SUISUN, CA -- (Marketwired) -- 12/14/15 -- WPCS International Incorporated (NASDAQ: WPCS), which specializes in contracting services for communications infrastructure, today announced its fiscal 2016 second quarter and six-month financial results for the period ended October 31, 2015.
Sebastian Giordano, Interim CEO of WPCS, commented, "While our Suisun Operations generated operating income of $55,000 and $600,000 for the three months and six months ended October 31, 2015, respectively, the other significant impact items reported this quarter were an $838,000 gain on sale of the China Operations and noncash charges of $783,000 for dividends on preferred stock and $1,518,000 in stock option expense related to issuance of stock options to employees and the Board of Directors."
Financial Results for the Three Months Ended October 31, 2015
Revenue for the three months ended October 31, 2015 decreased $2,266,000, or 37%, to $3,824,000 as compared to $6,090,000 for the same period in 2014, as one, multi-year, high revenue project was completed in the prior fiscal year.
The Company's $2,041,000 loss from continuing operations for the three months ended October 31, 2015 was comprised of the $55,000 operating income from the Suisun Operations, offset by $2,095,000 of corporate overhead, of which $1,518,000 was attributable to stock compensation expense for stock options issued to employees and the Board of Directors. This compared to a net operating loss from continuing operations of $1,882,000 for the same period in 2014.
WPCS has recorded the financial results for its divested subsidiaries as discontinued operations. For the three months ended October 31, 2015, WPCS recorded income from discontinued operations of approximately $838,000 due to the gain on the sale of the China Operations. Net loss attributable to common shareholders for the three-month period totaled $1,986,000 due primarily to the $2,041,00 loss from continuing operations, $783,000 in dividends declared on preferred stock, and which partially was offset by the $838,000 gain on the sale of the China Operations.
Financial Results for the Six Months Ended October 31, 2015
Revenue for the six months ended October 31, 2015 decreased $3,866,000, or 32%, to $8,288,000 as compared to $12,154,000 for the same period in 2014, as one, multi-year, high revenue project was completed in the prior fiscal year.
The Company's $1,957,000 loss from continuing operations for the six months ended October 31, 2015 was primarily comprised of the $600,000 operating income from the Suisun Operations and $400,000 income from Section 16 settlements, and which was offset by $2,951,000 of corporate overhead, of which $1,518,000 was attributable to stock compensation expense for stock options issued to employees and the Board of Directors. This compared to a net operating loss from continuing operations of $4,530,000 for the same period in 2014.
WPCS has recorded the financial results for its divested subsidiaries as discontinued operations. For the six months ended October 31, 2015, WPCS recorded income from discontinued operations of approximately $879,000. Net loss attributable to common shareholders for the six-month period totaled $6,168,000 due primarily to the $1,956,000 loss from continuing operations, $5,072,000 in dividends declared on preferred stock, and which was partially offset by the income from discontinued operations of $878,000.
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
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
October 31, April 30,
2015 2015
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,515,318 $ 2,364,360
Accounts receivable, net of allowance of $92,000
at October 31, 2015 and April 30, 2015 4,087,358 6,494,890
Costs and estimated earnings in excess of
billings on uncompleted contracts 585,721 420,434
Prepaid expenses and other current assets 67,354 159,769
Current assets held for sale - 4,566,251
------------ ------------
Total current assets 7,255,751 14,005,704
Property and equipment, net 147,755 162,986
Other assets 25,384 25,384
Other assets held for sale - 963,119
------------ ------------
Total assets $ 7,428,890 $ 15,157,193
============ ============
LIABILITIES AND EQUITY
Current liabilities:
Current portion of loans payable $ 37,156 $ 39,935
Accounts payable and accrued expenses 2,760,288 5,414,269
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,549,500 1,346,461
Other payable to Zurich 90,000 360,000
Short-term promissory notes - 1,703,000
Dividends payable 105,885 677,546
Current liabilities held for sale - 5,710,807
------------ ------------
Total current liabilities 4,542,829 15,252,018
Loans payable, net of current portion 43,943 44,239
------------ ------------
Total liabilities 4,586,772 15,296,257
------------ ------------
Commitments
Equity (deficit):
WPCS equity (deficit):
Preferred stock - $0.0001 par value, 5,000,000
shares authorized at October 31, 2015 and April
30, 2015, respectively
Convertible Series F - 0 and 5,268 shares
issued and outstanding at October 31, 2015
and April 30, 2015, respectively - 1,589,933
Convertible Series F-1 - 0 and 5,642 shares
issued and outstanding at October 31, 2015
and April 30, 2015, respectively - 1,702,808
Convertible Series G - 0 and 2,088 shares
issued and outstanding at October 31, 2015
and April 30, 2015, respectively - 731,706
Convertible Series G-1 - 1,359 and 3,128
shares issued and outstanding at October 31,
2015 and April 30, 2015, respectively;
liquidation preference of $2,789,000 476,234 1,096,250
Convertible Series H - 2,818 and 0 shares
issued and outstanding at October 31, 2015
and April 30, 2015, respectively; liquidation
preference of $209,000 433,982 -
Convertible Series H-1 - 8,532 and 0 shares
issued and outstanding at October 31, 2015
and April 30, 2015, respectively; liquidation
preference of $1,348,000 733,595 -
Common stock - $0.0001 par value, 100,000,000
shares authorized, 2,497,002 and 982,660 shares
issued and outstanding as of October 31, 2015
and April 30, 2015, respectively 250 98
Additional paid-in capital 83,916,701 70,380,397
Accumulated deficit (82,718,644) (76,550,894)
Accumulated other comprehensive income on
foreign currency translation - 349,723
------------ ------------
Total WPCS equity (deficit) 2,842,118 (699,979)
Noncontrolling interest - 560,915
------------ ------------
Total equity (deficit) 2,842,118 (139,064)
------------ ------------
Total liabilities and equity $ 7,428,890 $ 15,157,193
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended For the six months ended
October 31, October 31,
-------------------------- --------------------------
2015 2014 2015 2014
------------ ------------ ------------ ------------
Revenue $ 3,824,241 $ 6,089,672 $ 8,288,244 $ 12,154,129
------------ ------------ ------------ ------------
Costs and expenses:
Cost of revenue 3,294,565 5,112,525 6,741,768 9,892,944
Selling, general
and
administrative
expenses 2,555,206 1,318,408 3,868,009 2,363,418
Depreciation and
amortization 14,493 15,641 29,462 31,824
------------ ------------ ------------ ------------
5,864,264 6,446,574 10,639,239 12,288,186
------------ ------------ ------------ ------------
Operating loss (2,040,023) (356,902) (2,350,995) (134,057)
Other income
(expense):
Interest expense (606) (1,990) (1,498) (2,837,472)
Inducement expense - (1,870,498) - (1,870,498)
Income from
section 16
settlement - 350,000 400,000 350,000
Other expenses - (942) (2,906) (8,442)
------------ ------------ ------------ ------------
Loss from continuing
operations before
income tax
provision (2,040,629) (1,880,332) (1,955,399) (4,500,469)
Income tax provision - 1,825 1,099 29,188
------------ ------------ ------------ ------------
Loss from continuing
operations (2,040,629) (1,882,157) (1,956,498) (4,529,657)
Discontinued
operations:
(Loss) income from
discontinued
operations - (1,887,384) 41,261 (2,325,498)
Gain from disposal 837,720 - 837,720 798,896
------------ ------------ ------------ ------------
Income (loss) from
discontinued
operations, net
of tax 837,720 (1,887,384) 878,981 (1,526,602)
Consolidated net
loss (1,202,909) (3,769,541) (1,077,517) (6,056,259)
Net (loss) income
attributable to
noncontrolling
interest - (53,115) 16,505 (102,135)
------------ ------------ ------------ ------------
Net loss
attributable to
WPCS (1,202,909) (3,716,426) (1,094,022) (5,954,124)
Dividends declared
on preferred stock (782,837) (116,212) (4,369,958) (190,699)
Deemed dividend on
convertible
preferred stock,
due to beneficial
conversion feature - - (703,770) -
------------ ------------ ------------ ------------
Net loss
attributable to
WPCS common
shareholders $ (1,985,746) $ (3,832,638) $ (6,167,750) $ (6,144,823)
============ ============ ============ ============
Basic and diluted
net loss
attributable to
WPCS common
shareholders:
Loss from
continuing
operations $ (1.17) $ (3.16) $ (3.62) $ (7.46)
------------ ------------ ------------ ------------
(Loss) income from
discontinued
operations $ - $ (2.90) $ 0.01 $ (3.52)
Gain from disposal $ 0.35 $ - $ 0.43 $ 1.26
------------ ------------ ------------ ------------
Basic and diluted
net income (loss)
from discontinued
operations $ 0.35 $ (2.91) $ 0.44 $ (2.26)
------------ ------------ ------------ ------------
Basic and diluted
net loss per
common share
attributable to
WPCS $ (0.82) $ (6.06) $ (3.17) $ (9.72)
============ ============ ============ ============
Basic and diluted
weighted average
number of common
shares outstanding 2,415,113 632,417 1,942,681 632,417
The accompanying notes are an integral part of these condensed consolidated
financial statements.
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended
October 31,
------------------------
2015 2014
----------- -----------
Operating activities:
Net loss from continuing operations $(1,956,498) $(4,529,657)
Consolidated net income (loss) from discontinued
operations 878,981 (1,526,602)
Adjustments to reconcile consolidated net loss to
net cash (used in) provided by operating
activities:
Depreciation and amortization 14,969 29,462
Amortization of notes discount - 853,417
Inducement expenses - 1,870,498
Shares based compensation 1,540,181 -
Interest expense related to make-whole amount - 1,889,716
Gain on sale of Pride - (798,896)
Gain on sale of China Operations (837,720) -
Income on section 16 settlements (400,000) -
Changes in operating assets and liabilities:
Accounts receivable 2,407,532 (2,195,156)
Costs and estimated earnings in excess of
billings on uncompleted contracts (165,287) 78,620
Deferred contract costs - (1,035)
Current assets held for sale (3,853,621) 5,465,396
Prepaid expenses and other current assets 92,677 8,363
Other assets - 18,150
Other assets held for sale (34,523) 358,930
Accounts payable and accrued expenses (2,653,981) 1,456,978
Current liabilities held for sale 2,200,030 (1,876,128)
Accrued severance expense - (1,303,292)
Billings in excess of costs and estimated
earnings on uncompleted contracts 203,039 678,176
----------- -----------
Net cash (used in) provided by operating
activities (2,564,221) 476,940
----------- -----------
Investing activities:
Acquisition of property and equipment - (137,842)
Proceeds from sale of China Operations 1,325,744 -
----------- -----------
Net cash provided by (used in) investing
activities 1,325,744 (137,842)
----------- -----------
Financing activities:
Proceeds from issuance of Series H-1 preferred
stock and warrants 1,575,000 -
Borrowings under loan payable obligations 7,762 1,623
Repayment under loan payable obligations (10,837) -
Repayments under other payable to Zurich (270,000) -
Repayments of short term promissory notes (4,000) -
Dividends paid on preferred stock - (146,521)
----------- -----------
Net cash provided by (used in) financing
activities 1,297,925 (144,898)
----------- -----------
Effect of exchange rate changes on cash 91,510 (127,104)
----------- -----------
Net increase in cash and cash equivalents 150,958 67,096
Cash and cash equivalents, beginning of the period 2,364,360 2,177,070
----------- -----------
Cash and cash equivalents, end of the period $ 2,515,318 $ 2,244,166
=========== ===========
Schedule of non-cash investing and financing
activities:
Declaration on preferred dividend payable $ 4,369,958 $ 190,699
Conversion of dividends payable related to make-
whole amount through the issuance of common
stock $ 4,104,529 $ -
Conversion of dividends payable related to
Series F-1 preferred stock $ 624,977 $ -
Conversion of dividends payable related to
Series G-1 preferred stock $ 212,113 $ -
Conversion of short term convertible note to
Series H preferred stock $ 1,299,000 $ -
Conversion of Preferred E to short term
promissory note $ - $ 794,000
Conversion of Series F and F-1 preferred stock
through the issuance of common stock $ 3,292,741 $ -
Conversion of Series G and G-1 preferred stock
through the issuance of common stock $ 1,351,722 $ -
Conversion of Series H preferred stock through
the issuance of common stock $ 865,018 $ -
Settlement of severance obligation and sale of
Pride $ - $ 970,000
The accompanying notes are an integral part of these condensed consolidated
financial statements.
INVESTOR CONTACT:
WPCS International Incorporated
David Allen
Chief Financial Officer
Phone: 707-759-6008
Email: Email Contact
