SOURCE: WPCS International Inc

WPCS International Inc

July 29, 2016 09:00 ET

WPCS Announces Financial Results for Fiscal Year Ended April 30, 2016

Suisun City Operations Remains Profitable

SUISUN, CA--(Marketwired - Jul 29, 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 July 28, 2016, it filed its Form 10-K, Annual Report for the fiscal year ended April 30, 2016.

Sebastian Giordano, CEO of WPCS, commented, "Operational results this past year demonstrated that our core business, Suisun City Operations, continues to perform profitably as it generated $1,064,000 in operating income on revenues of $14,555,000."

Financial Results for the Year Ended April 30, 2016

Revenue for the twelve months ended April 30, 2016 decreased $9,863,000, or 40%, to $14,555,000, as compared to $24,418,000, for the same period in 2015. Such decrease was attributable to the completion of one large customer contract during the prior fiscal year.

The Company's loss from continuing operations for the year ended April 30, 2016 was $3,631,000, due primarily from a $4,032,000 operating loss and interest expense of $3,200, which were partially offset by income from a Section 16 settlement of $400,000 and other income of $5,300. This compared to a loss from continuing operations of $6,998,000 for the same period in 2015.

The $4,032,000 loss from operations was comprised of $1,064,000 in operating income from the Suisun City Operations, which was offset by $4,813,000 of corporate overhead expenses, of which $2,439,000 related to non-cash compensation expense recognized on the issuance of employee stock options, a $237,000 loss from the start-up of our Texas Operations and the write-off of the remainder of the previously closed Trenton Operations assets of $47,000.

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  
CONSOLIDATED BALANCE SHEETS  
    April 30,     April 30,  
    2016     2015  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 2,235,597     $ 2,364,360  
  Accounts receivable, net of allowance of $92,000 at April 30, 2016 and April 30, 2015, respectively     2,886,154       6,494,890  
  Costs and estimated earnings in excess of billings on uncompleted contracts     357,210       420,434  
  Prepaid expenses and other current assets     66,256       159,769  
  Current assets held for sale     -       4,566,251  
    Total current assets     5,545,217       14,005,704  
                 
Property and equipment, net     237,800       162,986  
                 
Other assets     21,162       11,384  
                 
Other assets held for sale     -       977,119  
                 
Total assets   $ 5,804,179     $ 15,157,193  
                 
LIABILITIES AND EQUITY                
Current liabilities:                
  Current portion of loans payable   $ 53,996     $ 39,935  
  Accounts payable and accrued expenses     2,071,765       5,414,269  
  Billings in excess of costs and estimated earnings on uncompleted contracts     1,358,289       1,346,461  
  Other payable to Zurich     -       360,000  
  Short-term promissory notes     -       1,703,000  
  Dividends payable     -       677,546  
  Current liabilities held for sale     -       5,710,807  
    Total current liabilities     3,484,050       15,252,018  
                 
Loans payable, net of current portion     94,825       44,239  
Total liabilities     3,578,875       15,296,257  
                 
Commitments and contingencies                
                 
Equity (deficit):                
WPCS equity (deficit):                
  Preferred stock - $0.0001 par value, 5,000,000 shares authorized at April 30, 2016 and April 30, 2015, respectively                
    Convertible Series F, 5,268 shares designated, - 0 and 5,268 shares issued and outstanding at April 30, 2016 and April 30, 2015, respectively     -       1,589,933  
    Convertible Series F-1, 27,287 shares designated, - 0 and 5,642 shares issued and outstanding at April 30, 2016 and April 30, 2015, respectively     -       1,702,808  
    Convertible Series G, 2,088 shares designated, - 0 and 2,088 shares issued and outstanding at April 30, 2016 and April 30, 2015, respectively     -       731,706  
    Convertible Series G-1, 4,247 shares designated, - 0 and 3,128 shares issued and outstanding at April 30, 2016 and April 30, 2015, respectively     -       1,096,250  
    Convertible Series H, 8,500 shares designated, - 2,638 and 0 shares issued and outstanding at April 30, 2016 and April 30, 2015, respectively; liquidation preference of $406,000     406,262       -  
    Convertible Series H-1, 9,488 shares designated, - 8,119 and 0 shares issued and outstanding at April 30, 2016 and April 30, 2015, respectively; liquidation preference of $1,348,000     699,324       -  
  Common stock - $0.0001 par value, 100,000,000 shares authorized, 2,691,055 and 982,660 shares issued and outstanding as of April 30, 2016 and April 30, 2015, respectively     269       98  
  Additional paid-in capital     85,940,389       70,380,397  
  Accumulated deficit     (84,820,940 )     (76,550,894 )
  Accumulated other comprehensive income on foreign currency translation     -       349,723  
Total WPCS equity (deficit)     2,225,304       (699,979 )
                 
Noncontrolling interest     -       560,915  
Total equity (deficit)     2,225,304       (139,064 )
                 
Total liabilities and equity   $ 5,804,179     $ 15,157,193  
                 
                 

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,  
    2016     2015
               
Revenue   $ 14,555,102     $ 24,417,686
               
Costs and expenses:              
  Cost of revenue     11,570,364       20,559,427
  Selling, general and administrative expenses     6,951,637       4,867,056
  Depreciation and amortization     64,738       60,207
      18,586,739       25,486,690
               
Operating loss     (4,031,637 )     (1,069,004)
               
Other income (expense):              
  Interest expense     (3,196 )     (2,838,739)
  Inducement expense     -       (5,492,842)
  Income from section 16 settlement     400,000       1,401,516
  Gain on forgiveness of other payable to Zurich     -       883,757
  Other income     5,284       187,209
               
Loss from continuing operations before income tax provision     (3,629,549 )     (6,928,103)
Income tax provision     1,706       69,679
Loss from continuing operations     (3,631,255 )     (6,997,782)
               
Discontinued operations:              
  Income (loss) from discontinued operations     27,261       (2,550,113)
  Gain from disposal     837,720       798,896
  Gain from disposal of BTX     -       19,700
  Loss from disposal of Seattle Operations     -       (374,932)
  Income (loss) from discontinued operations, net of tax     864,981       (2,106,449)
               
Consolidated net loss     (2,766,274 )     (9,104,231)
Net income (loss) attributable to noncontrolling interest     16,505       (284,210)
Net loss attributable to WPCS     (2,782,779 )     (8,820,021)
Dividends declared on preferred stock     (4,742,768 )     (2,508,518)
Deemed dividend on convertible preferred stock, due to beneficial conversion feature     (744,499 )     -
Net loss attributable to WPCS common shareholders   $ (8,270,046 )   $ (11,328,539)
               
Basic and diluted net loss attributable to WPCS common shareholders:              
  Loss from continuing operations   $ (3.98 )   $ (14.13)
  Income (loss) from discontinued operations   $ 0.00     $ (3.37)
  Gain from disposal   $ 0.37     $ 0.66
  Basic and diluted net income from discontinued operations   $ 0.37     $ (2.71)
  Basic and diluted net loss per common share attributable to WPCS   $ (3.61 )   $ (16.84)
               
Basic and diluted weighted average number of common shares outstanding     2,290,050       672,723
               
               

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,  
    2016     2015  
Operating activities:                
  Net loss from operations   $ (3,631,255 )   $ (6,997,782 )
  Consolidated net income (loss) from discontinued operations     864,981       (2,106,449 )
Adjustments to reconcile consolidated net loss to net cash provided by operating activities:                
  Depreciation and amortization     64,738       60,207  
  Amortization of notes discount     -       853,417  
  Inducement expenses     -       5,492,842  
  Shares based compensation     2,506,239       170,562  
  Interest expense related to make-whole amount     -       1,889,716  
  Gain on sale of Pride     -       (798,897 )
  Gain on sale of China operations     (837,720 )     -  
  Gain on sale of BTX     -       (19,700 )
  Loss on sale of Seattle Operations     -       374,932  
  Income on section 16 settlement     (400,000 )     (1,401,516 )
  Cash received on section 16 settlement     -       650,000  
  Gain on forgiveness of other payable to Zurich     -       (883,757 )
Changes in operating assets and liabilities:                
  Accounts receivable     3,608,736       (1,879,137 )
  Costs and estimated earnings in excess of billings on uncompleted contracts     63,224       10,914  
  Current assets held for sale     (3,853,621 )     928,403  
  Prepaid expenses and other current assets     93,513       (7,706 )
  Other assets     (9,778 )     37,392  
  Other assets held for sale     (20,523 )     1,085,405  
  Income taxes payable     -       (2,366 )
  Accounts payable and accrued expenses     (3,342,504 )     1,583,312  
  Current liabilities held for sale     2,200,030       742,106  
  Accrued severance expense     -       (550,205 )
  Billings in excess of costs and estimated earnings on uncompleted contracts     11,828       (102,102 )
Net cash used in operating activities     (2,682,112 )     (870,409 )
                 
Investing activities:                
  Cash received on sale of Seattle     -       1,561,000  
  Acquisition of property and equipment     (139,552 )     (46,912 )
  Addition on acquisition of BTX capitalized software     -       (2,279 )
  Payment for sale of BTX     -       (59,097 )
  Proceeds from sale of China operations, net of acquisition cost     1,325,744       -  
Net cash provided by investing activities     1,186,192       1,452,712  
                 
Financing activities:                
  Proceeds from issuance of Series H-1 preferred stock and warrants     1,575,000       -  
  Borrowings under loan payable obligations     115,753       -  
  Repayment under loan payable obligations     (51,106 )     (4,043 )
  Repayments under other payable to Zurich     (360,000 )     (290,000 )
  Repayments of short term promissory notes     (4,000 )     -  
  Dividends paid on preferred stock     -       (146,520 )
Net cash provided by (used in) financing activities     1,275,647       (440,563 )
                 
Effect of exchange rate changes on cash     91,510       45,550  
                 
Net (decrease) increase in cash and cash equivalents     (128,763 )     187,290  
Cash and cash equivalents, beginning of the year     2,364,360       2,177,070  
Cash and cash equivalents, end of the year   $ 2,235,597     $ 2,364,360  
                 
                 

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

 
 
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
    For the years ended
    April 30,
    2016   2015
Schedule of non-cash investing and financing activities:            
  Declaration on preferred dividend payable   $ 4,742,768   $ 2,508,518
  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 dividends payable related to make-whole amount to common stock   $ 4,457,356   $ 1,622,954
  Conversion of dividends payable related to Series F-1 preferred stock   $ 624,977   $ 133,532
  Conversion of dividends payable related to Series G-1 preferred stock   $ 337,981   $ -
  Conversion of short term convertible note to Series H preferred stock   $ 1,299,000   $ -
  Conversion of Preferred E to short term promissory note   $ -   $ 2,438,000
  Conversion of Series F and F-1 preferred stock through the issuance of common stock   $ 3,292,741   $ 1,669,915
  Conversion of Series G and G-1 preferred stock through the issuance of common stock   $ 1,827,956   $ 110,035
  Conversion of Series H preferred stock through the issuance of common stock   $ 892,738   $ -
  Conversion of Series H-1 preferred stock through the issuance of common stock   $ 75,000   $ -
  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
  Settlement of severance obligation and sale of Pride   $ -   $ 970,000
               
               

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

Contact Information

  • INVESTOR CONTACT

    WPCS International Incorporated
    Mr. David Allen
    Chief Financial Officer
    Phone: 707-759-6008
    Email: Email Contact