SOURCE: WPCS International Inc

WPCS International Inc

July 30, 2015 09:00 ET

WPCS Announces Financial Results for Fiscal Year Ended April 30, 2015

4th Quarter Generated Income From Continuing Operations

SUISUN, CA--(Marketwired - Jul 30, 2015) - WPCS International Incorporated (NASDAQ: WPCS), which specializes in contracting services for communications infrastructure, today announced that on July 29, 2015, it filed its Form 10-K, Annual Report for the fiscal year ended April 30, 2015.

Sebastian Giordano, Interim CEO of WPCS, commented, "Operational results this past year demonstrated that our core business, Suisun City Operations, continues to perform profitably. While the overall Company had an operating loss of $1,069,000 and $3,932,000 for the twelve months ended April 30, 2015 and 2014, Suisun City Operations had operating income of $1,577,000 and $776,000 for the same periods. Moreover, the Company produced income from continuing operations of $397,000 during the three months ended April 30, 2015 as compared to a loss from continuing operations of $420,000 for the same period in 2014."

Financial Results for the Year Ended April 30, 2015
Revenue for the twelve months ended April 30, 2015 increased $8,667,000, or 55%, to $24,418,000, as compared to $15,751,000, for the same period in 2014.

The Company's loss from continuing operations for the year ended April 30, 2015 was $6,998,000, due primarily from the $1,069,000 operating loss, interest expense of $2,839,000 and a non-cash charge for inducement expense of $5,493,000, which was partially offset by income from Section 16 settlements of $1,402,000, recognition of a gain on the forgiveness of $884,000 of accounts payable and other income of $187,000. This compared to a loss from continuing operations of approximately $10,563,000 for the same period in 2014.

WPCS has recorded the financial results of our divested subsidiaries as discontinued operations. Accordingly, for the twelve months ended April 30, 2015, WPCS recorded a loss from discontinued operations of approximately $2,106,000. The net loss attributable to common shareholders for the year ended April 30, 2015 totaled approximately $11,329,000.

Moreover, subsequent to April 30, 2015, the Company completed a series of transactions that it believes will provide it with sufficient working capital and equity to operate for the next twelve months. The subsequent transactions included the: (i) elimination of $1,703,000 of promissory notes which were due and payable on September 30, 2015; (ii) issuance of common stock to satisfy approximately $500,000 of the $677,000 of dividends payable at April 30, 2015; (iii) completion of a $1,575,000 equity financing transaction; and (iv) closing of a $1,000,000 line of credit for its Suisun Operations.

These events have not only provided cash to the Company, but eliminated future cash requirements and, along with expected continued operating profits from our Suisun Operation for fiscal year 2016 and lower corporate overhead, are the primary factors that support our belief that the Company will have adequate liquidity for the next twelve months.

"Removing the going concern opinion is certainly another strong indicator of the fact that, while the year's financial results reflected the impact of noncash charges and issues that no longer exist, the restructuring efforts that commenced in third quarter of fiscal year ending April 30, 2014 and continued during, and subsequent to, the fiscal year ended April 30, 2015, have yielded significant positive results for the Company," 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  
   
CONSOLIDATED BALANCE SHEETS  
   
    April 30,     April 30,  
    2015     2014  
ASSETS                
CURRENT ASSETS:                
  Cash and cash equivalents   $ 2,364,360     $ 2,177,070  
  Accounts receivable, net of allowance of $92,000 and $100,000 at April 30, 2015 and April 30, 2014, respectively     6,494,890       4,615,753  
  Costs and estimated earnings in excess of billings on uncompleted contracts     420,434       431,348  
  Prepaid expenses and other current assets     159,769       152,063  
  Current assets held for sale     4,566,251       9,232,361  
    Total current assets     14,005,704       16,608,595  
                 
Property and equipment, net     162,986       176,281  
                 
Other assets     11,384       48,776  
                 
Other assets held for sale     977,119       5,188,074  
                 
Total assets   $ 15,157,193     $ 22,021,726  
                 
LIABILITIES AND EQUITY                
CURRENT LIABILITIES:                
  Current portion of loans payable   $ 39,935     $ 31,680  
  Senior secured convertible notes, net of debt discount of $0 and $853,000, respectively     -       44,921  
  Accounts payable and accrued expenses     5,409,361       3,826,049  
  Accrued severance     -       1,520,205  
  Billings in excess of costs and estimated earnings on uncompleted contracts     1,346,461       1,448,563  
  Other payable to Zurich     360,000       1,533,757  
  Short-term promissory note     1,703,000       -  
  Income taxes payable     4,908       7,274  
  Dividend payable     677,546       72,034  
  Current liabilities held for sale     5,710,807       7,513,356  
    Total current liabilities     15,252,018       15,997,839  
                 
Loans payable, net of current portion     44,239       56,537  
Total liabilities     15,296,257       16,054,376  
                 
COMMITMENTS AND CONTINGENCIES                
                 
(DEFICIT) EQUITY:                
WPCS (DEFICIT) EQUITY:                
  Preferred stock - $0.0001 par value, 5,000,000 shares authorized at April 30, 2015 and April 30, 2014, respectively                
    Convertible Series E - 0 and 2,438 shares issued and outstanding at April 30, 2015 and April 30, 2014, respectively; liquidation preference of $0 and $5,617,000 as of April 30, 2015 and April 30, 2014, respectively     -       2,438,000  
    Convertible Series F -5,268 and 0 shares issued and outstanding at April 30, 2015 and April 30, 2014, respectively; liquidation preference of $8,706,233     1,589,933       -  
    Convertible Series F-1 - 5,642 and 0 shares issued and outstanding at April 30, 2015 and April 30, 2014, respectively; liquidation preference of $9,247,065     1,702,808       -  
    Convertible Series G - 2,088 and 0 shares issued and outstanding at April 30, 2015 and April 30, 2014, respectively; liquidation preference of $4,206,577     731,706       -  
    Convertible Series G-1 - 3,128 and 0 shares issued and outstanding at April 30, 2015 and April 30, 2014, respectively; liquidation preference of $6,269,028     1,096,250       -  
  Common stock - $0.0001 par value, 100,000,000 shares authorized, 982,660 and 632,417 shares issued and outstanding as of April 30, 2015 and April 30, 2014, respectively     98       63  
  Additional paid-in capital     70,380,397       66,673,434  
  Accumulated deficit     (76,550,894 )     (65,222,355 )
  Accumulated other comprehensive income on foreign currency translation     349,723       1,232,003  
Total WPCS (deficit) equity     (699,979 )     5,121,145  
                 
Non-controlling interest     560,915       846,205  
Total (deficit) equity     (139,064 )     5,967,350  
                 
Total liabilities and equity   $ 15,157,193     $ 22,021,726  
                 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES  
   
CONSOLIDATED STATEMENTS OF OPERATIONS  
   
    For the years ended  
    April 30,  
    2015     2014  
                 
REVENUE   $ 24,417,686     $ 15,751,092  
                 
COSTS AND EXPENSES:                
  Cost of revenue     20,559,427       12,725,037  
  Selling, general and administrative expenses     4,867,056       5,072,566  
  Severance expense     -       1,775,732  
  Depreciation and amortization     60,207       110,058  
      25,486,690       19,683,393  
                 
OPERATING LOSS     (1,069,004 )     (3,932,301 )
                 
OTHER EXPENSE (INCOME):                
  Interest expense     2,838,739       4,795,178  
  Change in fair value of derivative liabilities     -       833,750  
  Loss on extinguishment of Notes     -       1,299,304  
  Inducement expense     5,492,842       -  
  Income from section 16 settlement     (1,401,516 )     -  
  Gain on forgiveness of other payable to Zurich     (883,757 )     -  
  Other income     (187,209 )     -  
                 
Loss from continuing operations before income tax provision     (6,928,103 )     (10,860,533 )
Income tax provision (benefit)     69,679       (297,843 )
LOSS FROM CONTINUING OPERATIONS     (6,997,782 )     (10,562,690 )
                 
Discontinued operations:                
  Loss from discontinued operations     (2,550,113 )     (380,516 )
  Gain (loss) from disposal     798,896       (104,446 )
  Gain from disposal of BTX     19,700       -  
  Loss from disposal of Seattle Operations     (374,932 )     -  
  Loss from discontinued operations, net of tax     (2,106,449 )     (484,962 )
                 
CONSOLIDATED NET LOSS     (9,104,231 )     (11,047,652 )
Net (loss) income attributable to noncontrolling interest     (284,210 )     11,287  
NET LOSS ATTRIBUTABLE TO WPCS     (8,820,021 )     (11,058,939 )
Dividend declared on preferred stock     (2,508,518 )     (109,027 )
NET LOSS ATTRIBUTABLE TO WPCS COMMON SHAREHOLDERS   $ (11,328,539 )   $ (11,167,966 )
                 
Basic and diluted net loss attributable to WPCS common shareholders:                
  Loss from continuing operations   $ (14.13 )   $ (41.94 )
  Loss from discontinued operations   $ (3.37 )   $ (1.54 )
  Gain (loss) from disposal   $ 0.66     $ (0.41 )
  Basic and diluted net loss from discontinued operations   $ (2.71 )   $ (1.95 )
  Basic and diluted net loss per common share attributable to WPCS   $ (16.84 )   $ (43.89 )
                 
Basic and diluted weighted average number of common shares outstanding     672,723       254,446  
                 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES  
   
CONSOLIDATED STATEMENTS OF CASH FLOWS  
   
    For the years ended  
    April 30,  
    2015     2014  
OPERATING ACTIVITIES :                
  Net loss from operations   $ (6,997,782 )   $ (10,562,690 )
  Consolidated net loss from discontinued operations     (2,106,449 )     (484,962 )
Adjustments to reconcile consolidated net loss to net cash provided by operating activities:                
  Depreciation and amortization     60,207       110,058  
  Inducement expense     5,492,842       -  
  Amortization of notes discount     853,417       4,301,146  
  Loss on extinguishment of senior secured convertible notes     -       1,299,304  
  Gain on sale of Pride     (798,897 )     -  
  Gain on sale of BTX     (19,700 )     -  
  Loss on sale of Seattle Operations     374,932       -  
  Stock-based compensation     170,562       24,535  
  Interest expenses related to make-whole amount     1,889,716       -  
  Income on section 16 settlement     (1,401,516 )     -  
  Cash received on section 16 settlement     650,000       -  
  Gain on forgiveness of other payable to Zurich     (883,757 )     -  
  Change in the fair value of derivative liabilities     -       833,750  
  Provision for doubtful accounts     -       505,646  
  Amortization of debt issuance costs     -       278,864  
  Loss on sale of fixed assets     -       8,638  
  Changes in operating assets and liabilities:                
  Restricted cash     -       1,869,178  
  Accounts receivable     (1,879,137 )     (3,569,319 )
  Costs and estimated earnings in excess of billings on uncompleted contracts     10,914       (102,207 )
  Current assets held for sale     928,403       252,698  
  Prepaid expenses and other current assets     (7,706 )     (55,160 )
  Other assets     37,392       24,488  
  Other assets held for sale     1,085,405       630,764  
  Income taxes payable     (2,366 )     (43,033 )
  Accounts payable and accrued expenses     1,583,312       1,844,483  
  Current liabilities held for sale     742,106       (121,858 )
  Accrued severance expense     (550,205 )     1,520,205  
  Billings in excess of costs and estimated earnings on uncompleted contracts     (102,102 )     104,404  
  Deferred revenue     -       (113,503 )
NET CASH USED IN OPERATING ACTIVITIES     (870,409 )     (1,444,571 )
                 
INVESTING ACTIVITIES:                
  Cash received on sale of Seattle     1,561,000       -  
  Acquisition of property and equipment     (46,912 )     (78,544 )
  Addition on acquisition of BTX capitalized software     (2,279 )     -  
  Payment for sale of BTX     (59,097 )     -  
  Cash received from acquisition of BTX software     -       1,185,000  
NET CASH PROVIDED BY INVESTING ACTIVITIES     1,452,712       1,106,456  
                 
FINANCING ACTIVITIES:                
  Repayments under loans payable, net     (4,043 )     (76,637 )
  Repayment to senior secured convertible notes     -       (9,507 )
  Repayments under other payable to Zurich     (290,000 )     (210,229 )
  Borrowings under loan payable obligations     -       21,440  
  Borrowings under short-term bank loan     -       816,100  
  Borrowings from related party     -       790,255  
  Debt issuance costs     -       (137,869 )
  Dividend paid on preferred stock     (146,520 )     (36,993 )
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES     (440,563 )     1,156,560  
                 
Effect of exchange rate changes on cash     45,550       (51,598 )
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS     187,290       766,847  
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR     2,177,070       1,410,223  
CASH AND CASH EQUIVALENTS, END OF THE YEAR   $ 2,364,360     $ 2,177,070  
                 
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                
  Declaration on preferred dividend payable   $ 2,508,518     $ -  
  Conversion of dividend payable related to make-whole amount to common stock   $ 1,622,954     $ -  
  Conversion of dividend payable related to Series F-1 preferred stock   $ 133,532     $ -  
  Settlement of severance obligation upon sale of Pride   $ 970,000     $ -  
  Conversion of Series E preferred stock to promissory notes   $ 2,438,000     $ -  
  Settlement of debt, make-whole interest and other liabilities on sale of BTX   $ 1,962,000     $ -  
  Settlement of capitalized software and other assets on sale of BTX   $ 1,883,000     $ -  
  Conversion of senior secured convertible note and related make-whole amount to Series F-1 preferred stock Series G-1 preferred stock   $ 973,180     $ -  
  Conversion of senior secured convertible note and related make-whole amount to Series F preferred stock Series G preferred stock   $ 451,141     $ -  
  Conversion of Series F-1 Preferred stock to common stock   $ 1,669,915     $ -  
  Conversion of Series G-1 Preferred stock to common stock   $ 110,035     $ -  
  Issuance of notes for property and equipment   $ -     $ 74,190  
  Issuance of common stock for the conversion of Notes and accrued interest   $ -     $ 3,114,816  
  Acquisition of BTX Software from issuance of Series E Preferred Stock   $ -     $ 2,635,147  
  Acquisition of BTX Software from assumption of BTX Note   $ -     $ 500,000  
  Reclassification of fair value of derivative liability on Notes and Warrants to additional paid-in capital upon the Amendment and Note Amendment   $ -     $ 7,166,991  
  Reclassification of fair value of derivative liability on Notes to additional paid-in capital upon conversion of Notes   $ -     $ 686,856  
                   
The accompanying notes are an integral part of these consolidated financial statements.
 

Contact Information

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