SOURCE: WPCS

WPCS

March 18, 2013 16:01 ET

WPCS Reports 3rd Quarter FY2013 Results

EXTON, PA--(Marketwire - Mar 18, 2013) - 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 diluted 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 Information

  • CONTACT:

    WPCS International Incorporated
    610-903-0400 x101
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