SOURCE: WPCS International Inc.

WPCS International Inc.

December 14, 2015 17:30 ET

WPCS Announces Financial Results for 2nd Quarter and Six Months Ended October 31, 2015

Suisun Year-to-Date Operating Income at $600,000

SUISUN, CA--(Marketwired - Dec 14, 2015) - WPCS International Incorporated (NASDAQ: WPCS), which specializes in contracting services for communications infrastructure, today announced its fiscal 2016 second quarter and six-month financial results for the period ended October 31, 2015.

Sebastian Giordano, Interim CEO of WPCS, commented, "While our Suisun Operations generated operating income of $55,000 and $600,000 for the three months and six months ended October 31, 2015, respectively, the other significant impact items reported this quarter were an $838,000 gain on sale of the China Operations and noncash charges of $783,000 for dividends on preferred stock and $1,518,000 in stock option expense related to issuance of stock options to employees and the Board of Directors."

Financial Results for the Three Months Ended October 31, 2015

Revenue for the three months ended October 31, 2015 decreased $2,266,000, or 37%, to $3,824,000 as compared to $6,090,000 for the same period in 2014, as one, multi-year, high revenue project was completed in the prior fiscal year.

The Company's $2,041,000 loss from continuing operations for the three months ended October 31, 2015 was comprised of the $55,000 operating income from the Suisun Operations, offset by $2,095,000 of corporate overhead, of which $1,518,000 was attributable to stock compensation expense for stock options issued to employees and the Board of Directors. This compared to a net operating loss from continuing operations of $1,882,000 for the same period in 2014.

WPCS has recorded the financial results for its divested subsidiaries as discontinued operations. For the three months ended October 31, 2015, WPCS recorded income from discontinued operations of approximately $838,000 due to the gain on the sale of the China Operations. Net loss attributable to common shareholders for the three-month period totaled $1,986,000 due primarily to the $2,041,00 loss from continuing operations, $783,000 in dividends declared on preferred stock, and which partially was offset by the $838,000 gain on the sale of the China Operations.

Financial Results for the Six Months Ended October 31, 2015

Revenue for the six months ended October 31, 2015 decreased $3,866,000, or 32%, to $8,288,000 as compared to $12,154,000 for the same period in 2014, as one, multi-year, high revenue project was completed in the prior fiscal year.

The Company's $1,957,000 loss from continuing operations for the six months ended October 31, 2015 was primarily comprised of the $600,000 operating income from the Suisun Operations and $400,000 income from Section 16 settlements, and which was offset by $2,951,000 of corporate overhead, of which $1,518,000 was attributable to stock compensation expense for stock options issued to employees and the Board of Directors. This compared to a net operating loss from continuing operations of $4,530,000 for the same period in 2014.

WPCS has recorded the financial results for its divested subsidiaries as discontinued operations. For the six months ended October 31, 2015, WPCS recorded income from discontinued operations of approximately $879,000. Net loss attributable to common shareholders for the six-month period totaled $6,168,000 due primarily to the $1,956,000 loss from continuing operations, $5,072,000 in dividends declared on preferred stock, and which was partially offset by the income from discontinued operations of $878,000.

About WPCS International Incorporated
WPCS provides contracting services to the public services, healthcare, energy and corporate enterprise markets in the United States. For more information, please visit www.wpcs.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including, but not limited to, statements with respect to the Company's future growth opportunities and strategic plan. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

   
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES  
   
CONDENSED CONSOLIDATED BALANCE SHEETS  
(UNAUDITED)  
   
  October 31,   April 30,  
  2015   2015  
         
ASSETS            
Current assets:            
  Cash and cash equivalents $ 2,515,318   $ 2,364,360  
  Accounts receivable, net of allowance of $92,000 at October 31, 2015 and April 30, 2015   4,087,358     6,494,890  
  Costs and estimated earnings in excess of billings on uncompleted contracts   585,721     420,434  
  Prepaid expenses and other current assets   67,354     159,769  
  Current assets held for sale   -     4,566,251  
    Total current assets   7,255,751     14,005,704  
             
Property and equipment, net   147,755     162,986  
             
Other assets   25,384     25,384  
             
Other assets held for sale   -     963,119  
             
Total assets $ 7,428,890   $ 15,157,193  
             
LIABILITIES AND EQUITY            
Current liabilities:            
  Current portion of loans payable $ 37,156   $ 39,935  
  Accounts payable and accrued expenses   2,760,288     5,414,269  
  Billings in excess of costs and estimated earnings on uncompleted contracts   1,549,500     1,346,461  
  Other payable to Zurich   90,000     360,000  
  Short-term promissory notes   -     1,703,000  
  Dividends payable   105,885     677,546  
  Current liabilities held for sale   -     5,710,807  
    Total current liabilities   4,542,829     15,252,018  
             
Loans payable, net of current portion   43,943     44,239  
Total liabilities   4,586,772     15,296,257  
             
Commitments            
             
Equity (deficit):            
WPCS equity (deficit):            
  Preferred stock - $0.0001 par value, 5,000,000 shares authorized at October 31, 2015 and April 30, 2015, respectively            
    Convertible Series F - 0 and 5,268 shares issued and outstanding at October 31, 2015 and April 30, 2015, respectively   -     1,589,933  
    Convertible Series F-1 - 0 and 5,642 shares issued and outstanding at October 31, 2015 and April 30, 2015, respectively   -     1,702,808  
    Convertible Series G - 0 and 2,088 shares issued and outstanding at October 31, 2015 and April 30, 2015, respectively   -     731,706  
    Convertible Series G-1 - 1,359 and 3,128 shares issued and outstanding at October 31, 2015 and April 30, 2015, respectively; liquidation preference of $2,789,000   476,234     1,096,250  
    Convertible Series H - 2,818 and 0 shares issued and outstanding at October 31, 2015 and April 30, 2015, respectively; liquidation preference of $209,000   433,982     -  
    Convertible Series H-1 - 8,532 and 0 shares issued and outstanding at October 31, 2015 and April 30, 2015, respectively; liquidation preference of $1,348,000   733,595     -  
  Common stock - $0.0001 par value, 100,000,000 shares authorized, 2,497,002 and 982,660 shares issued and outstanding as of October 31, 2015 and April 30, 2015, respectively   250     98  
  Additional paid-in capital   83,916,701     70,380,397  
  Accumulated deficit   (82,718,644 )   (76,550,894 )
  Accumulated other comprehensive income on foreign currency translation   -     349,723  
Total WPCS equity (deficit)   2,842,118     (699,979 )
             
Noncontrolling interest   -     560,915  
Total equity (deficit)   2,842,118     (139,064 )
             
Total liabilities and equity $ 7,428,890   $ 15,157,193  
             
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
   
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES  
   
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
    For the three months ended     For the six months ended  
    October 31,     October 31,  
    2015     2014     2015     2014  
                         
Revenue   $ 3,824,241     $ 6,089,672     $ 8,288,244     $ 12,154,129  
                                 
Costs and expenses:                                
  Cost of revenue     3,294,565       5,112,525       6,741,768       9,892,944  
  Selling, general and administrative expenses     2,555,206       1,318,408       3,868,009       2,363,418  
  Depreciation and amortization     14,493       15,641       29,462       31,824  
      5,864,264       6,446,574       10,639,239       12,288,186  
                                 
Operating loss     (2,040,023 )     (356,902 )     (2,350,995 )     (134,057 )
                                 
Other income (expense):                                
  Interest expense     (606 )     (1,990 )     (1,498 )     (2,837,472 )
  Inducement expense     -       (1,870,498 )     -       (1,870,498 )
  Income from section 16 settlement     -       350,000       400,000       350,000  
  Other expenses     -       (942 )     (2,906 )     (8,442 )
                                 
Loss from continuing operations before income tax provision     (2,040,629 )     (1,880,332 )     (1,955,399 )     (4,500,469 )
Income tax provision     -       1,825       1,099       29,188  
Loss from continuing operations     (2,040,629 )     (1,882,157 )     (1,956,498 )     (4,529,657 )
                                 
Discontinued operations:                                
  (Loss) income from discontinued operations     -       (1,887,384 )     41,261       (2,325,498 )
  Gain from disposal     837,720       -       837,720       798,896  
  Income (loss) from discontinued operations, net of tax     837,720       (1,887,384 )     878,981       (1,526,602 )
                                 
Consolidated net loss     (1,202,909 )     (3,769,541 )     (1,077,517 )     (6,056,259 )
Net (loss) income attributable to noncontrolling interest     -       (53,115 )     16,505       (102,135 )
Net loss attributable to WPCS     (1,202,909 )     (3,716,426 )     (1,094,022 )     (5,954,124 )
Dividends declared on preferred stock     (782,837 )     (116,212 )     (4,369,958 )     (190,699 )
Deemed dividend on convertible preferred stock, due to beneficial conversion feature     -       -       (703,770 )     -  
Net loss attributable to WPCS common shareholders   $ (1,985,746 )   $ (3,832,638 )   $ (6,167,750 )   $ (6,144,823 )
                                 
Basic and diluted net loss attributable to WPCS common shareholders:                                
  Loss from continuing operations   $ (1.17 )   $ (3.16 )   $ (3.62 )   $ (7.46 )
  (Loss) income from discontinued operations   $ -     $ (2.90 )   $ 0.01     $ (3.52 )
  Gain from disposal   $ 0.35     $ -     $ 0.43     $ 1.26  
  Basic and diluted net income (loss) from discontinued operations   $ 0.35     $ (2.91 )   $ 0.44     $ (2.26 )
  Basic and diluted net loss per common share attributable to WPCS   $ (0.82 )   $ (6.06 )   $ (3.17 )   $ (9.72 )
                                 
Basic and diluted weighted average number of common shares outstanding     2,415,113       632,417       1,942,681       632,417  
                                 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
   
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES  
   
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
   
    For the six months ended  
    October 31,  
    2015     2014  
Operating activities:                
  Net loss from continuing operations   $ (1,956,498 )   $ (4,529,657 )
  Consolidated net income (loss) from discontinued operations     878,981       (1,526,602 )
Adjustments to reconcile consolidated net loss to net cash (used in) provided by operating activities:                
  Depreciation and amortization     14,969       29,462  
  Amortization of notes discount     -       853,417  
  Inducement expenses     -       1,870,498  
  Shares based compensation     1,540,181       -  
  Interest expense related to make-whole amount     -       1,889,716  
  Gain on sale of Pride     -       (798,896 )
  Gain on sale of China Operations     (837,720 )     -  
  Income on section 16 settlements     (400,000 )     -  
  Changes in operating assets and liabilities:                
  Accounts receivable     2,407,532       (2,195,156 )
  Costs and estimated earnings in excess of billings on uncompleted contracts     (165,287 )     78,620  
  Deferred contract costs     -       (1,035 )
  Current assets held for sale     (3,853,621 )     5,465,396  
  Prepaid expenses and other current assets     92,677       8,363  
  Other assets     -       18,150  
  Other assets held for sale     (34,523 )     358,930  
  Accounts payable and accrued expenses     (2,653,981 )     1,456,978  
  Current liabilities held for sale     2,200,030       (1,876,128 )
  Accrued severance expense     -       (1,303,292 )
  Billings in excess of costs and estimated earnings on uncompleted contracts     203,039       678,176  
Net cash (used in) provided by operating activities     (2,564,221 )     476,940  
                 
Investing activities:                
  Acquisition of property and equipment     -       (137,842 )
  Proceeds from sale of China Operations     1,325,744       -  
Net cash provided by (used in) investing activities     1,325,744       (137,842 )
                 
Financing activities:                
  Proceeds from issuance of Series H-1 preferred stock and warrants     1,575,000       -  
  Borrowings under loan payable obligations     7,762       1,623  
  Repayment under loan payable obligations     (10,837 )     -  
  Repayments under other payable to Zurich     (270,000 )     -  
  Repayments of short term promissory notes     (4,000 )     -  
  Dividends paid on preferred stock     -       (146,521 )
Net cash provided by (used in) financing activities     1,297,925       (144,898 )
                 
Effect of exchange rate changes on cash     91,510       (127,104 )
                 
Net increase in cash and cash equivalents     150,958       67,096  
Cash and cash equivalents, beginning of the period     2,364,360       2,177,070  
Cash and cash equivalents, end of the period   $ 2,515,318     $ 2,244,166  
                 
Schedule of non-cash investing and financing activities:                
  Declaration on preferred dividend payable   $ 4,369,958     $ 190,699  
  Conversion of dividends payable related to make-whole amount through the issuance of common stock   $ 4,104,529     $ -  
  Conversion of dividends payable related to Series F-1 preferred stock   $ 624,977     $ -  
  Conversion of dividends payable related to Series G-1 preferred stock   $ 212,113     $ -  
  Conversion of short term convertible note to Series H preferred stock   $ 1,299,000     $ -  
  Conversion of Preferred E to short term promissory note   $ -     $ 794,000  
  Conversion of Series F and F-1 preferred stock through the issuance of common stock   $ 3,292,741     $ -  
  Conversion of Series G and G-1 preferred stock through the issuance of common stock   $ 1,351,722     $ -  
  Conversion of Series H preferred stock through the issuance of common stock   $ 865,018     $ -  
  Settlement of severance obligation and sale of Pride   $ -     $ 970,000  
                   
The accompanying notes are an integral part of these condensed consolidated financial statements.
 

Contact Information

  • INVESTOR CONTACT:
    WPCS International Incorporated
    David Allen
    Chief Financial Officer
    Phone: 707-759-6008
    Email: Email Contact