Exhibit 99.1

                                                                                                              
PRESS RELEASE          SOURCE: WPCS International Incorporated
 
WPCS Reports FY2011 Third Quarter Financial Results


EXTON, PA - (PR Newswire - First Call - March 17, 2011) - WPCS International Incorporated (NASDAQ: WPCS), a leader in design-build engineering services for communications infrastructure, today announced financial results for the fiscal year 2011 third quarter ended January 31, 2011. In the third quarter, WPCS reported revenue of $23.4 million compared to $27.0 million for the same period a year ago. The decrease in revenue is due primarily to delays in projects and bid awards.

In the third quarter, WPCS generated an EBITDA loss of approximately $428,000, compared to an EBITDA loss of $1.1 million in the second quarter. EBITDA is defined as earnings before interest, taxes, acquisition-related contingent earn-out costs, goodwill impairment, one-time charges related to seeking strategic alternatives including the possible sale of the company and depreciation and amortization. The company generated $751,000 in EBITDA for the same period a year ago. The Company maintains a net tangible asset value of $21.7 million or $3.13 per diluted share.
 
For the third quarter, following the completion of a valuation for its Suisun City Operations, the company has incurred an additional goodwill impairment charge of $2.6 million. This additional charge was a result of finalizing the estimated goodwill charge recorded in the second quarter. The company emphasized that this goodwill impairment charge is a non-cash charge and will have no impact on its operations or cash flows. For the third quarter ended January 31, 2011, WPCS reported a net loss of approximately $3.5 million or $0.50 per diluted share which includes the goodwill impairment and the one-time charges of $205,000 associated with seeking strategic alternatives including the possible sale of the company. This compares to net income of $71,000 or $0.01 per diluted share for the same period a year ago.

For the nine months ended January 31, 2011, WPCS reported revenue of $79.0 million compared to $76.6 million for the same period a year ago, which represents an increase of approximately 3%. In the nine months, WPCS generated an EBITDA loss of approximately $1.3 million. The company generated $3.3 million in EBITDA for the same period a year ago. For the nine months ended January 31, 2011, WPCS reported a net loss of approximately $9.8 million or $1.41 per diluted share which includes the total goodwill impairment charge for Suisun City of $6.9 million and the one-time charges of $481,000 associated with seeking strategic alternatives including the possible sale of the company. This compares to net income of $843,000 or $0.12 per diluted share for the same period a year ago.

Andrew Hidalgo, CEO of WPCS, commented, “Fiscal year 2011 has been a transition year for WPCS. The primary issue centered around three projects that experienced cost overruns at two of our ten operation centers. The other eight operation centers continue to perform well and through nine months ended January 31, 2011, they have produced $64.7 million in revenue and $3.8 million in EBITDA. The positive news is that we have made significant strides in turning around the performance by containing the cost overruns at these three projects and improving the management efficiency at these two operation centers. The company was able to substantially reduce the quarter over quarter loss. Economic conditions are improving and we are seeing more potential bid activity in the public services, healthcare and energy markets. The company continues to be awarded significant contracts. WPCS maintains an extensive base of satisfied customers. This is an important factor for us in returning to the profitability and earnings level that we expect for our shareholders and employees. We see a prosperous year ahead for our company.”

As a reminder, there will be an investor conference call at 5:00 pm ET today. To participate on the conference call, please dial 888-299-4099 for calls within the U.S. or 302-709-8337 for calls from international locations. Upon reaching the operator, verbally transmit the participant code VH63665. When the overview concludes, your questions can be asked by pressing *1 and your questions can be removed from the queue by pressing the number sign. Replays of the conference call will be available for a period of five days by dialing 402-220-2946 and entering 63665 # as the program identification number.

 
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The attached press release includes financial measures that are not in accordance with GAAP, consisting of EBITDA and net tangible asset value. Management uses EBITDA to evaluate the Company's operating and financial performance in light of business objectives, for planning purposes, when publicly providing our business outlook and to facilitate period-to-period comparisons. Management uses net tangible asset value to evaluate the strength of the Company’s balance sheet.  WPCS believes that these measures are useful to investors because they enhance investors' ability to review the Company's business from the same perspective as our management and to facilitate comparisons of this period's results with prior periods.  Non-GAAP measures are used by some investors when assessing the ongoing operating and financial performance of our Company. These financial measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. The presentation of the additional information should not be considered a substitute for net income or net income per diluted share prepared in accordance with GAAP. The primary material limitations associated with the use of non-GAAP measures as compared to the most directly comparable GAAP financial measures are (i) they may not be comparable to similarly titled measures used by other companies in our industry, and (ii) they exclude financial information that some may consider important in evaluating our performance. Pursuant to the requirements of Regulation G, WPCS has included a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
 
About WPCS International Incorporated:

WPCS is a design-build engineering company that focuses on the implementation requirements of communications infrastructure. The company provides its engineering capabilities including wireless communication, specialty construction and electrical power to the public services, healthcare, energy and corporate enterprise markets worldwide. For more information, please visit www.wpcs.com

Statements about the company's future expectations, including future revenue and earnings and all other statements in this press release, other than historical facts, are "forward looking" statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward looking statements involve risks and uncertainties and are subject to change at any time.  The company’s actual results could differ materially from expected results.  In reflecting subsequent events or circumstances, the company undertakes no obligation to update forward looking statements.
 
 

CONTACT:

WPCS International Incorporated
610-903-0400 x101
ir@wpcs.com
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
                         
   
Three Months Ended
   
Nine Months Ended
 
   
January 31,
   
January 31,
 
   
2011
   
2010
   
2011
   
2010
 
                         
REVENUE
  $ 23,434,729     $ 26,972,380     $ 79,010,305     $ 76,557,723  
                                 
COSTS AND EXPENSES:
                               
Cost of revenue
    18,424,200       20,561,172       63,122,185       55,471,468  
Selling, general and administrative expenses
    5,643,916       5,660,707       17,657,254       17,800,852  
Depreciation and amortization
    638,337       662,705       2,094,658       1,970,848  
Goodwill impairment
    2,600,000       -       6,900,000       -  
Change in fair value of acquisition-related contingent consideration
    41,784       -       178,430       -  
                                 
Total costs and expenses
    27,348,237       26,884,584       89,952,527       75,243,168  
                                 
OPERATING (LOSS) INCOME
    (3,913,508 )     87,796       (10,942,222 )     1,314,555  
                                 
OTHER EXPENSE (INCOME):
                               
Interest expense
    293,274       53,294       410,011       193,931  
Interest income
    (11,436 )     (5,821 )     (35,804 )     (9,352 )
                                 
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) PROVISION
    (4,195,346 )     40,323       (11,316,429 )     1,129,976  
                                 
Income tax (benefit) provision
    (874,089 )     (12,253 )     (1,590,537 )     480,434  
                                 
NET (LOSS) INCOME
    (3,321,257 )     52,576       (9,725,892 )     649,542  
                                 
Net income (loss) attributable to noncontrolling interest
    141,547       (18,250 )     76,041       (192,988 )
                                 
NET (LOSS) INCOME ATTRIBUTABLE TO WPCS
  $ (3,462,804 )     70,826       (9,801,933 )   $ 842,530  
                                 
Basic net (loss) income per common share attributable to WPCS
  $ (0.50 )   $ 0.01     $ (1.41 )   $ 0.12  
                                 
Diluted net (loss) income per common share attributable to WPCS
  $ (0.50 )   $ 0.01     $ (1.41 )   $ 0.12  
                                 
Basic weighted average number of common shares outstanding
    6,954,766       6,944,032       6,954,766       6,942,855  
                                 
Diluted weighted average number of common shares outstanding
    6,954,766       6,968,587       6,954,766       6,966,054  

 
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WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
             
   
January 31,
   
April 30,
 
ASSETS
 
2011
   
2010
 
   
(Unaudited)
   
(Note 1)
 
CURRENT ASSETS:
           
             
Cash and cash equivalents
  $ 5,581,036     $ 5,584,309  
Accounts receivable, net of allowance of $189,724 and $206,617 at January 31, 2011 and April 30, 2010, respectively
    23,587,456       26,011,955  
Costs and estimated earnings in excess of billings on uncompleted contracts
    6,444,060       8,859,056  
Inventory
    2,957,067       2,720,052  
Prepaid expenses and other current assets
    1,986,245       848,626  
Prepaid income taxes
    379,751       -  
Income taxes receivable
    1,429,634       -  
Deferred tax assets
    578,873       666,000  
Total current assets
    42,944,122       44,689,998  
                 
PROPERTY AND EQUIPMENT, net
    6,335,993       6,468,787  
                 
OTHER INTANGIBLE ASSETS, net
    1,708,326       2,112,058  
                 
GOODWILL
    28,310,000       34,919,384  
                 
OTHER ASSETS
    139,221       162,858  
                 
Total assets
  $ 79,437,662     $ 88,353,085  
 
 
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WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

         LIABILITIES AND EQUITY
 
January 31,
   
April 30,
 
   
2011
   
2010
 
   
(Unaudited)
   
(Note 1)
 
CURRENT LIABILITIES:
           
             
Current portion of loans payable
  $ 37,407     $ 63,683  
Income taxes payable
    -       107,417  
Borrowings under line of credit
    6,690,488       -  
Current portion of capital lease obligations
    61,648       81,950  
Accounts payable and accrued expenses
    9,517,705       10,962,016  
Billings in excess of costs and estimated earnings on uncompleted contracts
    2,341,700       1,853,131  
Deferred revenue
    584,256       503,502  
Due joint venture partner
    3,323,778       3,288,294  
Acquisition-related contingent consideration
    997,606       851,516  
Total current liabilities
    23,554,588       17,711,509  
                 
Acquisition-related contingent consideration, net of current portion
    880,886       726,677  
Borrowings under line of credit
    -       5,626,056  
Loans payable, net of current portion
    18,048       46,364  
Capital lease obligations, net of current portion
    26,178       69,961  
Deferred tax liabilities
    1,921,508       2,018,462  
Total liabilities
    26,401,208       26,199,029  
                 
                 
                 
COMMITMENTS AND CONTINGENCIES
               
                 
EQUITY:
               
Preferred stock - $0.0001 par value, 5,000,000 shares authorized, none issued
    -       -  
Common stock - $0.0001 par value, 25,000,000 shares authorized, 6,954,766 shares issued and outstanding at January 31, 2011 and April 30, 2010
    695       695  
Additional paid-in capital
    50,418,824       50,346,655  
Retained earnings
    433,657       10,235,590  
Accumulated other comprehensive income on foreign currency translation, net of tax effects of $25,197 and $19,581 at January 31, 2011 and April 30, 2010, respectively
    908,756       398,116  
                 
Total WPCS shareholders' equity
    51,761,932       60,981,056  
                 
Noncontrolling interest
    1,274,522       1,173,000  
                 
Total equity
    53,036,454       62,154,056  
                 
Total liabilities and equity
  $ 79,437,662     $ 88,353,085  
 
Note 1.  Certain reclassifications have been made to prior period financial statements to conform to current presentation.
 
 
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WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES


Reconciliations of GAAP to Non-GAAP Financial Measures (Unaudited)

(1) Non-GAAP EBITDA Reconciliations:
 
     
Three Months Ended
   
Nine Months Ended
 
     
January 31,
   
January 31,
 
     
2011
   
2010
   
2011
   
2010
 
                           
NET (LOSS) INCOME ATTRIBUTABLE TO WPCS, GAAP
  $ (3,462,804 )   $ 70,826     $ (9,801,933 )   $ 842,530  
                                   
Plus:
                                 
 
Net income (loss) attributable to noncontrolling interest
    141,547       (18,250 )     76,041       (192,988 )
 
Income tax (benefit) provision
    (874,089 )     (12,253 )     (1,590,537 )     480,434  
 
Interest expense
    293,274       53,294       410,011       193,931  
 
Interest income
    (11,436 )     (5,821 )     (35,804 )     (9,352 )
 
Change in fair value of acquisition-related contingent consideration
    41,784       -       178,430       -  
 
Goodwill impairment
    2,600,000       -       6,900,000       -  
 
One time strategic costs
    204,895       -       480,570       -  
 
Depreciation and amortization
    638,337       662,705       2,094,658       1,970,848  
                                   
Consolidated EBITDA, Non-GAAP
  $ (428,492 )   $ 750,501     $ (1,288,564 )   $ 3,285,403  
Plus:
                                 
 
Operating loss (gain), Suisun City operations center
    631,918       (50,716 )     2,097,012       (1,979,457 )
 
Operating loss, Portland operations center
    -       -       485,710       200,324  
 
Corporate operating expenses
    584,902       666,427       2,459,059       2,616,972  
                                   
Performing Operation Centers EBITDA, Non-GAAP
  $ 788,328     $ 1,366,212     $ 3,753,217     $ 4,123,242  

2) Net Tangible Asset Value Reconciliation:
 
   
January 31,
   
April 30,
 
   
2011
   
2010
 
             
             
Total WPCS shareholders' equity
  $ 51,761,932     $ 60,981,056  
Less:
               
        Goodwill
    28,310,000       34,919,384  
        Other Intangible Assets, net
    1,708,326       2,112,058  
                 
Net Tangible Asset Value
  $ 21,743,606     $ 23,949,614  


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