WPCS Reports FY2006 and 4th Quarter Results
Thursday July 27, 9:38 am ET

EXTON, Pa., July 27 /PRNewswire-FirstCall/ -- WPCS International Incorporated (Nasdaq: WPCS - News) has reported its financial results for the fiscal year and fourth quarter ended April 30, 2006. For the fiscal year ended April 30, 2006, WPCS reported total revenue of approximately $52.1 million compared to $40.1 million for the same period a year ago, which represents an increase of approximately 30%. For the year ended April 30, 2006, non-GAAP net income was approximately $2.5 million or $0.58 per diluted share, compared to a non-GAAP net loss of $85,000 or $0.03 per share for the same period a year ago.

For the fourth quarter ended April 30, 2006, WPCS reported total revenue of approximately $13.9 million compared to $11.1 million for the same period a year ago, which represents an increase of approximately 25%. For the fourth quarter ended April 30, 2006, non-GAAP net income was approximately $688,000 or $0.14 per diluted share, compared to a non-GAAP net loss of approximately $296,000 or $0.08 per share for the same period last year.

From a GAAP perspective, the fourth quarter ended April 30, 2006 generated net income of approximately $8.0 million or $1.62 per diluted share, which includes a non-cash gain of approximately $7.3 million related to accounting for warrant liabilities under EITF 00-19. For the same period in the prior year, the reported net income was approximately $2.0 million or $0.51 per share, which included a non-cash gain of approximately $2.3 million related to accounting for warrant liabilities under EITF 00-19. For FY2006, the company reported a net loss of approximately $1.6 million or $0.40 per share, which includes a non-cash loss of approximately $4.1 million related to accounting for warrant liabilities under EITF 00-19. For the same period in the prior year, the reported net income was $1.3 million or $0.49 per share, which also included a non-cash gain of approximately $1.4 million related to accounting for warrant liabilities under EITF 00-19.

Andrew Hidalgo, CEO of WPCS International Incorporated, commented: "FY2006 was a very successful year for the company. From a non-GAAP perspective, we achieved the projected EPS target of $0.58 for the year and reached new highs in revenue and earnings. Although we had to comply with the accounting issues caused by EITF 00-19, which generated significant non-cash charges, we were able to eliminate these non-cash charges going forward and post a substantial credit in the fourth quarter. Addressing EITF 00-19 has overshadowed what has been a very successful year for WPCS and has caused some confusion for our investors. However, it is important for our investors to know that these charges and credits were non-cash related and do not affect the financial health of WPCS. It is all behind us and now we can focus on FY2007, which we believe will be our most successful year thus far."

About WPCS International Incorporated:

WPCS provides design-build engineering services for specialty communication systems and wireless infrastructure including site design, product integration and project management. The company has an extensive customer base that includes corporations, government entities and educational institutions. For more information, please visit the website at http://www.wpcs.com.

Statements about the company's expectations, including 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:
 
 Heather Tocket / Corporate Communications Manager
 WPCS International Incorporated
 610-903-0400 x102
 ir@wpcs.com
 
 
 
 WPCS INTERNATIONAL INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
 
 (Unaudited)
 Year Ended Three Months Ended
 April 30, April 30,
 2006 2005 2006 2005
 (Note 1) (Note 1)
 
 REVENUE $52,144,575 $40,148,233 $13,901,504 $11,132,837
 
 COSTS AND EXPENSES:
  Cost of revenue 38,010,945 32,445,470 10,284,208 9,008,148
 Selling, general
 and administrative
 expenses 9,191,392 7,032,504 2,358,446 2,271,896
 Depreciation and
 amortization 837,789  682,397 204,395 251,959
 
 Total costs
 and expenses 48,040,126 40,160,371 12,847,049 11,532,003
 
 OPERATING
 INCOME (LOSS) 4,104,449 (12,138) 1,054,455 (399,166)
 
 OTHER EXPENSE (INCOME):
 Interest expense 256,022 31,865 73,590 12,125
 Interest income (121,720) (10,817) (68,984) (6,048)
 Loss (gain) on
 change in fair
 value of
 warrants 4,078,494 (1,414,263) (7,327,920) (2,254,762)
 
 INCOME (LOSS) BEFORE
 INCOME TAX
 PROVISION (108,347) 1,381,077 8,377,769 1,849,519
 
 Income tax
 provision 1,515,773 52,096 362,000 (109,640)
 
 NET INCOME (LOSS) ($1,624,120) $1,328,981 $8,015,769 $1,959,159
 
 Basic net income
 (loss) per
 common share ($0.40) $0.50 $1.75 $0.51
 
 Diluted net income
 (loss) per
 common share ($0.40) $0.49 $1.62 $0.51
 
 Basic weighted
 average number of
 common shares
 outstanding 4,057,940 2,679,529 4,577,557 3,821,385
 
 Diluted weighted
 average number of
 common shares
 outstanding 4,057,940  2,729,866 4,943,810 3,830,846
 
 
 
 WPCS INTERNATIONAL INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 
 April 30, April 30,
 ASSETS  2006 2005
 
 CURRENT ASSETS:
 Cash and cash equivalents $12,279,646 $989,252
 Accounts receivable, net of allowance
 of $104,786 and $75,786 at April 30,
 2006 and 2005, respectively 12,141,789 9,907,316
 Costs and estimated earnings in excess
 of billings on uncompleted contracts 1,441,977 908,955
 Inventory 1,204,540 885,624
 Prepaid expenses and other current assets 286,625 536,331
 Deferred income taxes 78,000 62,000
 Total current assets 27,432,577 13,289,478
 
 PROPERTY AND EQUIPMENT, net  1,352,216 1,560,271
 
 CUSTOMER LISTS, net 864,388 1,158,388
 
 GOODWILL 14,239,918 13,961,642
 
 DEBT ISSUANCE COSTS, net 111,091 -
 
 DEFERRED INCOME TAXES 51,000 50,000
 
 OTHER ASSETS 71,128 156,932
 
 Total assets $44,122,318 $30,176,711
 
 
 
  WPCS INTERNATIONAL INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS (continued)
 
 April 30, April 30,
 LIABILITIES AND SHAREHOLDERS' EQUITY 2006  2005
 (Note 1)
 CURRENT LIABILITIES:
 Borrowings under line of credit $- $382,281
 Current portion of capital lease obligation - 2,073
 Current portion of loans payable 231,065 187,420
 Accounts payable and accrued expenses 4,989,861 5,338,813
 Billings in excess of costs and estimated
 earnings on uncompleted contracts 1,213,364 1,204,491
 Due to shareholders 381,377 915,290
 Income taxes payable 420,066 24,790
 Deferred income taxes 21,000 139,000
  Total current liabilities 7,256,733 8,194,158
 
 Borrowings under line of credit 3,000,000 -
 Loans payable, net of current portion 256,692 261,455
 Due to shareholders, net of current portion 514,623 927,005
 Deferred income taxes 531,000 439,000
 Warrant liability - 1,994,570
 Total liabilities 11,559,048 11,816,188
 
 COMMITMENTS AND CONTINGENCIES
 
 COMMON STOCK WITH REGISTRATION RIGHTS:
 Common stock subject to continuing
 registration, $0.0001 par value,
 2,083,887 shares issued and outstanding
 at April 30, 2005  - 5,732,116
 
 SHAREHOLDERS' EQUITY:
 Preferred stock - $0.0001 par value,
 5,000,000 shares authorized, none issued - -
 
 Common stock - $0.0001 par value,
 75,000,000 shares authorized, 5,264,284
 and 1,737,498 shares issued and
 outstanding at April 30, 2006 and
 2005, respectively 526 174
 Additional paid-in capital 33,525,130 11,966,499
 (Accumulated deficit) retained earnings (962,386) 661,734
 
 Total shareholders' equity 32,563,270 12,628,407
 
 Total liabilities and
 shareholders' equity $44,122,318 $30,176,711
 

Note 1: Certain reclassifications have been made to prior period financial statements to conform to current presentation.

 
 Reconciliation of Non-GAAP Financial Measure (Unaudited)
 
 (1) Reconciliation of Non-GAAP Net Income:

Non-GAAP net income is defined as net income (loss), as reported plus non-cash loss (gain) on fair value of warrants. Our measure of non-GAAP net income may not be comparable to similarly titled measures of other companies. The loss (gain) on fair market value of warrants represents the non-cash change in the fair value of certain warrants during the period. This non-cash loss (gain) has no impact on our cash flows or cash resources.

 
 Year Ended Three Months Ended
 April 30, April 30,
 2006 2005 2006 2005
 
 NET INCOME (LOSS),
 as reported ($1,624,120) $1,328,981 $8,015,769 $1,959,159
 
 Plus: Loss (gain)
 on change in fair
 value of warrants 4,078,494 (1,414,263) (7,327,920) (2,254,762)
 
 NET INCOME
 (LOSS), Non-GAAP $2,454,374 ($85,282) $687,849 ($295,603)
 
 Basic net income
 (loss) per common
 share, Non-GAAP $0.60 ($0.03) $0.15 ($0.08)
 
 Diluted net income
 (loss) per common
 share, Non-GAAP $0.58 ($0.03) $0.14 ($0.08)
 
 Basic weighted
 average number of
 common shares
  outstanding 4,057,940 2,679,529 4,577,557 3,821,385
 
 Diluted weighted
 average number of
 common shares
 outstanding 4,202,772 2,679,529 4,943,810 3,821,385