WPCS Announces Financial Results for Third Quarter Ended January 31, 2017

SUISUN, CA--(Marketwired - Mar 16, 2017) - 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, today announced its financial results for the third quarter ended January 31, 2017.

Sebastian Giordano, CEO of WPCS, commented, "For the three and nine months ended January 31, 2017, we incurred an operating loss of $473,000 and $1,632,000, as compared to operating losses of $823,000 and $3,174,000 for the comparable periods in 2016. Meanwhile, our backlog has increased $3,302,000, or 23.8%, to $17,138,000 from $13,836,000 for the same period last year."

Financial Results for the Three Months Ended January 31, 2017

Revenue for the three months ended January 31, 2017 increased $946,000, or 28.5%, to $4,264,000, as compared to $3,318,000 for the same period in 2016. Such increase was due primarily to increases of $734,000 and $212,000 in our Suisun City and Texas Operations, respectively.

WPCS generated a net loss to common shareholders for the three months ended January 31, 2017 of $996,000, as compared to a net loss to common shareholders of $1,233,000 for the same period last year. This quarter's results were comprised of income from: (i) Suisun City Operations of $286,000 and (ii) other income of $20,000, and which were partially offset by: (i) corporate expenses of $470,000; (ii) a loss from our Texas Operations of $289,000; (iii) deemed dividend on convertible preferred stock of $541,000; and (iv) interest expense of $2,000.

Financial Results for the Nine Months Ended January 31, 2017

Revenue for the nine months ended January 31, 2017 increased $922,000, or 7.9%, to $12,528,000, as compared to $11,606,000 for the same period in 2016. Such increase was due primarily to increases in revenues of $881,000 and $41,000 in our Texas and Suisun City Operations, respectively.

WPCS generated a net loss to common shareholders for the nine months ended January 31, 2017 of $878,000, as compared to a net loss of $7,400,000 for the same period last year. This quarter's results were comprised of income from: (i) Suisun City Operations of $832,000; (ii) gain on an arbitration settlements of $1,181,000; and (iii) other income of $143,000, which were partially offset by: (i) a loss from our Texas Operations of $951,000; (ii) corporate expenses of $1,514,000; (iii) deemed dividend on convertible stock of $561,000; (iv) interest expense of $5,000; and (v) an income tax provision of $3,000.

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.

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
(UNAUDITED)
				January 31,				April 30,
				2017				2016
ASSETS
Current assets:
	Cash and cash equivalents			$	2,340,707			$	2,235,597
	Accounts receivable, net of allowance of $206,000 and $92,000 at January 31, 2017 and April 30, 2016, respectively				3,662,932				2,886,154
	Costs and estimated earnings in excess of billings on uncompleted contracts				330,724				357,210
	Prepaid expenses and other current assets				124,330				66,256
		Total current assets			6,458,693				5,545,217
Property and equipment, net					380,980				237,800
Other assets					14,305				21,162
Total assets				$	6,853,978			$	5,804,179
LIABILITIES AND EQUITY
Current liabilities:
	Current portion of loans payable			$	62,588			$	53,996
	Accounts payable and accrued expenses				1,810,015				2,071,765
	Billings in excess of costs and estimated earnings on uncompleted contracts				2,481,122				1,358,289
		Total current liabilities			4,353,725				3,484,050
Loans payable, net of current portion					139,564				94,825
Total liabilities					4,493,289				3,578,875
Commitments and contingencies
Stockholders' equity
	Preferred stock - $0.0001 par value, 5,000,000 shares authorized at January 31, 2017 and April 30, 2016, respectively
		Convertible Series H, 8,500 shares designated - 8 and 2,638 shares issued and outstanding at January 31, 2017 and April 30, 2016, respectively; liquidation preference of $1,000			1,242				406,262
		Convertible Series H-1, 9,488 shares designated, - 4,289 and 8,119 shares issued and outstanding at January 31, 2017 and April 30, 2016, respectively; liquidation preference of $712,000			437,530				699,324
		Convertible Series H-2, 3,500 shares designated, - 3,305 and 0 shares issued and outstanding at January 31, 2017 and April 30, 2016, respectively; liquidation preference of $400,000			230,721				-
	Common stock - $0.0001 par value, 100,000,000 shares authorized, 3,352,159 and 2,691,055 shares issued and outstanding as of January 31, 2017 and April 30, 2016, respectively				335				269
	Additional paid-in capital				87,389,538				85,940,389
	Accumulated deficit				(85,698,677	)			(84,820,940	)
Total stockholders' equity					2,360,689				2,225,304
Total liabilities and equity				$	6,853,978			$	5,804,179

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 nine months ended
			January 31,								January 31,
			2017				2016				2017				2016
Revenue			$	4,263,709			$	3,317,636			$	12,527,872			$	11,605,880
Costs and expenses:
	Cost of revenue			3,235,871				2,521,627				9,690,566				9,263,395
	Selling, general and administrative expenses			1,465,550				1,602,751				4,385,862				5,470,760
	Depreciation and amortization			35,219				16,075				83,914				45,537
				4,736,640				4,140,453				14,160,342				14,779,692
Operating loss				(472,931	)			(822,817	)			(1,632,470	)			(3,173,812	)
Other income (expense):
	Interest expense			(2,430	)			(523	)			(5,440	)			(2,021	)
	Income from Section 16 settlement			-				-				-				400,000
	Income from arbitration settlement			-				-				1,180,902				-
	Other income			20,394				4,871				142,828				1,965
Loss from continuing operations before income tax provision				(454,967	)			(818,469	)			(314,180	)			(2,773,868	)
Income tax provision				-				607				2,567				1,706
Loss from continuing operations				(454,967	)			(819,076	)			(316,747	)			(2,775,574	)
Discontinued operations:
	Income from discontinued operations			-				-				-				41,261
	Gain from disposal			-				-				-				837,720
Consolidated net income (loss)				(454,967	)			(819,076	)			(316,747	)			(1,896,593	)
Net income attributable to noncontrolling interest				-				-				-				16,505
Net loss attributable to WPCS				(454,967	)			(819,076	)			(316,747	)			(1,913,098	)
Dividends declared on preferred stock				-				(372,810	)			-				(4,742,768	)
Deemed dividend on convertible preferred stock, due to beneficial conversion feature				(541,266	)			(40,729	)			(560,990	)			(744,499	)
Net loss attributable to WPCS common shareholders			$	(996,233	)		$	(1,232,615	)		$	(877,737	)		$	(7,400,365	)
Basic and diluted loss from continuing operations per common share			$	(0.33	)		$	(0.47	)		$	(0.31	)		$	(3.82	)
Basic and diluted income from discontinued operations per common share				-				-				-				0.01
Basic and diluted net loss per common share			$	(0.33	)		$	(0.47	)		$	(0.31	)		$	(3.81	)
Basic and diluted weighted average number of common shares outstanding				2,976,670				2,597,952				2,844,101				2,161,104

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 nine months ended
			January 31,
			2017				2016
Operating activities:
	Net loss from operations		$	(316,747	)		$	(2,775,574	)
	Consolidated net income from discontinued operations			-				878,981
Adjustments to reconcile consolidated net loss to net cash used in operating activities:
	Depreciation and amortization			83,914				45,537
	Shares based compensation			22,501				2,219,068
	Gain on sale of China operations			-				(837,720	)
	Income on Section 16 settlement			-				(400,000	)
	Changes in operating assets and liabilities:
	Accounts receivable			(776,778	)			2,725,507
	Costs and estimated earnings in excess of billings on uncompleted contracts			26,486				4,387
	Current assets held for sale			-				(3,853,621	)
	Prepaid expenses and other current assets			(58,074	)			66,211
	Other assets			6,857				(2,110	)
	Other assets held for sale			-				(34,523	)
	Accounts payable and accrued expenses			(261,750	)			(3,149,544	)
	Current liabilities held for sale			-				2,200,030
	Billings in excess of costs and estimated earnings on uncompleted contracts			1,122,833				374,840
Net cash used in operating activities				(150,758	)			(2,538,531	)
Investing activities:
	Acquisition of property and equipment			(104,069	)			(109,851	)
	Proceeds from sale of China operations, net of acquisition cost			-				1,325,744
Net cash (used in) provided by investing activities				(104,069	)			1,215,893
Financing activities:
	Proceeds from issuance of Series H-1 preferred stock and warrants			-				1,575,000
	Proceeds from issuance of Series H-2 preferred stock and warrants			429,631				-
	Borrowings under loan payable obligations			-				99,369
	Repayment under loan payable obligations			(69,694	)			(35,304	)
	Repayments under other payable to Zurich			-				(360,000	)
	Repayments of short term convertible note			-				(4,000	)
Net cash provided by financing activities				359,937				1,275,065
Effect of exchange rate changes on cash				-				91,510
Net increase in cash and cash equivalents				105,110				43,937
Cash and cash equivalents, beginning of the period				2,235,597				2,364,360
Cash and cash equivalents, end of the period			$	2,340,707			$	2,408,297

The accompanying notes are an integral part of these condensed consolidated financial statements

WPCS INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
			For the nine months ended
			January 31,
			2017			2016
Schedule of non-cash investing and financing activities:
	Automobile financing		$	123,025		$	-
	Declaration on preferred dividend payable		$	-		$	4,742,768
	Issuance of warrants with Series H-2 preferred stock		$	231,248		$	-
	Beneficial conversion feature of Series H-2 convertible preferred stock		$	183,284		$	-
	Deemed dividends related to immediate accretion of beneficial conversion feature of Series H-2 convertible preferred stock		$	183,284		$	-
	Conversion of dividends payable related to make-whole amount to common stock		$	-		$	4,457,356
	Conversion of dividends payable related to Series F-1 preferred stock		$	-		$	624,977
	Conversion of dividends payable related to Series G-1 preferred stock		$	-		$	337,981
	Conversion of short term convertible note to Series H preferred stock		$	-		$	1,299,000
	Conversion of Series F and F-1 preferred stock through the issuance of common stock		$	-		$	3,292,741
	Conversion of Series G and G-1 preferred stock through the issuance of common stock		$	-		$	1,827,927
	Conversion of Series H preferred stock through the issuance of common stock		$	405,020		$	892,680
	Conversion of Series H-1 preferred stock through the issuance of common stock		$	639,500		$	75,000
	Deemed dividend on conversion of Series H-1 convertible preferred stock to common stock		$	377,706		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.