SOURCE: WPCS International Inc.

WPCS International Inc.

July 30, 2014 16:29 ET

WPCS Announces Financial Results for the Three Months and Year Ended April 30, 2014

EXTON, PA--(Marketwired - Jul 30, 2014) - WPCS International Incorporated (NASDAQ: WPCS), which specializes in contracting services for communications infrastructure and the development of a digital currency trading platform, today announced its fiscal three month and full year 2014 financial results for the period ended April 30, 2014.

Sebastian Giordano, Interim CEO of WPCS, commented, "We are pleased with our revenue growth for the three months and full year period ended April 30, 2014. Accounting for the strategic reduction of our unprofitable Trenton Operations during both periods, revenue on a period-over-period basis for the three month period increased approximately 47% and for the full year approximately 34%. Also worth noting is the improvement to our balance sheet. As of April 30, 2014 we had $2.2 million in cash and shareholders' equity of $6.0 million, an improvement from $1.4 million in cash and a deficit of $900,000 at April 30, 2013. We remain focused on strengthening our balance sheet and continuing to implement our strategic plan to build our profitable assets while divesting others such as Seattle, Australia and China that we anticipate will generate working capital and eliminate certain costs."

Mr. Giordano continued, "Since acquiring BTX Trader in December 2013, we continue to enhance the technology and launch new products. Initially, we established a brand and a dedicated trader user base with limited marketing. Now, with the launch of our new product, Celery, our new web-based product committed to putting digital currency in the hands of ordinary consumers, we are excited about the additional market opportunity afforded us by being able to leverage the BTX Trader platform."

Company and Financial Highlights:

  • Since acquiring the BTX Trader software platform in December 2013, the online platform has grown to 5,000 users and over 1,500 unique visitors per month;
  • BTX Trader has launched Celery (www.gocelery.com), a new product providing consumers with the simplest and fastest way to buy their first digital currency using direct bank transfers, initially focused on Bitcoin and Dogecoin;
  • BTX Trader has engaged the services of Clarity PR for public relations and social media marketing;
  • As previously announced, for the period January 1, 2014 through May 31, 2014, Suisun City was awarded approximately $5.5 million in new contracts as compared to $2.3 million for the same period year-over-year, an increase of 139%;
  • For the 2014 fiscal fourth quarter, revenue increased 25.7%. Taking into account the strategic reduction of the Company's Trenton operations, revenue for the quarter and full year ended April 30, 2014 increased 47.2% and 34.4% respectively;
  • Reported cash and cash equivalents of $2.2 million as of April 30, 2014;
  • Increased shareholders' equity by approximately $6.9 million from a deficit of $900,000 at April 30, 2013 to equity of $6.0 million at April 30, 2014; and
  • Entered into definitive agreements to divest the Australia and Seattle Operations.

Financial Results for the Three Month Period Ended April 30, 2014
For the fourth quarter of fiscal year 2014 ended April 30, 2014, WPCS reported revenue of approximately $6.2 million, an increase of 25.7% compared to revenue of $4.9 million for the same period in the prior year. This increase was partially offset by a $721,000 decrease in revenue in our Trenton Operations due to the reduction of this unprofitable operation, which commenced in September 2013. Excluding the decrease for the Trenton Operations, the effective increase in revenue from the remaining Suisun City and China operations was approximately 47.2%.

For the fourth quarter ended April 30, 2014, WPCS reported a net loss to common shareholders of approximately $1.2 million or $0.09 per share, which included: $301,000 of severance expense recorded per the separation agreement with CFO Joseph Heater; a $567,000 loss from discontinued operations for the Australia, Seattle, Lakewood and Hartford Operations; operating losses of $95,000 from the initial start-up of the Bitcoin trading segment; and operating losses of $64,000 from the wind-down of the Trenton Operation. The Company had a net loss of $6.2 million, or $6.23 per share, for the same period in fiscal 2013.

Financial Results for the Year Ended April 30, 2014
Revenue for the year ended April 30, 2014 was approximately $21.3 million, as compared to $24.8 million for the year ended April 30, 2013. This decrease in revenue was due primarily to an $8.8 million decrease in revenue in our Trenton Operations due to the strategic reduction of this unprofitable operation that commenced in September 2013. Excluding the decrease for the Trenton Operations, the effective increase in revenue from the remaining Suisun City and China Operations was approximately 34.4%.

The net loss attributable to common shareholders was approximately $11.2 million, or $1.99 per share, for the year ended April 30, 2014, of which approximately $9.2 million was attributable to: one-time charges of $1.8 million related to severance expense recorded per the separation agreements with former CEO Andrew Hidalgo and CFO Joseph Heater; $4.3 million of non-cash interest expense for the amortization of debt discount and expenses related to the conversion of senior secured convertible notes (the "Notes") and the amendments to the Notes and warrants (the "Warrants") (the "Amendment and Note Amendment"); $1.3 million related to the loss on extinguishment of the Notes; $834,000 related to the final change in fair value of the derivative liabilities associated with the Notes and Warrants prior to the Amendment and Note Amendment, which enabled us to reclassify the former derivative liabilities to stockholders' equity; a net loss of approximately $71,000 from discontinued operations for the Australia, Seattle, Lakewood and Hartford Operations; approximately $443,000 in operating losses from the initial start-up of the Bitcoin trading segment; and approximately $438,000 of operating losses from the wind-down of the Trenton Operation. Such net loss for the year ended April 30, 2014, compares to a net loss attributable to common shareholders of $6.9 million, or $6.95 per diluted share, for the year ended April 30, 2013.

Shareholder Update Conference Call
Management will host a shareholder update conference call in August 2014. Details, including dial-in and webcast information, will be provided in an upcoming news release prior to the call.

About WPCS International Incorporated
WPCS operates in two business segments including: (1) providing communications infrastructure contracting services to the public services, healthcare, energy and corporate enterprise markets worldwide; and (2) developing a digital currency trading platform. For more information, please visit www.wpcs.com, www.btxtrader.com and www.gocelery.com.

Statements about the company's future expectations, including future revenue and earnings and all other statements in this press release, other than historical facts, are "forward looking" statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time. The company's actual results could differ materially from expected results. In reflecting subsequent events or circumstances, the company undertakes no obligation to update forward-looking statements.

 
 
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
    Three Months Ended   Years Ended
    April 30,   April 30,
    2014   2013   2014   2013
        (Note 1)   (Note 1)   (Note 1)
REVENUE   $6,238,656   $4,964,300   $21,264,288   $24,774,876
                 
COSTS AND EXPENSES:                
  Cost of revenue   5,185,235   3,096,545   16,744,720   17,556,832
  Selling, general and administrative expenses   1,389,437   1,947,699   5,988,117   6,574,237
  Severance expense   301,455   -   1,775,732   -
  Depreciation and amortization   174,663   231,340   752,109   916,449
                 
    7,050,790   5,275,584   25,260,678   25,047,518
                 
OPERATING LOSS   (812,134)   (311,284)   (3,996,390)   (272,642)
                 
OTHER EXPENSE (INCOME):                
  Interest expense   123,803   785,116   5,042,189   2,091,771
  Loss on extinguishment of Notes   -   -   1,299,304   -
  Change in fair value of derivative liabilities   -   2,000,674   833,750   2,703,248
  Interest income   (11,595)   -   (11,595)   -
                 
Loss from continuing operations before income tax (benefit) provision   (924,342)   (3,097,074)   (11,160,038)   (5,067,661)
                 
Income tax (benefit) provision   (305,455)   296,046   (182,942)   216,314
                 
LOSS FROM CONTINUING OPERATIONS   (618,887)   (3,393,120)   (10,977,096)   (5,283,975)
                 
Discontinued operations:                
  Income (loss) from discontinued operations, net of tax benefit   (566,645)   (2,711,187)   33,890   (3,287,932)
  (Loss) gain from disposal   -   (69,953)   (104,446)   1,756,586
                   
  Loss from discontinued operations, net of tax   (566,645)   (2,781,140)   (70,556)   (1,531,346)
                 
CONSOLIDATED NET LOSS   (1,185,532)   (6,174,260)   (11,047,652)   (6,815,321)
                 
Net (loss) income attributable to noncontrolling interest   (41,586)   12,484   11,287   95,406
                 
NET LOSS ATTRIBUTABLE TO WPCS   (1,143,946)   ($6,186,744)   (11,058,939)   (6,910,727)
                 
Dividend declared on preferred stock   (72,034)   -   (109,027)   -
                 
NET LOSS ATTRIBUTABLE TO WPCS COMMON SHAREHOLDERS   ($1,215,980)   ($6,186,744)   ($11,167,966)   ($6,910,727)
                 
Basic and diluted net loss attributable to WPCS common shareholders:                
  Loss from continuing operations   ($0.05)   ($3.43)   ($1.98)   ($5.41)
  (Loss) income from discontinued operations   ($0.04)   ($2.73)   $0.01   ($3.31)
  (Loss) gain from disposal   $ -   ($0.07)   ($0.02)   $1.77
  Basic and diluted net loss from discontinued operations   ($0.04)   ($2.80)   ($0.01)   ($1.54)
  Basic and diluted net loss per common share attributable to WPCS   ($0.09)   ($6.23)   ($1.99)   ($6.95)
                 
Basic and diluted weighted average number of common shares outstanding   13,913,164   994,187   5,597,821   994,187
                 
                 
 
 
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
         
    April 30,   April 30,
ASSETS   2014   2013
        (Note 1)
CURRENT ASSETS:            
             
  Cash and cash equivalents   $ 2,177,070   $ 1,410,223
  Restricted cash     -     1,869,178
  Accounts receivable, net of allowance for doubtful accounts of $1,033,786 and $957,918 respectively     8,614,396     4,139,768
  Costs and estimated earnings in excess of billings on uncompleted contracts     431,348     329,141
  Deferred contract costs     1,166,734     1,597,894
  Prepaid expenses and other current assets     217,235     96,903
  Current assets held for sale     4,001,812     5,152,809
    Total current assets     16,608,595     14,595,916
             
PROPERTY AND EQUIPMENT, net     1,780,520     2,526,638
             
CAPITALIZED SOFTWARE COSTS     3,207,305     -
             
OTHER ASSETS     52,376     214,259
             
OTHER ASSETS HELD FOR SALE     372,930     808,153
             
    Total assets   $ 22,021,726   $ 18,144,966
                 
                 
   
   
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS (continued)  
   
LIABILITIES AND EQUITY   April 30,     April 30,  
    2014     2013  
          (Note 1)  
CURRENT LIABILITIES:                
                 
  Current portion of loans payable   $ 31,680     $ 23,790  
  Senior secured convertible notes, net of debt discount of $853,413 and $2,888,889, respectively     44,921       1,111,111  
  Derivative liability - senior secured convertible notes     -       3,088,756  
  Accounts payable and accrued expenses     4,956,232       3,036,981  
  Accrued severance     1,520,205       -  
  Billings in excess of costs and estimated earnings on uncompleted contracts     1,448,563       1,344,159  
  Deferred revenue     -       113,503  
  Due related party     778,573       -  
  Other payable to Zurich     1,533,757       1,743,986  
  Short-term bank loan     3,195,000       2,432,205  
  Income taxes payable     30,855       139,557  
  Dividend payable     72,034       -  
  Current liabilities held for sale     1,797,615       2,046,000  
    Total current liabilities     15,409,435       15,080,048  
                 
Loans payable, net of current portion     56,537       66,874  
Secured promissory note, related parties     500,000       -  
Loans payable, net of current portion, held for sale     88,404       66,964  
Derivative liability - warrants     -       3,858,508  
    Total liabilities     16,054,376       19,072,394  
                 
COMMITMENTS AND CONTINGENCIES                
                 
EQUITY:                
                 
WPCS EQUITY (DEFICIT):                
  Preferred stock - 5,000,000 shares authorized, 2,438 shares of Series E Preferred Stock issued with $1,000 stated value, and liquidation preference of $5,707,000     2,438,000       -  
  Common stock - $0.0001 par value, 14,285,714 shares authorized, 13,913,164 and 993,538 shares issued and outstanding, respectively     1,391       99  
  Additional paid-in capital     66,672,106       50,844,183  
  Accumulated deficit     (65,222,355 )     (54,054,389 )
  Accumulated other comprehensive income on foreign currency translation     1,232,003       1,433,541  
                 
    Total WPCS equity (deficit)     5,121,145       (1,776,566 )
                     
    Noncontrolling interest     846,205       849,138  
    Total equity (deficit)     5,967,350       (927,428 )
                     
    Total liabilities and equity   $ 22,021,726     $ 18,144,966  
                     
                     

Note 1. Certain reclassifications have been made to prior period results to conform to the current period presentation.

Contact Information

  • INVESTOR CONTACT:
    Capital Markets Group, LLC
    Valter Pinto
    PH: (914) 669-0222
    or (212) 398-3486
    Email Contact