WPCS Announces Financial Results for Fiscal 2018 Second Quarter

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.


INVESTOR RELATIONS CONTACT Investor Relations Department 917.909.6330 IR@wpcs.com

Source:WPCS International Incorporated