Exhibit 99.01

 

 

WPCS Announces Financial Results for the Three and Nine Month Periods Ending January 31, 2014

 

EXTON, PA - (Marketwired – March 17, 2014) - WPCS International Incorporated (NASDAQ: WPCS), which specializes in contracting services for communications infrastructure and the development of a Bitcoin trading platform, today announced its fiscal 2014 financial results for the three and nine month periods ending January 31, 2014.

 

Sebastian Giordano, Interim CEO of WPCS, commented, “Since the launch of BTX Trader (“BTX”) in December 2013, we have continued to make significant progress in the roll-out of our Bitcoin trading platform. Today, our platform remains available for free download on our Windows-based desktop application. The next phase of our platform development is to allow access to the beta version via the web. We will begin generating revenue from this platform during the second quarter of calendar year 2014.”

 

Mr. Giordano continued, “In addition to the successful beta launch of BTX, our primary objective continues to be in stabilizing operations, improving cash flow and strengthening our balance sheet. Since implementing an aggressive turnaround strategy in August 2013, we have made significant strides, in part, by divesting and closing underperforming operations, reducing expenses and improving performance in our ongoing contracting operations. We believe this strategy has and will continue to improve our financial condition and be beneficial towards future shareholder value.”

 

Year-to-Date Company Highlights:

 

·Acquired BTX, the first trading platform to enable Bitcoin traders and industry researchers to access market data and execute orders on the five most popular Bitcoin exchanges on a single application;
·Launched the beta version Windows-based trading platform available at www.btxtrader.com;
·Achieved a 26.1% increase in YTD revenues from its remaining continuing operations within its legacy business, including a 27.3% increase from our two profitable domestic subsidiaries;
·Increased shareholders’ equity by approximately $8.1 million from a deficit of approximately $900,000 at April 30, 2013 to equity of approximately $7.2 million at January 31, 2014; and,
·Improved working capital by approximately $2.6 million, from a deficit of $500,000 at April 30, 2013 to a positive position of $2.1 million at January 31, 2014, which consisted of current assets of $16.6 million and current liabilities of approximately $14.5 million.

  

Financial Results for the Three Month Period Ending January 31, 2014

 

For the third quarter of fiscal year 2014 ended January 31, 2014, WPCS reported revenue of approximately $8.3 million, an increase of 9.5% compared to revenue of $7.6 million for the same period in the prior year. This increase was partially offset by an $835,000 decrease in revenue in our Trenton Operations due to the strategic wind-down of this unprofitable operation, which commenced in September 2013. Excluding the decrease for the Trenton Operations, the effective increase in revenue from the remaining Suisun City, Seattle and China operations was approximately 23.2%.

 

For the third quarter ended January 31, 2014, WPCS reported a net loss to common shareholders of approximately $3.6 million or $0.55 per diluted share, of which approximately $3.4 million of the net loss was attributable to: $2.5 million of non-cash interest expense charges related to the accelerated amortization of debt discount from the conversion its senior secured convertible notes during the third quarter and which do not affect the operating cash flow of the Company; a $290,000 loss from discontinued operations for the Australia, Lakewood and Hartford Operations; operating losses of $347,000 from the initial start-up of the Bitcoin trading segment; and operating losses of $248,000 from the wind-down of the Trenton Operation. The net loss for the third quarter ended January 31, 2014, compares to a net loss of $1.2 million, or $1.24 per diluted share, for the same period one year ago.

 

 
 

 

Financial Results for the Nine Month Period Ending January 31, 2014

 

Revenue for the nine months ended January 31, 2014 was approximately $23.5 million, as compared to $26.8 million for the nine months ended January 31, 2013. This decrease in revenue was due primarily to an $8.1 million decrease in revenue in our Trenton Operations due to the strategic wind-down of this unprofitable operation that commenced in September 2013. Excluding the decrease for the Trenton Operations, the effective increase in revenue from the remaining Suisun City, Seattle and China Operations was approximately 26.1%.

 

The net loss attributable to common shareholders was approximately $10.0 million, or $3.41 per diluted share, for the nine months ended January 31, 2014, of which approximately $9.0 million was attributable to: one-time charges of $1.5 million related to severance expense recorded per the separation agreement with former CEO Andrew Hidalgo; $4.3 million of non-cash interest expense for the amortization of debt discount and expenses related to the conversion of senior secured convertible notes (the “Notes”) and the amendments to the Notes and Warrants (the “Amendment and Note Amendment”); $1.3 million related to the loss on extinguishment of the Notes; $834,000 related to the final change in fair value of the derivative liabilities associated with the Notes and Warrants prior to the Amendment and Note Amendment, which enabled us to reclassify the former derivative liabilities to stockholders’ equity; a net loss of approximately $330,000 from discontinued operations for the Australia, Lakewood and Hartford Operations ; approximately $347,000 in operating losses from the initial start-up of the Bitcoin trading segment; and approximately $366,000 of operating losses from the wind-down of the Trenton Operation. Such net loss for the nine months ended January 31, 2014, compares to a net loss attributable to common shareholders of $724,000, or $0.73 per diluted share, for the nine months ended January 31, 2013.

 

Shareholder Update Conference Call

 

Management will host a shareholder update conference call in early April 2014. Details, including dial-in and webcast information, will be provided in an upcoming news release prior to the call.

 

About WPCS International Incorporated

WPCS operates in two business segments including: (1) providing communications infrastructure contracting services to the public services, healthcare, energy and corporate enterprise markets worldwide; and (2) developing a Bitcoin trading platform. For more information, please visit www.wpcs.com and www.btxtrader.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.

 

 

 

INVESTOR CONTACT:

Alliance Advisors, LLC

Valter Pinto

PH: (914) 669-0222

valter@allianceadvisors.net

 

 
 

 

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

  

   Three Months Ended   Nine Months Ended  
   January 31,   January 31,  
   2014   2013   2014   2013 
       (Note 1)   (Note 1)   (Note 1) 
REVENUE  $8,296,132   $7,573,275   $23,483,259   $26,819,535 
                     
COSTS AND EXPENSES:                    
Cost of revenue   6,227,892    5,173,016    17,574,888    19,141,228 
Selling, general and administrative expenses   2,278,433    1,674,268    6,116,248    5,830,550 
Severance expense   -    -    1,474,277    - 
Depreciation and amortization   214,212    268,388    672,164    840,674 
                     
    8,720,537    7,115,672    25,837,577    25,812,452 
                     
OPERATING (LOSS) INCOME   (424,405)   457,603    (2,354,318)   1,007,083 
                     
OTHER EXPENSE:                    
Interest expense   2,680,909    867,362    4,922,547    1,308,375 
Loss on extinguishment of Notes   -    -    1,299,304    - 
Change in fair value of derivative liabilities   -    702,574    833,750    702,574 
                     
Loss from continuing operations before income tax provision (benefit)   (3,105,314)   (1,112,333)   (9,409,919)   (1,003,866)
                     
Income tax provision (benefit)   104,225    (14,556)   122,513    (79,732)
                     
LOSS FROM CONTINUING OPERATIONS   (3,209,539)   (1,097,777)   (9,532,432)   (924,134)
                     
Discontinued operations:                    
(Loss) from operations of discontinued operations, net of tax (benefit) provision of $0, ($199,175), $0, and $70,689, respectively   (185,495)   (59,324)   (225,242)   (1,543,466)
(Loss) gain from disposal   (104,446)   (12,880)   (104,446)   1,826,539 
                     
(Loss) income from discontinued operations, net of tax   (289,941)   (72,204)   (329,688)   283,073 
                     
CONSOLIDATED NET LOSS   (3,499,480)   (1,169,981)   (9,862,120)   (641,061)
                     
Net  income attributable to noncontrolling interest   49,439    54,317    52,873    82,922 
                     
NET LOSS ATTRIBUTABLE TO WPCS  $(3,548,919)  $(1,224,298)   (9,914,993)  $(723,983)
                     
Dividend declared on preferred stock  $(36,993)   -   $(36,993)   - 
                     
NET LOSS ATTRIBUTABLE TO WPCS COMMON SHAREHOLDERS  $(3,585,912)  $(1,224,298)   (9,951,986)  $(723,983)
                     
Basic and diluted net (loss) income attributable to WPCS common shareholders:                    
(Loss) from continuing operations  $(0.51)  $(1.16)  $(3.30)  $(1.01)
(Loss) income from discontinued operations  $(0.04)  $(0.08)  $(0.11)  $(0.28)
Basic and diluted net loss per common share  $(0.55)  $(1.24)  $(3.41)  $(0.73)
                     
Basic and diluted weighted average number of common shares outstanding   6,475,773    994,187    2,916,425    994,187 

  

 
 

 

 WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES

 CONDENSED CONSOLIDATED BALANCE SHEETS

 

    January 31,    April 30, 
ASSETS   2014    2013 
    (unaudited)    (Note 1) 
CURRENT ASSETS:          
           
Cash and cash equivalents  $2,069,450   $915,752 
Restricted cash   -    1,869,178 
Accounts receivable, net of allowance of  $998,493 and $1,107,593 at          
    January 31, 2014 and April 30, 2013, respectively   9,427,733    7,085,969 
Costs and estimated earnings in excess of billings on uncompleted contracts   996,389    1,079,367 
Deferred contract costs   2,073,562    1,597,894 
Prepaid expenses and other current assets   383,643    142,307 
Current assets held for sale   1,707,332    1,905,449 
Total current assets   16,658,109    14,595,916 
           
PROPERTY AND EQUIPMENT, net   2,185,131    2,754,734 
           
CAPITALIZED SOFTWARE COSTS   3,124,741    - 
           
OTHER INTANGIBLE ASSETS, net   -    16,228 
           
OTHER ASSETS   78,467    227,259 
           
OTHER ASSETS HELD FOR SALE   329,725    550,829 
           
Total assets  $22,376,173   $18,144,966 

 

 
 

 

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

 

 

LIABILITIES AND EQUITY  January 31,   April 30, 
   2014   2013 
  (unaudited)   (Note 1) 
CURRENT LIABILITIES:          
Current portion of loans payable  $51,617   $43,942 
Senior secured convertible notes, net of debt discount of $875,876 and $2,888,889, January 31, 2014 and April 30, 2013, respectively   22,462    1,111,111 
Derivative liability - senior secured convertible notes   -    3,088,756 
Accounts payable and accrued expenses   4,763,502    4,102,050 
Accrued severance   1,300,000    - 
Billings in excess of costs and estimated earnings on uncompleted contracts   1,656,874    1,619,307 
Deferred revenue   294,827    113,503 
Due related party   799,116    - 
Other payable to Zurich   1,533,757    1,743,986 
Short-term bank loan   3,279,300    2,432,205 
Income taxes payable   11,371    139,557 
Dividend payable   36,993    - 
Current liabilities held for sale   789,555    685,631 
Total current liabilities   14,539,374    15,080,048 
Loans payable, net of current portion   643,603    133,838 
Derivative liability - warrants   -    3,858,508 
Total liabilities   15,182,977    19,072,394 
COMMITMENTS AND CONTINGENCIES          
EQUITY:          
WPCS EQUITY (DEFICIT):          
Preferred stock - $1,000 stated value, 5,000,000 shares authorized, 2,438 issued   2,438,000    - 
     liquidation preference of $7,030,000          
Common stock - $0.0001 par value, 14,285,714 shares authorized, 13,913,164 and 994,187 shares issued and outstanding at January 31, 2014 and April 30, 2013, respectively   1,391    99 
Additional paid-in capital   66,671,222    50,844,183 
Accumulated deficit   (64,006,375)   (54,054,389)
Accumulated other comprehensive income on foreign currency translation   1,177,794    1,433,541 
Total WPCS equity (deficit)   6,282,032    (1,776,566)
Noncontrolling interest   911,164    849,138 
Total equity (deficit)   7,193,196    (927,428)
Total liabilities and equity  $22,376,173   $18,144,966 

 

Note 1. Certain reclassifications have been made to prior period results to conform to the current period presentation.