ex991.htm

In the second quarter, WPCS generated EBITDA of approximately $371,000 compared to an EBITDA loss of $1.3 million for the same period a year ago. WPCS defines EBITDA in the traditional sense of earnings before interest, income taxes, depreciation and amortization but in addition, WPCS has incurred one-time charges for the loss from discontinued operations and the strategic alternatives effort as well as non-cash charges from acquisition related earn-out costs and goodwill impairments. These charges are also excluded from the EBITDA calculation so that the company can provide a more meaningful perspective on the improved results for the continuing operations.

For the six months ended October 31, 2011, WPCS reported revenue of $51.7 million compared to $46.5 million for the same period a year ago, which represents an increase of approximately 11%. In the six months of this fiscal year, WPCS has generated EBITDA of approximately $1.5 million compared to an EBITDA loss of $1.6 million for the same period a year ago. For the six months ended October 31, 2011, WPCS reported a net loss of approximately $1.7 million or $0.24 per diluted share which includes the $1.3 million loss from discontinued operations and $141,000 associated with the strategic alternatives effort. This compares to a net loss of $6.3 million or $0.91 per diluted share for the same period a year ago.

Andrew Hidalgo, CEO of WPCS, commented, “We are very pleased to announce that we achieved a consecutive quarter of EBITDA profitability. This recent performance continues to reaffirm that we are focused on returning to profitability levels we have generated historically prior to a difficult fiscal year 2011. We continue to see a strong level of bid activity and ample opportunities for growth. The year over year improvement in EBITDA is substantial and we are ahead of last year’s revenue even after the divestiture of two operation centers. We continue to maintain a healthy balance sheet with $5.2 million in cash, $14.6 million in working capital and a net tangible asset value of $20.9 million or $3.01 per diluted share. We recently reduced our debt to $2.4 million and we are in the process of renegotiating our forbearance agreement with Bank of America while we finalize arrangements with a new senior lender. The management team is focused on improving our financial performance and we remain optimistic that fiscal year 2012 will be financially successful.”

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 VH45830. 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 call will be available for a period of five days by dialing 402-220-2946 and entering 45830 # as the program identification number.

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.

This 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 loss or net income or loss 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.

	Three Months Ended						Six Months Ended
	October 31,						October 31,
	2011			2010			2011			2010

REVENUE	$	28,161,040		$	23,200,436		$	51,724,634		$	46,466,311

COSTS AND EXPENSES:
Cost of revenue		23,069,272			19,321,195			41,101,427			37,932,177
Selling, general and administrative expenses		4,797,551			5,424,634			9,310,362			10,422,693
Depreciation and amortization		560,362			644,404			1,112,613			1,301,750
Goodwill and intangible assets impairment		-			4,300,000			-			4,300,000
Change in fair value of acquisition-related contingent consideration		40,560			73,593			83,628			136,645

		28,467,745			29,763,826			51,608,030			54,093,265

OPERATING (LOSS) INCOME		(306,705	)		(6,563,390	)		116,604			(7,626,954	)

OTHER EXPENSE (INCOME):
Interest expense		235,373			62,101			331,213			116,693
Interest income		(23,493	)		(14,299	)		(31,969	)		(24,367	)

Loss from continuing operations before income tax provision (benefit)		(518,585	)		(6,611,192	)		(182,640	)		(7,719,280	)

Income tax provision (benefit)		194,166			(734,959	)		130,000			(1,087,331	)

LOSS FROM CONTINUING OPERATIONS		(712,751	)		(5,876,233	)		(312,640	)		(6,631,949	)

Discontinued operations:
Income (loss) from operations of discontinued operations, net of		119,664			(162,746	)		(299,668	)		227,314
tax (benefit) of ($226,645), $256,890, ($188,819) and $370,882, respectively
Loss from disposal		(1,027,637	)		-			(1,027,637	)		-

(Loss) income from discontinued operations, net of tax		(907,973	)		(162,746	)		(1,327,305	)		227,314

CONSOLIDATED NET LOSS		(1,620,724	)		(6,038,979	)		(1,639,945	)		(6,404,635	)

Net income (loss) attributable to non-controlling interest		44,604			(75,800	)		60,060			(65,506	)

NET LOSS ATTRIBUTABLE TO WPCS	$	(1,665,328	)	$	(5,963,179	)	$	(1,700,005	)	$	(6,339,129	)

Basic net (loss) income per common share attributable to WPCS:
Loss from continuing operations attributable to WPCS	$	(0.11	)	$	(0.83	)	$	(0.05	)	$	(0.94	)
(Loss) income from discontinued operations attributable to WPCS	$	(0.13	)	$	(0.03	)	$	(0.19	)	$	0.03
Basic net loss per common share attributable to WPCS	$	(0.24	)	$	(0.86	)	$	(0.24	)	$	(0.91	)

Diluted net (loss) income per common share attributable to WPCS:
Loss from continuing operations attributable to WPCS	$	(0.11	)	$	(0.83	)	$	(0.05	)	$	(0.94	)
(Loss) income from discontinued operations attributable to WPCS	$	(0.13	)	$	(0.03	)	$	(0.19	)	$	0.03
Diluted net loss per common share attributable to WPCS	$	(0.24	)	$	(0.86	)	$	(0.24	)	$	(0.91	)

Basic weighted average number of common shares outstanding		6,954,766			6,954,766			6,954,766			6,954,766
Diluted weighted average number of common shares outstanding		6,954,766			6,954,766			6,954,766			6,954,766

	October 31,		April 30,
ASSETS	2011		2011
	(Unaudited)
CURRENT ASSETS:

Cash and cash equivalents	$	5,207,045	$	4,879,106
Accounts receivable, net of allowance of $905,378 and $1,662,168 at
October 31, 2011 and April 30, 2011, respectively		25,444,738		22,474,024
Costs and estimated earnings in excess of billings on uncompleted contracts		3,292,698		4,669,012
Inventory		1,727,820		1,972,905
Prepaid expenses and other current assets		2,318,779		1,413,151
Prepaid income taxes		89,730		173,700
Income taxes receivable, restricted		1,185,000		1,166,225
Deferred tax assets		2,336,847		2,621,329
Total current assets		41,602,657		39,369,452

PROPERTY AND EQUIPMENT, net		5,250,124		6,035,353

OTHER INTANGIBLE ASSETS, net		672,707		803,171

GOODWILL		1,975,460		2,044,856

DEFERRED TAX ASSETS		2,307,536		2,675,511

OTHER ASSETS		72,794		134,654

Total assets	$	51,881,278	$	51,062,997

LIABILITIES AND EQUITY	October 31,			April 30,
	2011			2011
	(Unaudited)
CURRENT LIABILITIES:

Current portion of loans payable	$	141,474		$	35,724
Borrowings under line of credit		3,500,000			7,000,000
Current portion of capital lease obligations		36,508			54,496
Accounts payable and accrued expenses		15,861,316			10,249,503
Billings in excess of costs and estimated earnings on uncompleted contracts		2,610,337			2,039,117
Deferred revenue		675,134			792,414
Due joint venture partner		3,075,591			3,415,641
Acquisition-related contingent consideration		1,058,680			1,008,200
Total current liabilities		26,959,040			24,595,095

Loans payable, net of current portion		214,728			10,554
Capital lease obligations, net of current portion		877			15,465
Total liabilities		27,174,645			24,621,114


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 October 31, 2011 and April 30, 2011		695			695
Additional paid-in capital		50,477,946			50,433,626
Accumulated deficit		(28,295,836	)		(26,595,831	)
Accumulated other comprehensive income on foreign currency translation, net of tax
effects of $203,938 and $185,060 at October 31, 2011 and April 30, 2011, respectively		1,410,681			1,564,965

Total WPCS shareholders' equity		23,593,486			25,403,455

Noncontrolling interest		1,113,147			1,038,428

Total equity		24,706,633			26,441,883

Total liabilities and equity	$	51,881,278		$	51,062,997

		Three Months Ended						Six Months Ended
		October 31,						October 31,
		2011			2010			2011			2010

NET (LOSS) INCOME ATTRIBUTABLE TO WPCS, GAAP		$	(1,665,328	)	$	(5,963,179	)	$	(1,700,005	)	$	(6,339,129	)

Plus:
	Net income (loss) attributable to noncontrolling interest		44,604			(75,800	)		60,060			(65,506	)
	Income tax (benefit) provision		194,166			(734,959	)		130,000			(1,087,331	)
	Interest expense		235,373			62,101			331,213			116,693
	Interest income		(23,493	)		(14,299	)		(31,969	)		(24,367	)
	Change in fair value of acquisition-related contingent consideration		40,560			73,593			83,628			136,645
	Goodwill and intangible assets impairment		-			4,300,000			-			4,300,000
	One time strategic costs		76,842			275,675			140,512			275,675
	Depreciation and amortization		560,362			644,404			1,112,613			1,301,750
	(Income) loss from operations of discontinued operations, net of tax		(119,664	)		162,746			299,668			(227,314	)
	Loss from disposal of discontinued operations		1,027,637			-			1,027,637			-

Consolidated EBITDA, Non-GAAP		$	371,059		$	(1,269,718	)	$	1,453,357		$	(1,612,884	)

NET TANGIBLE ASSET VALUE
	October 31,		April 30,
	2011		2011

Total WPCS shareholders' equity	$	23,593,486	$	25,403,455
Less:
Goodwill		1,975,460		2,044,856
Other Intangible Assets, net		672,707		803,171

Net tangible asset value	$	20,945,319	$	22,555,428

Diluted weighted average number of common shares outstanding		6,954,766		6,954,766

Net tangible asset value per common share attributable to WPCS	$	3.01	$	3.24