Exhibit 99.1
 
PRESS RELEASE SOURCE: WPCS International Incorporated
 
WPCS Reports 1st Quarter FY2013 Results


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.
 
 
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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
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.
 
 
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WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
 
   
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  
 
(1) The prior year financial statements contain certain reclassifications to present discontinued operations.

 
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WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
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  

 
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WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
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  
 
 
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Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)

(1) Reconciliation of Non-GAAP EBITDA:
     
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 )
 
 
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