SOURCE: WPCS International Incorporated

WPCS International Incorporated

December 16, 2013 08:00 ET

WPCS Reports 2nd Quarter FY2014 Results

EXTON, PA--(Marketwired - Dec 16, 2013) - WPCS International Incorporated (NASDAQ: WPCS), which specializes in design-build engineering services for communications infrastructure, today announced financial results for the fiscal year 2014 second quarter ended October 31, 2013. WPCS currently has a backlog of $25.4 million in orders to fulfill and a bid list of $40.5 million in potential projects.

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)
 
    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
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