WPCS Announces Financial Results for the Three Months and Year Ended April 30, 2014

WPCS Announces Financial Results for the Three Months and Year Ended April 30,  2014  EXTON, PA -- (Marketwired) -- 07/30/14 --  WPCS International Incorporated (NASDAQ: WPCS), which specializes in contracting services for communications infrastructure and the development of a digital currency trading platform, today announced its fiscal three month and full year 2014 financial results for the period ended April 30, 2014.  Sebastian Giordano, Interim CEO of WPCS, commented, "We are pleased with our revenue growth for the three months and full year period ended April 30, 2014. Accounting for the strategic reduction of our unprofitable Trenton Operations during both periods, revenue on a period-over-period basis for the three month period increased approximately 47% and for the full year approximately 34%. Also worth noting is the improvement to our balance sheet. As of April 30, 2014 we had $2.2 million in cash and shareholders' equity of $6.0 million, an improvement from $1.4 million in cash and a deficit of $900,000 at April 30, 2013. We remain focused on strengthening our balance sheet and continuing to implement our strategic plan to build our profitable assets while divesting others such as Seattle, Australia and China that we anticipate will generate working capital and eliminate certain costs."  Mr. Giordano continued, "Since acquiring BTX Trader in December 2013, we continue to enhance the technology and launch new products. Initially, we established a brand and a dedicated trader user base with limited marketing. Now, with the launch of our new product, Celery, our new web-based product committed to putting digital currency in the hands of ordinary consumers, we are excited about the additional market opportunity afforded us by being able to leverage the BTX Trader platform."  Company and Financial Highlights:      --  Since acquiring the BTX Trader software platform in December 2013, the     online platform has grown to 5,000 users and over 1,500 unique     visitors per month; --  BTX Trader has launched Celery (www.gocelery.com), a new product     providing consumers with the simplest and fastest way to buy their     first digital currency using direct bank transfers, initially focused     on Bitcoin and Dogecoin; --  BTX Trader has engaged the services of Clarity PR for public relations     and social media marketing; --  As previously announced, for the period January 1, 2014 through May     31, 2014, Suisun City was awarded approximately $5.5 million in new     contracts as compared to $2.3 million for the same period     year-over-year, an increase of 139%; --  For the 2014 fiscal fourth quarter, revenue increased 25.7%. Taking     into account the strategic reduction of the Company's Trenton     operations, revenue for the quarter and full year ended April 30, 2014     increased 47.2% and 34.4% respectively; --  Reported cash and cash equivalents of $2.2 million as of April 30,     2014; --  Increased shareholders' equity by approximately $6.9 million from a     deficit of $900,000 at April 30, 2013 to equity of $6.0 million at     April 30, 2014; and --  Entered into definitive agreements to divest the Australia and Seattle     Operations.     Financial Results for the Three Month Period Ended April 30, 2014  For the fourth quarter of fiscal year 2014 ended April 30, 2014, WPCS reported revenue of approximately $6.2 million, an increase of 25.7% compared to revenue of $4.9 million for the same period in the prior year. This increase was partially offset by a $721,000 decrease in revenue in our Trenton Operations due to the reduction 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 and China operations was approximately 47.2%.   For the fourth quarter ended April 30, 2014, WPCS reported a net loss to common shareholders of approximately $1.2 million or $0.09 per share, which included: $301,000 of severance expense recorded per the separation agreement with CFO Joseph Heater; a $567,000 loss from discontinued operations for the Australia, Seattle, Lakewood and Hartford Operations; operating losses of $95,000 from the initial start-up of the Bitcoin trading segment; and operating losses of $64,000 from the wind-down of the Trenton Operation. The Company had a net loss of $6.2 million, or $6.23 per share, for the same period in fiscal 2013.  Financial Results for the Year Ended April 30, 2014  Revenue for the year ended April 30, 2014 was approximately $21.3 million, as compared to $24.8 million for the year ended April 30, 2013. This decrease in revenue was due primarily to an $8.8 million decrease in revenue in our Trenton Operations due to the strategic reduction 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 and China Operations was approximately 34.4%.  The net loss attributable to common shareholders was approximately $11.2 million, or $1.99 per share, for the year ended April 30, 2014, of which approximately $9.2 million was attributable to: one-time charges of $1.8 million related to severance expense recorded per the separation agreements with former CEO Andrew Hidalgo and CFO Joseph Heater; $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 "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 $71,000 from discontinued operations for the Australia, Seattle, Lakewood and Hartford Operations; approximately $443,000 in operating losses from the initial start-up of the Bitcoin trading segment; and approximately $438,000 of operating losses from the wind-down of the Trenton Operation. Such net loss for the year ended April 30, 2014, compares to a net loss attributable to common shareholders of $6.9 million, or $6.95 per diluted share, for the year ended April 30, 2013.  Shareholder Update Conference Call  Management will host a shareholder update conference call in August 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 digital currency trading platform. For more information, please visit www.wpcs.com, www.btxtrader.com and www.gocelery.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.                                                                                                                                                                              WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES                                   CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                                             Three Months Ended            Years Ended                                        April 30,                  April 30,                                     2014         2013          2014         2013                             ------------ ------------ ------------- ------------                                        (Note 1)      (Note 1)     (Note 1)   REVENUE                   $6,238,656   $4,964,300   $21,264,288  $24,774,876                         ------------ ------------ ------------- ------------                                                                              COSTS AND EXPENSES:                                                            Cost of revenue          5,185,235    3,096,545    16,744,720   17,556,832   Selling, general and                                                          administrative                                                               expenses                1,389,437    1,947,699     5,988,117    6,574,237   Severance expense          301,455            -     1,775,732            -   Depreciation and                                                              amortization              174,663      231,340       752,109      916,449                         ------------ ------------ ------------- ------------                                                                                                         7,050,790    5,275,584    25,260,678   25,047,518                         ------------ ------------ ------------- ------------                                                                              OPERATING LOSS             (812,134)    (311,284)   (3,996,390)    (272,642)                                                                              OTHER EXPENSE (INCOME):                                                        Interest expense           123,803      785,116     5,042,189    2,091,771   Loss on                                                                       extinguishment of                                                            Notes                           -            -     1,299,304            -   Change in fair value                                                          of derivative                                                                liabilities                     -    2,000,674       833,750    2,703,248   Interest income           (11,595)            -      (11,595)            -                         ------------ ------------ ------------- ------------                                                                              Loss from continuing                                                          operations before                                                            income tax (benefit)                                                         provision                 (924,342)  (3,097,074)  (11,160,038)  (5,067,661)                                                                              Income tax (benefit)                                                          provision                 (305,455)      296,046     (182,942)      216,314                                                                                                      ------------ ------------ ------------- ------------ LOSS FROM CONTINUING                                                          OPERATIONS                (618,887)  (3,393,120)  (10,977,096)  (5,283,975)                         ------------ ------------ ------------- ------------                                                                              Discontinued                                                                  operations:                                                                   Income (loss) from                                                            discontinued                                                                 operations, net of                                                           tax benefit             (566,645)  (2,711,187)        33,890  (3,287,932)   (Loss) gain from                                                              disposal                        -     (69,953)     (104,446)    1,756,586                                                                                                      ------------ ------------ ------------- ------------   Loss from                                                                     discontinued                                                                 operations, net of                                                           tax                     (566,645)  (2,781,140)      (70,556)  (1,531,346)                         ------------ ------------ ------------- ------------                                                                              CONSOLIDATED NET LOSS    (1,185,532)  (6,174,260)  (11,047,652)  (6,815,321)                                                                              Net (loss) income                                                             attributable to                                                              noncontrolling                                                               interest                   (41,586)       12,484        11,287       95,406                         ------------ ------------ ------------- ------------                                                                              NET LOSS ATTRIBUTABLE                                                         TO WPCS                 (1,143,946) ($6,186,744)  (11,058,939)  (6,910,727)                                                                              Dividend declared on                                                          preferred stock            (72,034)            -     (109,027)            -                         ------------ ------------ ------------- ------------                                                                              NET LOSS ATTRIBUTABLE                                                         TO WPCS COMMON                                                               SHAREHOLDERS           ($1,215,980) ($6,186,744) ($11,167,966) ($6,910,727)                         ============ ============ ============= ============                                                                              Basic and diluted net                                                         loss attributable to                                                         WPCS common                                                                  shareholders:                                                                 Loss from continuing                                                          operations                ($0.05)      ($3.43)       ($1.98)      ($5.41)                         ------------ ------------ ------------- ------------   (Loss) income from                                                            discontinued                                                                 operations                ($0.04)      ($2.73)         $0.01      ($3.31)   (Loss) gain from                                                              disposal                      $ -      ($0.07)       ($0.02)        $1.77                         ------------ ------------ ------------- ------------   Basic and diluted net                                                         loss from                                                                    discontinued                                                                 operations                ($0.04)      ($2.80)       ($0.01)      ($1.54)                         ------------ ------------ ------------- ------------   Basic and diluted net                                                         loss per common                                                              share attributable                                                           to WPCS                   ($0.09)      ($6.23)       ($1.99)      ($6.95)                         ============ ============ ============= ============                                                                              Basic and diluted                                                             weighted average                                                             number of common                                                             shares outstanding       13,913,164      994,187     5,597,821      994,187                         ============ ============ ============= ============                                                                                                                                                                                                                                                                                                                                   WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES                                        CONSOLIDATED BALANCE SHEETS                                                                                                                                                        April 30,      April 30,                       ASSETS                          2014           2013                                                     -------------- --------------                                                                  (Note 1)    CURRENT ASSETS:                                                                                                                                             Cash and cash equivalents                    $    2,177,070 $    1,410,223   Restricted cash                                           -      1,869,178   Accounts receivable, net of allowance for                                     doubtful accounts of $1,033,786 and                                          $957,918 respectively                            8,614,396      4,139,768   Costs and estimated earnings in excess of                                     billings on uncompleted contracts                  431,348        329,141   Deferred contract costs                           1,166,734      1,597,894   Prepaid expenses and other current assets           217,235         96,903   Current assets held for sale                      4,001,812      5,152,809                                                -------------- --------------     Total current assets                           16,608,595     14,595,916                                                                              PROPERTY AND EQUIPMENT, net                         1,780,520      2,526,638                                                                              CAPITALIZED SOFTWARE COSTS                          3,207,305              -                                                                              OTHER ASSETS                                           52,376        214,259                                                                              OTHER ASSETS HELD FOR SALE                            372,930        808,153                                                -------------- --------------                                                                                  Total assets                               $   22,021,726 $   18,144,966                                                ============== ==============                                                                                                                                                                                                                                                                                                                                   WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES                                 CONSOLIDATED BALANCE SHEETS (continued)                                                                                                             LIABILITIES AND EQUITY               April 30,      April 30,                                                        2014           2013                                                     -------------  -------------                                                                   (Note 1)    CURRENT LIABILITIES:                                                                                                                                        Current portion of loans payable             $      31,680  $      23,790    Senior secured convertible notes, net of                                      debt discount of $853,413 and $2,888,889,                                    respectively                                       44,921      1,111,111    Derivative liability - senior secured                                         convertible notes                                       -      3,088,756    Accounts payable and accrued expenses            4,956,232      3,036,981    Accrued severance                                1,520,205              -    Billings in excess of costs and estimated                                     earnings on uncompleted contracts               1,448,563      1,344,159    Deferred revenue                                         -        113,503    Due related party                                  778,573              -    Other payable to Zurich                          1,533,757      1,743,986    Short-term bank loan                             3,195,000      2,432,205    Income taxes payable                                30,855        139,557    Dividend payable                                    72,034              -    Current liabilities held for sale                1,797,615      2,046,000                                                 -------------  -------------      Total current liabilities                     15,409,435     15,080,048                                                                               Loans payable, net of current portion                 56,537         66,874  Secured promissory note, related parties             500,000              -  Loans payable, net of current portion, held                                   for sale                                             88,404         66,964  Derivative liability - warrants                            -      3,858,508                                                 -------------  -------------      Total liabilities                             16,054,376     19,072,394                                                 -------------  -------------                                                                               COMMITMENTS AND CONTINGENCIES                                                                                                                             EQUITY:                                                                                                                                                   WPCS EQUITY (DEFICIT):                                                         Preferred stock - 5,000,000 shares                                            authorized, 2,438 shares of Series E                                         Preferred Stock issued with $1,000 stated                                    value, and liquidation preference of                                         $5,707,000                                      2,438,000              -    Common stock - $0.0001 par value, 14,285,714                                  shares authorized, 13,913,164 and 993,538                                    shares issued and outstanding, respectively         1,391             99    Additional paid-in capital                      66,672,106     50,844,183    Accumulated deficit                            (65,222,355)   (54,054,389)   Accumulated other comprehensive income on                                     foreign currency translation                    1,232,003      1,433,541                                                 -------------  -------------                                                                                   Total WPCS equity (deficit)                    5,121,145     (1,776,566)                                                                                  Noncontrolling interest                          846,205        849,138                                                 -------------  -------------      Total equity (deficit)                         5,967,350       (927,428)                                                -------------  -------------                                                                                   Total liabilities and equity               $  22,021,726  $  18,144,966                                                 =============  =============     Note 1. Certain reclassifications have been made to prior period results to conform to the current period presentation.  INVESTOR CONTACT:  Capital Markets Group, LLC Valter Pinto PH: (914) 669-0222 or (212) 398-3486 valter@capmarketsgroup.com     
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