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

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.