Exhibit 99.01

 

PRESS RELEASE SOURCE: WPCS International Incorporated

 

WPCS Reports 2nd Quarter FY2014 Results

 

EXTON, PA - (Marketwired – December 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.

_________________________________________________________________________________________________

  

CONTACT:

 

WPCS International Incorporated

610-903-0400 x104

ir@wpcs.com

 

 
 

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