SUISUN, CA--(Marketwired - Mar 23, 2015) - WPCS International Incorporated (
Sebastian Giordano, Interim CEO of WPCS, commented, "Operational results this quarter demonstrate that our core business, Suisun City Operations, continues to perform very well, achieving a 21.7% increase in revenue over the same period last year. While the Company had a loss from operations of $408,000 and $702,000 for the three months and nine months ended January 31, 2015, Suisun City had operating income of $236,000 and $1,292,000 for the same periods, which we believe provides an excellent foundation for future growth."
Financial Results for the Three Months Ended January 31, 2015
Revenue for the three months ended January 31, 2015 increased $94,000, or 1.5%, to $6.4 million as compared to $6.3 million for the same period in 2014, primarily due to a 21.7% increase in revenue from our Suisun City Operations to $5.3 million from $4.3 million, which was partially offset by a 45.6% decrease in revenue from our China Operations, to $1.1 million from $2.0 million.
The Company's loss from continuing operations for the three months ended January 31, 2015 was $2.8 million, due primarily from the $408,000 operating loss and a non-cash charge for inducement expense of $3.6 million, which was partially offset by income from Section 16 settlements of $1.1 million, and $0.2 million of other income. This compared to a net operating loss from continuing operations of approximately $3.0 million for the same period in 2014.
WPCS has recorded the financial results for our divested subsidiaries as discontinued operations. For the three months ended January 31, 2015, WPCS recorded a loss from discontinued operations of approximately $111,000. Net loss attributable to common shareholders for the three-month period totaled approximately $3.5 million.
Financial Results for the Nine Months Ended January 31, 2015
Revenue for the nine months ended January 31, 2015 increased $5.2 million, or 34.9%, to $20.2 million as compared to $15.0 million for the same period in 2014, primarily due to a 66.6% increase in revenue from our Suisun City Operations to $17.4 million from $10.5 million, which was partially offset by a 29.7% decrease in revenue from our China Operations to $2.9 million from $4.0 million.
The Company's loss from continuing operations for the nine months ended January 31, 2015 was $7.6 million, due primarily from the $702,000 operating loss, interest expense of $3.0 million and a non-cash charge for inducement expense of $5.5 million, which was partially offset by income from Section 16 settlements of $1.4 million, and $200,000 of other income. This compared to a net operating loss from continuing operations of approximately $10.0 million for the same period in 2014.
WPCS has recorded the financial results for our divested subsidiaries as discontinued operations. For the nine months ended January 31, 2015, WPCS recorded a loss from discontinued operations of approximately $1.8 million. Net loss attributable to common shareholders for the six-month period totaled approximately $9.6 million.
"As expected, overall financial results reflect a Company still in the midst of a significant operational and financial restructuring. We continue to aggressively pursue additional debt and expense reductions, as well as the sale of our majority interest in the China Operations, while simultaneously seeking profitable growth opportunities for the Company," Giordano concluded.
About WPCS International Incorporated
WPCS provides contracting services to the public services, healthcare, energy and corporate enterprise markets in the United States and China. 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 | ||||||||||
January 31, | April 30, | |||||||||
2015 | 2014 | |||||||||
(Unaudited) | ||||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents | $ | 1,876,398 | $ | 2,177,070 | ||||||
Accounts receivable, net of allowance of $1,141,000 and $1,034,000 at January 31, 2015 and April 30, 2014, respectively | 10,755,652 | 8,614,396 | ||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 340,097 | 431,348 | ||||||||
Deferred contract costs | 224,538 | 1,166,734 | ||||||||
Prepaid expenses and other current assets | 294,084 | 201,001 | ||||||||
Current assets held for sale | - | 4,018,046 | ||||||||
Total current assets | 13,490,769 | 16,608,595 | ||||||||
PROPERTY AND EQUIPMENT, net | 1,268,711 | 1,769,976 | ||||||||
OTHER ASSETS | 11,384 | 48,776 | ||||||||
OTHER ASSETS HELD FOR SALE | 14,000 | 3,594,379 | ||||||||
Total assets | $ | 14,784,864 | $ | 22,021,726 | ||||||
LIABILITIES AND EQUITY | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Current portion of loans payable | $ | 36,493 | $ | 31,680 | ||||||
Senior secured convertible notes, net of debt discount of $0 and $853,000, respectively | - | 44,921 | ||||||||
Accounts payable and accrued expenses | 5,016,607 | 4,782,906 | ||||||||
Accrued severance | - | 1,520,205 | ||||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 1,843,517 | 1,448,563 | ||||||||
Due to related party | 795,732 | 778,573 | ||||||||
Other payable to Zurich | 1,533,757 | 1,533,757 | ||||||||
Short-term bank loan | 3,199,760 | 3,195,000 | ||||||||
Short-term promissory Notes | 1,703,000 | - | ||||||||
Income taxes payable | 23,265 | 30,855 | ||||||||
Dividend payable | 625,601 | 72,034 | ||||||||
Current liabilities held for sale | - | 2,559,345 | ||||||||
Total current liabilities | 14,777,732 | 15,997,839 | ||||||||
Loans payable, net of current portion | 43,097 | 56,537 | ||||||||
Total liabilities | 14,820,829 | 16,054,376 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
(DEFICIT) EQUITY: | ||||||||||
WPCS (DEFICIT) EQUITY: | ||||||||||
Preferred stock - $0.0001 par value, 5,000,000 shares authorized at January 31, 2015 and April 30, 2014, respectively | ||||||||||
Convertible Series E - 0 and 2,438 shares issued and outstanding at January 31, 2015 and April 30, 2014, respectively; liquidation preference of $0 and $5,617,000 as of January 31, 2015 and April 30, 2014, respectively | - | 2,438,000 | ||||||||
Convertible Series F - 5,268 and 0 shares issued and outstanding at January 31, 2015 and April 30, 2014, respectively; liquidation preference of $8,538,567 | 1,589,933 | - | ||||||||
Convertible Series F-1 - 10,575 and 0 shares issued and outstanding at January 31, 2015 and April 30, 2014, respectively; liquidation preference of $16,960,709 | 3,191,637 | - | ||||||||
Convertible Series G - 2,088 and 0 shares issued and outstanding at January 31, 2015 and April 30, 2014, respectively; liquidation preference of $3,384,307 | 731,706 | - | ||||||||
Convertible Series G-1 - 3,442 and 0 shares issued and outstanding at January 31, 2015 and April 30, 2014, respectively; liquidation preference of $5,559,704 | 1,206,285 | |||||||||
Common stock - $0.0001 par value, 100,000,000 shares authorized, 14,513,164 and 13,913,164 shares issued and outstanding as of January 31, 2015 and April 30, 2014, respectively | 1,451 | 1,391 | ||||||||
Additional paid-in capital | 66,968,332 | 66,672,106 | ||||||||
Accumulated deficit | (74,819,549 | ) | (65,222,355 | ) | ||||||
Accumulated other comprehensive income on foreign currency translation | 345,430 | 1,232,003 | ||||||||
Total WPCS (deficit) equity | (784,775 | ) | 5,121,145 | |||||||
Non-controlling interest | 748,810 | 846,205 | ||||||||
Total (deficit) equity | (35,965 | ) | 5,967,350 | |||||||
Total liabilities and equity | $ | 14,784,864 | $ | 22,021,726 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
January 31, | January 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
REVENUE | $ | 6,363,597 | $ | 6,269,742 | $ | 20,266,607 | $ | 15,025,632 | |||||||||
COSTS AND EXPENSES: | |||||||||||||||||
Cost of revenue | 5,210,427 | 4,829,942 | 16,348,515 | 11,559,485 | |||||||||||||
Selling, general and administrative expenses | 1,393,321 | 1,454,045 | 4,102,848 | 4,251,442 | |||||||||||||
Severance expense | - | - | - | 1,474,277 | |||||||||||||
Depreciation and amortization | 167,959 | 188,574 | 517,480 | 577,446 | |||||||||||||
6,771,707 | 6,472,561 | 20,968,843 | 17,862,650 | ||||||||||||||
OPERATING LOSS | (408,110 | ) | (202,819 | ) | (702,236 | ) | (2,837,018 | ) | |||||||||
OTHER EXPENSE (INCOME): | |||||||||||||||||
Interest expense | 61,769 | 2,679,411 | 3,023,691 | 4,918,386 | |||||||||||||
Change in fair value of derivative liabilities | - | - | - | 833,750 | |||||||||||||
Loss on extinguishment of Notes | - | - | - | 1,299,304 | |||||||||||||
Inducement expense | 3,622,344 | - | 5,492,842 | - | |||||||||||||
Income from section 16 settlement | (1,051,516 | ) | - | (1,401,516 | ) | - | |||||||||||
Other expenses | (197,220 | ) | - | (188,778 | ) | - | |||||||||||
Loss from continuing operations before income tax provision | (2,843,487 | ) | (2,882,230 | ) | (7,628,475 | ) | (9,888,458 | ) | |||||||||
Income tax provision | - | 104,225 | - | 122,513 | |||||||||||||
LOSS FROM CONTINUING OPERATIONS | (2,843,487 | ) | (2,986,455 | ) | (7,628,475 | ) | (10,010,971 | ) | |||||||||
Discontinued operations: | |||||||||||||||||
(Loss) income from discontinued operations | (110,513 | ) | (408,579 | ) | (1,805,748 | ) | 253,297 | ||||||||||
(Loss) gain from disposal | - | (104,446 | ) | 798,896 | (104,446 | ) | |||||||||||
Gain from disposal of BTX | 19,700 | - | 19,700 | - | |||||||||||||
Loss from disposal of Seattle Operations | - | - | (374,932 | ) | - | ||||||||||||
(Loss) income from discontinued operations, net of tax | (90,813 | ) | (513,025 | ) | (1,362,084 | ) | 148,851 | ||||||||||
CONSOLIDATED NET LOSS | (2,934,300 | ) | (3,499,480 | ) | (8,990,559 | ) | (9,862,120 | ) | |||||||||
Net income (loss) attributable to non-controlling interest | 8,682 | 49,439 | (93,453 | ) | 52,873 | ||||||||||||
NET LOSS ATTRIBUTABLE TO WPCS | (2,942,982 | ) | (3,548,919 | ) | (8,897,106 | ) | (9,914,993 | ) | |||||||||
Dividend declared on preferred stock | (509,389 | ) | - | (700,088 | ) | (36,993 | ) | ||||||||||
NET LOSS ATTRIBUTABLE TO WPCS COMMON SHAREHOLDERS | $ | (3,452,371 | ) | $ | (3,548,919 | ) | $ | (9,597,194 | ) | $ | (9,951,986 | ) | |||||
Basic and diluted net loss attributable to WPCS common shareholders: | |||||||||||||||||
Loss from continuing operations | $ | (0.20 | ) | $ | (0.46 | ) | $ | (0.55 | ) | $ | (3.43 | ) | |||||
(Loss) income from discontinued operations | $ | (0.01 | ) | $ | (0.06 | ) | $ | (0.13 | ) | $ | 0.09 | ||||||
Gain (loss) from disposal | $ | 0.00 | $ | (0.02 | ) | $ | 0.03 | $ | (0.04 | ) | |||||||
Basic and diluted net (loss) income from discontinued operations | $ | (0.01 | ) | $ | (0.08 | ) | $ | (0.10 | ) | $ | 0.05 | ||||||
Basic and diluted net loss per common share attributable to WPCS | $ | (0.21 | ) | $ | (0.54 | ) | $ | (0.65 | ) | $ | (3.38 | ) | |||||
Basic and diluted weighted average number of common shares outstanding | 13,929,468 | 6,475,773 | 13,918,599 | 2,916,425 | |||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) | |||||||||
Nine months ended | |||||||||
January 31, | |||||||||
2015 | 2014 | ||||||||
OPERATING ACTIVITIES : | |||||||||
Net loss attributable to WPCS | $ | (7,535,022 | ) | $ | (10,063,844 | ) | |||
Consolidated net (loss) income from discontinued operations | (1,362,084 | ) | 148,851 | ||||||
Adjustments to reconcile consolidated net loss to net cash used in operating activities: | |||||||||
Depreciation and amortization | 517,480 | 577,446 | |||||||
Inducement expense | 5,492,842 | - | |||||||
Amortization of notes discount | 853,417 | 4,278,687 | |||||||
Loss on extinguishment of Notes | - | 1,299,304 | |||||||
Make-whole amount | 1,889,716 | - | |||||||
Gain on sale of Pride | (798,896 | ) | 104,446 | ||||||
Gain on sale of BTX | (19,700 | ) | - | ||||||
Loss on sale of Seattle Operations | 374,932 | - | |||||||
Stock-based compensation | 115,200 | 23,651 | |||||||
Income on section 16 settlement | (1,401,516 | ) | - | ||||||
Cash received on section 16 settlement | 650,000 | - | |||||||
Change in the fair value of derivative liabilities | - | 833,750 | |||||||
Provision for doubtful accounts | - | 33,223 | |||||||
Amortization of debt issuance costs | - | 277,970 | |||||||
Gain on sale of fixed assets | - | 8,601 | |||||||
Changes in operating assets and liabilities: | |||||||||
Restricted cash | - | 1,869,178 | |||||||
Accounts receivable | (4,008,257 | ) | (2,661,869 | ) | |||||
Costs and estimated earnings in excess of billings on uncompleted contracts | (247,240 | ) | (82,735 | ) | |||||
Deferred contract costs | 944,824 | (457,041 | ) | ||||||
Current assets held for sale | 492,679 | 497,401 | |||||||
Prepaid expenses and other current assets | (154,055 | ) | (254,681 | ) | |||||
Other assets | 15,591 | 34,284 | |||||||
Other assets held for sale | 3,580,379 | 218,200 | |||||||
Income taxes payable | (8,323 | ) | (130,326 | ) | |||||
Accounts payable and accrued expenses | 2,127,417 | (994,750 | ) | ||||||
Current liabilities held for sale | (3,029,345 | ) | 1,984,037 | ||||||
Accrued severance expense | (550,205 | ) | 1,300,000 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 447,386 | (185,706 | ) | ||||||
Deferred revenue | - | 179,772 | |||||||
NET CASH USED IN OPERATING ACTIVITIES | (1,612,780 | ) | (1,162,151 | ) | |||||
INVESTING ACTIVITIES: | |||||||||
Cash received on sale of Seattle | 1,561,000 | - | |||||||
Sale (purchase) of property and equipment | 100,521 | (54,400 | ) | ||||||
Addition on acquisition of BTX capitalized software | (2,279 | ) | - | ||||||
Cash issued in the sale of BTX | (59,097 | ) | - | ||||||
Cash received from acquisition of BTX software | - | 1,185,000 | |||||||
NET CASH PROVIDED BY INVESTING ACTIVITIES | 1,600,145 | 1,130,600 | |||||||
FINANCING ACTIVITIES: | |||||||||
Repayments under loans payable, net | (8,627 | ) | (35,753 | ) | |||||
Repayment to senior secured convertible notes | - | (9,507 | ) | ||||||
Repayments under other payable | - | (210,229 | ) | ||||||
Borrowings under short-term bank loan | - | 818,550 | |||||||
Borrowings from related party | - | 790,256 | |||||||
Debt issuance costs | - | (102,182 | ) | ||||||
Dividend paid on preferred stock | (146,521 | ) | - | ||||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (155,148 | ) | 1,251,135 | ||||||
Effect of exchange rate changes on cash | (132,889 | ) | (65,886 | ) | |||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (300,672 | ) | 1,153,698 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | 2,177,070 | 917,752 | |||||||
CASH AND CASH EQUIVALENTS, END OF THE PERIOD | $ | 1,876,398 | $ | 2,071,450 | |||||
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||
Settlement of severance obligation and sale of Pride | $ | 970,000 | $ | - | |||||
Conversion of Series E preferred stock to promissory notes | $ | 2,438,000 | $ | - | |||||
Declaration on preferred dividend payable | $ | 700,088 | $ | - | |||||
Conversion of senior secured convertible note and related make-whole amount to Series F-1 preferred stock Series G-1 preferred stock | $ | 4,918,360 | $ | - | |||||
Conversion of senior secured convertible note and related make-whole amount to Series F preferred stock Series G preferred stock | $ | 2,321,640 | $ | - | |||||
Conversion of Series F-1 preferred stock to common stock | $ | 181,066 | $ | - | |||||
Section 16 settlement gain for cancellation of short term promissory notes | $ | 735,000 | $ | - | |||||
Section 16 settlement gain for cancellation of make-whole interest expense | $ | 17,000 | $ | - | |||||
Sale of BTX | $ | 79,000 | $ | - | |||||
Issuance of common stock for the conversion of Notes and accrued interest | $ | - | $ | 3,114,816 | |||||
Acquisition of BTX Software from issuance of Series E Preferred Stock | $ | - | $ | 2,635,147 | |||||
Reclassification of fair value of derivative liability on Notes and Warrants to additional paid-in capital upon the Amendment and Note Amendment | $ | - | $ | 7,166,991 | |||||
Reclassification of fair value of derivative liability on Notes to additional paid-in capital upon conversion of Notes | $ | - | $ | 686,856 | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Contact Information:
INVESTOR CONTACT:
WPCS International Incorporated
David Allen
Chief Financial Officer
Phone: 707-759-6008
Email: