss) to
income applicable to common shareholders:
Net income (loss)		3,726,213			(15,551,433	)
Series A Preferred stock dividend		(2,954,507	)
Series BPreferred stock dividend		(50,000	)		(8,333	)
Income applicable to common stockholders		721,706			(15,559,766	)
Income (loss) per common share
Basic	$	0.04		$	(1.31	)
Diluted	$	0.01		$	(1.31	)
Weighted average shares:
Basic		16,658,343			11,888,458
Diluted		57,542,816			11,888,458

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LATTICE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	December 31,
	2007
ASSETS:
Current assets:
Cash and cash equivalents	$	769,915
Accounts receivable, net		3,839,744
Inventories		65,846
Other current assets		127,801
Total current assets		4,803,306
Property and equipmen, net		27,530
Goodwill		7,629,632
Other intangibles, net		5,354,071
Other assetes		118,623
Total assets	$	17,933,162
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,716,411
Accrued expenses		1,252,916
Due to former Stockholder's per Sept 19, 2006 purchase agreement		1,500,000
Customer deposits		15,000
Deferred revenue		-
Notes payable		1,050,254
Derivative liability		7,217,099
Total current liabilities		13,751,680
Deferred tax liabilities		2,661,954
Minority interest		214,599
Shareholders' equity
Preferred Stock - .01 par value		88,387
Common stock - .01 par value, 200,000,000 authorized,		168,425
16,842,428 and 16,642,428 issued, 16,829,428 and 16,629,848 outstanding respectively
Additional paid-in capital		36,854,901
Accumulated deficit		(35,408,951	)
		1,702,762
Common stock held in treasury, at cost		(397,833	)
Shareholders' equity		1,304,929
Total liabilities and shareholders' equity	$	17,933,162

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LATTICE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Year Ended December 31,
	2007			2006
Cash flow from operating activities:
Net Income (Loss) before preferred dividends	$	3,726,213		$	(15,551,433	)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Derivative (income) expense		(4,970,932	)		13,753,295
Amortization of intangible assets		1,990,164			739,454
Providion for income taxes		(1,325,976	)		-
Amortization of debt discount (effective method)		205,809			371,753
Amortization of deferred financing		26,119			1,334,335
Stock issued for services		40,000
Financing expenses paid in stock		65,470
Extinguishment loss		157,130			158,266
Minority interest		79,038			57,245
Interest derivative		110,618
Share-based compensation		245,760			90,612
Depreciation		34,573			40,831
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable		(1,427,580	)		(818,847	)
Inventories		(1,404	)		23,150
Other current assets		(105,040	)		(69,472	)
Other assets		4,313			1,649
Increase (decrease) in:
Accounts payable and accrued liabilities		2,294,270			(270,269	)
Customer deposits		-			(135,199	)
Deferred revenue		(62,495	)		62,495
Total adjustments		(2,640,163	)		15,339,298
Net cash provided by (used for) operating activities		1,086,050			(212,135	)
Cash Used in investing activities:
Investment in "RTI"		-			(3,665,638	)
Acquired Cash RTI		-			156,772
Purchase of equipment		(24,916	)		(39,837	)
Net cash used for investing activities		(24,916	)		(3,548,703	)
Cash flows from financing activities:
Issuance of common stock, net		-			1,293,906
Repayments of convertible notes (Laurus)		-			(1,000,000	)
Issuance of convertible debt, net of fees		-			4,450,000
Financing fees in connection with Barron financing and Revolving Line of Credit		149,506			(553,059	)
Revolving credit facility (payments) borrowings, net		-			137,898
Short term notes paid		(833,000	)		(234,000	)
Loans from Stockholders' & Officers		-			250,000
Loans paid Stockholders' & Officers		-			(245,629	)
Net cash (used) provided by financing activities		(683,494	)		4,099,116
Net increase (decrease) in cash and cash equivalents		377,640			338,278
Cash and cash equivalents - beginning of period		392,275			53,997
Cash and cash equivalents - end of period	$	769,915		$	392,275
Supplemental cash flow information
Interest paid in cash	$	177,987		$	315,470
Non-cash
RTI earn out	$	1,500,000
Prepaid finance cost reclassified as equity	$	442,474
Accued expenses setteled with stock warrants	$	874,000

###

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EX-99.2

LATTICE, INCORPORATED

Moderator: Joe Noto

4-15-08/4:30 pm CT

Confirmation # 43157367

Page 1

LATTICE, INCORPORATED

Moderator: Joe Noto

April 15, 2008

4:30 pm CT

Ed: Good afternoon everyone and thanks for joining us on Lattice Incorporated’s fiscal year 2007 earnings conference call. With us today are Lattice’s Chief Executive Officer, Paul Burgess; and Chief Financial Officer, Joe Noto. Before I hand the call over to Paul, may I remind our listeners that on this call, management’s prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the Company claims the protection of the safe harbor for forward looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore we refer you to a more detailed discussion of the risks and uncertainties in the Company’s filings with the Securities & Exchange Commission. In addition, any projections as to the Company’s future performance represent management’s estimates as of today April 15, 2008. Lattice assumes no obligation to update these projections in the future as market conditions change. With that said, it is my pleasure to turn the call over to Paul Burgess.

Paul: Thanks, Ed, and welcome to everyone joining us on the call today.

-	We are pleased to report a year of strong top line growth.
-	The company was EBITDA Positive for the second consecutive year.
-	We have now delivered growth of 100% for 3 consecutive years
-	We have also expanded our backlog to record levels.
Some of the key financial highlights of fiscal year 2007 include:
·Revenues growth of103% to a record $15.2 million
·Backlog growth of 600% to $84 million

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LATTICE, INCORPORATED

Moderator: Joe Noto

4-15-08/4:30 pm CT

Confirmation # 43157367

Page 2

Lattice’s results for 2007 were driven by our focus in the areas of secure information and communication technology for the Federal government, in particular the Department of Defense.

Despite overall federal IT budget growth in the mid-single digits, we see significant opportunity for the growth of our business as the areas of secure information and communications technology have become a high priority. In this space we feel Lattice is well positioned with proprietary technologies and customer relationships to take advantage of three important dynamics that will support the rapid growth of our business in the quarters ahead, including: a move toward net-centric computing, a move to secure applications, and an effort to move legacy applications to a secure, net-centric environment.

During 2007 we successfully rolled our proprietary Aquifer 6.5 Application Framework to three of our customers. Aquifer enables the vision of Net Centric computing by leveraging the entire network down to the edge device using an advanced, DoD certified security layer to ensure confidentiality, integrity, and availability of components and data throughout the network in a cost effective manner.

Peace Corps was one of our first customers to select Aquifer to develop and deploy its Volunteer Information Database Application over 70 points of presence worldwide. In 2008 we plan a marketing push to leverage Aquifer’s unique features and DoD grade security certification to extend our market penetration directly and through partnership agreements with other Federal IT contractors.

We also had a couple of major contract wins in 2007. A five year $55 million IDIQ contract with JPMIS Seaport-e and $100 million BPA with one of our existing clients.

We were also delighted to be recognized as one of the fastest growing companies in North America by the Deloitte Technology Fast 500 program. This recognition puts Lattice among an elite group of companies in North America and reaffirms our commitment to establish Lattice as a leader in the secure communications and secure information technology solutions with a focus on the Federal government.

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LATTICE, INCORPORATED

Moderator: Joe Noto

4-15-08/4:30 pm CT

Confirmation # 43157367

Page 3

With that, I would like to turn the call over to Joe Noto for a more detailed discussion of our financials.

Joe:   Thank you, Paul. Good evening, everyone.

As Paul mentioned, our revenue in 2007 reached $15.2 million, up 103% from 2006.

Our government contracts business represented 91% of our total revenues or $13.9m, up from 77% in 2006.

We produced approximately 70% of our 2007 government contract business revenues as a prime contractor. Time and materials and fixed price contracts made up approximately 80% of revenues in 07. Cost-plus (CPFF) contracts accounted for 20% and are related to the SPAWAR 246 and Seaport-e JPMIS contract wins in July 07. Combined these contracts account for $65m of our total backlog.

Gross profit was $6.8 million, an increase of 66% over 2006. As a percent of revenues, our Gross margin was 44.6% in the year, down from 55.2% in the 2006. The year-over-year reduction in gross margin was primarily due to increased use of sub-contractors in support of the delivery of the Company’s JPMIS Seaport-e contract which was awarded in the third quarter of 2007.

Operating loss was $1.8 million, compared to operating income of $456 thousand reported last year. Our Operating loss for 2007 included non-cash amortization expense of $2.0 million related to intangible assets associated with the RTI & SMEI acquisitions and 245,000 of non-cash share-based compensation.

Our 2007 Fully diluted EPS was .01 cents. Our diluted weighted average share count in the fourth quarter stood at 57 million shares.

Turning to the balance sheet - as of December 31, 2007, we had $770 thousand in cash position and $740,000 outstanding on our line of credit balance. In 2007, we paid down notes payable of approximately $800,000. We recently expanded our revolver from $2.0m to $4.0m by refinancing our line with Private Bank at P+3 interest advanced at 85% of eligible AR.

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LATTICE, INCORPORATED

Moderator: Joe Noto

4-15-08/4:30 pm CT

Confirmation # 43157367

Page 4

Looking at the Cash Flow Statement, we reported $1.0 million in cash from operations for FY07. Cap Ex for the year was $62 thousand. This result in free cash flow of approximately $940 thousand.

Our total backlog as of December 29, 2007 was $84 million, of which approximately $54 million is represented by our JPMIS seaport-e contract. Our total backlog is up 600% from what we reported at the end of ’06. We define backlog as estimated revenue we expected to derive from awarded contracts over the remaining lives of those contracts including any option periods. With that I’ll turn the call back over to (Paul) for some closing remarks. Thanks.

(Paul): Thanks Joe. I just want to focus on some of the 2008 strategies and tactics that we’ll be addressing going forward. Currently we are operating the company with multiple brands through several subsidiaries that the company has. It is our plan to integrate all the subsidiaries under one Lattice brand in 2008 so that going forward what you’ll see when we win contracts you won’t be hearing us talking about another subsidiary, you’ll hear us talking about Lattice, and the Lattice brand.  

We’ve also grown our top line at an average rate of north of 100% per year. We’ve done that both organically and through acquisitions. It is our goal to continue that trend for our fourth consecutive year. Although we’ve had operational success I believe to some extent our complicated capital structure has been holding the company back. We’re going to be looking at ways to address this issue going forward, specifically how to get a more simplified capital structure in place that is a lot easier for investors to understand.

We also have several key operational assets in the company including our telecom technology group which is the legacy technology group from the old Science Dynamics. We’re going to be looking into a variety of strategies to ensure all of our assets are realizing their full potential as it relates to shareholder value.

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LATTICE, INCORPORATED

Moderator: Joe Noto

4-15-08/4:30 pm CT

Confirmation # 43157367

Page 5

	In summary we are confident that Lattice remains well positioned with its significant backlog orders to deliver on our growth and profitable objectives. With that I’ll open the call to your questions. Operator?
Operator:	At this time I’d like to remind everyone if you would like to ask a question simply press Star 1 on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster. Your first question comes from (Bill Lee). Sir your line is open.
(Bill Lee):	(Paul) how are you?
(Paul):	Good, how are you doing (Bill)?
(Bill Lee):	Well it’s so windy out here you can’t even see across the street with the dust flying.
(Paul):	Well I’m finally glad to be in New Jersey then.
(Bill Lee):	I think you picked a good time not to be here. Just a couple of questions. You mentioned back in December a backlog of $84 million.
(Paul):	Correct.
(Bill Lee):	What is your backlog right now?
(Paul):	Now it would probably be just north of - just right around $80 million and that’s - primarily what we tend to see is that backlog number will start to deplete through the first half of the year and then regenerate as we start to see some more contract wins in Q3, Q4. But we expect to see, you know, a little bit of a downturn in that for Q1 and Q2 and then probably an upturn in Q3 and Q4.

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LATTICE, INCORPORATED

Moderator: Joe Noto

4-15-08/4:30 pm CT

Confirmation # 43157367

Page 6

(Bill Lee):	What was the $100 million that you mentioned earlier in your comments?
(Paul):	That’s basically a blank purchase order agreement. It allows for, you know, a contract for us to be able to win business of up to $100 million. Now we’re a prime on that. That’s with one of our clients that I can’t mention obviously because of the GS clearance issue. But we’ve recently won that and we should start to see some revenue come out of that in I would probably say Q3, Q4.
	That doesn’t mean you’ll realize $100 million of revenue but it is a good opportunity for us to sell into those agencies and to be able to realize revenue against that contract up to that amount.
(Bill Lee):	So that - so the $84 million is not included in that $100 million?
(Paul):	No, $100 million represents zero of that.
(Bill Lee):	Okay so …
(Paul):	So, you know, we’re looking for some of our growth to be coming out of that $100 million BPA.
(Bill Lee):	So technically you could say your backlog is roughly $180 million?
(Paul):	No we could not because that’s - that is basically not a contract, it’s just a blank purchase order. The government could give us zero contracts out of that, we could get $100 million out of it. Until we actually get firm orders against it, it counts as zero.
(Bill Lee):	Okay what about acquisitions? Anything pending or that you’re looking at that could come to fruition in the near future?
(Paul):	Yeah, I mean, I don’t like to sound like I’m giving you my same caveat but I will. Yeah we’re continuing to look at acquisitions. We actually were very close to some deals in Q4 that we turned away from for various reasons. We always have other ones back in front of us. It’s a combination of a few things -- the right fit of the company, the right price, and more importantly the right financing package to close the deal.

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LATTICE, INCORPORATED

Moderator: Joe Noto

4-15-08/4:30 pm CT

Confirmation # 43157367

Page 7

	So, you know, I think one of the things that we want to make sure we’re addressing is the capital structure of the company because that tends to complicate a lot of the deals we’re looking at and we are looking at fixing that issue fairly quickly here.
(Bill Lee):	As far as your outlook for ’08, doubling revenues is still your goal right now?
(Paul):	It’s still our goal. We’ll do that through a combination of organic growth and through acquisition. That’s, you know, a trend we’ve shown for three consecutive years and we want to make sure that we’re staying on that trend.
(Bill Lee):	Okay, finally as a shareholder we’re all getting rather frustrated with the price kind of hanging in the mid 30s. Any reason that you can see why with your excellent results in the last couple of years why that price hasn’t moved up at all?
(Paul):	I think some of the feedback we had especially when we were at the Roth conference in February was primarily around the capital structure as one issue. Obviously the second issue is we’re still relatively small. That’s why, you know, the goal of growing 100% per annum gets us up to something that’s a little more interesting once we get up to some larger revenue numbers.
	But primarily if we can solve that capital structure issue I think that will enable us to be a lot more strategic, a lot more aggressive on the acquisition side and that will help us when we hit the road being able to explain, you know, our capital structure because right now it is fairly complicated.

(Bill Lee):	And when do you plan on hitting the road?
(Paul):	As soon as we get that capital structure addressed.
(Bill Lee):	And how long do you think that will take?
(Paul):	I don’t think it will take long at all.

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(Bill Lee):	Okay, 30 days, 60 days?
(Paul):	I would say we would definitely have something in the 30 to 60 day range.
(Bill Lee):	Okay. All right, that’s all I have.
(Paul):	All right, thanks (Bill).
(Bill):	Nice year.
(Paul):	Thank you.
Operator:	Your next question comes from (Darrell Patrick). Sir your line is open.
(Darrell Patrick):	Thank you. Can you give us a little more color or detail on the derivative income part on the income statement? How was that derived, what is it?
(Paul):	I’ll pass that one over to Joe.
Joe Noto:	So we did a financing as part of the RCI acquisition which involved convertible debentures and those equate to indexed securities when they convert out. And we also issued derivatives in trenches of warrants and those - that security received classification as a derivative liability.
	So what happens is you do a sort of (black shoals) net present value on those securities going out and you put that liability up on the balance sheet and you mark to market every quarter as the valuations of those securities change. It’s all non-cash so, you know, it’s not to be factored in a cash flow projection or anything and it really should be sort of discarded when looking into balance sheet ratios.
(Darrell Patrick):	Okay fine, very good, thank you very much.

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Joe Noto:	Okay.
Operator:	Your next question comes from (Andy Ratner). Sir your line is open.
(Andy Ratner):	Yes hi, can you address the drop in sequential revenue from Q3 to Q4 is the first question, is it - was it seasonal. And second question is the drop in gross margin. Is that going to continue? What levels of gross margin do you see going forward?
(Paul):	I’ll answer the question and then Joe maybe you can add some on the back end.
Joe Noto:	Sure.
(Paul):	As far as the revenue drop in Q4, there were a couple of contracts that we had held up that subsequently have come back online in Q2 so you’ll see the sequential revenue drop hit Q4 and then partially into Q1 as well.

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	As far as the margin drop, one of our larger contracts that we scaled up on, we actually have a lot of subcontractors on that which are much lower margin so I think you’ll see an impact on the gross margin in Q1 and as far in Q1 and then you’ll start to see it trend back up in Q2 and Q3.
	To what level, you know, right now I would say on an annualized basis going forward, you know, typically you’re seeing in the 40% to 50% range and our target would be to get as close to 50% as possible. But, you know, it really depends on how much of that revenue you’re deriving from direct labor as opposed from subcontractors. Joe do you want to add anything to that?
Joe Noto:	No I think that was it. That was pretty much pretty accurate on that. You know, we won that JPMS - JPMIS contract back in July and, you know, typically when you start up a contract a good portion of that is supported with pass through or subcontractor work until you can get your, you know, mobilize the staff and labor behind it and win incremental awards on top of it.

(Andy Ratner):	So just to clarify, is Q1 going to be sequentially lower in terms of revenue than Q4? Can you address that?
(Paul):	Not sequentially lower than Q4 but, you know, we won’t see the same trend of growth that we saw going into Q3. And then you’ll start to see it ramp again in Q2.
(Andy Ratner):	Okay, thank you.
Operator:	Your next question comes from (Matt Samuel). Sir your line is open.
(Matt Samuel):	Hey guys, just a couple of quick questions. You mentioned your backlog is $84 million. Historically what’s been your backlog realization rate?
(Paul):	Joe do you want to answer that?
Joe Noto:	Well, you know, the backlog is in two components. So we have like a funded backlog which is contracts awarded and that’s usually running about 40% to 50% our annual revenues. Is that your question (Matt)?
(Matt Samuel):	Okay, and what …
(Paul):	I think your question is out of the $84 million how much do you expect to realize or what’s the historical realization of that. Is that what you’re referring to (Matt)?

(Matt Samuel):	Yeah yeah yeah, that was the question, sorry about that. Somebody walked into my office.
(Paul):	Yeah I would say, you know, that can - the company historically hasn’t been in that business that long since we’ve just done a couple of small acquisitions. But typically what we’ve seen through the contracts that we have is we’ve realized the full amount of revenue out of those contracts.

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	You know, the bigger challenge with the company is now that we’ve scaled backlog at a rate of 600% and are probably going to continue to grow that into this year is realizing the majority of that through your own labor pool as opposed to subcontractors which are much lower margin.
(Matt Samuel):	Okay and just a general question. I’m not sure if you guys mentioned this when you were going through your financial highlights but what was EBITDA for 2007?
(Paul):	Joe do you want to give the number there? There were a couple of things before Joe answers the question is that we did have a couple of one-time costs in the company that we reinvested in the company and we had some restructuring we put in place. But Joe what was the final number?
Joe Noto:	Yeah if you add back the one-time costs it would be like in the $1.2 million neighborhood range.
(Paul):	Where we should be trending in EBITDA is about 10% of revenue, 10% to 12% of revenue is where we expect it to come in on a year to year annualized basis.
(Matt Samuel):	Okie dokie, and then my last question/thought is sort of for you guys as well as for CCG. What are the IR plans for this year? What do you have in place? You mentioned you attended the Roth conference. Have you got anything else in the hopper, any road shows that you’re planning?
(Paul):	Yeah we’ve got some things that we’re working on right now that we should bring to completion probably within the next 30 to 45 days. Once we have those in place then we’ll be going back on the road as well as looking at attending conferences. We thought the Roth conference was pretty good. We did get some good feedback, both good criticism of how we need to structure the company as well as what some of the investors are looking for going forward.

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	So, you know, we’re going to continue on that path. We just put a brief pause on it while we got through the year end as well as some other things that we’re working on that we expect to have completed in the next 30 to 45 days.
(Matt Samuel):	You already mentioned in terms of acquisitions you’re constantly looking but nothing is pending right now?
(Paul):	I didn’t quite say it that way. Yes we’re continually looking, yes we’re continually looking at different deals and we are always in negotiations on some of those deals but, you know, nothing that we’re ready to announce publicly yet. And we really, you know, have the policy that we’re not going to really publicly announce anything on the acquisition side until we’ve got a definitive purchase agreement.
	So, you know, as you know the stage of an acquisition goes through, you know, letter of intent to, you know, getting the financing done to the point until we actually put our signature on a definitive purchase agreement. Then we’ll announce it to the public.
(Matt Samuel):	And given sort of the current financial situation of U.S. markets, are you seeing acquisition prices come down on everything that you’re looking for?
(Paul):	Yeah, and either - it’s kind of a question I’ll answer in two ways. Yes we’re starting to see because of, you know, a lot of the tightness in the financial markets, we’re starting to see prices be a little more realistic. Secondly the company is in a lot different position now than it used to be in that, you know, we’re a lot more picky in the price we’ll pay for an acquisition and the type of deal that we’ll take a look at. So, you know, we’re in a much better position from that perspective.
	Having said that, you know, the financial markets tightening up actually hasn’t impacted us quite as much in that, you know, we’re a much more solid company to finance now than we were two years ago or even a year ago so things have definitely turned in our favor as far as that goes. But, you know, only time will tell and, you know, what an acquisition looks like when we finally close it. But what we’ve seen so far is fairly positive.

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(Matt Samuel):	All right, well thanks again you guys, you’re having a good year.
(Paul):	All right, thanks.
Operator:	Your next question comes from (Kevin Wood). Sir your line is open.
(Kevin Wood):	Hi, just a quick follow-up from (Matt)’s. I was going to ask about further guidance with respect to profitability but I think with a little math you may have answered that. You indicated you’re looking towards about 10% to 12% as an EBITDA margin of revenues and you’re looking at 100% plus. Is it fair to say you’re comfortable with what that adds up to, something like $3 million or a little more of EBITDA for the year or am I reaching?
(Paul):	Well if we were to double the revenue to $30 million yeah, $3 million EBITDA would be, you know, right in the ballpark of what we’d be looking at as far as EBITDA numbers in the 10% range.
(Kevin Wood):	Okay, okay. And that is your target. I realize that’s a target, not necessarily guidance, a little bit different. But the target is a full year number of 100% or better, not just getting to a run rate by the end of the year.
(Paul):	It’s always a combination of as I mentioned previously of organic growth and growth through acquisition. So, you know, both those things need to take place.
(Kevin Wood):	Yeah so that can be lumpy. If you close an acquisition in the second quarter it contributes a lot more than if you close it near the end of the third quarter. I understand that.
(Paul):	Exactly.

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(Kevin Wood):	So okay, and just to go back to your comments. You mentioned a few times the capital structure issue. Can you shed any more light on what you’re looking to do, what you’re trying to do there? Just to get convertibles converted or warrants, make warrants go away? Or can you say anything about what the target is there?
(Paul):	Primarily there are two primary issues with the capital structure. There’s, you know, a huge warrant overhang in the company as well as that creating, you know, a huge derivative impact on our balance sheet. So those two things tend to be, you know, add a lot of confusion to the financing of the company so those are the two things that we’d want to clean up. And cleaning up one takes care of the other.
(Kevin Wood):	Right, sure, sure. Okay, okay, well that’s all very helpful. I think that’s all I’ve got, thanks.
(Paul):	All right, thank you.
Operator:	Your next question comes from (Darrell Patrick). Sir your line is open.
(Darrell Patrick):	Yes, sorry I didn’t think of this the first time around but are you going to be able to do a deal before the restructuring of the balance sheet takes place?
(Paul):	Yeah and I think they would actually go hand in hand. I can tell you, you know, we’re in negotiations with restructuring some of the capital structure and, you know, we’re happy with where those negotiations are. I don’t see any major issues with it. So to answer your question, no we wouldn’t have to do that but, you know, I would say we probably will.
(Darrell Patrick):	Okay and then - okay that takes care of it. Thank you much.
(Paul):	All right, thank you.
Operator:	There are no further questions in queue at this time.

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(Paul):	Okay well I’d just like to thank everyone for their interest in Lattice and thank you for your insightful questions. If there is anything anyone would like to do as far as arranging an individual meeting you can either contact the company or contact Ed Job at our IR firm. And with that I’ll pass it back to the operator. Thank you.
Operator:	This concludes your conference call for today. You may now disconnect the lines.

END

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