WPCS Reports 3rd Quarter FY2013 Results

WPCS Reports 3rd Quarter FY2013 Results 
EXTON, PA -- (Marketwire) -- 03/18/13 --  WPCS International
Incorporated (NASDAQ: WPCS), a leader in design-build engineering
services for communications infrastructure, today announced financial
results for the fiscal year 2013 third quarter ended January 31,
2013. In the third quarter, WPCS generated consolidated EBITDA of
approximately $528,000 on revenue of $9.5 million. This compares to
an EBITDA loss of $5.6 million on $13.1 million of revenue for the
same period in the prior year. For the nine months of fiscal year
2013 ended January 31, 2013, WPCS generated consolidated EBITDA of
approximately $1.1 million on revenue of $32.9 million. This compares
to an EBITDA loss of $4.3 million on revenue of $53.5 million for the
same period in the prior year. 
In connection with the completion of the $4 million senior secured
convertible note financing facility on December 5, 2012, the
conversion features of the notes and the common stock warrants issued
are considered derivative financial instruments that are accounted
for as a note discount with each being a derivative liability. WPCS
is required to determine the fair value of these liabilities, with
the changes in fair value recorded in the financial results each
period as a non-cash charge or gain. In the third quarter, WPCS
recorded non-cash charges of approximately $1.4 million for the
amortization of note discounts and change in fair value of the
derivative liabilities. These are non-cash charges and do not affect
the operating cash flow or working capital of the company.  
WPCS reported a consolidated net loss of approximately $1.2 million
or $0.18 per diluted share, which includes the aforementioned
non-cash charges. This compares to a net loss of approximately $10.3
million or $1.48 per diluted share, for the same period a year ago,
which includes a loss from discontinued operations of approximately
$1.6 million, or $0.23 per diluted share, related to the sale of the
Hartford and Lakewood Operations.  
For the nine months ended January 31, 2013, WPCS reported a net loss
of approximately $724,000 or $0.10 per diluted share which includes
the aforementioned non-cash charges of $1.4 million, and income from
discontinued operations of approximately $1.1 million, or $0.16 per
d
iluted share, related to the asset sale of the Hartford and Lakewood
Operations. This compares to a net loss of $12.0 million or $1.73 per
diluted share, for the same period a year ago, which includes a loss
from discontinued operations of approximately $3.1 million, or $0.45
per diluted share, related to the sales of the Hartford, Lakewood,
St. Louis and Sarasota Operations.  
Andrew Hidalgo, CEO of WPCS, commented, "WPCS is excited to announce
a third consecutive quarter of EBITDA profitability. We are also very
pleased that our efforts in turning around the performance of the
company from two difficult prior fiscal years, has been successful.
We continue to improve our financial performance with higher gross
margins and a healthy $27.6 million backlog and $54.4 million bid
list." 
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 VH83754. 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 83754 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
changes in fair value of derivative liabilities, 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 at times by investors to assess the
ongoing 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           Nine Months Ended     
                             January 31,                 January 31,        
                         2013          2012          2013          2012     
                     ------------  ------------  ------------  ------------ 
            
                         (Note 1)                    (Note 1)   
REVENUE              $  9,515,276  $ 13,122,319  $ 32,901,854  $ 53,493,243 
                     ------------  ------------  ------------  ------------ 
                                                                            
COSTS AND EXPENSES:                                                         
  Cost of revenue       6,604,565    14,709,969    23,442,850    47,296,559 
  Selling, general                                                          
   and                                                                      
   administrative                                                           
   expenses             2,383,000     3,805,937     8,330,905    10,412,429 
  Depreciation and                                                          
   amortization           323,275       455,501     1,005,055     1,336,544 
  Change in fair                                                            
   value of                                                                 
   acquisition-                                                             
   related                                                                  
   contingent                                                               
   consideration                -             -             -        83,628 
                     ------------  ------------  ------------  ------------ 
                                                                            
                        9,310,840    18,971,407    32,778,810    59,129,160 
                     ------------  ------------  ------------  ------------ 
                                                                            
OPERATING INCOME                                                            
 (LOSS)                   204,436    (5,849,088)      123,044    (5,635,917)
                                                                            
OTHER EXPENSE                                                               
 (INCOME):                                                                  
  Interest expense        874,805       254,647     1,330,055       580,576 
  Change in fair                                                            
   value of                                                                 
   derivative                                                               
   liabilities            702,574             -       702,574             - 
  Interest income          (2,111)      (27,409)      (18,070)      (59,378)
                     ------------  ------------  ------------  ------------ 
                                                                            
Loss from continuing                                                        
 operations before                                                          
 income tax                                                                 
 (benefit) provision   (1,370,832)   (6,076,326)   (1,891,515)   (6,157,115)
                                                                            
Income tax (benefit)                                                        
 provision               (181,818)    2,606,559      (119,561)    2,664,063 
                                                                            
                     ------------  ------------  ------------  ------------ 
LOSS FROM CONTINUING                                                        
 OPERATIONS            (1,189,014)   (8,682,885)   (1,771,954)   (8,821,178)
                     ------------  ------------  ------------  ------------ 
                                                                            
Discontinued                                                                
 operations                                                                 
  Income (loss) from                                                        
   operations of                                                            
   discontinued                                                             
   operations, net                                                          
   of tax (benefit)                                                         
   of ($31,913),                                                            
   $1,954,051,                                                              
   $110,518 and                                                             
   $1,837,728,                                                              
   respectively            31,913    (1,599,614)     (695,646)   (2,073,629)
  (Loss) gain from                                                          
   disposal               (12,880)            -     1,826,539    (1,027,637)
                                                                            
                     ------------  ------------  ------------  ------------ 
  Income (loss) from                                                        
   discontinued                                                             
   operations-             19,033    (1,599,614)    1,130,893    (3,101,266)
                     ------------  ------------  ------------  ------------ 
                                                                            
CONSOLIDATED NET                                                            
 LOSS                  (1,169,981)  (10,282,499)     (641,061)  (11,922,444)
                                                                            
Net income                                                                  
 attributable to                                                            
 noncontrolling                                                             
 interest                  54,317        36,500        82,922        96,560 
                     ------------  ------------  ------------  ------------ 
                                                                            
NET LOSS                                                                    
 ATTRIBUTABLE TO                                                            
 WPCS                $ (1,224,298) $(10,318,999) $   (723,983) $(12,019,004)
                     ============  ============  ============  ============ 
                                                                            
Basic and diluted                                                           
 net loss per common                                                        
 share attributable                                                         
 to WPCS:                                                                   
  Loss from                                                                 
   continuing                                                               
   operations                                                               
   attributable to                                                          
   WPCS              $      (0.18) $      (1.25) $      (0.26) $      (1.28)
  Income (loss) from                                                        
   discontinued                                                             
   operations                                                               
   attributable to                          
                                
   WPCS              $       0.00  $      (0.23) $       0.16  $      (0.45)
                     ------------  ------------  ------------  ------------ 
  Basic and diluted                                                         
   net loss per                                                             
   common share                                                             
   attributable to                                                          
   WPCS              $      (0.18) $      (1.48) $      (0.10) $      (1.73)
                     ============  ============  ============  ============ 
                                                                            
Basic and diluted                                                           
 weighted average                                                           
 number of common                                                           
 shares outstanding     6,954,766     6,954,766     6,954,766     6,954,766 
                     ============  ============  ============  ============ 
                                                                            
                                                                            
    (1)  The prior year financial statements contain certain                
    reclassifications to present discontinued operations and to conform to  
    current presentation.                                                   
                                                                            
              WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES              
                                                                            
                    CONDENSED CONSOLIDATED BALANCE SHEETS                   
                                                                            
                                                  January 31,    April 30,  
                     ASSETS                           2013          2012    
                                                 ------------- -------------
                                                  (Unaudited)     (Note 1)  
CURRENT ASSETS:                                                             
                                                                            
  Cash and cash equivalents                      $   2,136,045 $     811,283
  Restricted cash                                      926,389             -
  Accounts receivable, net of allowance of                                  
   $1,635,761 and $1,794,729 at January 31, 2013                            
   and April 30, 2012, respectively                 10,903,997    22,343,304
  Costs and estimated earnings in excess of                                 
   billings on uncompleted contracts                 1,019,220     1,340,379
  Deferred contract costs                            1,888,839     1,816,116
  Inventory                                                  -     1,475,266
  Prepaid expenses and other current assets            481,262       326,075
  Prepaid income taxes                                  48,280       137,279
  Deferred tax assets                                  527,268       307,550
                                                 ------------- -------------
    Total current assets                            17,931,300    28,557,252
                                                                            
PROPERTY AND EQUIPMENT, net                          3,411,853     4,309,450
                                                                            
OTHER INTANGIBLE ASSETS, net                           285,073       382,852
                                                                            
GOODWILL                                             1,946,501     1,930,826
                                                                            
DEFERRED TAX ASSETS                                    258,537       243,999
                                                                            
OTHER ASSETS                                           271,800       371,020
                                                 ------------- -------------
                                                                            
    Total assets                                 $  24,105,064 $  35,795,399
                                                 ============= =============
                                                                            
                                                                            
              WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES              
                                                                            
             CONDENSED CONSOLIDATED BALANCE SHEETS (continued)              
                                                                            
                                                                            
            LIABILITIES AND EQUITY              January 31,     April 30,   
                                                    2013           2012     
                                               -------------  ------------- 
                                                (Unaudited)      (Note 1)   
CURRENT LIABILITIES:                                                        
                                                                            
  Current portion of loans payable             $      37,655  $     143,514 
  Borrowings under line of credit                          -      4,964,140 
  Senior secured convertible notes, net of                                  
   debt discount                                     444,444              - 
  Derivative liability - senior secured                                     
   convertible note                                3,001,306              - 
  Current portion of capital lease obligations             -         15,465 
  Accounts payable and accrued expenses            4,824,341     16,669,621 
  Billings in excess of costs and estimated                                 
   earnings on uncompleted contracts               1,687,438      3,594,193 
  Deferred revenue                                   762,442        790,270 
  Due joint venture partner                          959,864      3,314,708 
  Other payable                                    2,287,621              - 
  Short-term bank loan                             2,410,755              - 
  Income taxes payable                               168,598        194,963 
                                               -------------  ------------- 
      Total current liabilities                   16,584,464     29,686,874 
                                                                            
Loans payable, net of current portion                 95,207        223,561 
Derivative liability - warrants                    1,945,284              - 
                                               -------------  ------------- 
      Total liabilities                           18,624,955     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 January 31, 2013 and                                  
   April 30, 2012                                        695            695 
  Additional paid-in capital                  
    50,834,577     50,477,543 
  Accumulated deficit                            (47,867,645)   (47,143,662)
  Accumulated other comprehensive income on                                 
   foreign currency translation                    1,468,686      1,433,066 
                                               -------------  ------------- 
                                                                            
      Total WPCS equity                            4,436,313      4,767,642 
                                                                            
      Noncontrolling interest                      1,043,796      1,117,322 
                                               -------------  ------------- 
                                                                            
      Total equity                                 5,480,109      5,884,964 
                                               -------------  ------------- 
                                                                            
      Total liabilities and equity             $  24,105,064  $  35,795,399 
                                               =============  ============= 
                                                                            
                                                                            
Reconciliation of GAAP to Non-GAAP Financial Measure (Unaudited)            
                                                                            
                                                                            
(1) Reconciliation of Non-GAAP EBITDA as Adjusted:                          
                                                                            
                                                                            
                                                                            
                         Three Months Ended           Nine Months Ended     
                             January 31,                 January 31,        
                         2013          2012          2013          2012     
                     ------------  ------------  ------------  ------------ 
                                                                            
NET LOSS                                                                    
 ATTRIBUTABLE TO                                                            
 WPCS, GAAP          $ (1,224,298) $(10,318,999) $   (723,983) $(12,019,004)
                                                                            
Plus:                                                                       
  Net income                                                                
   attributable to                                                          
   noncontrolling                                                           
   interest                54,317        36,500        82,922        96,560 
  (Income) loss from                                                        
   discontinued                                                             
   operations, net                                                          
   of tax                 (31,913)    1,599,614       695,646     2,073,629 
  Loss (gain) from                                                          
   disposal of                                                              
   discontinued                                                             
   operations              12,880             -    (1,826,539)    1,027,637 
  Income tax                                                                
   (benefit)                                                                
   provision             (181,818)    2,606,559      (119,561)    2,664,063 
  Interest expense        874,805       254,647     1,330,055       580,576 
  Change in fair                                                            
   value of                                                                 
   derivative                                                               
   liabilities            702,574             -       702,574             - 
  Interest income          (2,111)      (27,409)      (18,070)      (59,378)
  Change in fair                                                            
   value of                                                                 
   acquisition-                                                             
   related                                                                  
   contingent                                                               
   consideration                -             -             -        83,628 
  One time strategic                                                        
   costs                        -      (199,260)            -       (58,748)
  Depreciation and                                                          
   amortization           323,275       455,501     1,005,055     1,336,544 
                                                                            
                     ------------  ------------  ------------  ------------ 
Consolidated EBITDA                                                         
 as adjusted, Non-                                                          
 GAAP                $    527,711  $ (5,592,847) $  1,128,099  $ (4,274,493)
                     ============  ============  ============  ============ 

  
CONTACT:  
WPCS International Incorporated
610-903-0400 x101
ir@wpcs.com 
 
 
Press spacebar to pause and continue. Press esc to stop.