WPCS Announces Financial Results for First Quarter Ended July 31, 2016

SUISUN, CA--(Marketwired - Sep 13, 2016) - WPCS International Incorporated (NASDAQ: WPCS), a full-service low-voltage solutions provider in the business of developing, installing and servicing integrated structured cabling, audio-visual and security systems, today announced that on September 12, 2016, it filed its Form 10-Q, Quarterly Report for the first quarter ended July 31, 2016.

Sebastian Giordano, CEO of WPCS, commented, "With more than a $4.7 million swing over the same period last year, going from a net loss to net income to common shareholders, we are pleased with our first quarter results, which continue to demonstrate that we are headed in the right direction. Looking ahead, we have a number of new initiatives in play that we believe will produce solid results in the quarters ahead." 

Financial Results for the Three Months Ended July 31, 2016

Revenue for the three months ended July 31, 2016 decreased $1,048,000, or 23%, to $3,416,000, as compared to $4,464,000, for the same period in 2015. Such decrease was due primarily to a $1,310,000 decrease in revenue in our Suisun City Operations related to work on one major contract, which was effectively completed during the last fiscal year, and which was partially offset by revenues of approximately $262,000 from our newly established Texas Operations.

We generated a net income to common shareholders for the three months ended July 31, 2016 of approximately $557,000, as compared to a net loss of approximately $4,182,000 for the same period last year. This quarter's results were comprised of income from: (i) Suisun City Operations of approximately $207,000 and (ii) corporate division of approximately $657,000, which is comprised of a gain on an arbitration settlement of $1,150,000 and reduced by corporate expenses of approximately $495,000; and which was partially offset by a loss from our newly established Texas Operations of approximately $307,000.

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)
				July 31,				April 30,
				2016				2016
ASSETS
Current assets:
	Cash and cash equivalents			$	1,939,900			$	2,235,597
	Accounts receivable, net of allowance of $92,000 at July 31, 2016 and April 30, 2016, respectively				4,328,118				2,886,154
	Costs and estimated earnings in excess of billings on uncompleted contracts				437,185				357,210
	Prepaid expenses and other current assets				123,977				66,256
		Total current assets			6,829,180				5,545,217
Property and equipment, net					298,559				237,800
Other assets					24,940				21,162
Total assets				$	7,152,679			$	5,804,179
LIABILITIES AND EQUITY
Current liabilities:
	Current portion of loans payable			$	60,848			$	53,996
	Accounts payable and accrued expenses				2,276,717				2,071,765
	Billings in excess of costs and estimated earnings on uncompleted contracts				1,901,295				1,358,289
		Total current liabilities			4,238,860				3,484,050
Loans payable, net of current portion					108,833				94,825
Total liabilities					4,347,693				3,578,875
Commitments and contingencies
Stockholders' equity
	Preferred stock - $0.0001 par value, 5,000,000 shares authorized at July 31, 2016 and April 30, 2016, respectively
		Convertible Series H, 8,500 shares designated, - 2,638 shares issued and outstanding at July 31, 2016 and April 30, 2016, respectively; liquidation preference of $406,000			406,262				406,262
		Convertible Series H-1, 9,488 shares designated, - 8,119 shares issued and outstanding at July 31, 2016 and April 30, 2016, respectively; liquidation preference of $1,348,000			699,324				699,324
	Common stock - $0.0001 par value, 100,000,000 shares authorized, 2,706,159 and 2,691,055 shares issued and outstanding as of July 31, 2016 and April 30, 2016, respectively				271				269
	Additional paid-in capital				85,962,888				85,940,389
	Accumulated deficit				(84,263,759	)			(84,820,940	)
Total stockholders' equity					2,804,986				2,225,304
Total liabilities and stockholders' equity				$	7,152,679			$	5,804,179

 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
			July 31,
			2016				2015
Revenue			$	3,416,453			$	4,464,003
Costs and expenses:
	Cost of revenue			2,635,508				3,447,203
	Selling, general and administrative expenses			1,352,986				1,312,803
	Depreciation and amortization			20,666				14,969
				4,009,160				4,774,975
Operating loss				(592,707	)			(310,972	)
Other income (expense):
	Interest expense			(1,981	)			(892	)
	Income from Section 16 settlement			-				400,000
	Income from Arbitration settlement			1,150,000				-
	Other income (expense)			4,487				(2,906	)
Income from continuing operations before income tax provision				559,799				85,230
Income tax provision				2,618				1,099
Income from continuing operations				557,181				84,131
Discontinued operations:
	Income from discontinued operations			-				41,261
Consolidated net income				557,181				125,392
Net income attributable to noncontrolling interest				-				16,505
Net income attributable to WPCS				557,181				108,887
Dividends declared on preferred stock				-				(3,587,121	)
Deemed dividend on convertible preferred stock, due to beneficial conversion feature				-				(703,770	)
Net income (loss) attributable to WPCS common shareholders			$	557,181			$	(4,182,004	)
Basic income (loss) from continuing operations per common share			$	0.21			$	(2.86	)
Basic income from discontinued operations per common share				-				0.02
Basic income (loss) per common share			$	0.21			$	(2.84	)
Diluted income (loss) from continuing operations per common share			$	0.14			$	(2.86	)
Diluted income from discontinued operations per common share				-				0.02
Diluted income (loss) per common share			$	0.14			$	(2.84	)
Weighted average shares outstanding - basic				2,701,404				1,470,248
Weighted average shares outstanding - diluted				3,937,628				1,470,248

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 three months ended
				July 31,
				2016				2015
Operating activities:
	Net income from operations			$	557,181			$	84,131
	Consolidated net income from discontinued operations				-				41,261
Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities:
	Depreciation and amortization				20,666				14,969
	Shares based compensation				22,501
	Income on Section 16 settlement				-				(400,000	)
	Changes in operating assets and liabilities:
		Accounts receivable			(1,441,964	)			1,424,935
		Costs and estimated earnings in excess of billings on uncompleted contracts			(79,975	)			(103,324	)
		Current assets held for sale			-				(506,215	)
		Prepaid expenses and other current assets			(57,721	)			84,464
		Other assets			(3,778	)			-
		Other assets held for sale			-				(34,522	)
		Income taxes payable			-				(2,658	)
		Accounts payable and accrued expenses			204,952				(1,277,741	)
		Current liabilities held for sale			-				2,200,030
		Billings in excess of costs and estimated earnings on uncompleted contracts			543,006				125,355
Net cash (used in) provided by operating activities					(235,132	)			1,650,685
Investing activities:
	Acquisition of property and equipment				(30,803	)			(10,707	)
Net cash used in investing activities					(30,803	)			(10,707	)
Financing activities:
	Proceeds from issuance of Series H-1 preferred stock and warrants				-				1,575,000
	Borrowings under loan payable obligations				-				7,762
	Repayment under loan payable obligations				(29,762	)			-
	Repayments under other payable to Zurich				-				(135,000	)
	Repayments of short term convertible note				-				(4,000	)
Net cash (used in) provided by financing activities					(29,762	)			1,443,762
Effect of exchange rate changes on cash					-				91,510
Net (decrease) increase in cash and cash equivalents					(295,697	)			3,175,250
Cash and cash equivalents, beginning of the period					2,235,597				2,364,360
Cash and cash equivalents, end of the period				$	1,939,900			$	5,539,610

 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 three months ended
			July 31,
			2016			2015
Schedule of non-cash investing and financing activities:
	Asset financing		$	50,622		$	-
	Declaration on preferred dividend payable		$	-		$	3,587,121
	Warrants issued with convertible preferred stock		$	-		$	841,405
	Deemed dividend on conversion of preferred stock to common stock		$	-		$	703,770
	Conversion of dividends payable related to make-whole amount to common stock		$	-		$	3,375,792
	Conversion of dividends payable related to Series F-1 preferred stock		$	-		$	501,826
	Conversion of dividends payable related to Series G-1 preferred stock		$	-		$	158,481
	Conversion of short term convertible note to Series H preferred stock		$	-		$	1,299,000
	Conversion of Series F and F-1 preferred stock to common stock		$	-		$	2,731,984
	Conversion of Series G and G-1 preferred stock to common stock		$	-		$	1,084,230
	Conversion of Series H preferred stock to common stock		$	-		$	691,768

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