SUISUN CITY, CA — (Marketwired) — 09/24/14 — WPCS International Incorporated (NASDAQ: WPCS) (the “Company”), which specializes in contracting services for communications infrastructure and the development of a digital currency trading platform, today announced its fiscal 2015 first quarter financial results for the period ended July 31, 2014.
Sebastian Giordano, Interim CEO of WPCS, commented, “We continue to diligently make progress across several fronts. First, we are pleased with our fiscal 2015 first quarter revenue growth of 59% on a year-over-year basis, which was mostly attributable to our Suisun City Operations. This segment of our operations is doing very well and we anticipate this trend to continue in the foreseeable future. In addition to the restructuring measures previously reported for fiscal year end 2014, we continue to make steady progress in this area during the first quarter of 2015, as we completed the sale of our Australian Operations and obtained shareholder approval for the sale of our Seattle Operations. These accomplishments are part of a comprehensive restructuring effort that, when completed, should better financially position the Company going forward. We continue to pursue the sale of our China joint venture interest, debt restructuring and further reduction of expenses and liabilities. As such, our financials for this period still reflect the impact of these legacy issues and the remaining areas that still need to be addressed. Finally, we continue our commitment to developing our digital currency business, which has resulted in an increased user base on our platforms and new product launches, such as Celery, which began generating nominal revenues during this quarter. On behalf of the management team, we are excited about the future of WPCS and thank our shareholders for their continued support during this process.”
Revenue for the fiscal 2015 first quarter increased 59% to $6.8 million as compared to $4.3 million for the same period the prior year, mostly attributable to contracting services project revenue in the Company–s Suisun City Operations.
On July 31, 2014, the Company completed the sale of The Pride Group (QLD) Pty Ltd. (the “Australia Operations”), to Turquino Equity LLC, whose managing member is Andrew Hidalgo (“Hidalgo”), the former Chairman and CEO of WPCS. With the sale, the Company eliminated its outstanding $1.0 million severance obligation to Hidalgo.
On August 15, 2014, the Company held a special meeting of stockholders at which the Company–s shareholders approved the sale of substantially all of the assets of its wholly-owned subsidiary WPCS International — Seattle, Inc. (the “Seattle Operations”). The Company expects that this transaction will close on September 30, 2014 and it may generate approximately $1.5 million in working capital.
The Company appointed David Horin, CPA, as its new Chief Financial Officer, effective September 1, 2014.
Received a letter from NASDAQ, dated September 3, 2014, indicating that WPCS has regained compliance with Listing Rule 5550(a)(2), as the closing bid price of the Company–s common stock has been $1.00 per share or greater for the last 10 consecutive business days. Accordingly, NASDAQ advised that the matter is now closed.
Revenue for the three months ended July 31, 2014 was approximately $6,771,000, as compared to approximately $4,256,000 for the three months ended July 31, 2013. The increase in revenue was due primarily to an increase in revenue of the contracting services segment, as a result of the significant increase in contracting services project revenue in our Suisun City Operations. There was nominal revenue for the virtual currency trading platform segment.
Cost of revenue consists of direct costs on contracts: materials, direct labor, third party subcontractor services, union benefits and other overhead costs. Cost of revenue was approximately $5,293,000, or 78.2% of revenue, for the three months ended July 31, 2014, as compared to $3,155,000, or 74.1%, for the same period the prior year. The increase in total cost of revenue was due to the increase in revenue as compared to the prior year. The increase as a percentage of revenue is primarily due to the revenue blend of project work completed during the year.
For the three months ended July 31, 2014, total selling, general and administrative expenses were approximately $1,361,000 or 20.1%, of total revenue. For the three months ended July 31, 2013, total selling, general and administrative expenses were approximately $1,412,000, or 33.2%, of total revenue. Included in selling, general and administrative expenses for the three months ended July 31, 2014 were salaries, commissions, payroll taxes and other employee benefits incurred in the normal course of business of $468,000, which was a $571,000 decrease compared to the prior year, due primarily to lower salaries from cost reduction strategies.
As a result of the execution of the agreement on September 19, 2013 for the divestiture of the Australia Operations, we have recorded the Australia Operations– financial results as discontinued operations. As a result of the execution of the purchase agreement on March 31, 2014 for the divestiture of the Seattle Operations, we have recorded the Seattle Operations– financial results as discontinued operations. For the three months ended July 31, 2014, we recorded an income from discontinued operations of approximately $948,000.
WPCS operates in two business segments: (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 , and .
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.
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