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WPCS Reports 2nd Quarter FY2013 Results


WPCS Reports 2nd Quarter FY2013 Results

EXTON, PA -- (Marketwire) -- 12/17/12 -- WPCS International Incorporated (NASDAQ: WPCS), a leader in design-build engineering services for communications infrastructure, today announced financial results for the fiscal year 2013 second quarter ended October 31, 2012. In the second quarter, the WPCS domestic and international operation centers generated EBITDA of approximately $1.4 million on revenue of $9.9 million. This compares to EBITDA of $894,000 on $21.7 million of revenue for the same period in the prior year. For the six months of fiscal year 2013 ended October 31, 2012, these same operation centers generated EBITDA of approximately $2.1 million on revenue of $23.4 million. This compares to EBITDA of $2.9 million on revenue of $40.4 million for the same period in the prior year.

In regards to net income from continuing operations for the second quarter, WPCS reported net income from continuing operations of approximately $80,000 or $0.01 per diluted share, compared to a net loss from continuing operations of $352,000, or $0.05 per diluted share, for the same period in the prior year. In the second quarter, WPCS reported a consolidated net loss of $493,000, or $0.07 per diluted share, which includes a loss from discontinued operations of approximately $573,000 related to the asset sale of the Hartford and Lakewood Operations. This compares to a net loss of approximately $1.7 million or $0.24 per diluted share, for the same period a year ago, which includes a loss from discontinued operations of approximately $1.3 million, or $0.19 per diluted share, primarily related to the sale of the St. Louis and Sarasota Operations.

For the six months ended October 31, 2012, WPCS reported consolidated net income of approximately $500,000 or $0.07 per diluted share which includes income from discontinued operations of $1.1 million, or $0.16 per diluted share, related to the asset sale of the Hartford and Lakewood Operations. This compares to a net loss of $1.7 million or $0.24 per diluted share, for the same period a year ago, which includes a loss from discontinued operations of approximately $1.5 million, or $0.22 per diluted share, primarily related to the sale of the St. Louis and Sarasota Operations.

Andrew Hidalgo, CEO of WPCS, commented, "We are pleased to report consecutive quarters of EBITDA profitability from our operation centers. We have worked through a difficult prior fiscal year but the recent results show that we are turning around our operating performance and improving the organization. We have a healthier balance sheet, positive operating results and now we have obtained financing to support our working capital needs and growth prospects. We have made great progress and believe we can now deliver increased shareholder value. The management team is reaffirming that we remain on target to achieve revenue of $60 million and EBITDA of $1 million for this fiscal year ending April 30, 2013."

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 VH36248. 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 36248 as the program identification number.

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.

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.


 
                                                                            
                                                                            
              WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES              
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS              
                                 (UNAUDITED)                                
                                                                            
                            Three Months Ended         Six Months Ended     
                                October 31,               October 31,       
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
                                        (Note 1)                  (Note 1)  
                                                                            
REVENUE                  $ 9,942,161  $21,754,833  $23,386,578  $40,370,924 
                         -----------  -----------  -----------  ----------- 
                                                                            
COSTS AND EXPENSES:                                                         
  Cost of revenue          6,324,209   18,379,347   16,838,285   32,586,590 
  Selling, general and                                                      
   administrative                                                           
   expenses                2,936,939    3,348,554    5,947,905    6,606,492 
  Depreciation and                                                          
   amortization              320,066      441,870      681,780      881,043 
  Change in fair value                                                      
   of acquisition-                                                          
   related contingent                                                       
   consideration                   -       40,560            -       83,628 
                         -----------  -----------  -----------  ----------- 
                                                                            
                           9,581,214   22,210,331   23,467,970   40,157,753 
                         -----------  -----------  -----------  ----------- 
                                                                            
OPERATING INCOME (LOSS)      360,947     (455,498)     (81,392)     213,171 
                                                                            
OTHER EXPENSE (INCOME):                                                     
  Interest expense           330,135      230,136      455,250      325,929 
  Interest income             (6,161)     (23,493)     (15,959)     (31,969)
                         -----------  -----------  -----------  ----------- 
                                                                            
Income (loss) from                                                          
 continuing operations                                                      
 before income tax                                                          
 provision                    36,973     (662,141)    (520,683)     (80,789)
                                                                            
Income tax (benefit)                                                        
 provision                   (72,272)    (354,384)      62,257       57,504 
                                                                            
                         -----------  -----------  -----------  ----------- 
INCOME (LOSS) FROM                                                          
 CONTINUING OPERATIONS       109,245     (307,757)    (582,940)    (138,293)
                         -----------  -----------  -----------  ----------- 
                                                                            
Discontinued operations                                                     
  Loss from operations                                                      
   of discontinued                                                          
   operations, net of                                                       
   tax of $88,267,                                                          
   $321,905, $142,431                                                       
   and ($116,323),                                                          
   respectively              (88,267)    (285,330)    (727,559)    (474,015)
  (Loss) gain from                                                          
   disposal                 (485,212)  (1,027,637)   1,839,419   (1,027,637)
                                                                            
                         -----------  -----------  -----------  ----------- 
(Loss) income from                                                          
 discontinued                                                               
 operations, net of tax     (573,479)  (1,312,967)   1,111,860   (1,501,652)
                         -----------  -----------  -----------  ----------- 
                                                                            
CONSOLIDATED NET (LOSS)                                                     
 INCOME                     (464,234)  (1,620,724)     528,920   (1,639,945)
                                                                            
Net income attributable                                                     
 to noncontrolling                                                          
 interest                     29,152       44,604       28,605       60,060 
                         -----------  -----------  -----------  ----------- 
                                                                            
NET (LOSS) INCOME                                                           
 ATTRIBUTABLE TO WPCS    $  (493,386) $(1,665,328) $   500,315  $(1,700,005)
                         ===========  ===========  ===========  =========== 
                                                                            
Basic and diluted net                                                       
 income (loss) per                                                          
 common share                                                               
 attributable to WPCS:                                                      
  Income (loss) from                                                        
   continuing operations                                                    
   attributable to WPCS  $      0.01  $     (0.05) $     (0.09) $     (0.02)
  (Loss) income from                                                        
   discontinued                                                             
   operations                                                               
   attributable to WPCS  $     (0.08) $     (0.19) $      0.16  $     (0.22)
                         -----------  -----------  -----------  ----------- 
  Basic and diluted net                                                     
   income (loss) per                                                        
   common share                                                             
   attributable to WPCS  $     (0.07) $     (0.24) $      0.07  $     (0.24)
                         ===========  ===========  ===========  =========== 
                                                                            
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               6,963,737    6,954,766    6,954,766    6,954,766 
                         ===========  ===========  ===========  =========== 
                                                                            
(1) The prior year financial statements contain certain reclassifications to
present discontinued operations.                                            
                                                                            
                                                                            

 
                                                                            
              WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES              
                                                                            
                    CONDENSED CONSOLIDATED BALANCE SHEETS                   
                                                                            
                                                  October 31,    April 30,  
                     ASSETS                           2012          2012    
                                                 ------------- -------------
                                                  (Unaudited)               
CURRENT ASSETS:                                                             
                                                                            
  Cash and cash equivalents                      $     921,206 $     811,283
  Accounts receivable, net of allowance of                                  
   $1,682,840 and $1,794,729 at October 31, 2012                            
   and April 30, 2012, respectively                 11,263,660    22,343,304
  Costs and estimated earnings in excess of                                 
   billings on uncompleted contracts                 1,096,883     1,340,379
  Inventory                                                  -     1,475,266
  Prepaid expenses and other current assets          2,113,824     2,142,191
  Prepaid income taxes                                  48,586       137,279
  Deferred tax assets                                  453,455       307,550
                                                 ------------- -------------
    Total current assets                            15,897,614    28,557,252
                                                                            
PROPERTY AND EQUIPMENT, net                          3,003,768     4,309,450
                                                                            
OTHER INTANGIBLE ASSETS, net                           316,422       382,852
                                                                            
GOODWILL                                             1,933,921     1,930,826
                                                                            
DEFERRED TAX ASSETS                                    254,146       243,999
                                                                            
OTHER ASSETS                                            73,378       371,020
                                                 ------------- -------------
                                                                            
    Total assets                                 $  21,479,249 $  35,795,399
                                                 ============= =============
                                                                            
                                                                            
                                                                            
              WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES              
                                                                            
              CONDENSED CONSOLIDATED BALANCE SHEETS (continued)             
                                                                            
            LIABILITIES AND EQUITY              October 31,     April 30,   
                                                    2012           2012     
                                               -------------  ------------- 
                                                (Unaudited)                 
CURRENT LIABILITIES:                                                        
                                                                            
  Current portion of loans payable             $      38,438  $     143,514 
  Borrowings under line of credit                  1,034,323      4,964,140 
  Current portion of capital lease obligations           877         15,465 
  Accounts payable and accrued expenses            4,931,005     16,669,621 
  Billings in excess of costs and estimated                                 
   earnings on uncompleted contracts               1,980,538      3,594,193 
  Deferred revenue                                   759,909        790,270 
  Due joint venture partner                          781,268      3,314,708 
  Other payable                                    2,391,151              - 
  Short term bank loan                             2,404,545              - 
  Income taxes payable                               309,924        194,963 
                                               -------------  ------------- 
    Total current liabilities                     14,631,978     29,686,874 
                                                                            
Loans payable, net of current portion                 65,919        223,561 
                                               -------------  ------------- 
    Total liabilities                             14,697,897     29,910,435 
                                               -------------  ------------- 
                                                                            
                                                                            
COMMITMENTS AND CONTINGENCIES                                               
                                                                            
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 October 31, 2012 and                                  
   April 30, 2012                                        695            695 
  Additional paid-in capital                      50,835,855     50,477,543 
  Accumulated deficit                            (46,643,347)   (47,143,662)
  Accumulated other comprehensive income on                                 
   foreign currency translation                    1,434,828      1,433,066 
                                               -------------  ------------- 
                                                                            
    Total WPCS equity                              5,628,031      4,767,642 
                                                                            
    Noncontrolling interest                        1,153,321      1,117,322 
                                               -------------  ------------- 
                                                                            
    Total equity                                   6,781,352      5,884,964 
                                               -------------  ------------- 
                                                                            
    Total liabilities and equity               $  21,479,249  $  35,795,399 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
  Reconciliation of GAAP to Non-GAAP Financial Measure (Unaudited)          
                                                                            
  (1) Reconciliation of Non-GAAP EBITDA:                                    
                                                                            
                            Three Months Ended         Six Months Ended     
                         October 31,  October 31,         October 31,       
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
                                                                            
NET (LOSS) INCOME                                                           
 ATTRIBUTABLE TO WPCS,                                                      
 GAAP                    $  (493,386) $(1,665,328) $   500,315  $(1,700,005)
                                                                            
Plus:                                                                       
  Net income                                                                
   attributable to                                                          
   noncontrolling                                                           
   interest                   29,152       44,604       28,605       60,060 
  Loss from discontinued                                                    
   operations, net of                                                       
   tax                        88,267      285,330      727,559      474,015 
  Loss (gain) from                                                          
   disposal of                                                              
   discontinued                                                             
   operations                485,212    1,027,637   (1,839,419)   1,027,637 
  Income tax (benefit)                                                      
   provision                 (72,272)    (354,384)      62,257       57,504 
  Interest expense           330,135      230,136      455,250      325,929 
  Interest income             (6,161)     (23,493)     (15,959)     (31,969)
  Change in fair value                                                      
   of acquisition-                                                          
   related contingent                                                       
   consideration                   -       40,560            -       83,628 
  One-time strategic                                                        
   costs                           -       76,842            -      140,512 
  Depreciation and                                                          
   amortization              320,066      441,870      681,780      881,043 
                                                                            
                         -----------  -----------  -----------  ----------- 
Consolidated EBITDA,                                                        
 Non-GAAP                $   681,013      103,774      600,388    1,318,354 
                         -----------  -----------  -----------  ----------- 
Plus:                                                                       
  Corporate operating                                                       
   expenses                  747,673      790,574    1,523,416    1,596,638 
                                                                            
                         -----------  -----------  -----------  ----------- 
EBITDA of Continuing                                                        
 Operation Centers, Non-                                                    
 GAAP                    $ 1,428,686  $   894,348  $ 2,123,804  $ 2,914,992 
                         ===========  ===========  ===========  =========== 

CONTACT:

WPCS International Incorporated 610-903-0400 x101 ir@wpcs.com

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