WPCS Announces Financial Results for Fiscal 2018 Second Quarter

Suisun City Operations Continue Profitability


SUISUN, Calif., Dec. 15, 2017 (GLOBE NEWSWIRE) -- 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 announced that today it filed its Quarterly Report on Form 10-Q, for the three and six months ended October 31, 2017.

Sebastian Giordano, CEO of WPCS, commented, "While we continue working towards completing the proposed merger with DropCar, Inc., we are pleased to report that for the three and six months ended October 31, 2017, our Suisun City Operations generated net income of $158,000 and $343,000, respectively."

Financial Results for the Three Months Ended October 31, 2017

Revenue for the three months ended October 31, 2017 decreased $988,000, or 20%, to $3,860,000, as compared to $4,848,000 for same prior year period due to revenue decreases of: (i) $583,000 in our Suisun City Operations and (ii) $405,000 from our Texas Operations, which will not generate any further revenues as it was closed in the fourth quarter of fiscal year 2017.

The Company had a net loss from operations of $457,000 for the three months ended October 31, 2017 due primarily to an operating loss of $490,000 and interest expense of $2,000, which were partially offset by income of $8,000 from a legal settlement and other income of $27,000. This compared to a net loss from operations of $419,000 for the same prior year period.  The Company had a net loss attributable to WPCS common shareholders of $1,271,000 for the three months ended October 31, 2017 as compared to a net loss attributable to WPCS common shareholders of $439,000 for the same prior year period.  

Financial Results for the Six Months Ended October 31, 2017

Revenue for the six months ended October 31, 2017 decreased $881,000, or 10.7%, to $7,383,000, as compared to approximately $8,264,000 for same prior year period due to revenue decreases of: (i) $203,000 in our Suisun City Operations and (ii) $678,000 from our Texas Operations, which will not generate any further revenues as it was closed in the fourth quarter of fiscal year 2017.

The Company had a net loss from operations of $897,000 for the six months ended October 31, 2017 due primarily to an operating loss of $936,000 and interest expense of $4,000, which were partially offset by income of $16,000 from a legal settlement and other income of $27,000. This compared to a net loss from operations of $1,160,000 for the same prior year period.  The Company had a net loss attributable to WPCS common shareholders of $1,711,000 for the six months ended October 31, 2017 as compared to net income attributable to WPCS common shareholders of $118,000 for the same prior year period, primarily due to income from legal settlements of $1,180,000.

About WPCS International Incorporated

WPCS is a full-service, low-voltage solutions provider, installing and servicing integrated structured cabling, audio-visual and security systems for public services, healthcare, energy and corporate enterprise markets in the United States. The Company delivers end-to-end solutions, superior project management and best-in-class products and technology. For more information about WPCS, please visit www.wpcs.com.

On September 6, 2017, WPCS announced the signing of a definitive merger agreement with DropCar, a privately-held company that provides app-based automotive logistics and concierge services for both consumers and the automotive industry. For more information about DropCar, please visit www.dropcar.com. For more information about the proposed merger, please see WPCS’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 6, 2017 and the Company’s Registration Statement on Form S-4 (SEC File # 333-220891).

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, other future conditions and the risk factors detailed from time to time in the Company’s periodic filings with the Securities and Exchange Commission, including without limitation, the Company’s Annual Report on Form 10-K for the year ended April 30, 2017. 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, 
  2017  2017 
ASSETS        
Current assets:        
Cash and cash equivalents $3,195,086  $1,659,318 
Restricted cash  500,176   500,026 
Accounts receivable, net of allowance of $247,000 at October 31, 2017 and April 30, 2017, respectively  2,922,031   4,199,674 
Costs and estimated earnings in excess of billings on uncompleted contracts  315,437   410,826 
Prepaid expenses and other current assets  41,555   41,135 
Total current assets  6,974,285   6,810,979 
         
Property and equipment, net  389,668   322,643 
         
Other assets  11,484   11,484 
         
Total assets $7,375,437  $7,145,106 
         
LIABILITIES AND EQUITY        
Current liabilities:        
Current portion of loans payable $51,590  $52,946 
Accounts payable and accrued expenses  1,732,411   1,790,256 
Billings in excess of costs and estimated earnings on uncompleted contracts  2,247,174   2,105,797 
Total current liabilities  4,031,175   3,948,999 
         
Loans payable, net of current portion  99,702   124,559 
Total liabilities  4,130,877   4,073,558 
         
Commitments and contingencies        
         
Stockholders' equity        
Preferred stock - $0.0001 par value, 5,000,000 shares authorized at October 31, 2017 and April 30, 2017, respectively        
Convertible Series H, 8,500 shares designated - 8 shares issued and outstanding at October 31, 2017 and April 30, 2017, respectively; liquidation preference of $1,000  1,242   1,242 
Convertible Series H-1, 9,488 shares designated - 0 and 4,289 shares issued and outstanding at October 31, 2017 and April 30, 2017, respectively; liquidation preference of $0   -   437,530 
Convertible Series H-2, 3,500 shares designated - 2,066 and 3,305 shares issued and outstanding at October 31, 2017 and April 30, 2017, respectively; liquidation preference of $250,000  167,494   230,721 
Convertible Series H-3, 9,500 shares designated - 3,189 and 7,017 shares issued and outstanding at October 31, 2017 and April 30, 2017, respectively; liquidation preference of $440,000  251,233   475,185 
Common stock - $0.0001 par value, 100,000,000 shares authorized, 5,090,224 and 3,352,159 shares issued and outstanding as of October 31, 2017 and April 30, 2017, respectively  508   335 
Additional paid-in capital  91,612,396   89,003,669 
Accumulated deficit  (88,788,313)  (87,077,134)
Total stockholders' equity  3,244,560   3,071,548 
         
Total liabilities and equity $7,375,437  $7,145,106 
         

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, 
  2017  2016  2017  2016 
             
Revenue $3,859,617  $4,847,710  $7,382,964  $8,264,163 
                 
Costs and expenses:                
Cost of revenue  3,061,372   3,819,187   5,815,922   6,454,695 
Selling, general and administrative expenses  1,249,147   1,567,326   2,433,648   2,920,312 
Depreciation and amortization  38,844   28,029   68,917   48,695 
   4,349,363   5,414,542   8,318,487   9,423,702 
                 
Operating loss  (489,746)  (566,832)  (935,523)  (1,159,539)
                 
Other income (expense):                
Interest expense  (1,581)  (1,029)  (3,632)  (3,010)
Income from legal settlement  7,750   30,902   15,500   1,180,902 
Other income  27,471   117,947   27,471   122,434 
                 
(Loss) income from operations before income tax provision  (456,106)  (419,012)  (896,184)  140,787 
Income tax provision  1,020   (51)  1,020   2,567 
(Loss) income from operations  (457,126)  (418,961)  (897,204)  138,220 
Net (loss) income  (457,126)  (418,961)  (897,204)  138,220 
Deemed dividend on convertible preferred stock, due to beneficial conversion feature  (813,975)  (19,724)  (813,975)  (19,724)
Net (loss) income attributable to WPCS common stockholders $(1,271,101) $(438,685) $(1,711,179) $118,496 
                 
Basic (loss) income per common share $(0.34) $(0.15) $(0.48) $0.04 
Diluted (loss) income per common share $(0.34) $(0.15) $(0.48) $0.03 
                 
Weighted average shares outstanding – basic  3,748,861   2,854,230   3,550,510   2,777,817 
Weighted average shares outstanding – diluted  3,748,861   2,854,230   3,550,510   3,790,800 
                 

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, 
  2017  2016 
Operating activities:        
Net (loss) income $(897,204) $138,220 
Adjustments to reconcile consolidated net loss to net cash provided by operating activities:        
Depreciation and amortization  68,917   48,695 
Shares based compensation  -   22,501 
Changes in operating assets and liabilities:        
Accounts receivable  1,277,643   (324,990)
Costs and estimated earnings in excess of billings on uncompleted contracts  95,389   (372,408)
Prepaid expenses and other current assets  (420)  (46,908)
Other assets  -   1,999 
Accounts payable and accrued expenses  (57,845)  143,477 
Billings in excess of costs and estimated earnings on uncompleted contracts  141,377   372,707 
Net cash provided by (used in) operating activities  627,857   (16,707)
         
Investing activities:        
Acquisition of property and equipment  (135,942)  (96,475)
Net cash used in investing activities  (135,942)  (96,475)
         
Financing activities:        
Warrants exercised for cash  1,070,216   - 
Repayment under loan payable obligations  (26,213)  (52,027)
Net cash provided by (used in) financing activities  1,044,003   (52,027)
         
Net increase (decrease) in cash, cash equivalents and restricted cash  1,535,918   (165,209)
Cash, cash equivalents and restricted cash beginning of the year  2,159,344   2,235,597 
Cash, cash equivalents and restricted cash end of the year $3,695,262  $2,070,388 
         




WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
    
  For the six months ended 
  October 31, 
  2017  2016 
Schedule of non-cash investing and financing activities:        
Automobile financing $-  $72,650 
Conversion of Series H preferred stock through the issuance of common stock $-  $219,450 
Conversion of Series H-1 preferred stock to common stock $860,501  $36,920 
Deemed dividend on conversion of Series H-1 convertible preferred stock to common stock $422,971  $19,724 
Conversion of Series H-2 preferred stock to common stock $149,919  $- 
Deemed dividend on conversion of Series H-2 convertible preferred stock to common stock $86,692  $- 
Conversion of Series H-3 preferred stock to common stock $528,264  $- 
Deemed dividend on conversion of Series H-3 convertible preferred stock to common stock $304,312  $- 
         

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



            

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