WPCS Announces Financial Results for 3rd Quarter and Nine Months Ended January 31, 2016

SUISUN, CA--(Marketwired - Mar 10, 2016) - WPCS International Incorporated (NASDAQ: WPCS), which specializes in low voltage communications and security contracting services, today announced its fiscal 2016 third quarter and nine-month financial results for the period ended January 31, 2016.

Sebastian Giordano, Interim CEO of WPCS, commented, "The most telling facts at this juncture are that:

(i) Suisun Operations continues to operate profitably, generating operating income of $286,000 and $886,000 for the three months and nine months ended January 31, 2016, respectively;

(ii) Over 96% of our approximately $7,000,000 of assets are current assets;

(iii) Other than $150,000 in vehicle loans for operations, the Company is debt-free; and,

(iv) We have no further preferred dividend requirements.

"We believe that our results continue to demonstrate that, not only have we successfully restructured the Company and dramatically cleaned-up our balance sheet, but more importantly, we have a sound, core profitable business from which to build upon. In addition to just recently establishing operations in Texas and forming a unique technology alliance, we are currently evaluating various other growth alternatives that we believe will yield positive results in the near term."

Financial Results for the Three Months Ended January 31, 2016

Revenue for the three months ended January 31, 2016 decreased $1,944,000, or 37%, to $3,318,000 as compared to $5,262,000 for the same period in 2015, as one, multi-year, high revenue project was completed in the prior fiscal year.

The Company's $819,000 loss from continuing operations for the three months ended January 31, 2016 was comprised of the $286,000 operating income from the Suisun Operations and offset by: (i) $1,073,000 of corporate overhead, of which $656,000 was attributable to stock compensation expense for stock options issued to employees and the Board of Directors, and (ii) $32,000 of start-up costs for our new Texas Operations. This compared to a net operating loss from continuing operations of $2,865,000 for the same period in 2015.

WPCS has recorded the financial results for its divested subsidiaries as discontinued operations. For the three months ended January 31, 2016, WPCS recorded no income or loss from discontinued operations. Meanwhile, the net loss attributable to common shareholders for the three-month period totaled $1,233,000, due primarily to the $819,000 loss from continuing operations and $414,000 in dividends declared on preferred stock.

Financial Results for the Nine Months Ended January 31, 2016

Revenue for the nine months ended January 31, 2016 decreased $5,810,000, or 33%, to $11,606,000 as compared to $17,416,000 for the same period in 2015, as one, multi-year, high revenue project was completed in the prior fiscal year.

The Company's $2,776,000 loss from continuing operations for the nine months ended January 31, 2016 was primarily comprised of the $886,000 operating income from the Suisun Operations and $400,000 income from Section 16 settlements, and which was offset by: (i) $4,030,000 of corporate overhead, of which $2,174,000 was attributable to stock compensation expense for stock options issued to employees and the Board of Directors and (ii) $32,000 in start-up costs for our new Texas Operations. This compared to a net operating loss from continuing operations of $7,395,000 for the same period in 2015.

WPCS has recorded the financial results for its divested subsidiaries as discontinued operations. For the nine months ended January 31, 2016, WPCS recorded income from discontinued operations of approximately $863,000. Meanwhile, the net loss attributable to common shareholders for the nine-month period totaled $7,400,000 due primarily to the $2,776,000 loss from continuing operations, $5,487,000 in dividends declared on preferred stock, and which was partially offset by the income from discontinued operations of $879,000.

About WPCS International Incorporated
WPCS provides low voltage communication and security 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)
				January 31,				April 30,
				2016				2015
ASSETS
Current assets:
	Cash and cash equivalents			$	2,408,297			$	2,364,360
	Accounts receivable, net of allowance of $92,000 at January 31, 2016 and April 30, 2015				3,769,383				6,494,890
	Costs and estimated earnings in excess of billings on uncompleted contracts				416,047				420,434
	Prepaid expenses and other current assets				93,558				159,769
	Current assets held for sale				-				4,566,251
		Total current assets			6,687,285				14,005,704
Property and equipment, net					227,300				162,986
Other assets					27,494				25,384
Other assets held for sale					-				963,119
Total assets				$	6,942,079			$	15,157,193
LIABILITIES AND EQUITY
Current liabilities:
	Current portion of loans payable			$	49,747			$	39,935
	Accounts payable and accrued expenses				2,264,725				5,414,269
	Billings in excess of costs and estimated earnings on uncompleted contracts				1,721,301				1,346,461
	Other payable to Zurich				-				360,000
	Short-term promissory notes				-				1,703,000
	Dividends payable				-				677,546
	Current liabilities held for sale				-				5,710,807
		Total current liabilities			4,035,773				15,252,018
Loans payable, net of current portion					98,492				44,239
Total liabilities					4,134,265				15,296,257
Commitments
Equity (deficit):
WPCS equity (deficit):
	Preferred stock - $0.0001 par value, 5,000,000 shares authorized at January 31, 2016 and April 30, 2015, respectively
		Convertible Series F - 0 and 5,268 shares issued and outstanding at January 31, 2016 and April 30, 2015, respectively			-				1,589,933
		Convertible Series F-1 - 0 and 5,642 shares issued and outstanding at January 31, 2016 and April 30, 2015, respectively			-				1,702,808
		Convertible Series G - 0 and 2,088 shares issued and outstanding at January 31, 2016 and April 30, 2015, respectively			-				731,706
		Convertible Series G-1 - 0 and 3,128 shares issued and outstanding at January 31, 2016 and April 30, 2015, respectively			-				1,096,250
		Convertible Series H - 2,638 and 0 shares issued and outstanding at January 31, 2016 and April 30, 2015, respectively; liquidation preference of $406,000			406,262				-
		Convertible Series H-1 - 8,119 and 0 shares issued and outstanding at January 31, 2016 and April 30, 2015, respectively; liquidation preference of $1,348,000			699,324				-
	Common stock - $0.0001 par value, 100,000,000 shares authorized, 2,673,803 and 982,660 shares issued and outstanding as of January 31, 2016 and April 30, 2015, respectively				267				98
	Additional paid-in capital				85,653,220				70,380,397
	Accumulated deficit				(83,951,259	)			(76,550,894	)
	Accumulated other comprehensive income on foreign currency translation				-				349,723
Total WPCS equity (deficit)					2,807,814				(699,979	)
Noncontrolling interest					-				560,915
Total equity (deficit)					2,807,814				(139,064	)
Total liabilities and equity (deficit)				$	6,942,079			$	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 nine months ended
			January 31,								January 31,
			2016				2015				2016				2015
Revenue			$	3,317,636			$	5,262,154			$	11,605,880			$	17,416,283
Costs and expenses:
	Cost of revenue			2,521,627				4,486,949				9,263,395				14,379,893
	Selling, general and administrative expenses			1,602,751				1,237,402				5,470,760				3,600,820
	Depreciation and amortization			16,075				14,282				45,537				46,106
				4,140,453				5,738,633				14,779,692				18,026,819
Operating loss				(822,817	)			(476,479	)			(3,173,812	)			(610,536	)
Other income (expense):
	Interest expense			(523	)			(380	)			(2,021	)			(2,837,852	)
	Inducement expense			-				(3,622,344	)			-				(5,492,842	)
	Income from Section 16 settlements			-				1,051,516				400,000				1,401,516
	Other income, net			4,871				197,220				1,965				188,778
Loss from continuing operations before income tax provision				(818,469	)			(2,850,467	)			(2,773,868	)			(7,350,936	)
Income tax provision				607				14,726				1,706				43,914
Loss from continuing operations				(819,076	)			(2,865,193	)			(2,775,574	)			(7,394,850	)
Discontinued operations:
	Income (loss) from discontinued operations			-				(88,807	)			41,261				(2,414,305	)
	Gain from disposal			-				-				837,720				798,896
	Gain from disposal of BTX			-				19,700				-				19,700
	Income (loss) from discontinued operations, net of tax			-				(69,107	)			878,981				(1,595,709	)
Consolidated net loss				(819,076	)			(2,934,300	)			(1,896,593	)			(8,990,559	)
Net income (loss) attributable to noncontrolling interest				-				8,682				16,505				(93,453	)
Net loss attributable to WPCS				(819,076	)			(2,942,982	)			(1,913,098	)			(8,897,106	)
Dividends declared on preferred stock				(372,810	)			(509,389	)			(4,742,768	)			(700,088	)
Deemed dividends on convertible preferred Series H-1 stock, due to beneficial conversion feature				(40,729	)			-				(744,499	)			-
Net loss attributable to WPCS common shareholders			$	(1,232,615	)		$	(3,452,371	)		$	(7,400,365	)		$	(9,597,194	)
Basic and diluted net loss attributable to WPCS common shareholders:
	Loss from continuing operations		$	(0.47	)		$	(5.33	)		$	(3.82	)		$	(12.80	)
	Income (loss) from discontinued operations		$	-			$	(0.15	)		$	0.01			$	(3.67	)
	Gain from disposal		$	-			$	0.03			$	0.39			$	1.29
	Basic and diluted net income (loss) from discontinued operations		$	-			$	(0.12	)		$	0.40			$	(2.38	)
	Basic and diluted net loss per common share attributable to WPCS		$	(0.47	)		$	(5.45	)		$	(3.42	)		$	(15.18	)
Basic and diluted weighted average number of common shares outstanding				2,597,952				633,158				2,161,104				632,664

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 nine months ended
			January 31,
			2016				2015
Operating activities:
	Net loss from operations		$	(2,775,574	)		$	(7,394,850	)
	Consolidated net income (loss) from discontinued operations			878,981				(1,595,709	)
Adjustments to reconcile consolidated net loss to net cash used by operating activities:
	Depreciation and amortization			45,537				107,931
	Amortization of notes discount			-				853,417
	Inducement expenses			-				5,492,842
	Share based compensation			2,219,068				115,200
	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	)			-
	Gain on sale of BTX			-				(19,700	)
	Loss on sale of Seattle Operations			-				374,932
	Income on Section 16 settlements			(400,000	)			(1,401,516	)
	Cash received on Section 16 settlements			-				650,000
	Changes in operating assets and liabilities:
	Accounts receivable			2,725,507				(2,889,583	)
	Costs and estimated earnings in excess of billings on uncompleted contracts			4,387				(247,240	)
	Current assets held for sale			(3,853,621	)			850,592
	Prepaid expenses and other current assets			66,211				(146,878	)
	Other assets			(2,110	)			15,591
	Other assets held for sale			(34,523	)			3,580,379
	Income taxes payable			-				(2,934	)
	Accounts payable and accrued expenses			(3,149,544	)			2,414,902
	Current liabilities held for sale			2,200,030				(3,284,660	)
	Accrued severance expense			-				(550,205	)
	Billings in excess of costs and estimated earnings on uncompleted contracts			374,840				447,386
Net cash (used in) operating activities				(2,538,531	)			(1,539,283	)
Investing activities:
	Cash received on sale of Seattle			-				1,561,000
	Sale of property and equipment, net			-				27,024
	Acquisition of property and equipment			(109,851	)			-
	Addition on acquisition of BTX capitalized software			-				(2,279	)
	Payment for sale of BTX			-				(59,097	)
	Proceeds from sale of China Operations, net of acquisition cost			1,325,744				-
Net cash provided by investing activities				1,215,893				1,526,648
Financing activities:
	Proceeds from issuance of Series H-1 preferred stock and warrants			1,575,000				-
	Borrowings under loan payable obligations			99,369				-
	Repayment under loan payable obligations			(35,304	)			(8,627	)
	Repayments under other payable to Zurich			(360,000	)			-
	Repayments of short term promissory notes			(4,000	)			-
	Dividends paid on preferred stock			-				(146,521	)
Net cash provided by (used in) financing activities				1,275,065				(155,148	)
Effect of exchange rate changes on cash				91,510				(132,889	)
Net increase in cash and cash equivalents				43,937				(300,672	)
Cash and cash equivalents, beginning of the period				2,364,360				2,177,070
Cash and cash equivalents, end of the period			$	2,408,297			$	1,876,398

The accompanying notes are an integral part of these condensed consolidated financial statements.

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
			For the nine months ended
			January 31,
			2016			2015
Schedule of non-cash investing and financing activities:
	Declaration of preferred dividends payable		$	4,742,768		$	700,088
	Conversion of senior secured convertible note and related make-whole amount to Series F-1 preferred stock Series G-1 preferred stock		$	-		$	4,918,360
	Conversion of senior secured convertible note and related make-whole amount to Series F preferred stock Series G preferred stock		$	-		$	2,321,640
	Conversion of dividends payable related to make-whole amount to common stock		$	4,457,356		$	-
	Conversion of dividends payable related to Series F-1 preferred stock		$	624,977		$	-
	Conversion of dividends payable related to Series G-1 preferred stock		$	337,981		$	-
	Conversion of short term convertible note to Series H preferred stock		$	1,299,000		$	-
	Conversion of Preferred E to short term promissory note		$	-		$	2,438,000
	Conversion of Series F and F-1 preferred stock through the issuance of common stock		$	3,292,741		$	181,086
	Conversion of Series G and G-1 preferred stock through the issuance of common stock		$	1,827,927		$	-
	Conversion of Series H preferred stock through the issuance of common stock		$	892,680		$	-
	Conversion of Series H-1 preferred stock through the issuance of common stock		$	75,000		$	-
	Section 16 settlements gain for cancellation of short term promissory notes		$	-		$	735,000
	Section 16 settlements gain for cancellation of make-whole interest expense		$	-		$	17,000
	Sale of BTX		$	-		$	79,000
	Settlement of severance obligation and sale of Pride		$	-		$	970,000

The accompanying notes are an integral part of these condensed consolidated financial statements.