SOURCE: WPCS International Inc

WPCS International Inc

September 17, 2015 09:00 ET

WPCS Announces Financial Results for Fiscal 2016 First Quarter

Suisun Operations Generates Net Income of $542,000

SUISUN, CA--(Marketwired - Sep 17, 2015) - WPCS International Incorporated (NASDAQ: WPCS), which specializes in contracting services for communications infrastructure, today announced its first quarter fiscal 2016 financial results for the three month period ended July 31, 2015.

Sebastian Giordano, Interim CEO of WPCS, commented, "We are extremely pleased to report that the Company had income from continuing operations of $84,000 for the three months ended July 31, 2015, as our Suisun Operations generated net income of $542,000 in the first quarter."

Financial Results for the Three Months Ended July 31, 2015
Revenue for the three months ended July 31, 2015 decreased $1,600,000, or 27.0%, to $4,464,000 as compared to $6,064,000 for the same period in 2014.

The Company's $84,000 income from continuing operations for the three months ended July 31, 2015 was due primarily to an operating loss of $311,000 as well as interest, taxes and other expenses totaling $5,000, which were offset by noncash income from Section 16 settlements of $400,000. This compared to a net operating loss from continuing operations of $2,647,500 for the same period in 2014.

WPCS has recorded the financial results for our divested subsidiaries as discontinued operations. For the three months ended July 31, 2015, WPCS recorded income from discontinued operations of approximately $41,000. Net loss attributable to common shareholders for the three-month period totaled $4,182,000 due primarily from dividends declared and deemed on preferred stock.

"As one multi-year, high revenue, but lower margin project neared completion, we expected topline revenues to be lower this quarter than the same period last year. However, Suisun's profitability this quarter was significantly bolstered by a robust 22.8% gross profit margin due to more lower revenue, higher margin jobs," Giordano concluded.

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,  
  2015     2015  
               
ASSETS              
Current assets:              
  Cash and cash equivalents $ 5,539,610     $ 2,364,360  
  Accounts receivable, net of allowance of $92,000 at July 31, 2015 and April 30, 2015, respectively   5,069,955       6,494,890  
  Costs and estimated earnings in excess of billings on uncompleted contracts   523,758       420,434  
  Prepaid expenses and other current assets   75,305       159,769  
  Current assets held for sale   5,037,959       4,566,251  
    Total current assets   16,246,587       14,005,704  
               
Property and equipment, net   158,724       162,986  
               
Other assets   11,384       11,384  
               
Other assets held for sale   978,211       977,119  
               
Total assets $ 17,394,906     $ 15,157,193  
               
LIABILITIES AND EQUITY              
Current liabilities:              
  Current portion of loans payable $ 43,905     $ 39,935  
  Accounts payable and accrued expenses   4,131,620       5,409,361  
  Billings in excess of costs and estimated earnings on uncompleted contracts   1,471,816       1,346,461  
  Other payable to Zurich   225,000       360,000  
  Short-term promissory notes   -       1,703,000  
  Income taxes payable   2,250       4,908  
  Dividends payable   228,568       677,546  
  Current liabilities held for sale   7,935,488       5,710,807  
    Total current liabilities   14,038,647       15,252,018  
               
Loans payable, net of current portion   48,031       44,239  
Total liabilities   14,086,678       15,296,257  
               
Commitments and contingencies              
               
Equity (deficit):              
WPCS equity (deficit):              
  Preferred stock - $0.0001 par value, 5,000,000 shares authorized at July 31, 2015 and April 30, 2015, respectively              
    Convertible Series F - 0 and 5,268 shares issued and outstanding at July 31, 2015 and April 30, 2015, respectively; liquidation preference of $0   -       1,589,933  
    Convertible Series F-1 - 1,858 and 5,642 shares issued and outstanding at July 31, 2015 and April 30, 2015, respectively; liquidation preference of $3,089,348   560,757       1,702,808  
    Convertible Series G - 0 and 2,088 shares issued and outstanding at July 31, 2015 and April 30, 2015, respectively; liquidation preference of $0   -       731,706  
    Convertible Series G-1 - 2,122 and 3,128 shares issued and outstanding at July 31, 2015 and April 30, 2015, respectively; liquidation preference of $4,329,212   743,726       1,096,250  
    Convertible Series H - 3,943 and 0 shares issued and outstanding at July 31, 2015 and April 30, 2015, respectively; liquidation preference of $607,232   607,232       -  
    Convertible Series H-1 - 8,532 and 0 shares issued and outstanding at July 31, 2015 and April 30, 2015, respectively; liquidation preference of $1,415,030   733,595       -  
  Common stock - $0.0001 par value, 100,000,000 shares authorized, 2,200,649 and 982,660 shares issued and outstanding as of July 31, 2015 and April 30, 2015, respectively   220       98  
  Additional paid-in capital   80,469,531       70,380,397  
  Accumulated deficit   (80,732,898 )     (76,550,894 )
  Accumulated other comprehensive income on foreign currency translation   349,076       349,723  
Total WPCS equity (deficit)   2,731,239       (699,979 )
               
Noncontrolling interest   576,989       560,915  
Total equity (deficit)   3,308,228       (139,064 )
               
Total liabilities and equity $ 17,394,906     $ 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  
    July 31,  
    2015     2014  
                 
Revenue   $ 4,464,003     $ 6,064,457  
                 
Costs and expenses:                
  Cost of revenue     3,447,203       4,780,419  
  Selling, general and administrative expenses     1,312,803       1,045,010  
  Depreciation and amortization     14,969       16,183  
      4,774,975       5,841,612  
                 
Operating (loss) income     (310,972 )     222,845  
                 
Other income (expense):                
  Interest expense     (892 )     (2,835,482 )
  Income from Section 16 settlement     400,000       -  
  Other expenses     (2,906 )     (7,500 )
                 
Income (loss) from continuing operations before income tax provision     85,230       (2,620,137 )
Income tax provision     1,099       27,363  
Income (loss) from continuing operations     84,131       (2,647,500 )
                 
Discontinued operations:                
  Income (loss) from discontinued operations     41,261       (438,114 )
  Gain from disposal     -       798,896  
  Income from discontinued operations, net of tax     41,261       360,782  
                 
Consolidated net income (loss)     125,392       (2,286,718 )
Net income (loss) attributable to noncontrolling interest     16,505       (49,020 )
Net income (loss) attributable to WPCS     108,887       (2,237,698 )
Dividends declared on preferred stock     (3,587,121 )     (74,487 )
Deemed dividend on convertible preferred stock, due to beneficial conversion feature     (703,770 )     -  
Net loss attributable to WPCS common shareholders   $ (4,182,004 )   $ (2,312,185 )
                 
Basic and diluted net loss attributable to WPCS common shareholders:                
  Loss from continuing operations   $ (2.86 )   $ (4.30 )
  Income (loss) from discontinued operations   $ 0.02     $ (0.62 )
  Gain from disposal   $ -     $ 1.26  
  Basic and diluted net income from discontinued operations   $ 0.02     $ 0.64  
  Basic and diluted net loss per common share attributable to WPCS   $ (2.84 )   $ (3.66 )
                 
Basic and diluted weighted average number of common shares outstanding     1,470,248       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 three months ended  
  July 31,  
  2015     2014  
Operating activities:              
  Net income (loss) from operations $ 84,131     $ (2,647,500 )
  Consolidated net income from discontinued operations   41,261       360,782  
Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities:              
  Depreciation and amortization   14,969       16,183  
  Amortization of notes discount   -       853,417  
  Interest expense related to make-whole amount   -       1,889,716  
  Gain on sale of Pride   -       (798,896 )
  Income on Section 16 settlement   (400,000 )     -  
  Changes in operating assets and liabilities:              
  Accounts receivable   1,424,935       (1,577,117 )
  Costs and estimated earnings in excess of billings on uncompleted contracts   (103,324 )     (169,500 )
  Deferred contract costs   -       929  
  Current assets held for sale   (506,215 )     1,188,498  
  Prepaid expenses and other current assets   84,464       (84,620 )
  Other assets   -       18,150  
  Other assets held for sale   (34,522 )     179,591  
  Income taxes payable   (2,658 )     (2,200 )
  Accounts payable and accrued expenses   (1,277,741 )     2,082,017  
  Current liabilities held for sale   2,200,030       (559,652 )
  Accrued severance expense   -       (1,218,750 )
  Billings in excess of costs and estimated earnings on uncompleted contracts   125,355       (182,441 )
Net cash provided by (used in) operating activities   1,650,685       (651,393 )
               
Investing activities:              
  Acquisition of property and equipment   (10,707 )     (137,314 )
Net cash used in investing activities   (10,707 )     (137,314 )
               
Financing activities:              
  Proceeds from issuance of Series H-1 preferred stock and warrants   1,575,000       -  
  Borrowings under loan payable obligations   7,762       10,559  
  Repayments under other payable to Zurich   (135,000 )     -  
  Repayments of short term convertible note   (4,000 )     -  
  Dividends paid on preferred stock   -       (72,034 )
Net cash provided by (used in) financing activities   1,443,762       (61,475 )
               
Effect of exchange rate changes on cash   91,510       (7,939 )
               
Net increase (decrease) in cash and cash equivalents   3,175,250       (858,121 )
Cash and cash equivalents, beginning of the quarter   2,364,360       2,177,070  
Cash and cash equivalents, end of the quarter $ 5,539,610     $ 1,318,949  

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,
  2015   2014
Schedule of non-cash investing and financing activities:          
  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 promissory notes 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   $ -
  Settlement of severance obligation and sale of Pride $ -   $ 970,000
  Declaration on preferred dividends payable $ -   $ 74,487

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