WPCS Announces Financial Results for Fiscal 2016 First Quarter

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.