Delaware
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22-2011859
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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7150
N. Park Drive, Pennsauken, New Jersey
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08109
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(Address
of principal executive offices)
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(Zip
code)
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting company x
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Page
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PART
I - FINANCIAL INFORMATION
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Item
1. Financial Statements
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3
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Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
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13
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Item
3. Quantitative and Qualitative Disclosure About Market
Risks
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17
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Item
4T. Controls and Procedures
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17
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PART
II - OTHER INFORMATION
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Item
1. Legal Proceedings
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17
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Item
1A. Risk Factors
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17
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Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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17
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Item
3. Defaults Upon Senior Securities
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17
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Item
4. Submission of Matters to a Vote of Security Holders
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18
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Item
5. Other Information
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18
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Item
6. Exhibits
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18
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SIGNATURES
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19
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June
30,
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December 31,
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|||||||
2009
|
2008
|
|||||||
(Unaudited)
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(Audited)
|
|||||||
ASSETS:
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||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 171,245 | $ | 1,363,130 | ||||
Accounts
receivable
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4,063,355 | 3,560,690 | ||||||
Inventories
|
41,684 | 30,704 | ||||||
Other
current assets
|
199,335 | 51,008 | ||||||
Total
current assets
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4,475,619 | 5,005,532 | ||||||
Property
and equipment, net
|
53,863 | 21,090 | ||||||
Goodwill
|
3,599,386 | 3,599,386 | ||||||
Other
intangibles, net
|
1,811,252 | 2,409,748 | ||||||
Other
assetes
|
55,734 | 54,459 | ||||||
Total
assets
|
$ | 9,995,854 | $ | 11,090,215 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 2,174,346 | $ | 1,698,551 | ||||
Accrued
expenses
|
2,252,785 | 1,741,891 | ||||||
Notes
payable
|
613,305 | 1,766,098 | ||||||
Derivative
liability
|
264,676 | 200,606 | ||||||
Total
current liabilities
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5,305,112 | 5,407,146 | ||||||
Long
term liabilities:
|
||||||||
Long
Term Debt
|
348,053 | 666,515 | ||||||
Deferred
tax liabilities
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873,573 | 1,200,283 | ||||||
Total
long term liabilities
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1,221,626 | 1,866,798 | ||||||
Total
liabilities
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6,526,738 | 7,273,944 | ||||||
Minority
interest
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182,833 | 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
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78,107 | 78,387 | ||||||
Preferred
Stock series B 1,000,000 shares authorized 1,000 000
issued
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10,000 | 10,000 | ||||||
Preferred
Stock series C 575,000 shares authorized 520,000 issued
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5,200 | 5,200 | ||||||
Common
stock - .01 par value, 200,000,000 authorized,
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||||||||
16,942,428
and 16,842,428 issued, and 16,639,441 and 16,539,441 outstanding
respectively
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169,425 | 168,425 | ||||||
Additional
paid-in capital
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38,669,442 | 38,418,897 | ||||||
Accumulated
deficit
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(35,087,795 | ) | (34,499,822 | ) | ||||
3,844,379 | 4,181,087 | |||||||
Common
stock held in treasury, at cost
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(558,096 | ) | (558,096 | ) | ||||
Shareholders'
equity
|
3,286,283 | 3,622,991 | ||||||
Total
liabilities and shareholders' equity
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$ | 9,995,854 | $ | 11,090,215 |
Six
Months Ended
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Three Months Ended
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|||||||||||||||
June 30,
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June 30,
|
|||||||||||||||
2009
|
2008
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2009
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2008
|
|||||||||||||
Revenue
- Technology Services
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$ | 7,367,448 | $ | 6,881,682 | $ | 3,860,923 | $ | 3,527,669 | ||||||||
Revenue
- Technology Products
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607,135 | 437,311 | 305,777 | 200,418 | ||||||||||||
Total
Revenue
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7,974,583 | 7,318,993 | 4,166,700 | 3,728,087 | ||||||||||||
Cost
of Revenue - Technology Services
|
5,217,955 | 5,003,050 | 2,776,859 | 2,633,724 | ||||||||||||
Cost
of Revenue - Technology Products
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223,054 | 168,016 | 107,647 | 79,478 | ||||||||||||
Total
cost of revenue
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5,441,009 | 5,171,066 | 2,884,506 | 2,713,202 | ||||||||||||
Gross
Profit
|
2,533,574 | 2,147,927 | 1,282,194 | 1,014,885 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
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2,361,793 | 2,551,383 | 1,239,801 | 1,436,837 | ||||||||||||
Research
and development
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295,677 | 217,657 | 143,182 | 109,172 | ||||||||||||
Amortization
expense
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598,496 | 740,458 | 299,248 | 372,057 | ||||||||||||
Total
operating expenses
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3,255,966 | 3,509,498 | 1,682,231 | 1,918,066 | ||||||||||||
Loss
from operations
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(722,392 | ) | (1,361,571 | ) | (400,037 | ) | (903,181 | ) | ||||||||
Other
income (expense):
|
||||||||||||||||
Derivative
income (expense)
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(64,070 | ) | 2,554,590 | 108,373 | 2,374,923 | |||||||||||
Other
expense
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0 | 2,607,525 | 0 | 2,607,525 | ||||||||||||
Interest
expense
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(124,312 | ) | (81,446 | ) | (48,121 | ) | (30,625 | ) | ||||||||
Finance
expense
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(1,802 | ) | (1,466 | ) | (776 | ) | (1,014 | ) | ||||||||
Total
other income (expense)
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(190,184 | ) | 5,079,203 | 59,476 | 4,950,809 | |||||||||||
Minority
Interest income
|
10,447 | 55,419 | 5,052 | 27,997 | ||||||||||||
Net
income (loss) before taxes
|
(902,129 | ) | 3,773,051 | (335,509 | ) | 4,075,625 | ||||||||||
Income
taxes (benefit)
|
(326,710 | ) | (348,416 | ) | (163,355 | ) | (174,208 | ) | ||||||||
Net
Income (loss)
|
$ | (575,419 | ) | $ | 4,121,467 | $ | (172,154 | ) | $ | 4,249,833 | ||||||
Net
income (Loss) applicable to common
shareholders:
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||||||||||||||||
Net
income (loss)
|
$ | (575,419 | ) | $ | 4,121,467 | $ | (172,154 | ) | $ | 4,249,833 | ||||||
Series
B Preferred stock dividend
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(12,554 | ) | (25,000 | ) | (6,277 | ) | (12,500 | ) | ||||||||
Income
(Loss) applicable to common stockholders
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$ | (587,973 | ) | $ | 4,096,467 | $ | (178,431 | ) | $ | 4,237,333 | ||||||
Income
(Loss) per common share
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||||||||||||||||
Basic
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$ | (0.04 | ) | $ | 0.24 | $ | (0.01 | ) | $ | 0.25 | ||||||
Diluted
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$ | (0.04 | ) | $ | 0.03 | $ | (0.01 | ) | $ | 0.03 | ||||||
Weighted
average shares:
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||||||||||||||||
Basic
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16,720,555 | 16,829,428 | 16,739,444 | 16,829,428 | ||||||||||||
Diluted
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16,720,555 | 56,250,208 | 16,739,444 | 54,403,291 |
Six Months ended
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||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flow from operating activities:
|
||||||||
Net
loss before preferred dividends
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$ | (575,419 | ) | $ | 4,121,467 | |||
Adjustments
to reconcile net loss to net used for operating
activities:
|
||||||||
Derivative
(income) expense
|
64,070 | (2,554,590 | ) | |||||
Amortization
of intangible assets
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598,496 | 744,114 | ||||||
Extinguishment
(gain) loss
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(2,607,525 | ) | ||||||
Deferred
income taxes
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(326,710 | ) | (348,416 | ) | ||||
Minority
interest
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(10,447 | ) | (55,419 | ) | ||||
Share-based
compensation
|
251,266 | 56,041 | ||||||
Depreciation
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- | 15,579 | ||||||
Changes
in operating assets and liabilities:
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||||||||
(Increase)
decrease in:
|
||||||||
Accounts
receivable
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(1,184,897 | ) | 159,138 | |||||
Inventories
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(10,980 | ) | 9,138 | |||||
Other
current assets
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(144,621 | ) | 11,708 | |||||
Other
assets
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(1,275 | ) | 65,839 | |||||
Increase
(decrease) in:
|
||||||||
Accounts
payable and accrued liabilities
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971,355 | (328,698 | ) | |||||
Total
adjustments
|
206,257 | (4,833,091 | ) | |||||
Net
cash provided by ( used in) operating activities
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(369,162 | ) | (711,624 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Purchase
of equipment
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(32,773 | ) | (32,844 | ) | ||||
Net
cash used in investing activities
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(32,773 | ) | (32,844 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Payments
on notes payable
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(14,000 | ) | (84,500 | ) | ||||
Bank
line-of-credit borrowings (payments), net
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(775,950 | ) | 659,111 | |||||
Net
cash provided by (used in) by financing activities
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(789,950 | ) | 574,611 | |||||
Net
increase (decrease) in cash and cash equivalents
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(1,191,885 | ) | (169,857 | ) | ||||
Cash
and cash equivalents - beginning of period
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1,363,130 | 769,915 | ||||||
Cash
and cash equivalents - end of period
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$ | 171,245 | $ | 600,058 | ||||
Supplemental
cash flow information
|
||||||||
Interest
paid in cash
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$ | 100,769 | $ | 56,194 | ||||
Taxes
paid
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$ | 4,805 | $ | - | ||||
Supplemental
Disclosures of Non-Cash Financing Activities
|
||||||||
Sale
of accounts receivable by factor proceeds paid directly
|
||||||||
to
Private Bank Facility
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$ | 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 | ) | $ | - |
Six Months Ended
|
Three Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues:
|
||||||||||||||||
Goverment
Services
|
$ | 7,367,448 | $ | 6,725,594 | $ | 3,860,923 | $ | 3,421,451 | ||||||||
Other
|
607,135 | 593,399 | 305,777 | 306,636 | ||||||||||||
Total
Consolidated Revenues
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$ | 7,974,583 | $ | 7,318,993 | $ | 4,166,700 | $ | 3,728,087 | ||||||||
Gross
Profit:
|
||||||||||||||||
Government
Services
|
$ | 2,149,493 | $ | 1,802,417 | $ | 1,084,064 | $ | 846,655 | ||||||||
Corporate
and other
|
384,081 | 345,510 | 198,130 | 168,230 | ||||||||||||
Total
Consolidated
|
$ | 2,533,574 | $ | 2,147,927 | $ | 1,282,194 | $ | 1,014,885 |
June
30
|
December
31
|
|||||||
2009
|
2008
|
|||||||
Total
Assets:
|
||||||||
Goverment
Services
|
$ | 9,523,380 | $ | 10,127,333 | ||||
Corporate
and Other
|
472,474 | 962,882 | ||||||
Total
Consolidated Assets
|
$ | 9,995,854 | $ | 11,090,215 |
Due from Factor:
|
|||||
Six
months
ended
June 30,
|
|||||
2009
|
|||||
Accounts
receivable factored
|
$
|
1,825,991
|
|||
Amounts
advanced
|
1,808,413
|
||||
June 30,
|
|||||
2009
|
|||||
Due
from Factor, net of fees
|
$
|
-0-
|
|
June
30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Bank
line-of-credit (a)
|
$ | - | $ | 1,458,183 | ||||
Note
Payble – former RTI owners (b)
|
750,000 | 750,000 | ||||||
Notes
payable to Stockholders/director (c )
|
211,358 | 224,430 | ||||||
Total
notes payable
|
961,358 | 2,432,613 | ||||||
Less
current maturities
|
(613,305 | ) | (1,766,098 | ) | ||||
Long-term
debt
|
$ | 348,053 | $ | 666,515 |
Six
Months
|
Three
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Income
(loss) applicable to common shareholders
|
$ | (587,973 | ) | $ | 4,096,467 | $ | (178,431 | ) | $ | 4,237,333 | ||||||
Reconciliation
to numerator for diluted earnings per share
|
||||||||||||||||
Income
on derivative warrants
|
- | (2,554,590 | ) | - | (2,374,923 | ) | ||||||||||
Preferred
stock dividends
|
- | 25,000 | - | 12,500 | ||||||||||||
Numerator
for diluted earnings per share
|
$ | (587,973 | ) | $ | 1,566,877 | $ | (178,431 | ) | $ | 1,874,910 | ||||||
Weighted
average shares
|
16,720,555 | 16,829,428 | 16,739,444 | 16,829,428 | ||||||||||||
Reconciliation
to denominator for diluted earnings per share
|
||||||||||||||||
Dilutive
derivative warrants
|
- | 5,004,267 | - | 3,286,262 | ||||||||||||
Shares
indexed to convertible preferred stock
|
- | 34,110,568 | - | 34,110,568 | ||||||||||||
Dilutive
employee options
|
- | 305,945 | - | 177,033 | ||||||||||||
Denominator
for diluted earnings per share
|
16,720,555 | 56,250,208 | 16,739,444 | 54,403,291 | ||||||||||||
Earnings
per common share:
|
||||||||||||||||
Basic
|
(0.04 | ) | 0.24 | (0.01 | ) | 0.25 | ||||||||||
Diluted
|
(0.04 | ) | 0.03 | (0.01 | ) | 0.03 |
Exhibit
Number
|
Description
|
|
31.1
|
Certification
by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
of the Exchange Act
|
|
31.2
|
Certification
by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
of the Exchange Act
|
|
32.1
|
Certification
by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
United States Code
|
|
32.2
|
Certification
by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
United States Code
|
LATTICE
INCORPORATED
|
|
BY:
|
/s/
Paul Burgess
|
PAUL
BURGESS
|
|
CHIEF
EXECUTIVE OFFICER
(PRINCIPAL
EXECUTIVE
OFFICER),
SECRETARY AND
DIRECTOR
|
BY:
|
/s/
Joe Noto
|
JOE
NOTO
|
|
CHIEF
FINANCIAL OFFICER
(PRINCIPAL
ACCOUNTING
OFFICER)
AND DIRECTOR
|