ex991.htm

EXTON, PA - (Marketwire - September 14, 2012) - WPCS International Incorporated (NASDAQ: WPCS), a leader in design-build engineering services for communications infrastructure, today announced financial results for the fiscal year 2013 first quarter ended July 31, 2012. In the first quarter, the WPCS domestic and international operation centers generated EBITDA of approximately $695,000 compared to an EBITDA loss of $7.1 million in preceding quarter ended April 30, 2012. These same operation centers generated EBITDA of $2.0 million for the same period in the prior year.

WPCS reported net income of approximately $994,000 or $0.14 per diluted shared which includes income from discontinued operations of approximately $1.7 million, or $0.24 per diluted share related to the asset sales of the Hartford and Lakewood Operations. This compares to a net loss of approximately $35,000 or $0.01 per diluted share for the same period a year ago, which includes a loss from discontinued operations of approximately $189,000, or $0.03 per diluted share. For the first quarter, WPCS reported revenue of $13.4 million compared to $18.6 million for the same period in the prior year. Although the company has recently announced many new contract awards, the start of these projects are scheduled for later in the year, therefore these project delays caused the reported revenue to be lower than planned. However, the delayed project revenue is expected to be recognized in the quarters ahead.

Andrew Hidalgo, CEO of WPCS, commented, “I am pleased to report a substantial improvement in financial performance quarter over quarter. For the first quarter, our operation centers generated $695,000 in EBITDA on revenue of $13.4 million. Even our Trenton Operations, which is coming off a difficult year of losses, generated positive EBITDA of $208,000 in the first quarter. The projects that generated the losses are behind us. We have strengthened the balance sheet and income statement. Our challenge continues to be cash flow. The current debt facility of $2 million with Sovereign Bank is not sufficient to meet our future operating requirements. We need to replace this debt facility as a priority. If we are able to obtain an adequate debt facility, we believe we will be in a better position for growth and increased shareholder value.”

As a reminder, there will be an investor conference call at 5:00 pm ET today. To participate on the conference call, please dial 800-875-3456 for calls within the U.S. or 302-607-2001 for calls from international locations. Upon reaching the operator, verbally transmit the participant code VH25585. 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 800-355-2355 and entering 25585 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.

The press release references a financial measure, EBITDA that is not in accordance with GAAP. 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 (credits) for the (gain) loss from discontinued operations and the strategic alternatives effort as well as non-cash charges from deferred tax asset valuation allowances, 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 results for the continuing operations. The company uses EBITDA to evaluate its 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. The company believes that this measure is useful to investors because it enhances 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 the 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 (loss) or net income (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 EBITDA to the most directly comparable GAAP financial measure.

	Three Months Ended
	July 31,
	2012			2011
				(Note 1)
REVENUE	$	13,444,417		$	18,616,091

COSTS AND EXPENSES:
Cost of revenue		10,514,076			14,207,243
Selling, general and administrative expenses		3,010,966			3,257,938
Depreciation and amortization		361,714			439,173
Change in fair value of acquisition-related contingent consideration		-			43,068
		13,886,756			17,947,422

OPERATING (LOSS) INCOME		(442,339	)		668,669

OTHER EXPENSE (INCOME):
Interest expense		125,115			95,793
Interest income		(9,798	)		(8,476	)

(Loss) income from continuing operations before income tax provision		(557,656	)		581,352

Income tax provision		134,529			411,888
(LOSS) INCOME FROM CONTINUING OPERATIONS		(692,185	)		169,464

Discontinued operations:
Loss from operations of discontinued operations, net of
tax of $54,164 and ($438,228), respectively		(639,292	)		(188,685	)
Gain from disposal		2,324,631			-
Income (loss) from discontinued operations, net of tax		1,685,339			(188,685	)

CONSOLIDATED NET INCOME (LOSS)		993,154			(19,221	)

Net (loss) income attributable to noncontrolling interest		(547	)		15,456

NET INCOME (LOSS) ATTRIBUTABLE TO WPCS	$	993,701		$	(34,677	)

Basic and diluted net income (loss) per common share attributable to WPCS:
(Loss) income from continuing operations attributable to WPCS	$	(0.10	)	$	0.02
Income (loss) from discontinued operations attributable to WPCS	$	0.24		$	(0.03	)
Basic and diluted net income (loss) per common share attributable to WPCS	$	0.14		$	(0.01	)

Basic weighted average number of common shares outstanding		6,954,766			6,954,766
Diluted weighted average number of common shares outstanding		6,954,766			6,964,211

	July 31,		April 30,
ASSETS	2012		2012
	(Unaudited)
CURRENT ASSETS:

Cash and cash equivalents	$	1,257,920	$	811,283
Accounts receivable, net of allowance of $1,618,454 and $1,794,729 at
July 31, 2012 and April 30, 2012, respectively		13,776,221		22,343,304
Costs and estimated earnings in excess of billings on uncompleted contracts		2,310,399		1,340,379
Inventory		-		1,475,266
Prepaid expenses and other current assets		2,356,016		2,142,191
Prepaid income taxes		48,586		137,279
Deferred tax assets		396,391		307,550
Total current assets		20,145,533		28,557,252

PROPERTY AND EQUIPMENT, net		3,173,186		4,309,450

OTHER INTANGIBLE ASSETS, net		354,210		382,852

GOODWILL		1,963,321		1,930,826

DEFERRED TAX ASSETS		247,362		243,999

OTHER ASSETS		69,776		371,020

Total assets	$	25,953,388	$	35,795,399

LIABILITIES AND EQUITY	July 31,			April 30,
	2012			2012
	(Unaudited)
CURRENT LIABILITIES:

Current portion of loans payable	$	44,124		$	143,514
Borrowings under line of credit		-			4,964,140
Current portion of capital lease obligations		5,432			15,465
Accounts payable and accrued expenses		11,128,316			16,669,621
Billings in excess of costs and estimated earnings on uncompleted contracts		2,448,516			3,594,193
Deferred revenue		631,716			790,270
Due joint venture partner		3,412,434			3,314,708
Other payable		793,927			-
Income taxes payable		268,816			194,963
Total current liabilities		18,733,281			29,686,874

Loans payable, net of current portion		56,414			223,561
Total liabilities		18,789,695			29,910,435


COMMITMENTS AND CONTINGENCIES
EQUITY:
WPCS 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 July 31, 2012 and April 30, 2012		695			695
Additional paid-in capital		50,739,430			50,477,543
Accumulated deficit		(46,149,961	)		(47,143,662	)
Accumulated other comprehensive income on foreign currency translation		1,471,089			1,433,066

Total WPCS equity		6,061,253			4,767,642

Noncontrolling interest		1,102,440			1,117,322

Total equity		7,163,693			5,884,964

Total liabilities and equity	$	25,953,388		$	35,795,399

		Three Months Ended
		July 31,			July 31,			April 30,
		2012			2011			2012

NET INCOME (LOSS) ATTRIBUTABLE TO WPCS, GAAP		$	993,701		$	(34,677	)	$	(8,528,827	)

Plus:
	Net income (loss) attributable to noncontrolling interest		(547	)		15,456			(118,400	)
	Loss from discontinued operations, net of tax		639,292			188,685			442,903
	(Gain) loss from disposal of discontinued operations		(2,324,631	)		-			5,100
	Income tax provision (benefits)		134,529			411,888			(458,442	)
	Interest expense		125,115			95,793			270,059
	Interest income		(9,798	)		(8,476	)		-
	Change in fair value of acquisition-related contingent consideration		-			43,068			-
	One time strategic costs		-			63,670			13,402
	Goodwill and intangible assets impairment		-			-			20,167
	Depreciation and amortization		361,714			439,173			439,128

Consolidated EBITDA, Non-GAAP			(80,625	)		1,214,580			(7,914,910	)
Plus:
	Corporate operating expenses		776,225			736,855			817,985

EBITDA of Continuing Operation Centers, Non-GAAP		$	695,600		$	1,951,435		$	(7,096,925	)