EXTON, PA--(Marketwired - Dec 16, 2013) - WPCS International Incorporated (
For the second quarter of fiscal year 2014 ended October 31, 2013, WPCS reported a net loss of approximately $473,000 or $0.37 per diluted share. The net loss for the second quarter ended October 31, 2013, compares to a net loss of $493,000 or $0.50 per diluted share, for the same period one year ago, which includes a loss from discontinued operations for the Hartford, Lakewood and Australia operations of approximately $959,000, or $.97 per diluted share.
For the six months ended October 31, 2013, WPCS reported a net loss of approximately $6.4 million or $5.60 per diluted share which includes a loss from discontinued operations of $40,000, or $0.03 per diluted share, related to the pending sale of the Australia Operations, and includes a one-time charge for severance expense of approximately $1.5 million related to the separation agreement with the company's former CEO, Andy Hidalgo. As part of the separation agreement, WPCS reached agreement with Mr. Hidalgo to acquire the Australia Operations, which is consistent with the company's plan to improve its financial results. The closing is anticipated by January 31, 2014, and is subject to WPCS shareholder approval.
The net loss for the first six months of fiscal 2014 compares to a net income of $500,000 or $0.50 per diluted share, for the same period a year ago, which includes income from discontinued operations of approximately $355,000, or $0.35 per diluted share, primarily related to the sale of the Hartford and Lakewood Operations.
For the six months ended October 31, 2013, WPCS recorded non-cash charges of approximately $3.9 million related to the amortization of notes discount and change in fair value of derivative liabilities. In connection with the completion of the $4 million senior secured convertible note financing facility on December 5, 2012, the conversion features of the notes and the common stock warrants issued were historically considered derivative financial instruments, with the fair value accounted for as derivative liabilities, with the changes in fair value recorded in the financial results each period as a non-cash charge or gain. Effective as of October 31, 2013, WPCS entered into amendments with the holders of its notes and warrants to modify certain features of the notes and warrants which eliminated the derivative liability accounting treatment and permitted the Company to reclassify these former derivative liabilities to stockholders' equity at October 31, 2013. As a result of this reclassification, our stockholders' equity is approximately $4.5 million as of October 31, 2013, which allowed us to regain compliance with the continued listing requirements of the Nasdaq Capital Market.
Sebastian Giordano, Interim CEO of WPCS, commented, "While we continue to consider and develop organic growth opportunities, we are also seeking opportunities to improve our balance sheet. Since coming on board, we have sought and implemented a number of opportunities for improvement, including: (i) the execution of an aggressive plan over the past several months to stabilize the operations, improve cash flows of the business through, amongst other things, operating cost reductions; (ii) the divestiture of underperforming operations, as evidenced by the sale of the Pride business described above, and the wind-down of the unprofitable Trenton Operations; and (iii) the restructuring of the Notes and Warrants which has enabled the Company to eliminate the former derivative liabilities and rebuild our stockholders' equity to regain compliance with the NASDAQ minimum stockholder equity requirements. As a result, we believe that all of these actions, as well as continuing efforts to improve the Company's performance and financial position, will contribute favorably to providing the Company with an opportunity to deliver improved shareholder value in the future."
About WPCS International Incorporated:
WPCS is a design-build engineering company that focuses on the implementation requirements of communications infrastructure. The company provides its engineering capabilities including wireless communication, specialty construction and electrical power to the public services, healthcare, energy and corporate enterprise markets worldwide. For more information, please visit www.wpcs.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 | |||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
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| Three Months Ended | Six Months Ended | ||||||||||||||||
| October 31, | October 31, | ||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||
| (Note 1 | ) | (Note 1 | ) | (Note 1 | ) | ||||||||||||
| REVENUE | $ | 7,355,744 | $ | 7,958,243 | $ | 15,187,127 | $ | 19,246,260 | |||||||||
| COSTS AND EXPENSES: | |||||||||||||||||
| Cost of revenue | 5,602,337 | 5,013,329 | 11,346,996 | 13,968,212 | |||||||||||||
| Selling, general and administrative expenses | 1,854,241 | 2,061,126 | 3,837,815 | 4,156,282 | |||||||||||||
| Severance expense | - | - | 1,474,277 | - | |||||||||||||
| Depreciation and amortization | 214,895 | 268,179 | 457,952 | 572,286 | |||||||||||||
| 7,671,473 | 7,342,634 | 17,117,040 | 18,696,780 | ||||||||||||||
| OPERATING (LOSS) INCOME | (315,729 | ) | 615,609 | (1,929,913 | ) | 549,480 | |||||||||||
| OTHER EXPENSE (INCOME): | |||||||||||||||||
| Interest expense | 2,380,885 | 320,608 | 3,540,942 | 441,013 | |||||||||||||
| Change in fair value of derivative liabilities | (2,208,155 | ) | - | 833,750 | - | ||||||||||||
| (Loss) income from continuing operations before income tax provision | (488,459 | ) | 295,001 | (6,304,605 | ) | 108,467 | |||||||||||
| Income tax (benefit) provision | (5,863 | ) | (199,705 | ) | 18,288 | (65,176 | ) | ||||||||||
| (LOSS) INCOME FROM CONTINUING OPERATIONS | (482,596 | ) | 494,706 | (6,322,893 | ) | 173,643 | |||||||||||
| Discontinued operations | |||||||||||||||||
| Loss from operations of discontinued operations, net of tax provision of $0, $215,700, $0, and $269,864 respectively | (8,718 | ) | (473,728 | ) | (39,747 | ) | (1,484,142 | ) | |||||||||
| (Loss) gain from disposal | - | (485,212 | ) | - | 1,839,419 | ||||||||||||
| (Loss) income from discontinued operations, net of tax | (8,718 | ) | (958,940 | ) | (39,747 | ) | 355,277 | ||||||||||
| CONSOLIDATED NET (LOSS) INCOME | (491,314 | ) | (464,234 | ) | (6,362,640 | ) | 528,920 | ||||||||||
| Net (loss) income attributable to noncontrolling interest | (18,310 | ) | 29,152 | 3,434 | 28,605 | ||||||||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO WPCS | $ | (473,004 | ) | $ | (493,386 | ) | (6,366,074 | ) | $ | 500,315 | |||||||
| Basic and diluted net (loss) income per common share attributable to WPCS: | |||||||||||||||||
| (Loss) income from continuing operations attributable to WPCS | $ | (0.36 | ) | $ | 0.47 | $ | (5.57 | ) | $ | 0.15 | |||||||
| (Loss) income from discontinued operations attributable to WPCS | $ | (0.01 | ) | $ | (0.97 | ) | $ | (0.03 | ) | $ | 0.35 | ||||||
| Basic and diluted net (loss) income per common share attributable to WPCS | $ | (0.37 | ) | $ | (0.50 | ) | $ | (5.60 | ) | $ | 0.50 | ||||||
| Basic weighted average number of common shares outstanding | 1,272,877 | 994,187 | 1,136,750 | 994,187 | |||||||||||||
| Diluted weighted average number of common shares outstanding | 1,272,877 | 995,469 | 1,136,750 | 998,160 | |||||||||||||
| WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| October 31, | April 30, | |||||||
| ASSETS | 2013 | 2013 | ||||||
| (unaudited) | (Note 1) | |||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 1,498,206 | $ | 915,752 | ||||
| Restricted cash | - | 1,869,178 | ||||||
| Accounts receivable, net of allowance of $999,643 and $1,107,593 at October 31, 2013 and April 30, 2013, respectively | 9,099,911 |
7,085,969 |
||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 1,149,409 | 1,079,367 | ||||||
| Deferred contract costs | 1,745,324 | 1,597,894 | ||||||
| Prepaid expenses and other current assets | 237,962 | 140,122 | ||||||
| Prepaid income taxes | 2,185 | 2,185 | ||||||
| Current assets held for sale | 1,843,353 | 1,905,449 | ||||||
| Total current assets | 15,576,350 | 14,595,916 | ||||||
| PROPERTY AND EQUIPMENT, net | 2,370,591 | 2,754,734 | ||||||
| OTHER INTANGIBLE ASSETS, net | - | 16,228 | ||||||
| OTHER ASSETS | 63,347 | 227,259 | ||||||
| OTHER ASSETS HELD FOR SALE | 405,542 | 550,829 | ||||||
| Total assets | $ | 18,415,830 | $ | 18,144,966 | ||||
| WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES | ||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (continued) | ||||||||||
| LIABILITIES AND EQUITY | October 31, | April 30, | ||||||||
| 2013 | 2013 | |||||||||
| (unaudited) | (Note 1) | |||||||||
| CURRENT LIABILITIES: | ||||||||||
| Current portion of loans payable | $ | 46,773 | $ | 43,942 | ||||||
| Senior secured convertible notes, net of debt discount $3,400,000 and $2,888,889, October 31, 2013 and April 30, 2013, respectively | - | 1,111,111 | ||||||||
| Derivative liability - senior secured convertible notes | - | 3,088,756 | ||||||||
| Accounts payable and accrued expenses | 4,316,412 | 4,102,050 | ||||||||
| Accrued severance expense | 1,381,249 | - | ||||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | 1,998,367 | 1,619,307 | ||||||||
| Deferred revenue | 420,550 | 113,503 | ||||||||
| Other payable | 1,533,757 | 1,743,986 | ||||||||
| Short-term bank loan | 3,283,860 | 2,432,205 | ||||||||
| Income taxes payable | 46,816 | 139,557 | ||||||||
| Current liabilities held for sale | 700,430 | 685,631 | ||||||||
| Total current liabilities | 13,728,214 | 15,080,048 | ||||||||
| Loans payable, net of current portion | 147,222 | 133,838 | ||||||||
| Derivative liability - warrants | - | 3,858,508 | ||||||||
| Total liabilities | 13,875,436 | 19,072,394 | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||
| EQUITY: | ||||||||||
| WPCS EQUITY (DEFICIT): | ||||||||||
| Preferred stock - $0.0001 par value, 5,000,000 shares authorized, none issued | - | - | ||||||||
| Common stock - $0.0001 par value, 14,285,714 shares authorized, 1,308,669 and 994,187 shares issued and outstanding at October 31, 2013 and | ||||||||||
| April 30, 2013, respectively | 131 | 99 | ||||||||
| Additional paid-in capital | 62,803,147 | 50,844,183 | ||||||||
| Accumulated deficit | (60,420,463 | ) | (54,054,389 | ) | ||||||
| Accumulated other comprehensive income on foreign currency translation | 1,294,816 | 1,433,541 | ||||||||
| Total WPCS equity (deficit) | 3,677,631 | (1,776,566 | ) | |||||||
| Noncontrolling interest | 862,763 | 849,138 | ||||||||
| Total equity (deficit) | 4,540,394 | (927,428 | ) | |||||||
| Total liabilities and equity (deficit) | $ | 18,415,830 | $ | 18,144,966 | ||||||
Contact Information:
CONTACT:
WPCS International Incorporated
610-903-0400 x104